CBN urges the National Assembly to fast-track the passage of the PIB

It has been reported that the Central Bank of Nigeria (“CBN”), through its spokesperson, Ugochukwu Okoroafor, has called on the National Assembly to fast-track the passage of the Petroleum Industry Bill.

The CBN’s appeal comes in light of recent allegations that the Nigerian National Petroleum Corporation failed to remit close to US$50 billion dollars in crude oil export revenue. The CBN anticipates that the Bill will put a stop to revenue leakages by reviewing the fiscal terms in sharing of oil revenues between Nigeria and its foreign oil partners, as well as improving governance and transparency in the oil sector.

Update on the 2013 Marginal Field Award Exercise

The DPR’s Nationwide Road Show for the 2013 Marginal Field Award Exercise drew to a close at the NICON Luxury Hotel, Abuja. The Road Show which was staged in four cities around the country revealed some interesting insights which are highlighted below:

  • The deadline for pre-qualification applications may be in mid-January;
  • Applications are to be made online – payments may also be made online if accepted by the Treasury. Discussions are ongoing for confirmation of mode of payment;
  • Application forms may be available as early as next week;
  • Prequalification structuring considerations – bidders will need to pay very close attention to the bidding vehicles to be utilized for the process. In particular, close attention needs to be paid to ensuring that Nigerian beneficial interest is not less than 51%. DPR will also give consideration to the number of individual promoters (minimum of 4) and in the case of consortia made up of companies, the shareholders in the individual promoter companies may not be less than 4;
  • Each bidding vehicle must have a promoter with upstream exploration and production experience;
  • Promoters may participate in not more than 2 companies;
  • Technical partners may enter into a relationship with not more than 4 companies;
  • All bidding vehicles must lease data; and
  • Post-qualification financial considerations- in selecting the final winners DPR will be concerned to examine whether a bidding vehicle has shown a “line of sight” to finance. Bank support letters on their own will be insufficient. Bidding vehicles must show access to 20% of the expected cost of development for the marginal field estimated by DPR to be between US$ 80 million – US$ 100 million.

We shall keep you apprised on further developments in this regard.

2013 Marginal Field Licensing Rounds

The Federal Ministry of Petroleum, via the Department of Petroleum Resources (DPR), recently announced the commencement of the second Marginal Field licensing round. To this end, the DPR has recently issued guidelines outlining the steps interested participants are to follow from pre-qualification to selection. Please see our guide to the process – Marginal Fields 2013 – A brief guide.

The exercise which is aimed at encouraging participation of indigenous exploration and production companies in the Nigerian upstream sector kicks off with  a series of Town hall sessions billed to take place on the following dates and at the following venues:

Lagos: December 3, 2013, 10 a.m. at Eko Hotel and suites, Victoria Island, Lagos;

Port Harcourt: December 5, 2013, 10 a.m. at Hotel Presidential, Port Harcourt;

Kaduna: December 10, 2013 10 a.m. at Crystal Garden Hotel; and

Abuja: December 12, 2013 10 a.m. at Nicon Luxury Hotel, Abuja.

We shall keep you updated on further developments.

 

SENATE’S PIB HEARING SUFFERS SET BACK

Reports reaching us indicate that the much anticipated second hearing on the Petroleum Industry Bill (“PIB”) by the Senate, slated for October 9, 2013, has been postponed. The Chairman of the Senate’s Committee on Petroleum, (Upstream), Senator Emmanuel Paulker, billed this down to the ongoing Hajj exercise. We shall keep you informed on further developments.

NAEC to Hold PIB Themed Conference

The National Association of Energy Correspondents (NAEC) will hold its annual conference on August 22, 2013 at Eko Hotel and Suites, Victoria Island, Lagos by 9 a.m. This year’s conference is themed “PIB: Harmonisation and Implementation for Economy Growth”.

In a Press Statement by Yunus Yusuf, NAEC’s Secretary, he confirmed that the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, the Minister of Power, Prof. Chinedu Nebo, legislators, as well as other stake holders in the petroleum and power industry will be in attendance.

The Keynote address will be delivered by the Group Managing Director, Nigerian National Petroleum Corporation, Engr. Andrew Yakubu. The Director, Department of Petroleum Resources, Engr. George Osahon, will speak on “Expectations and Challenges of Effective Regulation in a Deregulated Regime” and the Executive Secretary, Nigerian Content Development and Monitoring Board, Engr. Ernest Nwapa, will deliver a paper titled “Three Years of NCDMB: Achievements and Challenges.”

Other papers to be delivered include “Driving Capacity Growth in a Liberalised Power Sector” by Prof. Chinedu Nebo, “Balancing National Interest with Investment Incentives” by the Chairman, Senate Joint Committee on PIB, Sen. Emmanuel Paulker, as well as papers from the OPTS Chair, Mark Ward, and the PIB Team lead, Ministry of Petroleum, Engr. Abiye Membere.

SENATE’S JOINT COMMITTEE ON PIB HOLDS PUBLIC HEARINGS (DAY 1)

The Senate’s Joint Committee on the Petroleum Industry Bill (PIB), yesterday, July 18, 2013, held the first of its two-day public hearing on the Bill.

As reported in ThisDay and the Guardian, stakeholders in the petroleum industry (including the Minister of Petroleum Resources, State Governors and representatives of both government parastatals and oil companies) made their presentations on the Bill before the Senate’s Joint Committee.

International and local oil companies under the auspices of Oil Producers Trade Section (OPTS) opposed the passage of the PIB in its current state. In a presentation made by the Managing Director, Mobil Producing Nigeria, Mr. Mark Ward, the OPTS said the PIB fell short of addressing the challenges in the oil industry.

He observed that the Bill sought to significantly increase royalties and taxes making Nigeria one of the harshest fiscal regimes in the world, a situation that will culminate in the country, as an oil and gas producing region, becoming uncompetitive as projects will now become uneconomical.

Given the enormous expenditure required to develop gas infrastructure, he also opined that an incentive-based approach to domestic gas supply obligations will be required to jump start Nigeria’s much needed gas revolution.

According to him, while OPTS supports the objectives of the Bill and the reforms it seeks, the Bill as drafted will fail in delivering such objectives and will reduce the oil and gas industry contributions to the Nigerian economy.

The Nigeria Extractive Industry Transparency International (NEITI), in its submissions, explained that for effective regulation of the industry, it was necessary to reduce the powers of the Minister and ensure the creation of autonomous institutions that would promote effective governance and control in the management of Nigeria’s petroleum resources.

NEITI also noted that the Bill did little to protect the Nigerian environment. They insisted that the Bill should provide minimum environmental standards in the relationship between Operators in the sector and the environment.

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC), in its presentation, opposed the Bill’s provision mandating a ten per cent (10%)  contribution of Operator profits to the Petroleum Host Community Fund (PHCF). The Commission instead advocated exploring the open-ended opportunity available under the Constitution vis-a-vis the provision stipulating that a minimum of thirteen per cent (13%) of the revenue accruing from the Federation Account be paid to oil producing States. They also recommended that the Bill provide for the remittance of revenue by petroleum regulatory agencies into the Commission’s account.

RMAFC’s position on the PHCF was supported by the Governors of Niger and Kaduna State who described its conception as the most controversial of the entire Bill’s provision.

The Honorable Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in her presentation, said it would take about five years before the provisions of the Bill could be fully implemented. She urged stakeholders not to personalise or politicise the Bill adding that the PIB was put together in the interest of the nation.

She downplayed beliefs that the Bill accorded enormous powers to the Minister, stressing that the current Petroleum Act actually vested more powers in the office.

She further added that “Whilst we take best practices from other developed regions, we should also work within the understanding of our own socio-economic and social-cultural norms, and create entities and policies that will work and are not destined to fail from the word-go.”

The Minister also noted that the PHCF was proposed to mitigate the human and environmental conditions in oil producing regions and to assuage the feelings of the host communities towards oil and gas companies.

Declaring the hearing open, the Senate President, David Mark, promised that the National Assembly would facilitate the passage of the bill, noting that the pursuit of the Bill must be a win-win situation.

He however urged that: “Oil companies should not take undue advantage of Nigeria. What I do not want is when people begin to threaten that if you do not do this, we will park out of Nigeria. That is not the correct thing. We are conscious of the fact that there is frustration in the oil industry”.

 

 

SENATE SHIFTS PIB HEARING / EXCERPTS FROM HOUSE OF REPS HEARING ON JULY 11, 2013

The Senate’s two-day Petroleum Industry Bill (“PIB”) public hearing session, initially slated for July 16 and July 17, 2013, has been moved to Thursday, July 18 and Friday, July 19, 2013.

The hearings were moved as a result of the Senate’s planned vote on Constitutional amendment and  a valedictory session in honor of the late Senator Pius Ewherido both taking place on the 16th and 17th of July respectively.

The Senate’s hearing will now come up exactly one week after the House of Representatives’ final public hearing on the Bill.

Although hearings failed to hold on Wednesday, July 10 as initial stated, the House of Representatives, on the second day of hearings, played host to a cross-section of stakeholders in the oil and gas industry made up of the National Union of Petroleum and Gas Workers Association (NUPENG), Petroleum and Natural Gas Senior Staff Association (PENGASSAN) and other interested stakeholders as reported.

Both NUPENG and PENGASSAN, in a joint presentation, submitted that the Bill conferred excessive powers on the Minister and as such encroached on the powers of the Regulators. The Unions’ position was also shared by Malam Nasir Ahmed El-Rufai.

Speaking in his capacity as Director of the Centre for Africa’s Progress and Prosperity (“CAPP”), El-Rufai suggested that Joint Ventures be incorporated and quoted on the stock exchange to encourage Nigerian’s participation in the petroleum industry. He also panned the President’s indiscriminate powers to allocate acreages.

The General Manager (Commercial), Shell Exploration and Production Africa, Marc den Hartog, said the company “fully supports the aspirations of government as contained in the PIB.” He however suggested that the PIB clearly define the roles and responsibilities of entities, especially those of the Regulators so as to avoid overlaps and conflicts.

NEITI’s Executive Secretary, Hajiya Zainab Ahmed, suggested that the PIB provide for a public register of corporate entities that bid for, operate or invest in petroleum upstream assets, including the identities of their beneficial owners and their levels of ownership. She also urged for provisions that would allow for cash-call payments for Joint Ventures as a first line charge on the Federation Account. “This means that the federal government’s share of the expenses for JV operation would be paid based on agreed work-plan and budgets directly from the Federation Account, prior to other disbursements from the said account,” she said.

HOUSE OF REPRESENTATIVES AND SENATE HOLD FINAL PUBLIC HEARING ON PIB

The House of Representatives’ Ad-hoc Committee on the Petroleum Industry Bill (“PIB”) in a communiqué issued on Monday, July 8, 2013, has notified the general public of its final public hearing on the Bill.

Members of the public, especially industry stakeholders, professional / interest groups, host communities, state and local governments, have been invited to make representations to the Ad-hoc Committee on the PIB on Wednesday, 9th and Thursday, 10th July 2013 at the New Wing of the House of Representatives National Assembly Complex, Abuja. All memoranda on the Bill are required to be typed, hardcover bound and produced in twenty (20) copies.

The House of Representatives’ hearing is to be followed by a two-day public hearing by the Senate’s Joint Committee on the PIB.

The Senate’s public hearing, taking place on Tuesday, 16th and Wednesday, 17th July, 2013 at Conference Room 022, New Senate Wing National Assembly Complex, is to host the Minister of Petroleum Resources, the 36 State Governors as well as heads of government Ministries, Departments and Agencies on the first day, and on the second day, Managing Directors of International and National Oil Companies, the Nigerian Labour Congress, Petroleum Marketers, industry stake holders and members of the public.

Stakeholders and interested members of the public willing to make representations on the Bill to the Senate’s Joint Committee are required to submit their memoranda in fifty (50) hard copies and one (1) soft copy to the Committee’s Secretariat in Room SB 10 (Red Carpet), (White House), the Senate National Assembly Complex, Abuja on or before Thursday 11th July, 2013.