Government charges N50 for multi-billion pipelines licences
Sixty-three years after the Oil Pipelines Act came into force, the country has continued to charge a meagre N50 for licences to operate pipeline networks worth $4.6 million.
Verification from the Department of Petroleum Resources (DPR) showed that over 85 per cent of the networks are in the hands of the private sector, while the rest, basically used to transport products, resides with the government.
While Nigeria has approximately 15,000 kilometres of pipeline network, constructing a kilometre costs as much as $4.6 million. The Abuja-Kaduna-Kano pipeline has a length of 614km. It is thought to be worth $2.8 billion, bringing the cost per kilometre to $4.6 million.
Section 31 (Sub-section One to Six) of the Act states: “The applicant for a permit to survey shall pay a fee of twenty naira upon submitting his application, and a fee of fifty naira upon the grant of such permit. The applicant for a licence shall pay a fifty-naira fee upon the submission of his application, and a fee of N200 upon the grant of such licence. The holder of a permit shall pay a fee of N50 in respect of each variation of such permit. The holder of a licence shall pay a fee of N200 in respect of each variation of such licence. An annual fee shall be paid on each licence of twenty naira per mile (1.6km) of the length of the pipeline, subject to a minimum of N200. The holder of a licence shall pay a fee of N100 upon submitting his application for a restriction order under Section 12 of this act, and a fee of such amount as the minister may determine, not exceeding N400 on such order being made.”
Some regulations were introduced by DPR on the matter, but since the pipeline legislation is an act of parliament, the regulations by the DPR may not void the act unless repealed by the National Assembly, a top official in the petroleum ministry, who pleaded anonymity told The Guardian.
Coming at a time the Federal Government is increasing taxes and borrowing to finance projects and operations, most stakeholders noted that the government has not been proactive and strategic enough to shore up resources from existing loopholes. They also berated the National Assembly for failing to review extant legislations and make them attune current realities.
It took the country decades to amend the Deep Offshore and Inland Basin Production Sharing Contract even as the Petroleum Industry Bill remains in limbo.
Partner and Head of Odujinrin & Adefulu’s Energy Practice, Real Estate, and Mining Teams, Dr. Adeoye Adefulu, noted that the development is only one of the many obsolete legislations that government has failed to properly review.
“Many of the acts were created at a time when the value of the naira was high. Unfortunately, they were not reviewed in terms of fees, fines or penalties. This is not a problem that is limited to the Oil Pipelines Act but it runs across the system,” Adefulu said.
A former management employee of the Nigerian National Petroleum Corporation, now chairman of International Energy Services (IES) Ltd, Dr Diran Fawibe, described the situation as official carelessness.
PricewaterhouseCoopers’s Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola, disclosed that most of the fines and charges attached to the country’s regulations are archaic and require urgent attention.
“We really need to look at how current some of these things are in the current economic system in the country,” Jaiyeola, said, insisting that the nation is losing in terms of economic value.
According to him, the pipeline industry is huge and is a great means for government to raise revenue. But the industry must be reset in terms of regulations, to ensure that legislations are brought into the economic framework of the country.
“There is a lot going through pipelines – oil, gas, petroleum products and others. When these things are going through different pipelines, the person who has right over them makes money but the appropriate value is not coming to the government,” he said.
An expert with the Emerald Energy Institute for Petroleum and Energy Economics, Policy and Strategic Studies, University of Port Harcourt, Henry Biose, noted that despite the prevailing situation, pipelines are grossly inadequate to meet the nation’s domestic supply obligation.
He stressed the need for strategies to ensure sustainable development, especially of gas pipelines, for socio-economic development in the country.
The Chief Executive Officer, Degeconek, and former President of the Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, said the development was shocking, given that the figure was low, even as at 1956 when the act was introduced. “These are aberrations. They shouldn’t be there in the first place. Urgent action is required on things like this,” he said.
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