PIB and foreign investors’ apathy

The Petroleum Industry Bill (PIB) was expected to, for the umpteenth time, be submitted to the National Assembly for passage highlighting happenings in industry during the third quarter of 2020. Adeola Yusuf, in this analysis, shows how unstable fiscal regime and dearth of foreign capital foistered in the country based on footdragging on PIB passage and signing into law doted events for the quarter


Penultimate Monday, the Group Managing Director of the Nigerian National Petroleum Corporation, NNPC, Mallam Mele Kyari, declared that the country’s oil industry is suffering serious apathy from foreign investors who have starved it of the much-needed funding.


Kyari, who expected the growth of industry at much faster pace, envisaged a faster passage of the Petroleum industry Bill (PIB). The absence of a stable fiscal environment, the NNPC boss said, is inhibiting the growth of the Nigerian petroleum industry, especially the upstream sector.


Setting a table for PIB


Mallam Kyari, who stated this while playing host to members of the House of Representatives Committee on Petroleum Resources (Upstream), who were on an oversight visit to the corporation recently, said international investors were losing confidence in the nation’s oil and gas industry and tasked the lawmakers to act fast and arrest the situation.


“We need to act quickly to move from this unstable situation to a very stable one and the only way is for us to get the Petroleum Industry Bill (PIB) to work so that countries and investors can work with us,” the GMD stated, according to a statement.


The statement issued by the Group General Manager, Group Public Affairs division, Dr. Kennie Obateru, quoted Kyari to have further said that foreign capital was needed in the upstream sector and that the only way to attract it was to have stable laws and a friendly business environment that could guarantee cost recovery  and a decent return on investment for investors.


He disclosed that the uncertainty in the sector created by the long delay in the passage of the PIB has led to a number of divestments from the country in the recent past.


The GMD also stated that the drive by the management of NNPC to entrench the culture of transparency in the corporation has improved its business fortunes and creditworthiness as lenders are now willing to grant credit to it.


The loss mounts


Nigeria is losing over N3.3 trillion ($15 billion) annually due to nonpassage of Petroleum Industrial Bill (PIB), a 2015 document of NNPC read. Quoting a former GMD and ex- Minister of Petroleum Resources, Dr. Ibe Kachikwu, the corporation assured that non-passage of PIB would not stop it from doing the necessary things in turning around the petroleum sector.


“Fielding questions during screening as a ministerial nominee, Kachikwu said that any refinery that is producing less than 60 percent is not production. Kachikwu described importation of petroleum into the country as an embarrassment. “We are going to pump crude oil to Kaduna as from tomorrow (Thursday, October 13, 2015).


“Any refinery that is not producing up to sixty percent is failing because a good refinery needs to produce up to ninety percent,’ he said. The PIB which has been in the National Assembly since 2003 has yet to be passed into law.


All eyes on Buhari


Nigerian President Muhammadu Buhari has signed a long-awaited oilreform bill and it will be formally presented in the Senate as early as this week, four sources familiar with the matter revealed.m to Reuters.


The legislation has been in the  works for the past 20 years, and the main laws governing Nigeria’s oil and gas exploration have not been fully updated since the 1960s because of the contentious nature of any change to oil taxes, terms and revenue-sharing within Nigeria.


But reforms and regulatory certainty became more pressing this year as low oil prices and a shift towards renewable energy made competition for investment from oil majors tougher. The alignment of both chambers with Buhari’s All Progressives Congress party has also given the reforms the best chance of passage in years.


Buhari officially signed the bill late last week, and his team has already been building support for it in the National Assembly. The sources, who asked not to be named because of the sensitivity of the issue, said the assembly has already chosen teams of members who will work most closely on individual portions of the bill.


Both the Senate and the House of Representatives must approve it before Buhari can sign it into law. Two presidential spokesmen declined to comment and the Senate had no immediate comment. The Ministry of Petroleum Resources sent the draft, the product of months of consultation between Nigerian officials, oil and gas companies, and other industry stakeholders, to Buhari last month.


Excepts from ‘new’ PIB

from the bill seen by Reuters included provisions that would streamline and reduce some oil and gas royalties, boost the amount of money companies pay to local communities, and for environmental clean-ups and alter the dispute resolution process between companies and the government. It also included measures to push companies to develop gas    discoveries and a framework for gas tariffs and delivery. Commercialising gas, particularly for use in local power generation, is a core government priority.


Assurance of passage


In his remarks, the Chairman of the Committee, Hon. Musa Sarki Adar, expressed the readiness of his committee to provide the necessary support for the Corporation to discharge its duties without hindrance.


He acknowledged the corporation’s efforts at deepening transparency and accountability, stressing that the committee was impressed with the level of professionalism exhibited by the NNPC management and the leadership role played by the GMD in rallying the oil and gas industry to provide support for the Federal Government’s fight against the COVID-19 pandemic


In a presentation, the Managing Director of the Nigerian Petroleum Development Company (NPDC), Engr. Mansur Sambo, said the company has increased its gas production to 860mmscf/d and is now the largest supplier of gas to the domestic market. All the business units in the upstream arm of the NNPC made presentations to the committee.


Last line


All eyes are on Nigeria as it promises to, for the umpteenth time, submit the PIB to the Senate for passage. Will this turn out to be like the previous attempts?


Can the government do the right thing this time around, which will lead to the passage and signing of the bill into law?


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