Nigeria may have lost about $50 billion in estimated investment for not passing the PIB. This is why stakeholders are convinced that the signing of the Petroleum Industry Bill by President Muhammadu Buhari may have opened another phase in the oil and gas sector. But discordant tunes have continued to trail the law, causing division among stakeholders. How far can the Act rev the industry, nay, the economy
Given the over 20 years wait to get the Petroleum Industry Bill (PIB) passed by the National Assembly (NASS), stakeholders believe that its eventual passage would have erupted in jubilation in the industry. But, alas, the reverse seems to be the case.
Since the Senate passed the PIB on July 1, 2021, there have been different lines of argument on the content of the PIB. Now, the signing of the PIB into law by President Muhammadu Buhari last Monday appears to have further divided stakeholders on the matter.
With the President assenting to the document, the PIB has now metamorphosed into a law, that is, Petroleum Industry Act (PIA).
The Petroleum Industry Act provides legal, governance, regulatory and fiscal framework for the petroleum industry, the development of host communities, and related matters.
Support
For some, this act signifies the country’s readiness for a new regime in the oil and gas economy. For instance, the Secretary General of the Organisation of Petroleum Exporting Countries (OPEC), Dr. Mohammad Sanusi Barkindo, expressed delight with the development, describing it as a “significant milestone for Nigeria’s oil industry and an historic achievement for President Buhari’s administration.”
To him, the PIA marks a new era for the industry, especially after years of legislative efforts to strengthen the legal, regulatory, fiscal and governance framework of the sector.
“Indeed, the new law will enhance the Nigerian petroleum industry’s reputation, open the door to new investment, and ultimately strengthen its position to meet the world’s growing demand for energy. The enactment of this legislation is especially timely as the investment outlook becomes clouded by efforts aimed at accelerating a lower-carbon future. Furthermore, the new law will help harness Nigeria’s potential to achieve its programme of raising oil production to four million barrels per day and oil reserves to 40 billion barrels, while also drawing on the country’s vast natural gas reserves to provide clean and efficient energy,” Barkindo said.
He added that the resources would be vital to supplying world markets with a broad portfolio of energy options, and support global efforts to alleviate energy poverty as outlined in the United Nations’ Sustainable Development Goal 7.
Subsidy burden
Minister of State for Petroleum, Timipre Sylva,is convinced that the removal of petrol subsidy is in the best interest of the country, especially as the PIB has no provision for subsidy.
“This (subsidy removal) is desirable for the interest and growth of Nigeria. Of course, everybody will have their perspectives, but from where I sit, I believe that subsidy removal is the best thing for Nigeria, not just the industry,” he said.
“So far, the discussions with stakeholders are still ongoing. But I will also bring it to your attention that today, when the President assents to the PIB, subsidy will become a matter of law, because it is already in the PIB that petroleum products will be sold at market determined prices.
“The removal of subsidy has the potential of unlocking a lot more funds for deployment to development. Unfortunately, what we are doing by way of subsidy is like cutting our nose to spite our face.”
Fund
One aspect that has fueled disagreement in the PIA is the Community Trust Fund for host communities, which is pegged at three per cent. Although host communities are demanding for between five and 10 per cent as the minimum threshold, Sylva argues that increasing the three per cent host communities’ fund will affect the profit of oil companies and in turn force them to exit the country. The minister said the country was in its last phase of cashing out from the oil industry and needed an influx of investors.
“As a country, we have a direction that we are going to and so right now, if you talk about the three per cent in the bill, some of us in the Niger Delta are asking for three per cent of something. Is it not better than 100 per cent of what you don’t know? The philosophy behind this bill is to attract investors to Nigeria to produce as much of this crude in the ground as possible.
“So, we must measure everything against its philosophy. So, as the Niger Delta, if activities are not going on because investors look at the numbers and the numbers don’t add up, because when you say 10 per cent, or you say five per cent or you say 100 per cent, where will the investors charge it to? Are they going to charge it to their profit or to their operational cost? These charges all go to the operational cost and today we already have a lot going through there,” Slyva argued, noting that the operational expenses of the oil companies had been over-burdened. He added that further pressure would impact on their profits.
The minister further argued that apart from the three per cent host communities’ fund, oil firms were still burdened by deductions such as the three per cent of the Niger Delta Development Commission (NDDC); one per cent to Tertiary Education Trust Fund (TETFUND); one per cent to the Nigerian Content Development & Monitoring Board (NCDMB). All these, he said, add up to the overhead of operators.
“So, you have a situation where the production cost is going up. So, you must be very mindful of heaping up more on that operational cost. Now, this three per cent will go on top of everything that is being deducted from the operational side. So where do you want to get the benefit from? You take it from the operational side, you will see the effect of it from the profit, because you have already taken it from the profit. If the operational cost goes up, your profit will reduce. It’s just a matter of cutting your nose to spite your face, so now if because of that the investors say the operational cost in this territory is too high we can’t go there. There are too many deductions, so many things to be deducted and we won’t come. So, there will be no investments. Then you can have 100 per cent and there is nothing to get, because there is no investment,” he warned.
Industry experts like the Nigerian National Petroleum Corporation (NNPC) Group Managing Director, Mallam Mele Kyari, explained that at three per cent, the host communities’ fund may exceed $500 million yearly.
Mounting opposition
But even before the passage of the PIB, there were agitations. These agitations may not have been addressed by the Act. For instance, during the country-wide tour of the Joint Committee on PIB, Cross River State Governor, Ben Ayade, tasked the National Assembly to handle related issues to the bill with circumspection to avoid contentions that likely to trail its passage into law.
Ayade, while addressing the committee members, led by its Chairman, Senator Sabo Muhammed Nakuda, in Calabar, cautioned that “in spite of the haste with which we want to drive the PIB, we must exercise ecclesiastical caution to ensure that the PIB does not throw up other developments that will bring about other contentions and continuous struggle.”
Specifically, Ayade flayed the focus of the bill which, he noted, centred more on oil bearing communities, with scant regard to communities that suffer direct impact of exploration activities.
“While we make haste, we must show caution as the people of Cross River State have a very strong feeling that the PIB bill must address their unique concern,” the governor charged, decrying that “the PIB bill focused so much on producing communities without emphasising on the adversely impacted communities. We are the most impacted, because all the oils within the “Akpami” fields find their way into Cross River State.”
Ayade also fumed at the state’s non-oil producing status. “I do not understand how on earth Edo, Delta, Bayelsa, Rivers, and Akwa Ibom states, as well as Cameroon, will have oil and only Cross River will be non-oil producing state.
Definition brouhaha
Similarly, the Movement for the Survival of Ogoni People (MOSOP) expressed concerns over two key areas in the PIB – the three per cent allocation to the Community Trust Fund and the new definition of host communities that include communities pipelines traverse.
Consequently, the Group described the National Assembly’s definition of host community in the PIA as “false”. It claims it was a trick of creating more controversy and chaos in the Niger Delta region as well as trying to weaken the host communities. MOSOP warned that, by so doing, the government was regenerating restiveness in the region.
A former Secretary of MOSOP, Bari-ara Kpalap, in a telephone chat with The Nation, disagreed with the “new” definition of host communities given by the Upper House. According to him, including communities where pipelines traverse translates to a call to create more chaos and also trying to weaken the host communities, which he noted can lead to recreating restiveness in the region.
Rather, Kpalap contended, definition of “host community” should be limited to those communities that are oil bearing; communities that house the oil facilities, well-head, pipelines crisscrossing their communities, flow stations and several other things that relate to oil production in their communities.
“That you have pipelines merely transporting oil from oil bearing community down to the export terminal does not make that community an oil bearing community; therefore you cannot define such community as a host community. It’s very unfair because it does not make them host communities, pipeline traversing your community does not make you oil bearing community and as such you are not a host community,” he explained.
He, however, said MOSOP had made their position known to the National Assembly, “and we have also contacted relevant institutions to make our protest”. He said the Senators representing the region had not much to do anyway, adding they are weakened by what he described as inconsequential numerical strength. “In a situation where you have 109 senators and you have only one representing you in your zone is that not inconsequential”, he asked.
Similarly, the Paramount Ruler, Kaani Community, Khana Local Government Area of River State and President of MOSOP, Prince Biira, also expressed disappointment over the new definition given to host community. He described the three percent allocation as a neglect to the oil producing communities. “It’s not enough for the development of the host community, the host community is a fundamental basis for any form of development”, he stated.
He therefore called on the government to review the percentage, as well as giving a proper definition to the term “host community, warning that if the PIB is accented to without giving a proper stand or definition of who the “host communities” are, the the Ogoni people would see it as a call to anarchy.
Drawing board
Perhaps, following the continued expression of descenting voices, President Buhari has placed an embargo on the implementation of the PIA till August 2022. To this end, he set up a “Steering Committee” on the PIA to oversee the process.
The committee is headed by the Honourable Minister of State, Petroleum Resources, Timipre Sylva. The primary responsibility of the steering committee shall be to guide the effective and timely implementation of the PIA in the course of transition to the petroleum industry envisaged in the reform program, and ensure that the new institutions created have the full capability to deliver on their mandate under the new legislation. The committee has 12 months duration for the assignment, and periodic updates will be given to Mr President.
Other members are: Permanent Secretary, Ministry of Petroleum Resources, Group Managing Director, NNPC, Executive Chairman, FIRS, Representative of the Ministry of Justice, Representative of the Ministry of Finance, Budget and National Planning, Senior Special Assistant to the President on Natural Resources, Barrister Olufemi Lijadu as External Legal Adviser. The Executive Secretary, Petroleum Technology Development Fund, will serve as Head of the Coordinating Secretariat and the Implementation Working Group.
