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Hope rises for troubled PIB

…as it moves to second reading

Troubled from the beginning, beset by political interest and primordial sentiments, finally, the Petroleum Industry Bill, PIB, is breathing the fresh air of hope, a kind of silver lining at the end of a dark tunnel. Indications are rife that the bill, which has suffered many reverses, will move to a second reading at the National Assembly by October 20.

This definitely is cheering news to stakeholders and Niger Deltans who have for long demanded a framework that would engender justice, and reverse the curse of oil to blessings for the region. Recall that the bill scaled first reading at the Senate and the House of Representatives late September.

The bill, which was presented by the Senate Leader, Abdullahi Yahaya, scaled first reading hours after its presentation to the National Assembly for consideration and passage by President Muhammadu Buhari. After its reading, the Senate president, Ahmad Lawan, instructed that full copies of the bill be distributed to all the lawmakers ahead of the second reading where details of the bill will be discussed.

The expected second reading will now hold on Tuesday, October 20, when the Senate will debate the bill. Not left out, the bill followed a similar trajectory at the House of Representatives. House speaker, Femi Gbajabiamila said the bill will come up for second reading on Tuesday, October 20 – the same day as in the Senate.

President Buhari, early last month, had promised to see to the passing of the Bill into law latest by the end of 2020 even as stakeholders have underscored the importance of a business-friendly fiscal policy to investments in the oil and gas sector.

Talking about the expected debate of the bill on October 20, Senator Lawan said that an early debate on the bill was imperative to forestall any delay in its consideration. He stated further that the legislation would, after debating on the floor, passed second reading and be referred to the Joint Committees on Petroleum and Gas for further consideration.

Saying, “For the PIB, we need to get the document to our Joint Committee before we suspend plenary, otherwise, the document will remain unattended to throughout the time that we would be handling the budget; and that means we can only come back to it around November or December, and that would be late.

“Everybody is waiting for the PIB to be attended to, but we will take sufficient time to work on it because it is a very sensitive document. Nevertheless, we should take the debate and second reading of the PIB by the upper week, Tuesday 20th (October), 2020, and refer the document to our Joint Committees on Petroleum (Upstream and Downstream); and Gas.

“So, while we are working on the budget, they can keep work on the PIB. Our Joint Committee must do everything possible for us to have a document or report that we would work within the Senate and something that Nigerians and investors will be happy with,” Lawan added.

The chairman, Senate Committee on Media and Public Affairs, Senator Ajibola Basiru, noted the commitment of the upper chamber to  the passage of the bill, saying:

“The Senate is committed to expeditious passage of the bill because it is central even to the realisation of revenue and putting our oil in a competitive international market.

“On the 20th of October, the bill will enter second reading after which it will be sent to the relevant committee of the Senate, that is, committee on upstream/downstream sector so that as work is being done on the 2021 appropriation, work will be done at the same time on the bill”.

He added: “Recall that the PIB scaled first reading in the Senate last week, an indication that the Senate has begun work on the Bill. Also, recall that the leadership of the National Assembly had penultimate week, pledged to accelerate legislative action on the Petroleum Industry Bill submitted by President Muhammadu Buhari two weeks ago.

“The leadership of the National Assembly had also said that the ninth Assembly will break the jinx of not being able to pass the Petroleum Industry Bill after several attempts”.

 Nigerians are at a frenzy awaiting the passage of the bill into law. Many have stressed that the bill will streamline operations in the oil and gas sector and boost investors’ confidence in Nigeria.

Mrs Mary Udok, an oil and gas expert told this newspaper that “the bill has an enormous capacity to raise the confidence of investors in the oil and gas sector.” This, she said, “will lead to more opportunities in the sector that will rub off positively on the host communities.”

BusinessHallmark’s findings revealed that the revised PIB 2020, now before the National Assembly, has enough capacity to turn things around in the sector.

It makes arrangements for a template that will eliminate Nigerian National Petroleum Corporation, NNPC, and the Petroleum Products Pricing Regulatory Agency, PPPRA, as both will be scrapped. Though, the minister of State for Petroleum, Timpreye Silver has rebutted this, saying the giant oil company will be privatised.

The NNPC, as currently constituted, will be replaced by Nigerian National Petroleum Company Limited or NNPC Limited while, according to the bill, the upstream sector of the oil industry will get its own agency known as the Nigerian Upstream Regulatory Commission- to be responsible for the technical and commercial regulation of upstream petroleum operations, and the midstream and downstream sector will get the Midstream and Downstream Petroleum Regulatory Authority, MDPRA, known as ‘The Authority’.

 The bill is expected to amend controversial changes to the government’s take of deepwater oil made last year. The bill is set to touch on fields producing more than 15,000 barrels per day (bpd), as it would cut the tax to 35%, from 50%, leaving royalties at 10%. For fields producing less, the royalty would be 7.5%.

Compared to Nigeria, Ghana has a 5% royalty and 35% tax on its deepwater production according to findings. As for onshore fields, the bill would cut the tax to 72.5%, from 85%, and cut the royalty to 18% from 20%, raising the oil price at which a sliding scale of higher royalties kick into $50 per barrel.

New Regulations

According to the bill, oversight would be fragmented into new entities covering upstream, midstream and downstream. An entity called the Commission would take over oil and gas licensing. It will also become mandatory for the Commission to publish all contracts, licences and leases on its website.

 The new downstream regulator, the Authority, would also be allowed to set fuel prices if it determines there is not enough competition. The bill also says the ministries of finance and petroleum would transfer the assets of the state oil company, NNPC, into a limited liability corporation (LLC), while the new LLC would operate as a commercial entity without access to government funding.

 However, the bill does not explicitly state that it would keep all its revenues.  The bill does not outline a requirement for the government to sell shares to others, meaning it would not necessarily be “privatised”.

The bill also mandates oil companies to set up host community development trusts, and pay 2.5% of annual operating expenditure in the given area toward them. This is in addition to fees that companies would now pay to the Niger Delta Development Commission, NDDC.

The bill has also stopped companies from deducting gas flaring penalties from their taxes, firmly closing an avenue that some used to defray the costs of burning gas. In addition, oil and gas concerns would      have to supply a set amount of gas to be determined by the new regulator, to the domestic market or face penalties of $3.50 per 1 million British Thermal Units (mmbtu)

The bill also says companies can avoid penalties in the case of a force majeure, or if they cannot transport the gas or find a suitable paying buyer.