Time for passage of PIB
The recent call by the Director General of the Bureau of Public Enterprises (BPE), Mr.Benjamin Ezra Dikki for the immediate passage of the Petroleum Industry Bill (PIB) is not only welcome but also timely. For long, stakeholders in the oil and gas industry have been calling for an enabling law that would encourage local and international investors and further open up the country’s economy.
There is no gainsaying that the Nigerian oil and gas sector has enormous potentials which when deregulated would instill confidence in those willing to participate in exploration, refining and other associated services. Such deregulation will not only cushion the effects of the plummeting price of crude at the international market, but also curb corruption in the industry, thus enabling the government to focus more on non-oil sources to boost revenue generation.
Definitely, the PIB is an ambitious attempt to comprehensively reform the oil industry and enhance transparency. Unfortunately, the bill, which was presented in 2008, has been languishing in the National Assembly due to sabotage and curious collusion by legislators. There are strong indications that one of the reasons International Oil Companies (IOCs) are opposing the PIB is the alleged lack of guarantees to existing investors.
For example, holders of existing joint venture and Production Sharing Contracts (PSC) licenses and leases will be required to re-apply for their respective contracts within a year of the PIB’s passage. The bill also plans to separate oil and natural gas licensing which currently provides for combined rights for exploration and operation. By separating the contracting frameworks, the on-going development of associated fields would become more difficult, since the operator would be required to hold two licenses.
Experts say the measure is intended to re-open the natural gas licensing field, but in practice, it would likely increase bureaucratic obstacles and the cost of the licensing process. Incidentally, one of the most important aspects of the PIB is the concept of the Incorporated Joint Ventures (IJVs). For long, most of Nigeria’s oil concessions have been held in Unincorporated Joint Ventures by Shell, Total, Mobil, Agip, Chevron, Mobil and the Nigerian National Petroleum Corporation (NNPC).
Industry analysts say these unincorporated JVs always had their share of problems, due to government’s inability to meet funding obligations. A popular thinking is that if these JVs are incorporated, then the funding would become much easier, as funds could be raised from the capital market. That is why capital market operators believe that a quick passage of the PIB will pave the way for an organisation like the NNPC and the IOCs to be listed on the Exchange. We are therefore calling on the National Assembly to fast-track the passage of the PIB to correct the existing anomalies in the oil and gas industry and to also hold operators, especially multinationals, to strict global best practices.
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