A Review of the Nigerian Energy Industry

Nigeria: Govt to represent PIB in 1st quarter of 2016

*Vice President Yemi Osinbajo of Nigeria.
*Vice President Yemi Osinbajo of Nigeria.

*Licences 30 new refineries to be built near NNPC facilities 

 Oscarline Onwuemenyi
with agency reports

23 October 2015, Abuja — The Federal Government has said it plans to split the controversial Petroleum Industry Bill, PIB, which has been stuck in parliament over the past seven years, and resubmit it to lawmakers adding that its delay deters investment in Africa’s largest crude producer.

Breaking up the Petroleum Industry Bill, or PIB, into smaller laws focused on fiscal and regulatory measures in Nigeria’s energy industry would make it easier to pass through parliament, he said. The bill, first presented in 2008, will be resent to lawmakers in the first quarter of 2016.
“Separating the PIB, breaking it up, obviously is the way I would think that we’ll proceed,” Osinbajo, 58, said in an interview on Tuesday in Abuja. “That’s really what the market has been waiting for.”
The proposed law has been held up largely by political wrangling and objections by international oil companies, which say the government is demanding too big an increase in its share of revenue.
The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Emmanuel Kachikwu told the Senate last week that delays in the passage of the PIB have caused uncertainty and are costing $15 billion a year in lost investments.
Kachikwu had advocated during his Ministerial nominee screening by the Senate that the country should split the PIB into parts for easier passage, and to avoid further delays to reforms that have been stuck in the National Assembly for seven years.
According to him, “As long as we continue to want to pass a holistic PIB, it’s going to be a major challenge. Once you begin to break it up into critical aspects, you begin to make a faster run to passing the PIB.”
He said that the delays faced by the proposed petroleum bill, first presented to the National Assembly in 2008, have caused “a level of uncertainty that no international investor wants to grapple with” and cost the country $15 billion a year in lost investments.
Kachikwu said rather, the issue of tax should be kept separate from the monolithic bill, allowing for greater flexibility and suggested that the tax changes for the oil industry can be incorporated into the national tax code. He noted that the reorganization of oil taxes should provide scope for giving producers incentives to invest when prices are low and for increasing the rates they pay as prices recover.
Nigeria depends on crude exports for about two-thirds of state revenue and more than 90 percent of export earnings. A drop in crude prices in the past year has put pressure on public finances, while the naira has declined 7.4 percent against the dollar this year.
Meanwhile, the Vice President has stated that while the government isn’t planning to sell its four refineries, which are running at a fraction of their capacity because of poor maintenance and aging equipment, the administration wants to encourage the development of private plants to cut Nigeria’s dependence on imports.
To that extent, he explained, more than 30 licenses for refineries have been granted and private refineries will be allowed to build near the state-run units so they can “benefit from the available infrastructure,” he said.
The country of about 180 million people subsidizes fuel and relies on imports for more than 70 percent of its supply. Two state-owned refineries in the southern oil hub of Port Harcourt with a combined capacity of 210,000 barrels a day are currently producing at 67 percent of capacity, while others in Warri and Kaduna were shut, Kachikwu said.
“In the medium term we will be able to get cheaper pump-price oil because we will be importing far less refined petroleum,” Osinbajo said.
After taking office in May by defeating Goodluck Jonathan and his Peoples Democratic Party in Nigeria’s first electoral transfer of power from one party to another, Buhari fired the board and management of the NNPC, which has been dogged by allegations of losing billions of dollars of revenue since the 1970s.
The NNPC has started publishing monthly accounts and is reviewing contracts with joint venture partners to improve transparency at the national oil company, which had the worst disclosure record of 44 energy companies analyzed in a 2011 report by Transparency International and the Revenue Watch Institute.
The NNPC’s divisions will be “unbundled” to make them more efficient and the corporation will assume more of a regulatory role “as the private sector takes most of the downstream,” Osinbajo said.
However, the government isn’t considering selling its stakes in ventures with oil companies, which would be a “last resort,” he said.
Set up to look after Nigeria’s interests with foreign oil companies, the NNPC controls an aggregate 55 percent share in joint ventures with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and Chevron Corp.
“We think that we are able to resolve some of the cash-call difficulties that we have experienced,” Osinbajo said. The partners may be allowed to “borrow even on behalf of the federal government and being able to introduce their own capital.”
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