Is FG, National Assembly Set to Break the PIB Jinx?

-By Fred Ojiegbe

The Minister of State for Petroleum, Mr. Timipre Sylva, recently ignited hope of the long-awaited Petroleum Industry Bill (PIB) being pass into law when he revealed that his ministry will within weeks transmit the bill to the National Assembly.

The minister who spoke in an interview on AriseTV, explained that the executive was desirous of sending to the parliament the PIB, adding that having gone through several modifications, when passed, the law would stand the test of time.
“That’s the whole idea. You can’t change the laws very easily,” said Sylva during the interview.

“It tells you that when we are able to pass the bill, it won’t change for a long time because it has taken us about 20 years to get to where we are. It’s now ready to go to the national assembly.

“It’s a bill at the foundation of the main industry. There are lots of parts to it: community, government, industry, everybody’s interest has to be accommodated. We have been able to take a lot of interests on board. Not everybody will be on the same page. There’s no way government and private sector will be on the same page 100 percent, but what we have tried to do is to narrow the gap as much as possible.

“Right now, we are ready to go to the national assembly, so we can get this bill passed,” the minister stated.

The Petroleum Industry Bill was first brought before the National Assembly in 2008 but is yet to become law. Every PIB process has ended with each administration and restarted almost from the scratch by the succeeding government.
Succeeding governments have changed the bill’s structure several times, and in February the present administration stated that it hoped it would be passed by mid-2020.

Running Out of Time
The need to urgently pass the PIB has become critical at a time Nigeria is struggling to be insulated from the impacts of COVID-19.

It becomes even more important at this time that the pandemic has put the country’s public finances, and by extension its economy, in dire straits.

The coronavirus disease has thrown most countries into the throes of sudden and multiple crises and exposed the inherent economic vulnerabilities of resource-dependent countries like Nigeria.

This is largely due to the sudden slump in oil prices, caused by the collapse in oil demand as countries imposed lockdowns in a bid to contain the health crisis.

Coupled with the fall out of the pandemic, Nigeria’s trouble appears to be mounting, as the passage of the PIB delays, decisions on developing new deepwater fields, are reportedly being postponed.

Similarly, short-term projects that provide quick returns and are based on discretionary spending are also on hold.
According to Gail Anderson, research director at consultancy firm, Wood Mackenzie, “It is still believed in some quarters that Shell wants to go ahead with Bonga Southwest, and Total would like to develop Preowei because it is such a small field that can be tied back to the existing infrastructure. But for a bigger project such as Owowo, it is doubtful if ExxonMobil will develop it because the company has better projects in its global portfolio.”

Energy experts and stakeholders say Nigeria would continue to be faced with severe cases of capital flight and paucity of new investments if it continues to delay in passing the PIB, adding that delay in the passage of the bill was holding down lots of final Investment Decisions (FID) and critical investments in the Nigerian oil sector.

In a recent media interview in Abuja, the immediate past President of the Petroleum Technology Association of Nigeria (PETAN) Engr. Bank-Anthony Okoroafor said that the delay in the passage of the PIB was holding down lots of FIDs and critical investments in the Nigerian oil sector.
According to him, it is important for the country to send a signal to the market that the government is serious about the oil reform agenda.

“Time is of the essence now to pass this PIB. There is no better time than now, especially as oil is being found everywhere around the globe,” he said.

The Cost of Delays
The oil sector remains the backbone of Nigeria’s economy and national life. The sector, according to the National Bureau of Statistics (NBS), accounts for almost 70 per cent of government revenues and more than 80 per cent of export earnings.
The delay in passing the bill has continued to deny Nigeria badly needed oil revenues to also fund critical projects in the sector.
In almost 20 years since the struggle to have the PIB started, business clarity and predictability have been lacking in the oil industry.

Experts estimate that over $120 billion (at over $15 billion yearly) has been lost to investment withheld or diverted by investors to other (more predictable) jurisdictions.

According to former Minister of State for Petroleum Resources Dr. Ibe Kachikwu, the cost of uncertainty is far greater than the cost of simply not having the law itself.
Further estimates put lost investment earnings between 2007 and 2012 at $100 billion.

Estimates of employment impact on the sector have been computed in hundreds of thousands. Other costs are historical, direct and equally astounding.

In a presentation made available to Valuechain in Abuja, Senior Partner, Energy and Commercial Contracts of Primera Africa Legal, Mr. Israel Aye, lamented that the country had lost billions as a result of the delay in the passage of the PIB, adding that the opportunity cost of the delay in terms of industry growth, infrastructure and value addition to the economy was too high, for the country to continue to toy with the passage of the bill.

According to him, until Nigeria reviews its strategies and policies relating to the petroleum industry, focusing more on increased domestic consumption of its oil and gas resources and development of the midstream sector of the industry, the industry would continue to make limited contributions to Nigeria’s economic growth, while its impact would always be limited.

He said: “We believe that this time around, the Ninth National Assembly will break the jinx and should be able to pass the Petroleum Industry Bill. Struggling to pass a legislative bill for 20 years is a shame to us all.”

No doubt, the passage of the petroleum legislation is imperative as the bill has the prospect to guarantee a robust fiscal regime, protect the environment, ensure development of host communities, ensure proper alignment with other sectors and encourage investors to expand their investments in Nigeria.

Group Managing Director of the NNPC, Mallam Mele Kyari had in October last year explained that getting the petroleum legislation passed is the right thing to do because investors will not invest their money if they are not sure of how they are going to get their investment back and what benefits can they get from their investment and how stable the investment climate is.

“We must resolve the petroleum legislation and am aware that this administration is working assiduously to get the law passed within the shortest frame of time,” Mallam Kyari assured.

He said that the petroleum law, when passed, would create a robust fiscal regime that would make the Oil and Gas Industry competitive, even as he expressed optimism that International Oil Companies (IOCs) in the country would be spurred to invest more in the petroleum sector after the passage of the bill.

The Nigeria Extractive Industries Transparency Initiative (NEITI) in its latest policy brief, titled: “Insulating Nigeria from Perennial Oil Price Volatility” recommended that fast tracking the passage of the PIB was one strategy which it said would help Nigeria get more from the oil and gas sector in other to aid development of other revenue and export streams.