Unbundle PIB for easy passage, Investment

The Petroleum Industry Bill (PIB) as is currently constituted, is too complex and will need to be broken into bits, for it to stand a chance of being passed early by the National Assembly, stakeholders have said.

Non passage of the bill has held up further investment in oil exploration in Africa’s second largest economy and the world’s seventh oil exporter. Most of the oil majors in the recent past have invested in counries like Angola and Canada at the expense of Nigeria.

Speaking to BusinessDay, the stakeholders advocate that the fiscal aspect of the Bill be passed first, while the other provisions should be taken later, since the politicians will soon be preparing for the 2015 general elections.

“The bill is too big for a country like Nigeria at this stage of development,” the CEO of an indigenous oil company,” said, adding that because many people are going to lose their rent seeking opportunities in the sector, the fiscal issues of the Bill should have been tackled first,  while the contentious provisions are looked at later.

“The fiscal, terms which may be the least controversial aspect of the bill would be the easiest to push through, since doing so would restart investments in the deep offshore, and keep the oil flowing, which is where the interests of the lawmakers and Nigeria intersect,” said one stakeholder who spoke to BusinessDay.

The PIB aims to unify all the necessary legislation in one bill and provide a clear framework for investment in Nigeria’s energy sector, as well as to split the Nigerian National Petroleum Corporation (NNPC) and model it after a national oil company, as is the case with Petrobras of Brazil.

The Bill’s fiscal terms which have been described by major multi-national oil and gas companies as uneconomic, would tax deep offshore oil production at 74 percent, which is higher than Angola’s, take of 72 percent. Oil companies however say that the operating environment in Nigeria, with insecurity, kidnapping and bunkering, is different from that of Angola.

“Frankly, the gap is not big enough to fund deep offshore drilling,” a CEO said.

Another issue which may stall the PIB which is currently at the National Assembly, is the 2015 election permutation which would begin in earnest by the third quarter of 2013, stakeholders say.

The elections would be one year away by January 2014, meaning that the Bill must be pushed to pass in the next three to six months. Stakeholders say that Nigeria’s oil production is slowly going down, with no new investments in the deep offshore, as the uncertainty surrounding the Bill persists.

Nigeria, plans to export 69 shipments of crude in March, totalling 2.05 million barrels a day, the lowest in four months, according to loading programmes obtained by Bloomberg. That compares with 65 lots, or 2.13 million barrels a day in February.

The country’s oil production may fall by 40 percent by 2020 without new investment over the next ten years, if the government fails to provide a conducive investment environment a, senior official of ExxonMobil’s Nigerian producing unit said in Lagos last December.

Investment of at least $28 billion in Nigeria’s oil sector has been lost or deferred since 2010 as a result of  the non-passage of the Bill , with the beneficiaries being other producers in the sub-region, such as Angola and Ghana, according to estimates from the Senate committee on the upstream oil industry,

Nigeria  targets to produce 4.0 million barrels a day, of crude oil, and having 40 billion barrels in reserve by 2020, which will remain unfulfiled, unless the country reverses the significant lack of investments by oil majors,  industry stakeholders have said.

Culled from Business Day Nigeria