House of Reps Passes Petroleum Industry Bill

Channels Television reports that the House of Reps’ Ad-Hoc Committee report on the PIB has been considered and that the Bill has been passed by the lower house.

This comes after a flurry of Bills (46 in total) were passed by the Senate yesterday, June 3, after same were transmitted by the House of Reps.

The House of Reps’ passage of the PIB comes to little or no avail as the 7th Assembly wrapped up today. The Bill would have also required passage by the Senate.

Indeed, Senate president, David Mark, in his End-of-Assembly speech, admitted the lawmakers failure to pass the Bill.

The PIB has been before the House of Assembly since July 2012.

House of Representatives Move to Minimise Executive Discretion under the PIB

ThisDay and Leadership report that the House of Representatives’ Ad-hoc Committee on the PIB has recommended that the President’s discretionary powers to award licenses or leases, as well as the Minister of Petroleum Resources’ control over relevant regulatory agencies, be removed.

The recommendations, which are contained in the executive summary of the Committee’s report on the Bill, also seek to extend the coverage of the Petroleum Host Community Fund to communities where oil and gas installations are located.

The Committee will present its report on the PIB when the House reconvenes on March 31, 2015.

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”.

 

 

Who is really afraid of Nigeria’s Petroleum Industry Bill?

Feature Article by Humphrey Onyeukwu[i]

The Petroleum Industry Bill (PIB) is lauded to be the single most important legislation in Nigeria given our mono-economic set-up,  however ridden with various mutations from the original intervention of the Oil and Gas Implementation Committee (OGIC) inaugurated by the Obasanjo administration in April 2000.

Several versions of the PIB materialized as an outcome and greatly skewed the many efforts in producing a bill that would fundamentally reform an industry lacking significant changes in administration and regulation. Discordant tunes emerged from the various stakeholders, each with self-confessed belief on how the reform agenda would have been carried out. The International Oil Companies, indigenous operators, international independents, regulators and even the minister alike joined in a macabre dance of what a PIB should be and what it should not be.

A sigh of relief may have seemingly arrived with the recent transmission of the bill to the seventh National Assembly. The Special Task Force for Implementation of the PIB, brainchild of the Federal Government’s concerted efforts to deliver on its promise to the nation in aftermath of the subsidy protests, submitted their finished product, a new Petroleum Industry Bill.

The new PIB, without doubt, has agitated the déjà vu trailing previous attempts. Questions answered and unanswered: Is it the much-needed cure to revive an ailing Nigeria’s oil industry? Would this be another stillbirth or is the stage finally set for culmination of the sector reforms. Who is really afraid of the Petroleum Industry Bill?
Continue reading “Who is really afraid of Nigeria’s Petroleum Industry Bill?”

Petroleum Industry Bill Unlikely to Optimise Domestic Gas Supply

Continuing with our fiscal theme, here’s the link to KPMG’s recently published article titled Petroleum Industry Bill 2012: Highlights of the Fiscal Provisions.The article highlights critical provisions of the Petroleum Industry Bill and concludes by stating that its provisions are likely to lead to an increase in the effective tax rate of many companies. It also opines that the current provisions of the PIB are unlikely to optimise domestic gas supplies as the fiscal incentives for upstream gas development under the PIB are less attractive than available under the Petroleum Profits Tax regime. The article may be found here.

Fiscal Provisions of the Nigerian Petroleum Industry Bill: A not so quick-and-dirty assessment, Part II

This part concludes Dr Omonbude’s feature article on the fiscal provisions of the PIB

In the previous part of my note, I introduced and discussed two major features of the fiscal elements in the PIB. The aim of this exercise was to investigate these provisions in the context of how they had been presented within the Bill, and to set the ground for some of the analysis that would follow in this second part. The aim of this part of my note is to consider the other two big-ticket fiscal instruments as far as the Bill is concerned (namely the Nigerian Hydrocarbon Tax and the Companies Income Tax), and to then carry out a simplified analysis of these instruments. Continue reading “Fiscal Provisions of the Nigerian Petroleum Industry Bill: A not so quick-and-dirty assessment, Part II”

Fiscal Provisions of the Nigerian Petroleum Industry Bill: A not so quick-and-dirty assessment, Part I

Feature Article by Dr. Ekpen J. Omonbude

Background

After what can be described as a very, very long wait, the Nigerian Government has forwarded the Petroleum Industry Bill (‘PIB’ or ‘the Bill’) to the National Assembly. This follows a series of drafts, disputes and revisions as the Government, the international oil companies (‘IOCs’), and the legislature failed numerous times to agree on previous versions.

The Ministry of Petroleum Resources (‘the Ministry’) describes the PIB as potentially “one of the most important pieces of legislation in the history of the oil industry in Nigeria, changing everything from fiscal terms to the make-up of the state-oil firm”. It is clearly an ambitious document, one which in our assessment could change, fairly significantly, the way in which the oil and gas business is conducted in Nigeria if passed into law as-is.

The industry has greeted the PIB with mixed reactions. For some upstream E&P players, it does not appear that there is satisfaction with the fiscal terms as stated in the Bill. For others, there appears to be a certain degree of confusion as to what would apply when, and how. International organisations appear to have taken a position of quiet optimism for now.

At over 220 pages, the PIB is a daunting read for most non-lawyers. It does however try to simplify what is currently a difficult petroleum legislative and regulatory framework to explain to the untrained eye (lawyer’s paradise, anyone?). Highlights of such attempts at simplicity are the apparent amalgamation of the relevant petroleum sector laws into one piece, and a reduction of the points of fiscal burden to a handful of fiscal instruments. The Bill in fact defines fiscal rent as “the aggregation of royalty, Nigerian Hydrocarbon Tax and Companies Income Tax obligations arising from upstream petroleum operations[1]. This simplicity may not however translate to reduced fiscal burden. In my view at least three separate pieces of legislation could have been submitted to the National Assembly, rather than one, but this is not the purpose of this particular exercise. Continue reading “Fiscal Provisions of the Nigerian Petroleum Industry Bill: A not so quick-and-dirty assessment, Part I”

Alison-Madueke – Petroleum Industry Bill will boost output by attracting foreign investment

Nigeria’s Petroleum Minister, Mrs Diezani Alison-Madueke is reported by Bloomberg commending the potential benefits of the PIB for investment in the Nigerian oil and gas industry. According to Alison-Madueke, the PIB is designed to create “a fair balance between small and big operators in the same terrain.” The Minister’s comments are likely to refer to the provisions for Production Allowances in Schedule 5 of the PETROLEUM INDUSTRY BILL 2012, which give producers an allowance in accordance with their levels of production. As an example, under those provisions, small oil producers in onshore areas that produce less than 27,300 barrels of oil per day would be entitled to oil production allowances of the lower of US$ 30 per barrel or 30% of the official selling price.