Lack of reforms adversely affecting investments in oil/gas sector
What do you make of the evolution of the Nigerian Petroleum Industry Bill 17 years after it was initiated?
The process of reforming the Nigerian petroleum industry began in 2000, when President Obasanjo set up the Oil and Gas Reform Committee (OGRC).
And in 2008, the President Umaru Yar’ Adua-led government sent the Petroleum Industry Bill (PIB) to the National Assembly.
Since then, various versions of the PIB have found their way into the National Assembly.
In this Eighth Assembly, the National Assembly broke the PIB into four namely: the Petroleum Industry Governance Bill (PIGB); the Petroleum Industry Administration Bill (PIAB), the Petroleum Industry Fiscal Bill (PIFB), and the Petroleum Host and Impacted Communities Bill (PHICB).
The bills were drafted within the framework of the oil and gas policies, which were adopted by the Federal Executive Council (FEC).
So, how do you view President Muhammadu Buhari’s refusal to assent to the PIGB?
The President’s refusal to assent to the PIGB was a complete disappointment and also a very surprising development, surprising in the sense that the framework of the Bill was based on the Federal Government’s own oil policy.
I also said it was disappointing because it sends out a signal that Nigeria is not ready for reforms. This is unfortunate because
The country has lost a significant amount of investments in the last 18 years due to its failure to reform the industry.
When the process of reform started, Nigeria was one of a handful of African countries producing oil on commercial basis.
Since then, however, several African countries that discovered oil in commercial quantity, borrowed from the previous drafts of our petroleum industry bills and created a framework to attract investment.
This trend is going on all over the world. To be clear, the country’s petroleum industry cannot remain the way it is because our oil industry is in a state of decline.
If reforms are not undertaken now, the decline will be precipitous.
How reasonable are the factors, which the President claimed stopped him from signing the bill?
I am concerned that the true reasons for declining assent have not been revealed.
The reasons espoused by the Presidency, through the Senior Special Assistant to the President on National Assembly Matters, Senator Ita Enang, are not cogent enough for assent to be refused the PIGB.
We would expect that as has been done in the past, the Presidency would have asked for the necessary amendments to be made to the Bill.
Instead, what we heard from the Presidency was simply that assent has been refused.
What next for the PIGB?
The passage of, and the assent by Mr. President to the PIGB is important to send a signal to the market that this government is serious about the oil reform agenda.
The uncertainty created by the lack of reforms, have significantly affected investments in the oil and gas sector.
We believe that the issues raised by the Presidency may be addressed fairly quickly and our recommendation are as follows:
NPRC funding. Either reduce the percentage of revenue that may be used in funding the Nigerian Petroleum regulatory Commission (NPRC) to a figure more acceptable to the government, or find another means of providing independent funding to the regulator.
One method used in other countries is to levy the industry that is being regulated.
PEF issues. This may be resolved by removing the provisions on Petroleum Equalisation Fund (PEF) from the Bill.
We do not consider those provisions fundamental to the objectives of the Bill.
Alternatively, the executive may propose the amendments that it considers necessary to ensure that the provisions are aligned with its policies.
Drafting considerations. The executive should propose its changes for the consideration of the National Assembly.
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