Wednesday, 26 February 2014
New PIB: Who Is Steering Debates Away From Real Issues? By Ifeanyi Izeze
While the mandate of this now very controversial Petroleum Industry Bill (PIB) was to facilitate the delivery to our people, a legislation that addresses most comprehensively the hitches in arrangements that have encumbered the nation’s oil and gas sector and constrained optimal operations and returns on investments, it is really pathetic that debates on the thorny issues in the document have been covertly manipulated to grossly progress in error. It was a show a shame for us to have been torn along sectional lines on trivialities ignoring the weighty issues of the document that deserve very serious attention from all of us. Without mincing words, the unnecessary controversy the PIB has generated so far is a clear indication that national interests would be sacrificed for selfish/sectional and above all offshore desires. And this will not do us any good as a nation.
Throughout the ravaging sectional war lording, not a single person suggested we look at the original version of the PIB submitted to the National Assembly by the late President Umaru Musa Yar’Adua in 2008 but which was scuttled midway to see if we are still on the right track on this oil sector reform process.
The PIB, the result of the work of the Oil and Gas Sector Reform Implementation Committee inaugurated on April 24, 2000, under the chairmanship of Rilwanu Lukman, then serving as the Presidential Adviser on Petroleum and Energy and charged with the task of making recommendations for a far reaching restructuring of Nigeria’s oil and gas industry, aimed at sweeping reform of Nigeria’s oil sector. Its main plan was to create new institutions to govern the operations of the industry; transform the existing joint ventures between the IOCs and the NNPC into Incorporated Joint Ventures (IJVs) registered as limited liability companies under the laws of Nigeria; turn the NNPC into a fully-capitalised and profitable National Oil company; institute a new fiscal regime that significantly increases government take; remove confidentiality in industry operations and fully deregulate the downstream sector. The IJVs are expected to free the government of joint venture cash-call obligations as they would have to generate their own funds using their assets as security (where necessary). It is said that the IJVs would be akin to the Nigeria Liquefied Natural Gas Limited (NLNG) structure.
The way arguments progressed on the document does not at all factor-in the fact that the legislation was not just for today’s lawmakers and politicians but also for the tomorrow’s peoples of Nigeria. Is it not shame that in all heated public discourse, the only high level of interest as well as sentiment openly expressed had to do with selfish and sectional interests rather than our collective aspirations? Nigeria, who has bewitched you that you now believe more of lies than truth?
Has anybody bothered to pause to realise that since the Petroleum Resources Minister came up with this latest revised standard version of the PIB, the International Oil Companies (IOCs) which hitherto were in the trenches with arms, suddenly stopped their vicious attacks against the very spirit and intent of the reforms as captured in the original PIB. They fought fiercely in the media, national assembly and even at market places against it. So what happened that they stopped their vicious protests and campaigns? Is it not awkward? Truly, my people perish for lack of knowledge and verve to understand the adversary.
It would be recalled that the immediate-past Royal Dutch Shell's Regional Executive Vice- President, Exploration and Production, Africa, Ann Pickard, had at the 2010 Nigerian Oil and Gas conference in Abuja on the 24th of February, reeled out the possible consequences should the PIB, which was termed a cumbersome document, be passed into law by the National Assembly of Nigeria. According to the Shell chief, “the bill as formulated was the harshest in the world and could worsen the situation of the country's already dwindling crude oil production.”
Also, the managing director of ExxonMobil, Mr Mark Ward, had previously maintained that “the current PIB (the original version before this Diezani’s copy) before the National Assembly if signed into an act will tremendously stifle every planned investment of the IOCs.” Ward who believed the PIB did not properly addressed three key areas in the gas sector- the issue of gas pricing, market and infrastructure had wondered how competitive the Nigerian gas market will be if the issue of pricing is not well taken care of. According to him, “the current PIB (the copy before the Diezani version), if it became law, would take the hand of the clock back for the IOCs.”
It is on record that this thwarted Shell (or rather IOCs) mindset was attacked right at that same 2010 Abuja Oil and Gas conference by Pedro Van Meurs, a Dutch world- renowned Energy Consultant, who said that there was nothing in the proposed law that could scuttle future investment in Nigeria’s oil and gas industry.
His words: “There is no truth in the allegation that PIB fiscal system is the harshest in the world or that it will halt investment. I have been advising governments all over the world for over 40 years and I know that this is a battle whereby the oil company will try to get out of the parliament the highest possible share. ..So they make loud noise so maybe somebody out there might be listening to them. But the role of the minister is to make sure that the country's interest is protected by insisting on a fair share. I can tell you that for every one company that is planning to leave, I know of 50 new ones that are planning to come in once the door is open.”
The above were just a few of such attacks from the IOCs against the original spirit and intent of the PIB. The question now is: Has the concerns of the IOCs been addressed and in what ways- to favour them at the detriment of Nigeria and her people? They were protesting against almost all the proposed change in the existing relationships ranging from what they described as high rent and royalties, to community relationships. The proposed acreage management was not acceptable to them. They kicked against gas tax increasing from 30 per cent to 80 per cent and royalties increasing from 7 per cent to 12.5 per cent for big producers. To them, “minimal tax allowances for investment incentives on gas cannot simply work.” So what has changed in those areas and who decided what should obtain- the IOCs or Nigerian people as was supposed to be represented by the gang that did the desk collation of all the pieces of documents flying around as PIB?
Agreed that our leaders should try to strike a delicate but necessary balance between overriding national interests on the one hand and the need to make our oil industry attractive to foreign investments on the other, but we have to bear in mind that we need to get this thing at least near-right no matter how harshly we step on anybody’s toes. This is because it may not be possible for us to return any time soon to begin to talk of amending this fiscal framework guiding the nation’s oil sector because it will portray the country and her leaders as not only very unserious but a bunch of naïve people.
Authouritatively, what is being bandied at the National Assembly as PIB is the terribly balkanized and severely watered -down assemblage of scattered thoughts collated by people connected directly or by proxy to the foreign operators either as contractors/friends or ex-staff.
Is it not awkward that the IOCs suddenly became deaf and dumb over the fiscal and structural framework in the Diezani’s copy of the PIB? Could it be that the latest revised edition has completely “satisfied” the concerns raised by the foreign operators? The IOCs from day one had protested and even sabotaged efforts to increase the taxes payable under the country’s licensing terms and existing production- sharing contracts which were criminally tilted in favour of the operators to the detriment of Nigeria and her people.
The original version before the latest one proposed a new hydrocarbons tax, set at 50 percent, which will be levied on production instead of profits so that costs cannot be set against it. Secondly, there will be a new corporate tax specifically for petroleum operations, set at 30 percent. These two proposals the IOCs kicked against preferring the present petroleum-profits tax, levied at 85 percent. They attempted to blackmail Nigeria that the proposed new tax regime will only decrease, by half, the capital investment in the sector in the next 10 years and new oil and gas production will be reduced by nearly 50 percent.
So has the concerns of the IOCs been addressed in their protests against what they described as high rent and royalties? They have kicked against gas tax increasing from 30 per cent to 80 per cent, royalty increasing from 7 per cent to 12.5 per cent for big producers. They have maintained that “minimal tax allowances for investment incentives on gas cannot simply work.” So how come they are now accepting it as workable?
As presently packaged, can we say this legislation would guarantee the much-expected transparency; profitable and reasonable return on investment to the nation; and improved benefits to the communities that bear the direct brunt of oil and gas exploration and production? The answer is no! Nigerians shine your eyes!
IFEANYI IZEZE is an Abuja-based Consultant and can be reached on: firstname.lastname@example.org
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters