THE Petroleum Industry Bill (PIB) is
approaching its third reading, but its secure
passage out of the legislative mire and into law
is not yet guaranteed. The chance of failure,
though, is now getting slimmer.
This is because the coalition of support behind
the bill is growing – it is now very cross-party
in character. The PIB has the support of the
People’s Democratic Party, PDP, and has
secured special backing from the President.
Billowing fire at the Chevron fire facility after
the gas explosion.
At the end of May, the Minister of Mines and
Steel Development, Musa Muhammed Sada,
said on behalf of the President that Nigeria’s
commitment to the industry transparency
protocols (EITI and NEITI) “remains very
strong”, stressing that these principles of
transparency will underpin the operation of
the oil industry under the PIB.
Alongside the ruling party, the then Congress
for Progressive Change, CPC – spoke in favour
of the bill. It remains to be seen if this
position survives the creation of the All
Progressives Congress, APC, which the
erstwhile CPC is now a part of. It is extremely
valuable to have the organisational machinery
of all parties supporting the bill. It is, as the
Senate Committee Chairman on Rules and
Business, Senator Ita Enang of the PDP, has
said “a top-priority piece of legislation”.
Meanwhile, outsiders have also made
contributions. Despite increasing global
competition Nigeria is still attracting major
investments from large International Oil
Companies,IOCs. Two of the larger IOC’s have
signed major contracts to invest billions of
dollars into the upstream sector in Nigeria.
Smaller assets base
Chevron on June 13, announced that it is “in
Nigeria for the long term”, reassuring
journalists from the Premium Times that they
were selling oil concessions off the coast of
Bayelsa, in order to focus their investments on
a smaller asset base. Deji Haastrup, General
Manager of Policy, Government and Public
Affairs at Chevron said, “We believe there are
smaller companies who would find these assets
a perfect fit for their business profile and
portfolio.” Legislators are equally eager to back
this expanded role for smaller companies.
More recently, Exxon-Mobil and Total, signed
major engineering and fabrication contracts
for OML 133 and OPL 130 respectively.
Together these two decisions could boost
production by over 300,000 barrels per day by
2016. This makes it all the more important to
have a stable statutory regime in place to
govern the industry.
These investments are as the International
Monetary Fund, IMF, predicted back in March
2013, stating that it “looked forward to an
early passage of the Petroleum Industry Bill,
which would boost investment, government
revenue, and fiscal transparency” – a valuable
endorsement from a highly-regarded
international economic authority.
Most advanced
In a report produced by prestigious
consultants Ernst and Young, Dr Pedro van
Meurs (an industry expert) argued that the
bill’s transparency provisions “are now among
the most advanced in the world, and will make
Nigeria a leader in Africa in this respect”. His
endorsements extended to other areas of the
bill, including provisions designed to reduce
wasteful gas flaring – Nigeria in 2011 wasted
through flaring nearly a third as much gas as it
used. At the same time, IOCs have raised
concerns about the bill, raising particular
concerns about the unpredictability of the tax
regime, but they represent a minority voice.
The forces in favour of the bill are
marshalling. There are selfish reasons
motivating some of the bill’s supporters – the
imagined balance of power between Nigeria’s
North and South, for example, is one reason
compelling several PIB-enthusiasts. There are
genuine arguments, though, that are winning
the bill cross-party support, reasons that will,
with luck, propel it through the Senate.
In the private sector, the bill’s emphasis on
transparency and its introduction of communal
accountability for damage done to oil
infrastructure are reasons for enthusiasm. But,
to balance communal accountability, the PIB
brings in the Petroleum Host Community Fund,
a new line of income feeding directly into local
communities.
This is winning support from Southerners in
particular, but the bill’s creation of the
Frontier Exploration Service – which promises
to explore inland states for hydrocarbon and
solid mineral deposits is likewise offering hope
to Northerners eager to expand their
participation in the petroleum industry. It’s
likely, too, that the bill will benefit small
companies, offering them free access to the
latest geological data, which they currently
lack.
With the reform of the Nigerian National
Petroleum Company, NNPC, the bill risks
creating an enemy of the NNPC itself – the
sprawling company holds various
responsibilities today, operating as both a
regulator and commercial player, and faces the
prospect of comprehensive reform. But the
NNPC understands the importance of change –
it understands that it is impossible for one
organisation to regulate the market while
competing in it at the same time. It also
recognises the importance of deregulating
some areas, such as the downstream sector.
So, as the various constituencies fall into line,
the prospects for the PIB are now improving.
Some are pushing for further refinements, and
there is space for this, but as the then CPC put
it, the PIB will create an “enabling
environment”.
Their word choice could have been clearer,
but the point is important: without the PIB,
Nigeria’s energy sector (including power
generation) can only continue
decaying. Without a stable income from oil and
gas, and without a reliable supply of gas for
power generation, Nigerians should expect
power cuts, budget cuts and lower
infrastructure investments over the coming
years.
Failure is still possible – there is a way to hell,
even from the gates of heaven – but it seems
as if, after a long journey, the importance of
the PIB is finally being understood.
ABIYE MEMBERE is the Group Executive
Director, Exploration and Production, Nigerian
National Petroleum Corporation (NNPC)
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