Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke
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Some provisions of the Petroleum Industry draft Bill are still being criticised, four years after the first bill was prepared. STANLEY OPARA writes on the fresh controversy
The reason for the ongoing reform of Nigeria’s oil and gas industry is beyond illusion. It is a fundamental necessity to ensure the survival of the industry for the benefit of the citizenry.
Experts say laws made some 50 years ago cannot adequately envision the reality of today.
In enacting a new legislation or effecting changes to what already exists, every nation’s parliament must place the sovereign interest of the state above any other interests.
According to stakeholders in the oil and gas industry, the Petroleum Industry Bill remains a vehicle for the realisation of this feat.
In 2008, under the late President Umaru Yar’Adua, Nigeria began the arduous process of changing the institutional framework governing the nation’s oil and gas industry. The main objective of that effort was to accelerate development of the oil and gas industry for the benefit of all Nigerians. The effort gave birth to what is now known as the Petroleum Industry Draft Bill.
Following the criticism of the initial draft of the bill sent by late President Umaru Yar’Adua, President Goodluck Jonathan, on assumption of office ordered a withdrawal of the draft bill to enable the executive to address contentious areas and ensure all stakeholders are carried along.
On July 19, 2012, Jonathan sent to both chambers of the National Assembly a revised version of the PIB for consideration and passage into law.
On resumption of deliberation on the bill by the legislators, there have been criticisms of certain aspects of the draft bill. Chief among the criticism is that the draft legislation vested too much power in minister of petroleum resources; gave discretionary award authority to the President; and failed to adequately accommodate interest of non-oil producing states.
Just last week, Shell Nigeria said the tax terms in the PIB were uncompetitive as they risked rendering offshore oil and gas projects unviable.
The Managing Director, Shell Nigeria, Mr. Mutiu Sunmonu, also warned that the bill might stifle investment if its terms were not improved.
However, the Executive Secretary, Nigeria Extractive Industries Transparency Initiative, Mrs. Zainab Ahmed, at a stakeholders’ forum in Lagos, said the PIB was an important bill expected to drive the reforms in the Nigerian oil and gas industry, by providing a solid foundation for the regulatory, structural, commercial and fiscal frameworks for the operations of the sector.
According to her, the move will help to halt mismanagement, inefficiency and lack of transparency in the sector, which NEITI has over the years identified as the bane of the industry.
She said, “As an agency set up to develop a framework for transparency and accountability in the Nigerian extractive industries and to ensure conformity with the principles of Extractive Industries Transparency Initiative, NEITI has legitimate stake in the PIB. The PIB is, therefore, an important milestone in the implementation of EITI in Nigeria.
“We in NEITI believe that the bill must emerge as a law that respects fair competition, efficiency, professionalism, openness and prudent resource management while promoting investors’ interests. NEITI also thinks that financial, physical and governance issues provisions in the PIB should be such that citizens of Nigeria will feel the impact of the natural resources in their country.”
On the minister of petroleum and the President wielding so much powers, oil and gas consultant and Chairman, International Energy Services, Dr. Oladiran Fawibe, said power had to reside with somebody, adding that, “I don’t know what people mean by too much power. There has to be checks and balances and we have to build mechanisms for these.
“For instance, we can’t say the power of the President is too much because there are checks and balances ensuring that the power is not absolute.”
According to the former Minister of Petroleum, King Edmund Dakoru, the major point of divergence between the industry and the government in the PIB is that while it is true that oil prices have risen over the years, costs in Nigeria have also risen dramatically; hence to increase the government take in that situation is to make the business more uneconomic for investors.
However, the Chairman, Senate Committee on Petroleum, Senator Magnus Abe, said that Nigerians needed to see better treatment of the environment and better operations by indigenous producers than what the international oil companies do.
His message to the IOCs was that the National Assembly in considering the PIB would want the IOCs to help them to understand how to ascertain the profit per barrel to IOCS as that will be a benchmark that the NASS would apply in assessing the robustness or otherwise of the fiscal provisions of the PIB.
An economist and public policy analyst, Mr. Sanusi Bala, said it was not correct to say that the PIB gave excessive powers to the minister of petroleum resources to make regulations on practically all issues.
He said, “This is not true. Although the draft bill vests powers of coordination and general supervision of all institutions in the industry in the minister of petroleum resources, it nonetheless requires that the minister holds public inquiry before any regulation is made.
“The draft bill further requests publication of notice of the public inquiry in at least two national dailies.”
This provision, he noted, served as a check on the minister because the opinion of stakeholders and the public must be taken into consideration before regulations were made.
He also said, “The conferment of power of discretional award on the President was cited as a factor, which may impede transparency in the industry. However, the draft bill states that the President can only make discretional award in special circumstances.
“This is a buffer against abuse and which will ensure that the exercise is in the interest of Nigerians. It should be noted that discretional award by the President is not peculiar to Nigeria. The Norwegian petroleum industry law, for instance, provides for discretional award by the King.”
Throwing more light on the subject, Bala said PIB critics were also miffed about the proposal in respect of the Petroleum Equalisation Fund.
“Their concern relates to the clause, which gives the minister of petroleum resources powers to scrap the PEF when it is assumed that its functions are over. Why would they want an agency to exist when there is no obvious need?
“Certain persons from some non-oil producing geopolitical zones of the country were recently quoted to have said that the 2012 PIB, in the long run, intends to replace the Petroleum Equalisation Management Fund as well as its functions with the proposed Petroleum Host Communities Fund, which seeks to compel oil and gas companies to pay 10 per cent of their profit to host communities.
“This is far from the truth as the provision for Host Communities Funds was introduced to promote a sense of stake holding in the communities as a panacea for assuring peace and uninterrupted production operations.
“The power recommended for the minister of petroleum resources to scrap the PEF when it is assumed that its functions are over is consistent with the regulatory and supervisory functions of the minister as enshrined in the 2012 PIB.”
According to him, the insinuation that the 2012 PIB was heavily tilted towards the interest of the Niger Delta region while other components of the country are schemed out is a weak attempt to whip up emotions.
He said the 2012 PIB provided for general development of the country through revenues from oil and gas, and the draft bill only made special derivation provision to accommodate the interest of oil bearing communities in order to tackle unrest and promote development.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, recently said the increase in government stake in the deep offshore blocks from the current level of 61 per cent to a new figure of 73 per cent, as enshrined in the draft PIB, was necessitated by prevailing realities in the global oil and gas industry.
Throwing more light on why the Federal Government was proposing a review of the fiscal terms in the Production Sharing Contracts for deep water fields in the draft PIB, she said, “I like to state once again that the proposed increase of government take to about 73 per cent is not only competitive but considerate when we look at the scale of other entities around the world like Norway, Indonesia and even Angola with even higher government take.
Alison-Madueke noted that based on prevailing realities in the global oil industry, it was only natural to review the terms of the PSC to reflect the current trend, adding that the novel 1993 PSC agreement was based on $20 per barrel price for crude oil real time but records indicated that since the start of production in the PSC fields crude prices had been on the upward swing, thus the consensus to have a review of the terms.
Alison-Madueke also stated that the new PIB provided for a refreshing fiscal regime, which has strong incentives for enhanced exploration of new frontiers especially in the Inland Sedimentary Basins as well as providing strong support base for the complete activation of the Gas Master Plan.
Under the new arrangement, the minister had said the fiscal regime was anchored on royalty and tax, which is now predicated on production as opposed to terrain and investment as was previously done.
The PIB is meant to overhaul everything from fiscal terms to the NNPC. Its comprehensive nature has sparked disputes among lawmakers, ministers and the oil majors that have held it back for more than five years. A previous draft never got through parliament.
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Source : punchng[dot]com
Chinua Achebe
A PHCN employee at work in Ipaja, Lagos State
