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How PIB Scaled Critical Second Reading in House

25 Nov 2012

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Aminu Tambuwal

Against the hurdles of regional politics and primordial sentiments the Petroleum Industry Bill (PIB) scaled Second Reading in the House of Representatives. However in this report, Onwuka Nzeshi  points to an even greater obstacle ahead

Background

After the initial controversy surrounding its presentation to parliament and several postponements of its consideration, the House of Representatives penultimate week commenced debate on the bill seeking to establish a new Legal Fiscal and Regulatory Framework for the Petroleum Industry in Nigeria.

The age-long ethnic and regional interests, which had always polarised the parliament on sensitive national issues also reared its ugly head in the course of the discourse.

All the lawmakers who contributed to the debate were unanimous in their disapproval for some provisions of the bill that tended to arrogate enormous powers to any sitting Minister of Petroleum Resources. They were also not comfortable with the level of discretion a sitting President would have if the bill is passed untouched.

As book- makers earlier predicted the lawmakers were divided on the provision in the bill, which seeks to create a Petroleum Host Community Fund (PHCF) where oil firms are expected to pay ten per cent (10%) of their net profits for the benefit of the oil-bearing communities.

House Leader Hon Mulikat Akande-Adeola who set the ball rolling for the debate on the general principles of the bill described the Petroleum Industry Bill (PIB) as one of the most important bills the House will ever consider in the 7th National Assembly.

The Petroleum Industry Bill 2012, Akande -Adeola said, seeks to harmonize and consolidate about sixteen existing laws governing the oil and gas industry in order to better regulate, coordinate and manage the operations of the industry.  She said some of these laws such as the Petroleum Profits Tax Act, the Nigerian National Petroleum Corporation Act, the Deep Offshore and Inland Basin Production Sharing Act have been in the statute books for over four decades and needed to be reviewed to meet current challenges.

According to her, the PIB has been designed to promote a viable and sustainable petroleum industry in Nigeria as it seeks to unbundle the Nigeria National Petroleum Corporation (NNPC) and in its place

create a National Oil Company that promotes indigenous operational capacity.
The bill, Akande-Adeola explained, also recommends the creation of an Asset Management Company and the strengthening of regulatory institutions that promote transparency, safety consumer rights and safe environments. She stated that the proposed legislation will pave way for the establishment of a gas market and gas infrastructure development company; the establishment of a department in the Ministry of Petroleum Resources charged with frontier exploration services as well as a Petroleum Host Community Fund.
However, this lead debate provoked several harsh comments and a barrage of criticisms from subsequent contributors to the debate.
After two days of debate and apprehension, the Petroleum Industry Bill (PIB) scaled the Second Reading stage. Its passage through this critical stage of the legislative process was significant as no single legislator stood against the bill when it was put to a voice vote.

The Bawa Committee
Speaker of the House, Hon. Aminu Tambuwal described the passage of the bill through Second Reading as remarkable and an indication that the lawmakers understood the importance of the bill to the economy of the country.

According to Tambuwal, the bill made progress because the lawmakers who contributed to the debates moderated their sentiments and put forward the objectives of the proposed legislation with patriotism.

Tambuwal promptly constituted an Adhoc Committee to commence further work on the bill in view of the several defects and lapses identified in the course of the debate on its general principles.

He named the Chief Whip of the House, Hon. Ishaka Bawa, as Chairman of the Adhoc Committee and the Minority Whip as Deputy Chairman.  Members of the Committee include Chairman, House Committee on Petroleum Resources (Upstream), Hon. Ajibola Muraina; Chairman House Committee on Petroleum Resources (Downstream), Hon. Dakuku Peterside; Chairman, House Committee on Local Content, Hon. Honourable  Asita and Chairman, House Committee on Environment, Hon. Uche Ekwunife.

The deputy chairmen of the four aforementioned committees were also named as members.
Also part of the Ad hoc Committe are the Chairman, House Committee on Inter-Parliamentary Affairs, Hon. Daniel Reyenieju and Hon. Peter Akpatason, a former trade unionist, now lawmaker.

The Magic Wand
In view of what transpired during the Sixth Assembly, pundits had predicted that the PIB would be dead on arrival. However, this prediction did not come through given the relative ease with which it scaled second reading.

A member of the House Committee on Petroleum Resources (Upstream), Hon. Emmanuel Jime (PDP-Benue),gave an insight into what did the magic. Jime, who is also the Chairman of the House Committee on Federal Capital Territory, said the masterstroke was the merger of the PIB with the National Frontier Exploration Bill, which seeks to establish an agency that will prospect for oil in the Northern parts of Nigeria.

According to him, the House decided to consolidate the two bills to create a resource-wealth balance between the South and the North and reduce the friction that would have come in the course of considering the PIB alone.
“The House also decided to consolidate the PIB with the National Frontier Bill, which also seeks the exploration of oil in the North.
“The House reasoned that if a National Frontier Exploration Agency was established for oil exploration in the North, we would have created a balance in oil exploitation and that would go a long well in deepening our oil industry and increasing the country’s wealth,” he said.
The truth is that one of the reasons for the failure of the PIB in the Sixth Assembly was the erroneous perception by legislators of Northern origin that the bill was another legislation crafted to suit oil producing states of Southern Nigeria and advance their cause for resource control.

Who Wants PIB Dead?
The bill has crossed one hurdle but there are many more rivers to cross in the next couple of months. No sooner the bill was passed through Second Reading and the Bawa Committee set up, than some interest groups began to mobilise against the bill. Indications emerged that the multinational oil companies operating in Nigeria were not comfortable with the bill.

THISDAY investigations revealed that these multinationals were scared of the new fiscal regime that will come to bear on the oil industry as soon as the bill passes through the legislative crucible.

Feelers across the oil industry indicated that the survival of the  bill will be dependent on the ability of members of the National Assembly to remain focused and resist the possible threats and blackmail that are likely to come  from these  International Oil Companies (IOCs) and their powerful lobby groups.

It was learnt that the IOCs are against plans by the Federal Government to increase its revenue generation from the Join Ventures (JVs) and Production Sharing Contracts (PSCs) as proposed in the bill.

According to some insiders in the industry, the multinational oil firms want the bill either dead or deformed as it makes its way through the parliament.

The reason for this evil wish, analysts have said, is because the government has proposed in the bill new conditions for running both JVs and PSCs to enable Nigeria raise its share to rates commensurate with what obtains in other oil producing countries.

It has also introduced a new regime of royalties that will allow marginal field producers, many of them Nigerian firms, to grow and compete with the multinationals in line with the Nigerian Content Act of April 22, 2010.

The multinationals have allegedly deployed their agents to lobby parliamentarians and other government officials to abandon the bill. The dummy they are selling is that the efforts of the Federal Government to attract foreign investment will come to nothing if the bill is passed. They are quick to remind the government that the IOCs have suspended any fresh investments in the last five years and that many of them are likely to leave Nigeria to other oil producing countries in Africa.

Under the current regime, IOCs have had a field day because the PSC was designed in such a manner  that favoured them and made Nigeria a loser on all fronts.

An oil industry expert disclosed that with the existing PSC, the first five years where the huge capital is invested, the IOCs take a large chunk of revenue estimate of 70 per cent of the profit compared with 30 per cent for the government.

For instance, at the current production level of 2.4 million barrels per day (mbpd) of crude oil, he explained that the PSC fields are generating $7.8 billion annually from daily production of 900,000bpd compared with the contribution of $32 billion by the JV fields for 1.5mbpd. Under the current 1993 PSC terms, he noted that the Federal Government is also receiving between 15 per cent representing 180,000bpd from the production of 900,000bpd while the IOCs take 720,000bpd.

“The current arrangement is bad because royalty is set currently at zero in the 1993 PSC. So, what the PSC designed for us is that the juicy part is where the IOCs enjoy. It is when the oil well is getting old that the government begins to receive higher profit of 60:40 ratio.

“But that was at that time because we did not fully  understand the PSCs and  we wanted to give people incentives to go into the oil sector.”
He disclosed that the PSCs were signed when price of crude oil was pegged at $20 per barrel. In this case, it implies, if the oil price goes above $20, government should take more from the wind fall.

“But since the PSC started in 1993, oil price has always been above $20 per barrel, but government did not invoke the clause. The contract also said the contract will be due for review after 15 years which expires in 2008. It was not done because the oil companies threatened to relocate and government out of fear that time allowed it to linger.

In order to block these revenue loopholes being exploited by the oil multinationals, provisions have been made  in the bill to  raise Nigeria’s  revenue per barrel from 86 to 87 per cent for PSCs blocks and introduce  a  flexible royalty arrangement that will enable the government to earn higher revenue as the prices of crude oil rises above $100 per barrel in oil field operated by the  Joint Venture  partners.

The Challenge
The task ahead is for the executive and the legislature to be united and work towards the common goal of protecting the national interest of Nigeria.  The lawmakers who are mostly the targets of the multinationals should endeavour to reject the mouth watery offers and pressure that are likely to come. The IOCs are desperate to ensure the passage of a deformed PIB to sustain the current revenue leakages and only patriotism will save the bill from harm.

Chief Whip of the House and Chairman, Adhoc Committee on PIB, Hon. Ishaka Bawa said the bill was long overdue and assured that his team would do a good job in spite of all odds.

“ I believe that every member of the House welcomed the bill except for some reservations expressed during the debate. All that we are going to do is ensure that at all cost we provide a legislation that will protect and serve the interest of Nigerians. The interest of our people first before any other interest and any interest that is in conflict with the collective interests of Nigerians, I can assure that the interest of Nigeria will prevail on that bill.

“So at the end of the day, we will bring out a bill that will not bring any problem between the various sections of the country.
“In the course of our work as a committee, opportunity will be given to everybody to present their memos and make inputs, amendments, alteration and expunge any section. So if there is anybody who feels that another version of the bill is much better than you can bring it because we will call for memorandum,” Bawa said.

He said that the committee had no time limit to complete its assignment but would commence work on the PIB as soon as the House dispenses with the defense of the 2013 Appropriation Bill.

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