The passage of the Petroleum Industry Bill, PIB, has been lingering for decades in Nigeria, thereby hampering investment in the Oil and Gas sector in Nigeria, as there is no clarity in the industry guidelines.
This has delayed investment as investors want to be sure of return on their investment.
Speaking on this issue in Lagos, the Team Leader of Facility for Oil Sector Transparency and Reform in Nigeria, FOSTER, Henry Adigun, said the delay in the passage of PIB has stalled investment in the sector as Nigeria recorded last major investments in the sector in 1993. This had resulted in divestment by International Oil Companies, IOCs.
He revealed that Nigeria slid into recession as a result of lack of investment in human capital development and diversifying the nation’s economy. The team leader warned that something should be done to avert the looming crisis in the Nigerian economy due to lack of diversification of the nation’s economy as Nigeria is operating a mono economy. The only source of revenue is export of Crude Oil.
“In the next five years, If we do not take proactive steps to diversify the economy, we may get to the state of Venezuela”, he warned.
It will be recalled that Venezuela’s economy is in crisis as a result of poor management of the country’s revenue accrued from Oil.
Speaking on the Rights of Pre-emption Principles of negotiating Incorporated Joint Venture (IJV) the Senior Partner, Primera Africa Legal Director, Aspen Energy, Israel Aye, said the PIB should create an NNPC Limited, as a public limited liability company with an objective of commercial efficiency. NNPC according to him is lacking well-defined mandates and an objective of commercial efficiency. “NNPC is run as an extension of the Presidency and totally lacking accountability to the public”, he stated.
“There should be commercially defined priorities for the Nigerian Oil Companies, NOC. However, the mandate of the NOC, especially against the background of the global operating environment needs to be better clarified. Appointment of Board by Mr. President antithetical to the stated objectives of being accountable to the public, commercial efficiency and a clear mandate. There is room for that to be refined”, he said.
Also speaking in the same vein, Omowumi Iledare, Professor Emeritus, LSU Energy Studies, Baton Rouge, Louisiana, USA Ghana National Petroleum Research Chari, UCC Oil and Gas Institute, Ghana and Executive Director, Emmanuel Egbogah Foundation Abuja, said the growth of the Nigerian economy is hampered by the lack of electricity. “Nigeria has two very large sources for relatively low-cost power”.
Iledare who also spoke on PIB 2020: Understanding the Elements of Host Community Trust Fund listed the challenges in management of oil revenues in Nigeria to include Prebendalism and institutional ineptitude more likely than not in the management committees as common in the LGA and overcoming elite capture and Esau’s syndrome of the society.
“Section 263 (c) limits OPEC definition for upstream, perhaps out of Sync with OPEX definition with CITA, Separate and different HCT funding mechanism may be necessary for each PI segment, although lawful, I am not sure it is expedient for midstream/downstream operations, Perhaps a wishful thinking but I wish the doctrine of necessity can be invoked to use a fraction of royalty revenue to fund the HCTF instead of a fraction of OPEX”, he opined.
Also speaking on Content Mapping for PIB, the CEO BRANDish and Consultant to FOSTER, Ikem Okuhu, said the PIB should make commercial efficiency prime and evolving a segmented industry to help develop niches hitherto not getting the opportunities (like the marginal field era): Maximising the value chain.
He listed others factors that will enrich the PIB to include Issues of Asset velocity (Drill or Drop), Unlocking of financing (opportunities for Nigerian banks to play more…)…value it can add to the economy… and given the “Energy transition going on in the world, what type of PIB should be enacted to take the country for the longer haul.
On Fiscal flexibility and the management, the CEO stated that economic implications of the rule of law and the democratization of the governance structure in the industry should be taken into consideration.
He listed other factors to include PIB and the profitable management of government investments, funding of research vs Frontier exploration funds, unlocking finances and implications on freeing capital for opening of Oil and other sectors of the economy.
“PIB and the issue of revenue allocation as it affects host communities… development imperatives…values that can be unearthed…, who are the stakeholders: Reevaluating the ownership of oil and gas assets for value to host communities, indigenous participation vs PIB: the economic values, ensuring competitiveness and accountability and incentives vs frontier exploration funds should be enshrined in the PIB”, said.
“Managing Host community relations through value-chain localization (as mitigation to resistance and enhancement of opportunities), incentives for Host Community good behaviour: Upsides and downsides, balancing Host Community relationships with business and the potentials for peace and economic opportunities”, he added.
The passage of PIB will definitely reduce the price of Premium Motor Spirit (PMS), which stands at N165-N170 per litre. This is because lots of investors will join the sector when it becomes attractive to invest as the return on investment will be guaranteed. Lots of investments into the sector will definitely bring down the pump price of PMS.
Nigerians are paying higher for PMS because the price is determined by international oil price which ordinarily should not be.
This story was supported by the US Embassy via the ATUPA fellowship by Civic Hive