Take-away from ministerial screening: PIB should be split to be passed

The take-away that resonated from the senate screening of the ministerial nominees is that Nigeria should split the proposed Petroleum Industry Bill (PIB) into parts to avoid further delays to reforms that have kept the bill in the national assembly for seven years.

Emmanuel Kachikwu, roup managing director of the state-owned Nigerian National Petroleum Corporation (NNPC) who is also a ministerial nominee said that “as long as we continue to want to pass a holistic PIB, it is going to be a major challenge.”

“Once you begin to break it up into critical aspects, you begin to make a faster run to passing the PIB,” he added.

Addressing the senators during the screening, Kachikwu said that of four state-owned oil refineries, two units at Port Harcourt with a combined capacity of 210,000 barrels a day are currently producing at 67 percent of their ability. The Warri refinery is shut down, while Kaduna that also has not been operating, will reopen after pipeline repairs have been completed, he said.

“At the end of December, we would sit down and say which ones have shown the capacity to consistently perform at levels that make optimal sense. Those that are not, we will have to shut down and do complete maintenance,” Kachikwu said.

PIB refers to the Petroleum Industry Bill, which aims to consolidate a slew of oil and gas legislation and help make Nigeria’s oil industry more transparent.

The proposed petroleum law, first presented in parliament in 2008, has been held up largely by political wrangling and objections by international oil companies, which say the government is demanding too big an increase in its share of the revenue. The delays have caused “a level of uncertainty that no international investor wants to grapple with” and cost the country $15 billion a year in lost investments, said Kachikwu.

The proposal to break up the PIB is not new. According to Adeoye Adefulu and Ekpen Omonbude in a published report on West Africa Energy, with 363 sections in over 223 pages, the current draft of the Petroleum Industry Bill is unwieldy.

The Bill seeks to deal with a wide variety of issues, the majority of which are only peripherally related. This has made it difficult from a political and operational perspective to manage the diverse interests impacted by the Bill. Further, a thorough analysis of the Bill will show that a number of areas, such as the proposed reforms in the downstream petroleum and natural gas sectors, have been inadequately addressed. The new government should break the Bill up into its natural segments.

“We suggest the industry reforms be taken under the following bills; a fiscal reform bill – which deals with the tax and royalty issues surrounding the industry; institutional reform bill – this bill will be focused on creating new or reforming existing institutions. This will include the regulatory bodies as well as provisions for the commercial entities to be established and the process for transferring assets, liabilities and staff to these institutions; an Upstream Petroleum Bill, focused on the upstream oil and gas industry; a Petroleum Products Bill – focused on midstream and downstream matters; and a Natural Gas Bill – dealing with the operations of a domestic gas market. This bill should not address gas productions matters”, the report said.

Meanwhile, Yakubu Dogara, Speaker of the House of Representatives, at the 4th Triennial Branch Delegates’ Conference of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) said that the PIB presented to the National Assembly is not dead and will come out alive after lawmakers would have given it a final touch.

Despite being Africa’s largest oil producer, Nigeria relies on imports for more than 70 percent of its fuel needs. The state-owned processing plants operate at a fraction of their capacity because of poor maintenance and aging equipment.

Kachikwu said the reorganization of oil taxes should provide scope for giving producers incentives to invest when prices are low and for increasing the rates they pay as prices recover. The tax changes for the oil industry can be incorporated into the national tax code, he said.

“The times when oil prices are so low that nobody is willing to invest in your country, you may give some incentives,” he said. “At the time when they’re so high and people are making outrageous profits, you may increase your taxes.”

Nigeria depends on crude exports for two-thirds of state revenue and more than 90 percent of export earnings. A halving of crude prices in the past year has put pressure on public finances, while the currency has declined 7.8 percent against the dollar since January.

FRANK UZUEGBUNAM