Thursday, 30 March 2017

NIGERIA’S PETROLEUM INDUSTRY OF THE FUTURE

That the Nigerian petroleum (oil and gas) industry operates under out-dated legal, regulatory and institutional structures is not in doubt. And this is a disservice to the country. Following attempts to reform the sector that reach back to 2001, a comprehensive Petroleum Industry Bill (PIB) was forwarded to the Sixth National Assembly for enactment into law. But opposition to its fiscal provisions (that raised the takings of the country) by international oil companies and disapproval (by legislators from a section of the country) of recommendations in favour of host communities stalled the passage of the Bill in both the Sixth and Seventh Sessions of the National Assembly. However, professing “extensive discussions, collaboration and the participation of all stakeholders that began in mid-August 2015”, the Eighth Senate opted to enact, piecemeal, laws to deal with separate aspects of the petroleum industry as a replacement of the PIB.

Although it has yet to be formally presented to the National Assembly, the first of the envisaged series of the laws is the Petroleum Industry Governance Bill (PIGB) which passed its first and second reading in the Senate on April 13, 2016 and November 3, 2016 respectively. The PIGB establishes the Nigerian Petroleum Regulatory Commission, the Nigerian Petroleum Assets Management Company and the Nigerian Petroleum Company, among other provisions. When he declared open the Public Hearing on the PIGB last December, the Senate President noted that at the passage of the second reading of the PIGB, the upper chamber had committed to tackling the Fiscal Framework and Host Community Issues. He there and then signified the start of informal discussions, contributions, advice and opinions of participants on the two areas of Fiscal Framework and Host Community Issues.

While this was going on at a leisurely pace in the Senate despite the rampaging youth militancy in the oil fields, President Muhammadu Buhari met members of Pan Niger Delta Forum (PANDEF). Upon receipt of a 16-point demand for ending the systematic destruction of oil production and export facilities, Buhari assured the group that the demands did not require further negotiation apart from their untrammeled implementation.

Nonetheless, it is essential for all terms and conditions concerning the petroleum industry to be negotiated. Yet, it is noteworthy that various statements by the Vice President during subsequent visits to some Niger Delta communities beginning in January, 2017 show that the Buhari administration has adopted the PANDEF demands and by end-February (in the words of the Minister of State for Petroleum), “the activities of militants in the region have dropped to near zero”.

As regards the Senate’s self-given plan of action, the latest word on the legislations concerning the petroleum industry came from the Chairman of the Senate Committee on Petroleum Upstream, who told the Nigeria Oil and Gas Conference that the PIGB would be passed into law latest by April. However, the upper chamber should realise at this stage that it can no longer act alone on the future shape of the petroleum industry. The Senate should recall that owing to some legislators’ selfish interests, the National Assembly unpatriotically scuttled the PIB. But it was a pyrrhic victory which raised the intensity of youth militancy in the oil fields. And to the chagrin of the direct and indirect aborters of PIB, the envisaged piecemeal laws would willy-nilly be tempered by what has escalated into militants’ demands. Therefore, for it to be relevant, the PIGB, when passed, should reflect demands such as fiscal federalism and inclusive participation of oil communities in oil industry and ownership of oil blocks. And notwithstanding the orchestrated delay of the parturition of the piecemeal laws, some changes have begun in the oil industry. For example, NNPC joint ventures with international oil companies have shed upfront payment of cash calls in favour of self-sourced commercial financing of desired activities. Also in May, the process of awarding new oil blocks will kick off.

However, some bad habits would rather not die. In true character of most top government functionaries, the Minister of State for Petroleum subtly used the Oil and Gas Conference to prepare the public for an abdication of responsibility. He projected continued failure of NNPC refineries to “meet the target of ending petroleum products’ importation between 2018 and 2019… and that the first quarter of 2020, the Dangote refinery will come on board… and we will have scraps in our hands as refineries.” That déjà vu script of a minister being the chief lamenter who happily presides over corruption-suffused importation of refined products is unacceptable. With the activities of militants at near zero, why will the minister fiddle for 32 months from March 2017 to end-2019 while the NNPC refineries turn to scraps?

The way forward? Through legislation or executive order, the new commercial joint venture template with the IOCs should be extended to the refineries with specific shareholding being allotted to the community hosting a given refinery. Alternatively, the original builder of a given refinery, the respective host community and NNPC should be made co-owners of the plant with the builder becoming the principal manager. In either option above, needed payments for repairs should be effected in crude oil spread over a period of time.

An operational Dangote refinery should not pose any problem to the existing refineries and the modular ones expected to spring up soon in the creeks. The oil and gas industry should be geared toward providing the country’s energy needs with surplus added-value products being exported. Accordingly, oil producing firms, which have been in operation for a set period of time, should be required by law to refine at least 50 per cent of crude oil output domestically. Nigeria can and should work. (Guardian)