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PIB, a Killer, Say IOCs

19 Jul 2013

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 National Assembly

•Alison-Madueke decries alleged politicisation of bill

Omololu Ogunmade and Chineme Okafor

International and local oil companies under the aegis of Oil Producers Trade Section (OPTS)  Thursday stoutly opposed the passage of the Petroleum Industry Bill (PIB) at the opening session of a two-day public hearing in Abuja.

The two-day public hearing was organised by the Senate Joint Committee on the PIB.
According to the OPTS, which is a conglomerate of 18 international and indigenous oil companies, though the PIB possesses a unique opportunity to resolve the numerous challenges confronting the oil sector, it only sets out to aggravate it and simultaneously reduce investment potential in the oil sector.

The PIB also got some knocks from Niger State Governor, Dr. Mu’azu Babangida Aliyu, and his Kaduna State counterpart, Alhaji Ramalan Yero, who opposed the provision of 10 per cent host community fund as contained in the bill.

Miffed by the sweltering opposition to the PIB, Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in her contribution, urged stakeholders not to personalise or politicise the bill as it was conceived in the overall interest of the oil and gas sector as well as of the Nigerian economy.

In their presentation made by the OPTS representative and Managing Director, Mobil Producing Nigeria, Mr. Mark Ward, the oil companies said the PIB fell short of addressing the challenges in the oil industry.

He said: “The PIB presents a unique opportunity to resolve many of these challenges. However, in our view, the bill does not resolve these challenges but it will in fact reduce the much-needed investments to sustain and grow the oil and gas industry.”
Ward, who said the OPTS compared fiscal terms spelt out in the PIB with fiscal terms in 20 other countries, argued that the trend in such countries is to provide a platform for the balancing of high royalties with lower taxes and vice versa.

He also submitted that the PIB fails to guarantee this because “it significantly increases royalties and taxes and virtually eliminates all at the same time” and thus imply that Nigeria has the harshest fiscal regimes in the world.

“The result is that Nigeria will have one of the harshest fiscal regimes in the world, so harsh in fact, that not only is Nigeria uncompetitive, but the projects are actually uneconomic, meaning there is no acceptable return on investments,” he added.

Ward, who disclosed that Nigeria has the ninth largest gas reserves in the world, explained that the PIB would worsen the situation in the industry by increasing the tax rate from 30 per cent to 80 per cent.

“With the low regulated domestic gas price and the enormous expenditure required to develop gas infrastructure, we believe that an incentive-based approach to domestic obligations is the best way to achieve the gas development….which Nigeria so clearly needs to jump start the gas revolution,” he stated.

He also contended that the PIB would make oil exploration and production difficult by significantly limiting “your licence area to your field size with a small perimeter boundary”.

According to him, while OPTS supports the objectives of the bill and the reform it calls for given the manner the bill was drafted, it “will not deliver these objectives and will in fact reduce the oil and gas industry contributions to Nigeria”.

In its submission, the Nigeria Extractive Industry Transparency International (NEITI) explained that if indeed regulation and administration of the oil industry must be guaranteed, it is imperative to reduce the powers of the minister and ensure the creation of strong autonomous institutions that would promote effective governance and control in the management of Nigeria’s petroleum resources.

NEITI which also noted that “PIB does not adequately deal with and protect the Nigerian environment,” added that the bill should provide specifically minimum environmental standard in the relationship between operators in the sector and the environment.

Also, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) said the bill must provide for the remittance of revenues by regulatory agencies to the commission’s account.

It also opposed 10 per cent host community fund, which according to it, would put pressure on the purse of the commission.

The commission reasoned that instead of providing for another 10 per cent for oil-producing areas, proponents should rather explore the open-ended opportunity available in the constitution on 13 per cent derivation which it said only stipulated that the minimum derivation payable to oil-producing states should be 13 per cent but did not state the maximum.

The RMAFC found allies in Niger and Kaduna State governors who also opposed the 10 per cent host community fund, describing it as the most controversial of all the provisions of the bill.

According to a presentation titled “Niger State Position on Petroleum Industry Bill,” made by Aliyu, allocating a fund to host communities was synonymous with creating a fourth tier of government.

He further argued that the bill failed to state what actually constitutes a host community or how funds would be conveyed to such communities, adding that with the existence of Niger Delta Development Commission (NDDC) and the 13 per cent derivation, creating host community fund is an attempt to extend such opportunities through the National Assembly.

In his contribution, Yero said Kaduna State people were opposed to the provision.
When it was her turn, Alison-Madueke, who said it would take some years before the provisions of the bill could be fully implemented, urged stakeholders not to personalise or politicise the bill.

She also noted that the bill was put together in the interest of the nation with hopes that in the next few years, oil would be found in all parts of the country.
She also dismissed insinuations that the bill gives enormous powers to the minister, stressing that the current Petroleum Act rather apportions greater powers to the minister.

She added that the bill aimed at interfacing between the government and stakeholders in the oil industry with the intention that everybody would be a winner in the end.
According to her, “Whilst we take best practices from other developed regions, we should also work within the understanding of our own socio-economic and social-cultural norms, and create entities and policies that will work and are not destined to fail from the word-go.”

On the issue of the host communities, the minister noted that it was established to mitigate the human and environmental conditions in the region and to assuage the feelings of the host communities towards oil and gas companies.

“The PIB seeks to establish a legal, fiscal and regulatory framework that will revolutionise the petroleum industry in Nigeria; it intends to create a standard business practice, protect health, safety and environment in the course of petroleum exploration and enhance exploration and exploitation of petroleum in Nigeria,” she added.

While declaring the hearing open, Senate President David Mark promised that the National Assembly would fast track the passage of the bill, noting that the pursuit of the bill must be a win-win situation.

Tags: News, Nigeria, Featured, PIB, Killer, IOCs

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