Why PIGB may not be signed and its implications

The lack of consideration for the yearnings of people which has been the hallmark of this government may cause the country fortunes on account of not signing the Petroleum Industry Governance Bill.

Despite a general consensus that the bill should be signed into law no matter the level of its inadequacies so that it would be fine-tuned while  in operation, this government has found one excuse after another not pass it.

If it is not signed into law there are indications that tempers might rise among the Niger Delta residents or militants that are feeling surcharged that the petroleum industry governance bill that has been passed by the national assembly to the president for assent will not see the light of day after all.

This may therefore resort in some aggrieved militants using the issue as the reason to start attacking oil facilities to draw the attention of the government to their displeasure over the matter. If this is allowed to happen in these days that the price of crude is hovering around $70 per barrel and above, the consequences would be colossal.

The feeling across the region is that the government is not interested in signing the bill because the present structure in oil and gas industry, especially the Nigerian National Petroleum Corporation (NNPC), which favours the president and his cronies.

Some industry operators are citing the recent promotions carried out in the NNPC in which some young men from the president’s region are put in sensitive and juicy positions to the detriment of their more experienced seniors who are from the southern part of the country.  Such exercise they say may not have been possible without it being based on merit if the PIGB that was intended to restructure and reform the NNPC has been signed into law by the president.

The recent observation by the NNPC is an indication that the government may not sign the bill. This is because the NNPC must accept the contents of the bill before the president would assent to it.

The Nigerian National Petroleum Corporation (NNPC) has picked several holes in the bill.

According to the corporation the provision in the PIGB that the NNPC should be split up would be resisted by the oil worker trade unions unless it was communicated properly.

Maikanti Baru, group managing director of NNPC highlighted the issues and urged that they should be clarified when he spoke on emerging issues and concerns in respect of PIGB at a conference organised by National Associate of Energy Correspondents of Nigeria in Lagos.

Maikanti Baru who was represented by Roland  Ewubare, group general manager, National Petroleum Investment and Management  Services ( NAPISM) said the issue of divestment of 40 percent of Nigeria Petroleum  Company shares to the Nigerian Stock Exchange, needs clarity on the process of divestment and the steps should be clearly  provided for in the law.

The corporation wants to know if the shares are going to be sold to Nigerian public or foreign portfolio investors. This it says is not stated in the law.

There is no clarity regarding the nature of NNPC  liability  to be transferred  to the Liability  Management  Company  NPLMC, asides the outstanding  pension obligations  of the Department  of Petroleum  Resources. The bill, it says does not provide adequate clarity on type and nature of liability to be inherited and the process for the settlement of such liability.

He said adequate clarity should be provided on funding of NPAMC and the newly created NPLMC.

The NNPC boss advocated that the NPAMC should to be structured in the form of an agency rather than a company with limited role in the administration of production sharing contract assets. He said similar institutions across the world are structured as agencies for example Petition Norway.

He said that even though the PIGB has defined tenures for non-executive directors, there are currently no provisions that provides for stable  tenures for the executive directors and insulate them from changing dynamic of the political context, as far possible.

“The issuance of well-defined contract terms to the executive director may address this issue,” he said.

He said the newly established commercial entities are expected to be governed in line with the provisions of code of corporate governance by the Security and Exchange Commission. But the bill does not include recommendations to address possible conflicts that may arise between its provisions and those of the SEC code, when such conflict arises.

All these observations according to some industry source are tacit indication that president Muhammadu Buhari administration may not sign into law the PIGB.

Already, analysts are of the view that Nigeria is about to miss out on another opportunity to put in place some well-defined regulatory laws in the oil sector as time is running out for the passage of the Petroleum Industry Bills (PIB).

There are three other bills — the Petroleum Industry Administrative Bill (PIAB); the Petroleum Industry Fiscal Bill (PIFB); and the Petroleum Industry Host Community Bill (PIHB) — which have all gone through public hearings in both chambers of the National Assembly.

They are currently awaiting their third and final reading before they are sent to President Buhari for assent.

At the moment, there is a frosty relationship between the National Assembly and the Presidency. This is likely to make it difficult for the bills to be passed. If they are not before the end of the tenure of the current administration, all the work done on them so far would have been wasted and the next government will have to start afresh on the bills.

The proposal for a new legal regulatory framework for the oil sector has been stuck in the Legislative arm of the Federal Government since 2008 and the continued delay in giving Executive life to the bills is said to have cost the country over $20 billion a year in new investments.

However, Nigeria is expected to dominate the oil and gas sector in Africa in the next seven years with her Capital Expenditure (CapEx) outlook projected at $17.3 billion. At the current exchange rate, this will amount to some N6.21 trillion.

GlobalData, a leading data and analytics company says in sub-Saharan Africa, Nigeria will be leading with 10 planned oil and gas projects expected to start operations between 2018 and 2025.

The company’s latest report: ‘H1 2018 Production and Capital Expenditure Outlook for Key Planned Upstream Projects in sub-Saharan Africa‘ indicates that a total of 64 planned and announced crude and natural gas projects are expected to commence operations in sub-Saharan Africa between 2018 and 2025.

GlobalData’s Oil and Gas Analyst, Joseph Gatdula, says the total crude and condensate production from announced and planned projects in sub-Saharan Africa is expected to be around two million barrels per day (mmbd) in 2025 and the total natural gas production in 2025 is about 8.1 billion cubic feet per day (bcfd).

A proposed CapEx of $40.7 billion is expected to be spent on development of planned projects in sub-Saharan Africa, and $117.1billion is expected to be spent on key announced projects.

Among countries, the top three in terms of highest planned CapEx spending are Nigeria, Mozambique and Angola with around $17.3 billion, $7.7 billion, and $5.1 billion respectively, during 2018–2025. With early-stage projects Indonesia Mozambique with a CapEx of $38.5 billion, followed by Nigeria with $29.4 billion.

Among companies, Eni SpA, Royal Dutch Shell Plc, and Total SA have the highest level of spending on planned projects with $7.2 billion, and $5.6 billion and $3.4 billion respectively. The highest level of spending on early-stage announced projects is by Shell, Exxon Mobil, and Eni with $15.5 billion, $12.9 billion, and $6.9 billion spent on CapEx, respectively.

This expectation could be stalled if Nigeria’s oil and gas region decides to disrupt production activities in protest against the seeming jig-saw puzzle over the petroleum industry bills.

Olusola Bello