Festus Akanbi with agency report
Fresh facts emerged yesterday that the federal government may have tinkered with the sweeping oil reform bill in a desperate attempt to attract much-needed investment to the Nigerian oil industry, a report by Reuters said.
The proposed changes signal a shift by the federal government, which the agency report claimed was confirmed by four people closely involved with the legislation.
The measure is said to have showed the impact of an increasingly competitive environment in the energy business after 2020’s global oil price collapse and an expected shift to renewables.
According to the report, key changes to the bill would lower the royalties for new production from deep water oilfields to 5% from 7.5% and boost the production level that triggers higher royalties from 15,000 barrels per day (bpd) to 50,000 bpd.
For onshore and shallow water oilfields, it would reduce the hydrocarbon tax to 30% for converted leases, down from 42.5% in the original bill.
The report added that the changes would also guarantee that state oil company, the Nigerian National Petroleum Corporation (NNPC’s) assets and liabilities would transfer to a limited liability corporation. This will help oil companies to collect money owed by NNPC.
In his response, Special Assistant on Media to the Minister of State for Petroleum Resources, Mr. Garba Deen Muhammad, told THISDAY he didn’t know the changes being considered by the national assembly that is still holding unto the document.
He said, “As you know, the document is now before the NASS. They are entitled to conduct public hearing and meet with stakeholders, including of course the IOCs. Nigerians expect the NASS to produce a final document that captures and addresses the opinions and concerns of all stakeholders. I have no idea what changes they have made or are planning to make. But I trust the NASS to be patriotic and fair.”
Spokesperson for the NNPC, Dr. Kennie Obateru did not pick his calls when THISDAY tried to seek his views while WhatsApp and sms messages to his phone were not acknowledged.”
“In the letter seen by Reuters, oil industry executives pushed for more changes, particularly around gas development and “fiscal term stability” which provides assurance that there will not be any unexpected changes in the royalties and tax regime.
“The executives said that “terms are not sufficiently competitive to stimulate the desired new investments.”
Oil companies have noted that Nigeria got just 4% of the $70 billion invested in sanctioned projects in Africa between 2015 and 2019.
Last year, oil industry analysts Wood Mackenzie had said Nigeria’s oil output could fall sharply without reforms.
Gail Anderson, research director with consultancy Wood Mackenzie, said of the changes to the bill: “It shows that (the government) listened. They recognise the need to attract investment, not just in the Nigerian context but globally in the energy transition,” Anderson said.
“The competition is going to be more intense, and this is a move in the right direction to attain and attract investment.”
But Anderson also said that not all the gas terms in the bill were good enough to spur development, which Nigeria has said it wants for its “decade of gas.”
President Buhari originally sent the bill to the National Assembly in September. The legislative body has held two public hearings, but there have been a series of private consultations with stakeholders, including oil companies and community leaders that culminated in dozens of amendments.
Legislators worked over the Easter holidays to consider the amendments, which the executive submitted in March.
One proposed change, which would have instituted a mandatory review of fiscal terms every seven years, was removed after a backlash from companies concerned about stability of terms for projects with decades-long investment cycles.
Nigeria in 2019 had fast-tracked a law to boost its take of offshore oil revenue, a move, industry experts said at the time could put billions of dollars of offshore oil investments at risk.
Now the federal government has changed its stance in an attempt to balance its immediate revenue demands with the need to lock-in long-term investment for its oil industry.
The reform bill has been in the works for two decades, but the contentious nature of changes to the nation’s oil sector, which provides 90% of foreign exchange and nearly half the national budget, have scuppered previous versions.
In January, a fist fight broke out between local community leaders during one of the public hearings on the bill.
But with political alignment between President Muhammadu Buhari and the National Assembly, the measure is expected to pass this year, though likely not before late May, the people said.
