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PIB to boost indigenous production, capacity
The crude oil output from indigenous producers, today, is about 80,000 barrels per day out of 2.7 million barrels per day, which is Nigeria’s current total oil production. But CHARLES OKONJI writes that the new Petroleum Industry Bill (PIB), if passed into law, will raise local production to a significant level.
Indications have emerged that the new Petroleum Industry Bill (PIB), which is currently before the National Assembly, would make local oil producers to enjoy unlimited expansion capacity, as they would expand their capacity without restriction.
The new bill, if approved, would free local oil producers from any form of quota restriction in the new share of oil production, thus allowing them to produce 25,000 barrels per day, in addition to a certain share, without further tax inclusion.
An industry expert said it would boost marginal fields operation, which might enable the nation’s oil production to increase, as part of the draft bill stated that an indigenous petroleum company whose aggregate production of crude oil or its natural gas equivalent was not more than 25,000 barrels per day, could be allowed to produce up to the technical allowable output set for the licence or lease.
The bill equally stated that the Minister of Petroleum Resources could issue regulations or guidelines, which might prescribe clearly defined targets and programmes for continuously increasing the level of indigenous participation in the nation’s oil and gas industry.
The regulations and guidelines, the new draft PIB noted, included targets for indigenous petroleum reserves, production personnel content and measurable parameters for determining the level of indigenous participation.
An expert disclosed that indigenous oil producers accounted for only about 80,000 barrels per day, or three per cent of the 2.5 million barrels per day of crude oil production in Nigeria and, therefore, increased local participation would boost the value added to the economy.
The new PIB, from Section 286 to 288, specifically stated: “Participation by the Federal Government in accordance with the provisions of this Act or any law in force shall not be applicable to petroleum operations carried out by indigenous petroleum companies whose aggregate production from petroleum operations is not more than twenty-five thousand barrels per day of crude oil or its natural gas equivalent.
“An indigenous petroleum company whose aggregate production of crude oil and gas is not more than twenty-five thousand barrels per day or its natural gas equivalent may be allowed to produce up to the technical allowable output set for the licence or lease, by the Inspectorate.
“The Minister shall, in consultation with the Inspectorate, issue regulations or guidelines prescribing clearly defined targets and programmes for continuously increasing the level of indigenous participation in the Nigerian petroleum industry and to generally give effect to the provisions of this Act which regulations or guidelines shall include (a) targets for indigenous petroleum reserves; and (b) production personnel content and measurable parameters for determining the level of indigenous participation.
“Pursuant to section 287 of this Act, the Minister shall not later than three months after the Effective Date and thereafter at intervals of two years, undertake a general review of the set targets, parameters and programmes for continuous increase in the level of indigenous participation in the Nigerian petroleum industry and set such new targets, parameters and programmes as shall be necessary to give full effect to the provisions of this Act,” it stressed.
Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, while expatiating on the relevance of the bill in the Nigerian economy, said it would provide a robust and efficient fiscal regime with strong incentives for oil production.
Alison-Madueke noted that it would provide a healthy deregulated environment for private sector participation in the downstream sector and also have the capable of providing a win-win scenario for all stakeholders in the oil and gas industry in Nigeria.
She explained that the royalty structure in the bill would trigger inducement mechanism, which would provide a fair and balanced pricing for operators because of its self-adjusting rate based on the price of crude oil and the natural gas price.
The Petroleum Minister said: “We have a fiscal regime by royalty and tax, which is now predicated on production as opposed to terrain and investment as was previously done. Royalty by production as we have outlined in the bill will capture the output of the company as opposed to its location.
“It will create a fair balance between small and big operators operating in the same terrain; it will give operators the opportunity to make fair returns during field decline, and it proposes lower rates on condensates from large fields as well as ultra deep water fields,” she added.
According to her, the new bill would also provide an efficient tax regime that would be based on the Corporate Income Tax (CITA), the Natural Hydrocarbon Tax and Production Bonus.
While trying to explain the concerns raised by some operators over the proposed increase in the Federal Government’s take from 61 to 72 per cent in the deep and ultra deep offshore concessions, Alison-Madueke said that the government, in arriving at the figure, took into account all the variables, which would be of the nation’s interest, and what was obtainable in other jurisdictions across the world.
She said: “The proposed increase of government to 72 per cent is competitive when we look at the scale of other entities around the world like Norway, Indonesia and even Angola.
“You recall that the 1993 Production Sharing Contract (PSC) terms were based on $20 per barrel crude oil prices real time, but since the start of production in the PSC fields, crude prices have trended upwards. So it was very necessary to look at the terms again.”
Chairman, House of Representatives’ Committee on Petroleum (Downstream), Mr. Dakuku Peterside, in a recent interview, also said: “Nigeria stands to benefit a lot if the PIB is passed into law and there are reasons for that because the bill has the capacity to attract investments and generate employment, which means that it will keep idol hands busy and significantly reduce crime.
“The bill also has the capacity to reduce violence, riots and demonstrations in the region where oil is being produced. It is likely going to lead to increase in the of crude oil production. The nation will have more funds for infrastructure, industry and other things. It is likely to bring transparency in the industry.
“There are strong provisions in the bill, which will enhance transparency in the conducts of the affairs of the industry. It has the potentials of making the Nigeria to benefit more in the signing of joint venture deals between the nation and the multinationals.
“Now another part of what the PIB can do, which will be of interest to Nigerians, is the tackling of environmental concerns, raking more revenue for government for the development. More funds at government’s disposal will empower the President and other officials of government to do more our people,” he added.
Executive Secretary, Nigerian Content Development and Monitoring Board, Mr. Ernest Nwapa, not long again, had declared that the organisation had decided to focus on the big vessels that would carry crude oil as well as components manufacturing, geology, asset ownership, bringing training back into the country so that huge funds spent on training people abroad would extend to multiple beneficiaries in Nigeria.
Nwapa said: “We want to make sure that we manufacture things in Nigeria, so that even when Nigerian contractors get work, they do not just take the money and go abroad to buy goods and service. If we can work assiduously in the next one year, these changes will become as evident as the areas we have worked on.
“Two years ago, we were talking about fabrication, engineering. You hardly hear us talking about those areas now because all we have to do is to create capacity and everybody understands that we have the capability to do fabrication here.
“Each time we come to the point where we threaten sanctions, we have had reversals. When we had a failure and we try to correct it and the people get into the right lane, you do not worry about sending them to jail or getting them to pay a fine. We are not interested in raising money from wrong behavior; rather we are interested in correcting the behavior.
“It is important that the stakeholders you are working for will appreciate the little efforts you are making. One has been very lucky to have the support of the Minister of Petroleum Resources and a very knowledgeable team.
“This Board measures its success with the work that other people do. And we recognize that no matter how hard we push, if we do not convince stakeholders that what we are promoting is value driven, it will be difficult to achieve results,” he stressed.
However, some stakeholders in the industry have expressed worry over the bill, saying it might be delayed. To them, the National assembly should expedite action in passing the bill into law.
The Chairman of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr. Folorunsho Oginni, said that delay in passing the bill had hindered investments in the industry.
Oginni, who advised both the executive and legislative arms of government to encourage enactment of the bill to facilitate the growth of the economy, said that the bill, which is aimed at overhauling the Nigerian National Petroleum Corporation (NNPC) and create an independent regulator, should be expediently passed into law.
According to him, the bill was aimed at fostering more roles for indigenous oil groups and reverse under-investment in the industry.
He said: “It should not take eternity for the legislators to deliberate on the bill for passage into law. I hope that a draft of the reviewed PIB will get to the National Assembly on time for speedy passage into law.”
The chairman of NUPENG, Western Chapter, Mr. Tokunbo Korodo, said that the bill ought to have been passed into law long time ago, as it was critical to the development of the oil and gas sector.
Korodo advised the legislators to ensure speedy passage of the bill for socio-economic development of the country.
He said: “Government should understand that the bill is long overdue to be passed into law.”
Korodo said that the bill, which had generated controversies that led to its different versions at the National Assembly, should be enacted soonest.
An Executive Director of African Network for Environment and Economic Justice (ANEEJ) said that the bill would tackle many challenges in the petroleum industry.
He stated: “There is a general consensus that the only way forward is for the Federal Government to speed up the reform through the passage of the PIB. I was encouraged further when President Goodluck Jonathan told Nigerians that he would make the enactment of the PIB a reality.”
According to him, the PIB would help to improve the economy in several ways as the oil and gas sector had remained the major source of foreign exchange to the country.
