Northern State Governors’ Forum (NSGF) Chairman, Dr. Babangida Mu’azu Aliyu of Niger State

By Chuks Okocha

Opposition to the reworked Petroleum Industry Bill (PIB) is gathering ahead of its consideration by the National Assembly as critical stakeholders pick holes in the bill President Goodluck Jonathan submitted to the National Assembly in July.

A panel set up by Northern governors to advise them on the implications of the PIB on the geopolitical zone’s economy has kicked against some clauses in it.

One of the oil majors, Shell Petroleum Development Company (SPDC), has also expressed concern that the bill, if passed into law in its current form, could stifle offshore oil and gas projects.

The National Assembly is expected to start debating the bill in the next few weeks and if passed, the bill should end years of regulatory uncertainty that has blocked billions of dollars of investment.

The PIB is meant to change everything from fiscal terms to overhauling the state-owned Nigerian National Petroleum Corporation (NNPC).

Its comprehensive nature caused disputes between lawmakers, ministers and the oil majors that have held it back for more than five years, a development that stalled the passage of the first draft of the bill presented to the legislature in 2008.

The Northern governors’ panel is opposed to some clauses in the revised PIB, which it said are not in the interest of the region’s economy, drawing the governors’ attention to the fact that the new PIB is detrimental to oil exploration in the North.

The panel, in a preliminary report submitted to the Northern State Governors’ Forum (NSGF) Chairman, Dr. Babangida Mu’azu Aliyu of Niger State, recommended that lawmakers from the North in the National Assembly should be lobbied to insist on the inclusion of the needed clauses that would safeguard the North’s economy and guarantee further oil exploration in the area.

The Northern governors, after a meeting in Abuja on August 22, had set up the eight-member committee, headed by the Director General of the Infrastructure Concession Regulatory Commission (ICPC), Mansur Ahmed, an engineer and a retired group executive director of NNPC, to advise them on the bill and its effects on the people and economy of the area.

A source told THISDAY Wednesday that the preliminary report listed conditions that should be met before Northern lawmakers could lend their support to the bill’s passage into law.

He said the committee opposed the exclusion of the formation of a limited liability company to be known as the Oil Exploration Agency that would take charge of oil exploration activities in the North.

According to him, in the original PIB submitted by the late President Umaru Musa Yar’Adua, there was a provision for the establishment of Oil Exploratory Agency (OEA) that was charged to continue oil exploration in the Sokoto, Niger Basin and the Chad Basin, all in the North.

However, in the revised PIB, the provision for the establishment of OEA was removed, thus limiting oil exploration activities in the North.

A section of the preliminary report said: “We frown on this and believe that it was a calculated attempt to foreclose oil exploration in the North.

“The committee is of the view that the removal of this clause from the new PIB is not in the interest of the Northern states.

“The oil exploration clause in the old PIB should be extended in the new one. There is a great prospect of oil discovery in the North as is with the case in Sokoto.”

The committee also faulted the removal of the Petroleum Equalisation Fund (PEF) from the revised bill currently before the National Assembly.

In the original draft, there was a clause for the retention of the PEF, charged with the task of maintaining the “bridging cost” in the distribution of petrol, kerosene and diesel.

“In the oil PIB, PEF was meant to pay for the bridging cost of fuel supply to far away towns from the major refinery in Kaduna State. By bridging the cost of fuel, the price of PMS would be maintained in line with the approved price of fuel at N97 per litre.

“The new PIB removed the clause for PEF and replaced it with a 10 per cent fuel proceed to be paid to the community where the petroleum proceeds would have been discovered,” he said.

On the next step after the submission of the preliminary report, the source said: “It is left for the governors in the North to take a position. Our report has made the needed recommendations.

“What we think is that members of the Northern Nigeria in the National Assembly should be made to take a position on the need to include the needed clauses that were removed before the eventual passage of the PIB.

“It is not in our interest that the new PIB removed the provisions for the Oil Exploration Agency and the Petroleum Equalisation Fund in the bill. It is our recommendation that the excluded clauses be included; otherwise Northern lawmakers in both arms of the National Assembly should be asked to vote against the PIB.” 

The source said that the Northern governors would soon call a meeting of the Northern lawmakers in the National Assembly to make their position on the PIB known.

However, in a report by Reuters, oil majors believe that the tax terms in the PIB are uncompetitive and could make offshore oil and gas projects unviable.

In comments from a stakeholders' forum that Shell sent to Reuters Wednesday, Managing Director, Mr. Mutiu Sunmonu, while lauding the presentation of the bill to the legislature, warned that it might stifle investment if its terms are not improved.

“A balanced PIB is what is required - one that will provide optimal revenue to the government whilst providing sufficient incentives for new investment to fuel growth,” Sunmonu said, adding that it must also “take local business challenges into consideration as well as the impact on existing investments.”

He added: “What we have seen of the draft PIB to date does not indicate a bill that fits these criteria.

“The current draft PIB requires significant improvement to secure Nigeria's competitiveness. As it stands right now the PIB will render all deepwater projects and all dry gas projects... non-viable.”

In the current draft, oil companies will pay 50 per cent profit tax for onshore and shallow water areas and a 25-per-cent for frontier acreage and deep-water areas. Current taxes on both are not disclosed.

An industry source, who could not be named, said the deep-water profit tax was a worse deal than most oil majors were getting on existing deep-water projects.