PIB: Trudging through legislative tunnel
As the year draws to an end, with the lifespan of the current legislative regime shrinking, the hurdles facing the Petroleum Industry Bill (PIB), which are yet to be fully addressed by the National Assembly, make its passage before the expiration of the regime unlikely, writes FEMI ASU.
Those who had nursed hope, early in the year when the Petroleum Industry Bill (PIB) scaled second reading in the Senate, that the bill would be passed before the end of the year should have discarded such optimism by now.
The vital bill – seeking to overhaul the nation’s beleaguered oil and gas industry – may have seen some progress, but still faces an unclear future.
The PIB, which has been in the works for the past five years, first found its way into the legislative tunnel in 2008 when the late Umaru Yar’Adua-led government forwarded the PIB 2008 to the 6th National Assembly. But it was not passed into law during that legislative regime.
While in the 6th National Assembly, the bill passed first reading stage in 2008, second reading in 2009, clause by clause consideration in 2010 and third reading in 2011 before opposing forces put the brakes on its onward movement.
Primarily, the PIB when passed will establish the legal and regulatory framework, institutions and regulatory authorities for the Nigerian petroleum industry.
Its objectives include the creation of a conducive business climate for petroleum operations; establishment of a progressive fiscal framework that encourages further investment in the petroleum industry, while optimising revenues accruing to the government; creation of efficient and effective regulatory agencies, and promotion of transparency and openness in the administration of the petroleum resources of Nigeria.
A key proposal in the bill is the unbundling of the Nigerian National Petroleum Corporation (NNPC), a player-cum-regulator, into five entities including a fully profit-oriented National Oil Company.
But there are speculations in many quarters that the bill may not even be passed into law before the expiration of this current legislative regime as it seems to be sailing at a snail’s pace, even as it still faces headwinds from international oil companies (IOCs), lawmakers, government and other stakeholders.
Headway against headwinds
Enter President Goodluck Jonathan. Following controversies surrounding the bill, a Technical Committee and a Special Task Force on the PIB were set up in 2012. The committee was to harmonise the various versions of the draft bill, while the task force was saddled with the responsibility of incorporating all changes made by the committee, among other things. The process culminated into the PIB 2012.
In July 2012, the president forwarded the repackaged version of the bill to the National Assembly. In September and November of that year, the bill scaled through the first and second readings respectively in the House of Representatives. The Senate also finished the first reading in September, but could not take the second reading before the end of the year.
In March this year, after sessions of heated debate, the bill eventually scaled second reading in the Senate, and was approved for the Committee Stage where it is expected to undergo further legislative work.
At this stage, the bill suffered several setbacks with the postponement of public hearing by the Senate. In July, the public hearing on the bill was suspended due to the death of Senator Pius Ewherido. In October, the legislators again postponed a public hearing due to hajj operations. Just last month, the joint Senate Committee on Petroleum Upstream, Downstream, Gas, Judiciary and Legal Matters concluded public hearing on the bill.
But it is not yet uhuru. Roadblocks remain to the passage of the 223-page document.
Aside from the opposition from various vested interests, it is believed in some quarters that efforts to pass the bill before the end of this current legislative regime may be thwarted by the forthcoming 2015 general elections.
Hurdles in the way
Business Monitor International (BMI), in its recent report on Nigeria’s volatile oil and gas sector, said it expects the adoption of the PIB around fourth quarter of this year and first quarter of 2014.
The British agency’s expectation could well be a tall order as the PIB has hurdles in the way of its passage which have proven formidable over the years are yet to be cleared.
Since it made its entry into the National Assembly in 2008, the PIB has been opposed by different vested interests who reckon that the passage of the bill would do them more harm than good.
IOCs have continued to make an encore of the jeremiad over the fiscal terms in the current PIB. They are among the biggest hurdles to the passage of the PIB, saying higher taxes and an increase in royalties as proposed in the bill will create one of the world’s harshest fiscal regimes, and make exploration “uneconomical.”
Some of them have sold off and put up for sale oil blocks and suspended new investments, especially in deep offshore areas where they complain that the PIB imposes stiffer conditions on the operators.
Other issues yet to be resolved include the proposed ultimate powers given to the president and the petroleum minister to award and revoke oil licences and the proposed 10 percent host community fund for oil-producing communities, which recently polarised the National Assembly into North versus South.
Ayodele Oni, an energy law and policy expert and senior associate in top law firm, Banwo & Ighodalo, said the remaining hurdles still relate to how to forge a delicate balance between government take and the investors’ take.
“There are also issues around the measurement point for crude oil, domestic gas issues, privileges to be granted to indigenous companies and the threshold for determining what categories of companies would be regarded as indigenous companies and the fiscal regime,” he added.
Hampering new investments
According to the IOCs, the new 2012 draft PIB in the National Assembly, if passed as it is, will make it unprofitable for new investments worth $108 billion to go ahead.
The $108 billion is the sum of the planned capital expenditure of all the oil majors from 2012 to 2025, according to Mark Ward, chairman and managing director of ExxonMobil Nigeria and the president of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce.
Mutiu Sunmonu, country chair of Shell Companies in Nigeria and managing director, Shell Petroleum Development Company of Nigeria Limited, had recently said that the delay in the passage of the PIB and other uncertainties were holding back the company’s planned investment of about $30 billion in two offshore deepwater projects in Nigeria.
President Jonathan also recently said that investment in the country’s oil industry was falling because of delays in passing the PIB, adding that the conclusion of the bill was critical.
Analysts have argued that the uncertainty over when the PIB will be passed, as well as the form it will take, will continue to push back investment decisions, and some projects could be cancelled until the fiscal terms have been clarified.
“It is a sad fact that many important decisions have been held up for more than a decade and some major investments consequently diverted to other countries,” Philip Asiodu, former chief economic adviser, said at a recent conference organised by the Nigerian Association for Energy Economics.
Goodie Ibru, immediate past president, Lagos Chamber of Commerce and Industry (LCCI), speaking on the PIB at a recent quarterly press conference on the economy called on the National Assembly to ensure the inclusion of fiscal terms that would attract new investments, as well as ensure retention of existing investments by IOCs, adding that “the provision of attractive investment conditions and our national interests are not necessarily mutually exclusive.”
Assurance of passage before 2015
Ngozi Okonjo-Iweala, coordinating minister for the economy and minister of finance, confronted with the question about the PIB at a breakfast dialogue with the private sector on December 8, organised by the Nigerian Economic Summit Group (NESG) did not mince words in making the audience realise that the ball was in the lawmakers’ court.
“The executive has passed the PIB to the National Assembly. The political will is vast. It is with the National Assembly, and we are hoping they would work fast and get it passed soon,” she said.
“I doubt that the PIB would be passed anytime soon, unless the contentious provisions are expunged from it. To the extent that the PIB remains as it is, I don’t think this current assembly would pass same into law,” said Oni.
He believes the forthcoming elections have the potential of slowing down the legislative process. “If previous election years are anything to go by, then I believe that the legislative process would slow down from mid-next year until after the elections.”
According to him, the bill may need to be re-introduced and may w potentially have to go through the legislative process again which could also take considerable time.
Oladiran Ajayi, energy expert and a senior associate with Templars law firm corroborates Oni’s view: “Based on the current legislative process and political climate. The passing of the PIB may prove even more difficult next year, as it will face the added dimension of being deliberated during election campaigning season. At this rate, it will be a steep climb to achieve its passage before the end of this legislative season and before the 2015 elections.”
Aminu Tambuwal, speaker of the House of Representatives, had recently assured Nigerians that the PIB would be passed before 2015.
Tambuwal, who was represented at the recent Oil Trading and Logistics, held in Lagos, by Dagogo Peterside, chairman, House of Representatives committee on the Downstream sector, said the House had mapped out strategies to ensure that the bill is passed as soon as possible.
Ibru, at the press conference, had urged the National Assembly to give expeditious consideration to the bill.
“At LCCI, it is our view that due to the crucial role that the oil and gas industry plays in Nigeria’s economy and in our national development aspirations, Nigeria cannot afford to ‘get the PIB wrong’ at this time. Therefore we need to get a clear understanding of the PIB, its impact on the economy and what this means for Nigeria going forward,” he said.
On the implications of not passing the PIB before the end of this legislative regime, Oni said: “Many investors would not expend risk capital in Nigeria because of the uncertainty in the legal and regulatory regime. That is because it goes to the root of their investments in terms of their returns and ability to monetise their investments.”
He added: “What makes matters worse is the fact that many other countries are beginning to discover oil, especially in Africa. These discoveries, therefore, engender competition which means we can no longer, as a country, take things for granted. A solution in my view is probably to jettison the idea of a PIB and pass key legislation in piecemeal; except we want to, of course, strip the PIB of its contentious provisions.”
Clearly, the PIB has been going through a long and tortuous tunnel in the National Assembly, but whether there would be light at the end of the legislative tunnel in which it is currently going through in the 7th National Assembly is hard to say.
Industry analysts have said that the quick passage of a transparent and pragmatic PIB would help reverse the dwindling fortunes of the oil and gas industry, from which the nation derives about 80 percent of its total annual government revenue and more than 90 percent of its foreign exchange earnings.