The Nigeria Extractive Industry Transparency Initiative (NEITI) and the Oil Producers Trade Sector (OPTS) of the Lagos Chamber of Commerce and Industry Thursday threw their weights behind the Petroleum Industry Bill (PIB).
The two critical stakeholders in the oil and gas industry hailed the bill as a step in the right direction, but picked holes in some of its provisions.
Both organisations made their positions known at a public hearing organised by the House of Representatives Ad hoc Committee on the PIB.
NEITI is the official policeman of the extractives industry, while OPTS represents 18 leading oil and gas exploration and production companies in Nigeria. This includes the independent, indigenous and international companies in the country.
Executive Secretary of NEITI, Hajia Zainab Ahmed, said the PIB as presently conceived created a very powerful minister, even more than what obtained under the Petroleum Act, 1969. The situation, NEITI said, would not make for transparency in the governance of PIB institutions.
In order to ensure transparency in the administration and regulation of the petroleum industry, Ahmed said it would be necessary to limit the powers of the minister to policy formulation, review and monitoring, while creating strong autonomous institutions that would promote effective governance and controls in the management of the industry.
NEITI proposed that rather than concentrating enormous powers on the minister, appointments and removal of heads of institutions created by the bill should be subjected to the approval of the National Assembly except where the institution is privatised. This autonomy, NEITI argued will reduce possible intervention by the executive and aid the full functioning of the oil and gas industry.
NEITI observed that the PIB did not adequately address the funding issues pertaining to the entire petroleum industry. It recalled that the upstream sector of the industry had suffered problems of funding for several years because of the inability of the federal government to fund its joint venture obligations.
In order to overcome this challenge, NEITI proposed that the PIB should provide for independent funding for each regulator, such as a percentage of revenue derived by the institution as a result of fees or other monies.
Ahmed argued that there should be clear provisions on funding the National Oil Company, so that it will be independent and operate in line with global standards.
“The PIB should adequately provide for the funding of the entire industry, and its provisions should ensure the emergence of strong virile institutions, a commercially oriented national petroleum company, and well-funded upstream operations.
“Cash-call payments for funding the government share of joint Venture operations should be a first-line charge on the Federation Account, before other disbursements are made from the said account.
“NEITI further believes that these funds should only be used for funding JV operations, and not for any other matters. For the medium to long-term, NEITI is of the opinion that the PIB should provide for the conversion of existing JVs to PSCs,” NEITI said.
According to NEITI, the PIB should contain provisions mandating the placement of multi-flow meters at every new well that is built, and that the appropriate regulator for the upstream should have the mandate to develop and ultimately enforce a timed framework with an incentive system for the installation of meters at existing well-heads.
Chairman of the Oil Producers Trade Section (OPTS), Mr. Mark Ward, said its members were in support of the objectives of the PIB, including the creation of a conducive, transparent business environment to enhance exploration and production, of petroleum resources.
Ward said the PIB presented a unique opportunity to resolve the various challenges facing the oil and gas industry in Nigeria.
He, however, expressed concern that the PIB as currently drafted, would not only fail to achieve its stated objectives, but would also not resolve some of these challenges.
According to him, certain aspects of the bill will make it harder for oil and gas companies to invest the funds necessary to find and develop new oil and gas fields to support Nigeria’s aspirations.
“OPTS has modelled the impact of the PIB based on the business plans of all the majors and the majority of independent and indigenous producers. Under current fiscal terms, industry has the potential to add 63 per cent more production than we have today, if key industry challenges are resolved. However, under PIB terms, many projects will not go forward.
“Based on a comprehensive assessment of OPTS’ members current operations and potential projects, Nigeria’s production would decline by twenty five (25 per cent) through 2022.
This carries a heavy price – US$185 bn direct loss of oil and gas revenues for stakeholders and a significant knock-on effect in terms of jobs and GDP,” Ward said.
The OPTS said that the fiscal regime must be globally competitive in order to attract the sizable investments needed in an environment that has a growing number of competing opportunities across the globe.
“We have conducted a robust comparison of fiscal regimes covering more than 20 countries with PIB terms. No matter the type of environment considered, whether JV Oil, JV Gas, or Deepwater, the proposed fiscal terms significantly increases government take and moves Nigeria to one of the harshest fiscal regimes in the “world for investors. This will render Nigerian investment opportunities globally uncompetitive,” OPTS said.
Information from This Day was used in this report.