petroleum-industry-billThe Petroleum Industry Bill (PIB) is approaching its third reading, but its secure passage out of the legislative mire and into law is not yet guaranteed. The chance of failure, though, is now getting slimmer.

This is because the coalition of support behind the bill is growing – it is now very cross-party in character. The PIB has the support of the People’s Democratic Party, PDP, and has secured special backing from the President.

At the end of May, the Minister of Mines and Steel Development, Musa Muhammed Sada, said on behalf of the President that Nigeria’s commitment to the industry transparency protocols (EITI and NEITI) “remains very strong”, stressing that these principles of transparency will underpin the operation of the oil industry under the PIB.

Alongside the ruling party, the then Congress for Progressive Change, CPC – spoke in favour of the bill. It remains to be seen if this position survives the creation of the All Progressives Congress, APC, which the erstwhile CPC is now a part of. It is extremely valuable to have the organisational machinery of all parties supporting the bill. It is, as the Senate Committee Chairman on Rules and Business, Senator Ita Enang of the PDP, has said “a top-priority piece of legislation”.

Meanwhile, outsiders have also made contributions. Despite increasing global competition Nigeria is still attracting major investments from large International Oil Companies,IOCs. Two of the larger IOC’s have signed major contracts to invest billions of dollars into the upstream sector in Nigeria.

Smaller assets base

Chevron on June 13, announced that it is “in Nigeria for the long term”, reassuring journalists from the Premium Times that they were selling oil concessions off the coast of Bayelsa, in order to focus their investments on a smaller asset base. Deji Haastrup, General Manager of Policy, Government and Public Affairs at Chevron said, “We believe there are smaller companies who would find these assets a perfect fit for their business profile and portfolio.” Legislators are equally eager to back this expanded role for smaller companies.

More recently, Exxon-Mobil and Total, signed major engineering and fabrication contracts for OML 133 and OPL 130 respectively. Together these two decisions could boost production by over 300,000 barrels per day by 2016. This makes it all the more important to have a stable statutory regime in place to govern the industry.

These investments are as the International Monetary Fund, IMF, predicted back in March 2013, stating that it “looked forward to an early passage of the Petroleum Industry Bill, which would boost investment, government revenue, and fiscal transparency” – a valuable endorsement from a highly-regarded international economic authority.

Most advanced

In a report produced by prestigious consultants Ernst and Young, Dr Pedro van Meurs (an industry expert) argued that the bill’s transparency provisions “are now among the most advanced in the world, and will make Nigeria a leader in Africa in this respect”. His endorsements extended to other areas of the bill, including provisions designed to reduce wasteful gas flaring – Nigeria in 2011 wasted through flaring nearly a third as much gas as it used. At the same time, IOCs have raised concerns about the bill, raising particular concerns about the unpredictability of the tax regime, but they represent a minority voice.

The forces in favour of the bill are marshalling. There are selfish reasons motivating some of the bill’s supporters – the imagined balance of power between Nigeria’s North and South, for example, is one reason compelling several PIB-enthusiasts. There are genuine arguments, though, that are winning the bill cross-party support, reasons that will, with luck, propel it through the Senate.

In the private sector, the bill’s emphasis on transparency and its introduction of communal accountability for damage done to oil infrastructure are reasons for enthusiasm. But, to balance communal accountability, the PIB brings in the Petroleum Host Community Fund, a new line of income feeding directly into local communities.

This is winning support from Southerners in particular, but the bill’s creation of the Frontier Exploration Service – which promises to explore inland states for hydrocarbon and solid mineral deposits is likewise offering hope to Northerners eager to expand their participation in the petroleum industry. It’s likely, too, that the bill will benefit small companies, offering them free access to the latest geological data, which they currently lack.

With the reform of the Nigerian National Petroleum Company, NNPC, the bill risks creating an enemy of the NNPC itself – the sprawling company holds various responsibilities today, operating as both a regulator and commercial player, and faces the prospect of comprehensive reform. But the NNPC understands the importance of change – it understands that it is impossible for one organisation to regulate the market while competing in it at the same time. It also recognises the importance of deregulating some areas, such as the downstream sector.

So, as the various constituencies fall into line, the prospects for the PIB are now improving. Some are pushing for further refinements, and there is space for this, but as the then CPC put it, the PIB will create an “enabling environment”.

Their word choice could have been clearer, but the point is important: without the PIB, Nigeria’s energy sector (including power generation) can only continue decaying. Without a stable income from oil and gas, and without a reliable supply of gas for power generation, Nigerians should expect power cuts, budget cuts and lower infrastructure investments over the coming years.

Failure is still possible – there is a way to hell, even from the gates of heaven – but it seems as if, after a long journey, the importance of the PIB is finally being understood.


Information from Vanguard was used in this report.