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Petroleum Industry Bill: Dead and Buried?

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By Ali Smart…

When will the much hyped Petroleum Industry Bill (PIB) be passed into law? Is it going to have a smooth passage this time around after many hiccups? Will the PIB still serve its primary purpose? Is the PIB still in public interest?

The foregoing questions are begging for answers still as Ripples broached the subject of the propriety or otherwise of the PIB among a cross-section of discerning Nigerians who expressed deep-seated worries over undue delay in the passage of the PIB.

The overriding objective of the much-hyped bill when it was first put forward in 2000, as stated in its forward document, is “A Bill for an Act to provide for the establishment of a legal, fiscal and regulatory framework for the petroleum industry in Nigeria and for other related matters.”
But almost 15 years after, the bill has been returned to the Executive for fine-tuning many times over, to no avail.

The much-awaited bill, which has continued to go back and forth across the lower and upper legislative chambers, was reportedly scuttled by members of the 6th and 7th assembly in the last few years.

Update on PIB
The 223-page document, made up of 362 items, gives clear views on what should be the structure of ownership, and management of petroleum resources in the country, including the roles and functions of managers and other stakeholders in the petroleum sub-sector.

It was recently reported by Reuters Africa that the government is breaking up the PIB, which is to be replaced with “Petroleum Industry Governance and Institutional Framework Bill 2015”, aiming to create “commercially oriented and profit driven petroleum entities” and close loopholes that bred corruption.

It is, however instructive to note that many oil majors are less than comfortable with the bill as it is currently constituted.

Some of the changes reportedly made to the new Bill include amongst others, curtailment of Ministerial powers, the splitting of NNPC into two separate entities: the Nigeria Petroleum Assets Management Co (NPAM) and a National Oil Company (NOC).

The NOC will be an “integrated oil and gas company operating as a fully commercial entity” and will run like a private company. Thus, it will keep its revenues, deduct costs directly and pay dividends to the government and subsequently put an end to the era of waiting for federal allocation for funding and always failing to meet cash call obligations.

According to analysts, the new bill is bound to be a game changer, as far as the regulation of the upstream and downstream sector of the petroleum industry is concerned.

Corroborating the foregoing, President of the Institute of Mediators and Conciliators, ICMC, Dr. Brown Ogbeifun, while ventilating his views on the bill, among others, said: “The Petroleum Industry Bill has very good intentions. The laws we currently use to drive oil and gas process in Nigeria are dispersed in about16 pieces. This Bill seems to streamline these into one readable text.

“Furthermore, the laws and fiscal regimes put in place at the infancy of the oil and gas industry when we were virtually begging investors to invest in Nigeria are still applied today and time is running out in the oil and gas industry.”

Waxing philosophical, he said: “It is like saying that the clothes a child wore in its infancy should still be worn at 18 years. Paradoxical, is not it? This definitely cannot develop our oil and gas sector beyond developing other economies. If we must fix the energy sector, unemployment, infrastructure, then we do not have readymade alternatives to PIB. Secondly, the agencies involved in oil and gas business have several overlapping and chaotic functions that need to be streamlined. This Bill is supposed to do that.

“Thirdly, the federal government has been accused of opacity in running the oil and gas business. The Bill in all intents and purposes is trying to enthrone openness, transparency and accountability in the governance structure of the oil and gas post –PIB. If the Bill is passed, it becomes easier to monitor the inflow and outflow from crude business. The issues of deregulation, subsidy and the commercialisation of critical agencies in the value chain of the oil and gas sector become a done deal from the point of law. We shall now do oil and gas business as a world class industry.”

Best practice abroad

Ripples can authoritatively report that in several oil-producing countries, the counterpart subsidiaries of the Nigerian companies operate strictly according to the laws of the countries where they are resident.

In more than 80 percent of the countries that have oil and gas driving their economies, expatriates do not remain on the job for more than two years.
However, in Nigeria, most expatriates stay on the job for so many years without due compliance with the understudy clauses. The result is that Nigerians are not empowered to take over their duties.

Like Nigeria, like others.

Apart from Nigeria, no government allows the luxury of breaching the expatriate rules as they do in Nigeria. The fiscal regimes in most of those countries are more stringent, compared to what obtains in the country, yet they are not forced to divest or quit from those countries.

The Petroleum Minister, Dr. Ibe Kachikwu has reportedly assured that the bill will be amended and that the government may drop the taxation element of the PIB to aid in its passage.

“The truth is that going by our current fiscal regimes, monitoring strategies and expatriate quota policy, Nigeria remains the most generous and our take in financial terms remains one of the lowest in the world. So the truth is companies are allowed to relocate where they so desire. It is for the Nigerian nation to know who our true friends in plenty and adversities are and respond appropriately when we are out of the woods. Lastly, those who will remain will surely do so no matter the turn of events,” emphasised Ogbeifun.

Growing fears over PIB

It is, however instructive to note that many oil majors are less than comfortable with the bill as it is currently constituted.
Sharing this sentiment, a top management staff of Mobil Producing Unlimited, which is a joint venture partner with the federal government, who would not be named, said many operators have palpable fears as far as the implementation of the bill is concerned.

“Agreed, there are some areas where the international oil companies (IOCs) are favoured, like the fact that they won’t have to be tied to the apron strings of the NNPC. But all in all, the bill is skewed in favour of Nigeria, leaving little or no room for outside players.”

The consequence is that many would be persuaded to close shop in the country, the source said.
But Ogbeifun does not share such sentiments.

If anything, he holds the view, and very strongly too, that the bill, a well-articulated and intentioned PIB, will lead to job creation in the long run. “My appeal is that all the stakeholders must come together and see Nigeria as the essential goose that should be protected against dangers and death in order for her to continue to lay golden eggs.”

Expatiating, he said: “Even without PIB they are already divesting massively from Nigeria to other areas of Africa because of insecurity, illegal bunkering, corruption, policy inconsistency, tax issues, vandalism of their pipelines and equipment by vandals. All these have been articulated as causes of increasing overhead, which is compounded by the yearly negotiation cycles between them and their unions; and the increasing hard stance of the union. Rightly or wrongly, they may have their justifications for the assertions. PIB or no PIB, those that will go shall still go and those that will stay will.”

It would be recalled that President Goodluck Jonathan had, in the heat of the tension arising over the passage of the bill in 2013, mandated the petroleum ministry to constitute a task force to ensure the speedy passage of the bill.

In the memo to the immediate past Minister of Petroleun, Diezani Alison- Madueke, the former SGF, Anyim Pius Anyim, had noted that given the president’s desire for the accelerated passage of the bill, he had mandated the ministry to set up a bi-partisan Special PIB Task Force to work with the ministry to further facilitate the quick passage of the bill.

The taskforce then was headed by Senator Udoma Udo Udoma as chair with other members including Senators Tunde Ugbeha, Lawan Shuaibu and members of the lower chamber like Hon. Chibudom Nwuche, Abdullahi Gumel, Habeeb Fashinro and former president of the Trade Union Congress, Mr. Peter Esele.

But as it turned out, the committee could not achieve its set objective, even as speculations were rife that some had elected to do the bidding of some of the IOCs.

Hope rising for PIB

The Petroleum Minister, Dr. Ibe Kachikwu has reportedly assured that the bill will be amended and that the government may drop the taxation element of the PIB to aid in its passage.

“There is a need to look at the PIB as it was submitted to the sixth assembly and try and tinker with that a bit,” Kachikwu said after being appointed petroleum minister, or junior oil minister in November

“There are all kinds of issues … one of those is whether we need to yank out the fiscal terms and develop them into a different law relying on existing fiscal laws and amend those.”

National Assembly to the rescue

In what appears to be a twist of irony, members of the current National Assembly who served in previous political dispensations have again given assurances that things would work this time around.

“Investment decisions in this field cannot continue to wait. Clarity on the legal framework for oil and gas in Nigeria is crucial to our economy.

Contrary to what was witnessed in the 6th and 7th Senate, the lower and upper legislative chambers of the National Assembly have agreed to ensure the passage of the PIB in their tenure.

Senate President, Abubakar Bukola Saraki, while inaugurating the additional eleven standing committees of the Senate recently added that the passage of the PIB was very necessary for adequate reforms in the nation’s oil and gas sector.

Saraki, who hinted that the Senate had adopted the PIB as one of its legislative agenda added that the legislature was already working with the executive towards getting the bill passed quickly.

“The oil and gas industry remains the lifeblood of the Nigerian economy. The industry is going through a downturn period, which presents also the opportunity for us to reform the local industry to meet with changing times.

“Attempts in the past to re­form the industry through the Petroleum Industry Bill have not been able to go full circle for variety of reasons, the 8th Senate and by extension, 8th National Assembly is ready to tackle with all sense of patriotism,” he said.

He, therefore, charged the Petroleum Upstream, Petroleum Downstream and Gas committees to immediately swing into action so as to make the quick passage of the bill possible just as he in­formed that the Senate would, in a matter of weeks, begin considera­tion of the first seething of bills on the petroleum industry reforms.
“The Senate expects that you pay very good attention to these bills and treat them with dispatch so that we can quickly move towards the implemen­tation of the reforms, which have be­come long overdue,” he stressed.

He added that by the committees’ inauguration, the senate has begun the full implementation of its vision to make laws that will impact positively on the lives of Nigerians.

It would also be recalled that Speaker of the House of Representatives, Hon. Yakubu Dogara, had said the PIB is key to Nigeria’s economy.

Specifically, Dogara described the Petroleum Industry Bill (PIB) as very key to the survival of the Nation’s economy, despite failing to scale through the legislative process in the 6th and 7th National Assembly for reorganisation of the petroleum sector.

He also called on the Minister of Petroleum, President Muhammadu Buhari, to urgently forward a fresh copy of the bill to it for quick consid­eration and possible passage.

“We cannot meaningfully discuss the improvement of the national economy without discussing priority legislation in this field. Undoubtedly, one of the most important pieces of legislation is the Petroleum Industry Bill.

“This is necessary because oil and gas still accounts for over 70 percent of our foreign exchange earnings in spite of the rapid fall in oil prices. We, therefore, cannot afford not to organise the sector in such a manner as to benefit the nation.

“In this regard, may I call on the President, as the Minister of Petroleum, to, as a matter of urgency, transmit a bill to the National Assembly on how his administration intends to reorganise the petroleum sector.

“The PIB has had a checkered history. It was introduced late in the life of the 6th Assembly, and was not passed.
“In the 7th Assembly, a private members bill was introduced in the first month of that Assembly, based on the experience of the 6th Assembly.
However, the last administration informally indicated that it would prefer an executive bill on the matter, which took over two years to materialise. It was passed only by the House of Representatives very late in its tenure without the Senate concurring.

“Investment decisions in this field cannot continue to wait. Clarity on the legal framework for oil and gas in Nigeria is crucial to our economy.

Contrary to the assertion that the size of the bill is the problem, the fact is that an early introduction will lead to an early passage,” Dogara said.

Although Nigerians are desirous of taking ownership of the petroleum industry, which they hope the PIB will help to actualise, it appears it is going to be a long wait as there are still many unresolved issues with the PIB.

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