Nigeria’s Petroleum Bill (PIB) - silver bullet?

The (re)passage of the Petroleum Industry Bill (PIB) at end of June 2021 has generated much buzz in Nigeria. Hopefully, this version addresses the reasons for Mr. President’s rejection of the one passed in 2018, so it gets assent this time and the country can finally bring closure to the rigmarole and loss of investor confidence of the past two decades.



Recognition must be given to the original founders of the PIB (Alhaji Rilwan Lukman and Committees on Petroleum Industry Law Reform and Oil & Gas Sector Reform Implementation), key players in the industry, and the 9th National Assembly for efforts over the years.

The Bill’s proposed incorporation of NNPC Ltd as a limited liability company and streamlining the omnibus NNPC into two separate Upstream Commission and Midstream/Downstream Authority and the creation of a Midstream gas infrastructure fund to drive the growth of domestic gas, are positives. Bill should also enable deregulation of the downstream sector to eliminate huge wastages in subsidies. The fiscal with hydrocarbon tax and CIT seems an improvement for investors, but more importantly, the Bill brings certainty to the sector, on the rules of the game, as investors do not like uncertainty.

However, a reflection is whether we should have been passing a Petroleum Industry Bill (PIB) at a time like this, or rather an Energy Industry Bill (EIB), especially as the world is transitioning to a future that will be less about hydrocarbons in the energy mix. Of course, we would still need oil and gas for our domestic use (power, petrochemicals, and industries) for decades to come. But it would have been great, along with the Petroleum sector reforms, to also have included a section dedicated to the growth of renewables, its administration, fiscal, funding, and incentive to attract investment to the sector. The future will be more of alternative energy and we need to get our act together quickly, to take advantage (jobs, etc), along with continuing to develop our hydrocarbon, hopefully with CCUS and hydrogen.

Another reflection is whether the Bill’s fiscal are really competitive enough to attract investment levels needed to reach our aspirations of 40-billion reserves and 4-million BPD production. This is based on two challenges - in today’s world, investment in oil and gas is shrinking, as global financial institutions, international investors and oil companies are diversifying away from oil. Major oil companies are reducing their hydrocarbon footprints and prioritizing the most competitive countries. In addition, our fiscal have to be much more competitive than others because we have the unenviable disadvantage of unattractive ease of doing business environment, with our crippling bureaucracy, corruption, rent-seeking multiple regulators, community and security challenges. Whilst it may be a tall order to see any significant investments coming through from International Oil companies, the bill should hopefully give more comfort to independent and indigenous oil companies, to continue to seek funds to invest.

Sadly, much buzz on the Bill has been on the sharing of the cake (host community fund, commission /authorities opportunities) and there has been less on the aspect of growing the size of the cake (to attract investments). 100% of 0 is zero, hence our focus should always be more on how we will grow the cake rather than on how we will share it.

Whilst we await the joint passage by the National Assembly and Mr. President‘s assent, of note, is that more important than Bill’s passage and assent, will be its implementation and execution by the relevant new bodies. If it all ends up with “jobs for the boys” and round pegs in square holes, then the expected gains from this long-drawn legislation may be a disappointing mirage and much ado about nothing. 

Hopefully, we will get this right.

Comments

  1. Olabisi AkadiriJuly 4, 2021 at 7:04 AM

    Very accurately and succinctly put. I agree that the 2 biggest issues are the absence of an integrated energy framework that includes renewables, and the lack of consideration of benchmarking to make Nigeria super-attractive, given our unfavourable business environment. Also, I don't know whether this PIB recognises the fact that NNPC and indigenous companies are the future of E&P in Nigeria. Therefore, a much more intense focus on technology, skills/capacity development and a global view of growth and investment needs to be adopted. The Malaysian NOC Petronas does this admirably well. My optimism remains tempered by extreme caution.

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    Replies
    1. Babs OmotowaJuly 4, 2021 at 9:47 AM

      Thanks for kind words. Your point on local capacity and technology is apt and should be a key issue that "square pegs in square holes" should have as priority.

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