WORLD OF GAS
Bumpy Ride to Oil and Gas Legislation.
Nigeria’s journey to dream oil legislation has been a bumpy ride with twists, turns and somersaults.
Nigeria’s journey to dream oil legislation has been a bumpy ride with twists, turns and somersaults. The stalled reforms stunted the growth of the oil industry. And further danger lay ahead: the country’s enviable oil reserves could start to decline by 2022 as mature fields begin to deplete.
Seen as the most comprehensive oil legisla-tion, the Petroleum Industry Bill (PIB) seeks to update and replace the industry’s outdat-ed legal and regulatory framework with a more comprehensive and modern-day petroleum industry law that aligns with global standards. It was intended to open up the industry, clear it of opaqueness witnessed in the operations and limit government’s involvement to regulations. Nearly two decades after, the dilly-dallying has not abated.
“The delay in passing the PIB sends wrong signal to potential investors, thus, limiting the realisation of industry’s full potential,” says ChiChi Emenike, head, Neconde Gas Business.
For easier passage, the 8th National Assem-bly broke the PIB into 4 parts: Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and Petroleum Host and Impacted Communities Bill (PHICB).
“Nigeria loses $200 billion yearly due to the non-passage of the PIB.”
The PIAB addresses the licensing require-ments of the oil and gas industry operations and extensively spells out the powers and functions of the new regulatory agency, the Petroleum Regulatory Commission.
The PIFB sets out the fiscal regime like tax, royalties, economic rent and economic incentives. It repeals the Petroleum Profits Tax Act (PPTA) and introduces a new tax, called the Petroleum Income Tax, to upstream petroleum activities. The PHICB addresses the issue of host communities and enhancing peaceful and harmonious coexistence between oil firms and host communities.
The Petroleum Industry Governance Bill (PIGB) scaled the National Assembly hurdles but suffered a major setback with President Muhammadu Buhari withholding his assent on account that the bill permits the Petroleum Regulatory Commission to retain as much as 10% of the revenue generated in the oil and gas industry.
The setbacks suffered by the bill was not due to the poor understanding of the problems or the deficiency in expert input, but largely due to disagreements among stakeholders on the regulatory frameworks, including power of the minister, ownership and control of the resources, host community benefits, environmental concerns and appropriate fiscal regime, and in the process, every administration has produced its own PIB draft(s), but not the law. It has been politics all the way.
“PIGB has been the most politicised project, all the way from the executive and even right here in the National Assembly because of a lot of contending interests all over the place,” says Peter Akpatason, deputy majori-ty leader, House of Representatives.
“The multinationals formed its bloc and interest. The refining bloc is another, the marketers is another factor, and transporters are another big factor.
“Seen as the most comprehensive oil legislation, the Petroleum Industry Bill (PIB) seeks to update and replace the industry’s outdated legal and regulatory framework with a more comprehensive and modern-day petroleum industry law that aligns with global standards.”
A lot of people are benefiting from a dysfunctional oil sector and these people are highly influential and powerful people. The draft that comes to the National Assembly is filled with elements of political twisting and if you try to correct it at the level of committees, these interests will come to play,” Akpatason added.
The House Deputy Leader says the only way the PIGB can scale through without much delay is for the executive and the legislative arms of government to come together and get some experts work out the best draft.
The cost of non-passage of the bill has been enormous. In a policy brief by Nigeria Extractive Industries Transparency Initiative (NEITI), Waziri Adio, NEITI’s executive secretary, states that Nigeria loses $200 billion yearly due to the non-passage of the PIB. The brief also alerted the nation to the fact that another $15 billion is lost yearly in fresh investments to regulatory uncertainties.
Other African countries, minnows in the hydrocarbon industry, have moved on. Ghana passed its own Petroleum Production and Exploration Bill in August 2016. On 24 January 2019, Senegal which just made major oil and gas discoveries, adopted the bill repealing its 1998 Petroleum Code and Replacing Law No. 98-05 of 8 January 1998. On the same date, it also adopted a new law on local content in the hydrocarbons sector. And since 2017, Angola has embarked on petroleum industry reforms which span from deep changes in tax laws to changes in concession contracts and opening of marginal fields to African independents.
The burden is on the 9th National Assembly to ensure that this is not another bumpy ride for the country’s oil legislation. The process of enacting a new law for Nigeria’s petroleum sector needs more urgency and better coordination.