The Energia Today - Tomarrow's energy today

Fate of Petroleum Bill hanging

Sunday Osanyintuyi As the public hearing of the on going petroleum bill ended, hope of passing the bill by the senate appears to be hanging in the air as the south south senators in the national assembly called for the remover of the Petroleum minister, subsequently trashed the bill in dust bill.

They said the bill as it currently is, doesn�t support growth of the industry particularly small-scale producers, who are mainly Nigerians. But the minister has said in many for a that such position is not true.

South-South governors also rose from a meeting last week with an agreement that they would no longer support the presidential amnesty arrangement for the militants alleging deceit by the government. They said that government wants to use that as a tool for electioneering campaign for the next elections in 2011. The success of the PIB unarguably depends largely on the level peace in the Niger Delta region. If there were no peace in the region, efforts to make the petroleum industry viable and result-oriented as well as the implementation of the PIB, would end in futility.

The Senate was also divided on the bill before it scaled the second reading because of its inadequate provisions for the Niger Delta. The Chairman Senate Committee on Environment, Senator Grace Bent and some of the committee members restated the poor provision of the bill on environmental concerns in the region. Senator Bent said that the 80 per cent of the cause of the Niger Delta crises are hinged on environmental issues.

The operators of the Nigeria�s oil and gas industry including the international oil companies (IOCs), indigenous producers, marginal field producers and the service companies at a forum organized by the Petroleum Club in Lagos, unanimously agreed that the PIB doesn�t favour growth of the industry especially the indigenous oil and gas firms. The interactive forum was a platform for the operators to bare their minds and propose solutions on the way forward.

They said the bill is investor-unfriendly and uneconomic and will militate against government�s targets on oil and gas. They said the bill needs to be carefully reviewed or it will draw back the industry from the achievements already made.

The operators also raised alarm that the bill exists in more than one version. Some of the operators said that the version they have access to, is different from the one before the National Assembly and the one presented to the stakeholders at the consultative forum in Abuja.

The operators, which included the managing directors of the IOCs and indigenous operators condemned the introduction of new taxes by the bill including the Nigerian Hydrocarbon Tax (NHT), Company Income Tax (CITA), Niger Delta Development Commission (NDDC) levy, rent on acreages, education tax and penalty for flared gas, which is currently $3.50 per 1000 standard cubic feet (scf), among others.

The multinational and indigenous oil firm operators unanimously said if the bill would be passed into law in its current state with the numerous taxes and royalty, government would be taking a step to gradually stifle the petroleum industry and particularly indigenous players and local content.

Mr. Bunmi Toyobo and Chidi Momah who spoke on behalf of the IOCs the bill should encourage growth in oil and gas capacities, reform institutional framework, enhance linkage to broader economy, balance income and promote investor certainty and confidence.

He noted that industry operators, however, have not been consulted enough on the bill, as there are a lot of gray areas. Toyobo said for instance, the bill makes Production Sharing Contract (PSC) uneconomic at a production price of $60 per barrel.

They said that IOCs support the reform intentions of the new Petroleum Industry Bill but noted that certain provisions such as boosting gas development will help to materialise the Federal Government�s aspirations.

"The present oil price is $60 per barrel and the introduction of new taxes has increased cost of production. If we pay these aggravated taxes, it would reduce capital expenditure (capex) by $32 billion and reduce operating expenditure (opex ) by $11.1billion.

According to him, the new PSC investments must generate acceptable economic returns, and considering the high technical, complexities and costs of developing deepwater acreages and challenges in small field sizes, the PIB should make projects viable.

"Progressive PSC fiscal terms will provide sustainable investment environment for low prices, and increased government take in a high price scenario.

Current prices of gas for all categories of consumers require to be reviewed and consolidation at corporate level.

The indigenous operators were represented by Dr. Ebi Omatsola who is also the Managing Director of Conoil. He said that they face the same problems the IOCs face.

He said that some of the taxes paid should be repealed and to accelerate gas development in Nigeria, enablers such as gas or investment allowances, time-limited royalty waivers, are required. He said that government should show value for taxes paid.

The bill according to them, if passed into law as it is, will lead to proliferation of mushroom oil firms. They said the bill should reflect the peculiarities of the Nigerian situation and not patterned along other countries� blueprints.

The Chairman Senate Committee on Upstream Petroleum, Senator Lee Maeba who was the Special Guest of Honour at the event assured that the legislators would consider their concerns and input in the bill. On the existence of various versions of the bill, he said the PIB is not a book that does have various versions, "PIB is a bill and there is a procedure in attending to a bill. We are following the procedure. We will request memoranda from the operators and there will be public hearing on the bill. He said that considering the importance of the bill, it would not be passed in a hurry.

He said: "No Senator took a wholesome approval of the bill, which means that the bill also has been subject to criticisms by the representatives of the people. It will be out of place to do a bill right now that will not protect and project the overall interest of the Nigerian operators and it will also be out of place to do a bill that will not accommodate the interests of our foreign investors and IOCs. Also it will be suicidal to ignore the rising problems in the oil-producing communities in a bill at this time."