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Unending search for growth, justice in oil/gas sector



Among other reasons, the Petroleum Industry Bill (PIB) introduced about 17 years ago was intended to create a legal and regulatory framework, institutions and regulatory authorities for the petroleum industry and set guidelines for the operation of the country’s petroleum sector, which has remained the country’s highest revenue source, accounting for over 80 per cent of her total revenue earnings.

Since the journey to reform the oil and gas sector started under former President Olusegun Obasanjo, it has not been without innumerable obstacles, even after the PIB was broken into four bills- 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).

Withholding assent to the PIGB by President Muhammadu Buhari is now one of those obstacles that have characterised this checkered trip.

The late Dr. Emmanuel Egbogah, a key player in the industry and a reform advocate, had once pointed out that agitations for reforms in the oil and gas sector came along with the present century because “though amended in many instances along the way, the Petroleum Act (1969) remains a 40-year-old document that was designed for the industry at its infancy.”  
To him, the NNPC Act (1977), despite the various amendments is an outdated piece of legislation that is out of tune with contemporary global business realities.

The late geologist added that, “the regulatory body, the Department of Petroleum Resources (DPR) is, by and large, similarly constrained being a body tucked away within the ministry.

The most problematic, however, remains the national oil company, the Nigerian National Petroleum Corporation (NNPC).

It is simply a typical state institution that operates as a huge amorphous cost-centre with little or no sensitivity to the bottom-line.

The Timeline Of The PIB

Discussions around reforming the sector started shortly after Obasanjo came to power, when he initiated the Oil and Gas Reform Committee (OGRC).

The OGRC, which was headed by his Special Adviser on Energy and Strategic Matters, the late Rilwanu Lukman, had the mandate of carrying out broad-based reforms in the sector.

The group produced the National Oil and Gas Policy (NOGP), which could not be implemented until Obasanjo left office in 2007.
Since the objectives of the PIB included the need to empower ordinary Nigerians with petroleum and natural gas assets and resources, on behalf of the people, by allocating oil blocks to qualified companies; managing petroleum resources and allocating same and their derivatives for the total benefits that would accrue to the country, the bill received the support of late President Musa Yar’Adua. 

Yar’ Adua on September 7, 2007 reconstituted another committee, which was also headed by Lukman.

On August 3, 2008, the group was asked to “transform the broad provisions in the NOGP into functional institutional structures that are legal and practical for the effective management of the oil and gas sector in Nigeria.”

With that reality, the Lukman-led committee proposed an act that would bring onboard institutions, legal and regulatory templates to abolish and replace 16 obsolete legislations in the oil and gas sector; create accountability and transparency; address environmental challenges, and promote local content in the oil sector.
In September 2008, the Yar’Adua administration presented the first draft of the bill to the National Assembly.

The document was however criticised over disagreement in sharing of oil profits among international oil companies (IOCs), host communities and the federation.

Four years after, specifically in January 2012, the government of former President Goodluck Jonathan moved to fast-track the process by presenting a new draft of the bill.

The bill, however, encountered its worst criticism and could not also pass when it was represented in 2014.

Unfortunately, Jonathan left office without any progress being made on the bill.

Without a doubt, the current National Assembly, which is the eighth has put taken tremendous steps in ensuring that the four new bills, that is, PIAB, PIFB, PHICB and the PIGB scale through. Luckily, the PIGB did.

Primarily, it was expected to end discretionary awards of oil blocks, passing the power to institutions rather than individuals; eliminate bad governance practices, and generally tackle governance issues in the industry.

Other intents of the PIGB include, the setting up of a single independent regulatory agency; dividing the NNPC into two independent limited liability companies and defining the roles of the petroleum minister. 

If the bill had become an act, there would have been an end to inefficient, ineffective, rent-seeking, bias, and other issues limiting the potential of the sector, even as it was expected to deal with fiscal terms, particularly tax and other contractual regulations in the industry.

The PIAB on its part was expected to create a transparent and efficient management process for the exploration and production of oil and gas in the country, while the PHICB would have addressed issues relating to rights and opportunities available to host communities of oil-producing facilities. 

Rejection Of PIGB By Buhari

Even though reports revealed that Buhari withheld assent to the bill because it allegedly reduced the president’s control of the industry, a top source said the bitter politics between the Presidency and the leadership of the National Assembly could be the reason the bill was rejected.

Buhari’s Senior Special Assistant on National Assembly Matters, Senator Ita Enang said the rejection was primarily for constitutional and legal reasons.

Enang said: “By convention, it is inappropriate to speak on the content of executive communication addressed to the legislature until same has been read on the floor in plenary,” urging the legislature to understand the peculiar circumstance under, which the clarification was issued.

According to him, the provision of the Bill permitting the Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated unduly increases funds accruing to the commission to the detriment of the revenue available to the federal, states and local governments, as well as, the Federal Capital Territory.
The presidential aide explained that his principal felt that expanding the scope of the Petroleum Equalisation Fund (PEF) made some provisions of the draft law to be divergent from his administration’s policy, and conflicted with provisions on the PEF.

He noted that aspects of the bill would create ambiguity and conflict in interpretation of the final law if assented to, adding that the draft in some aspects would require further attention.

The Rejection Of PIGB In The Niger Delta

While stakeholders in the oil and gas sector and others have tackled Buhari for allegedly refusing to sign the PIGB into law, a tacit endorsement greeted the President’s decision from some stakeholders in the Niger Delta, who view the proposed law as being inimical to the interest of the region, though they were, quick to clarify that they were not averse to the reformation of the oil industry, as long as it takes care of their clamour for resource control.

For former Petroleum Minister, Prof. Tam David-West, the PIGB was defective in several aspects, including the planned unbundling of the NNPC into two limited liability companies that would pave way for the privatisation of the country’s oil and gas assets.

David-West argued that all that is required to manage the NNPC, was honesty and dedication, alleging that anyone suggesting that the NNPC should be unbundled into two limited liability companies so that the national oil and gas assets can be sold in the stock exchange is a criminal.

“Oil generates over 80 per cent of Nigeria’s foreign exchange and our national budget. It is the country’s livewire and they want to go to the stock market to sell it to a few moneybags that will control the country forever.

I don’t support it because it will not make Niger Delta better. The problem of the Niger Delta is neglect and things can be made better if the government and oil companies become more responsive,” he said.
Also, the former chairman of the board of the Nigeria Extractive Industries Transparency Initiative (NEITI), Ledum Mitee, said the people of the Niger Delta are not opposed to any reform of the petroleum industry that is supposed to break the NNPC’s monopoly and infuse some transparency in the way the oil industry is being run.

Mitee who is the past leader of the Movement for the Survival of the Ogoni People (MOSOP) said people are gravely concerned about certain provisions of the PIGB that aims to sell the national oil company out, through a process, which will make only rich people to own the company through skewed privatisation.
“Reforms can be carried out without necessarily privatising the national oil company, else it means that they are just taking what should otherwise be ours and giving it to other persons.

That means we are now deprived of all the necessary stakes in what God has given us in our own land.

There are other aspects of the bill, including the one they are considering now that is also inimical to the Niger Delta because, when you go through some of the provisions of what they have done in these bills, it reduces the 13 per cent derivation.

When you look at the fiscal provision, what our people would get as 13 per cent provision will be reduced,” said Mitee.
Dr. Joseph Ellah, a former Group General Manager, Corporate Planning and Development Division of NNPC, who emphasised that PIGB’s primary objective is government’s divestment from the oil and gas industry, implored Buhari never to sign the bill, insisting that it is inimical to interest of the Niger Delta and the country.

Ellah explained that it would be unjust to take oil and gas from the Niger Delta people, through the Petroleum Act and make it a national asset, and thereafter turn around under the PIGB to hand it over to a few private entities.
Based on historical antecedents, he further argued that nations that have subscribed to massive wholesale privatisation of their natural resources, almost always experience disastrous outcomes, as none has ever emerged economically strong thereafter.

Disgusted by the intrigues surrounding the PIGB, a prominent Ijaw leader, Prof. Kimse Okoko, warned that any bill that further tries to alienate the Niger Delta people would reignite the agitation for resource control.
“PIGB will not augur well for us because we too will not have control over our oil, unless we are able to succeed in pushing through the process of writing a new constitution that guarantees full resource control.

The Bill is inimical to the interest of the Niger Delta, and those who will benefit from the privatisation exercise will obviously not be from the Niger Delta.

They will be those that are buoyant enough to buy shares. We don’t have control over the oil industry now, but it will be worse if the current PIGB comes into force.

If the PIGB is signed into law, it will reignite the agitation for resource control, which is part of the clamour for restructuring,” he added.

Stakeholders Say Refusing Assent Unreasonable

Notwithstanding the fact that some stakeholders see the need to address some of the issues raised by the President and stakeholders from the Niger Delta region, they insisted that Buhari’s action was unreasonable, and the highest point of impunity and misplaced priority, stressing that it remains unacceptable for the country to continually act at the whims and caprices of the Minister of Petroleum Resources.

On some of the issues raised about the Bill, analysts claim that the All Progressives Congress (APC) administration was never sincere about reforming the sector in the first place.
The Human Rights Writers Association of Nigeria (HURIWA), which sees the decision as “intentional retrogression,” noted that the move might not shock most rational thinkers in and outside the country “because it is a notorious fact that pragmatic governance change has not yet manifested in Nigeria even with the much-talked about change mantra mouthed by President Muhammadu Buhari and his officials.”
President, Nigeria Association for Energy Economics (NAEE), Prof. Wunmi Iledare; former president, Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya and Executive Director, Civil Society Legislative Advocacy Centre (CISLAC), Auwal Ibrahim Musa, are united in their submission that it would be in Buhari’s best interest to sign the bill, failure of which he would be remembered as the worst president in the history of the nation.

They pooh-poohed claims that the country would lose its OPEC membership if the legislation sees the light of day.

Illedare specifically stated that the bill was out to terminate discretionary awards of oil blocks, he confirmed that the powers of the President remained intact.

While Adesanya, on his part, urged stakeholders to rise up to the situation, the Managing Partner, The Chancery Associates, Emeka Okwuosa described Buhari’s declined assent as the height of impunity.

For Musa, it would be unfortunate if the president remains adamant on this issue after promising to reform the industry, adding that, “It would be a big failure if the current government misses the opportunity to reform the sector into a globally agreed standard. It will be more disappointing if the president who made several references with his previous work as a former minister of petroleum now fails to take advantage and bring to fruition, his campaign promise to positively reform the sector,” Musa said.
According to him, it is so frustrating and disappointing that this government has spent its tenure without properly addressing this key important sector of the economy, where corruption, inefficiency, criminality, community conflict and sabotage have been institutionalised.

Uncertain Fate Of PIB

While latest capital inflow statistics released by the National Bureau of Statistics (NBS) continue to show a downward slide, stakeholders in the oil/gas and investment sectors noted that uncertainties could further quash inflows.

They insisted that the non-passage of the Petroleum Industry Bill (PIB) nearly two decades after it was initiated was enough reason to keep investors off, adding that since there were other viable investment destinations in the oil and gas sector on the continent, investors would not risk Nigeria’s volatile market.

Iledare was quick to point out that the country’s declining investment in the oil and gas sector at a time when the price of oil is rebalancing passes very negative signals and warnings that the worse could be ahead if urgent actions are not taken.

While the country expected to boost oil reserves to about 40 billion reserves, the reserves have remained stagnant for months as exploration and production activities, instead of making progress, are sliding backwards.

Statistics from the Department of Petroleum Resources (DPR) indicate that the country’s reserves declined by a whopping 961.47 million barrels between 2012 and 2016 alone.

Indeed, the award of new oil blocks might remained a mirage as the Minister of State for Petroleum, Ibe Kachikwu, recently pointed out that unless there are new oil and gas regulations (PIB) the country may not award oil blocks any longer.

In similar vein, experts are firm in their belief that the country cannot afford to let this opportunity to strengthen the oil and gas sector slip pass her, by not passing the PIGB into law.

In fact, they are urging stakeholders to close ranks and address issues raised in the bill, while also admitting that some of the areas of concern require amendments.

In the same breadth, they are also maintaining that some of the issues against the bill were unreasonable, hence its passage and assent by Buhari remained critical.

One of them, Partner, Odujinrin and Adefulu, Adeoye Adefulu said, “We believe that issues raised by the Presidency may be addressed fairly quickly … the executive should propose its changes for the consideration of the National Assembly.
“NPRC funding – either reduce the percentage of revenue that may be used in funding the 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 being regulated.”

The delay in signing the bill into law has increased the level of uncertainty and denied the country its projected income hovering around N3t yearly. “Once you announce that you are going to change your law, the level of uncertainty increases,” Iledare added. 

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