The long-awaited Petroleum Industry Bill (PIB) remains stuck in parliamentary limbo and is unlikely to be passed until after elections in 2015 as the country becomes engulfed in a political crisis, analysts have said.Thank you for reading this post, don't forget to subscribe!
Apart from the fact that the National Assembly is foot-dragging on the bill, watchers of the industry say that the current People’s Democratic Party (PDP) government may not want a balkanised Nigerian National Petroleum Corporation (NNPC) now because of the benefits it derives from the corporation.
The support of the corporation in terms of logistics, industry analysts say, is very crucial to the success of the current government in power.
International oil companies (IOCs) operating in Nigeria have said the delay in the passage of the PIB has completely slowed down their N17.2 trillion ($109 billion) proposed investments in the oil industry. The bill, subjected to stakeholders’ debates for about 12 years, is still being discussed at the National Assembly.
Oil majors, under the aegis of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry, had said the planned projects were no longer economical due to the fiscal terms of the bill. Members of the OPTS are Shell, Total, Chevron, ExxonMobil and Agip.
“$109 billion in planned investments is not progressing as new projects are no longer economical,” Mark Ward, who is the OPTS chairman, had said.
Ward, who also doubles as the chairman/managing director, ExxonMobil Nigeria, said the operators had planned to invest $33 billion in the next five years but warned that the fiscal terms of the PIB, if not reviewed, might jeopardise this.
Nigerian oil output has followed a volatile course in recent months, with a series of disruptions to vital pipelines and crude oil theft accounting for losses estimated at 100,000b/d in the first quarter of 2013 from its onshore operations alone.
Uncertainty over when the PIB will be passed, as well as the form it will take, will continue to push back investment decisions, and some projects could be cancelled until the financial terms have been clarified.
The proposed legislation aimed at overhauling the country’s oil and gas industry, which has been in the works for 15 years, is now in its fifth year of deliberations by lawmakers. Oil companies say higher taxes and an increase in royalties as proposed in the bill will create one of the world’s harshest fiscal regimes and make exploration “uneconomical”.
Analysts suggest that a watered-down version of the bill may be implemented in 2015, and while not perfect, it may put in place some guidelines that would guarantee a stable operational environment for operators and remove funding constraints.
“The Petroleum Industry Bill is not likely to happen this year but may be split up in more manageable bits or resuscitated after 2015,” Thomas Horn Hansen, senior analyst at Control Risks, said.
While it can hardly be disputed that Nigeria’s energy sector is ripe for a radical review, its failure to improve the investment climate will continue to stifle oil and gas industry’s growth.
For the first time since coming to power 14 years ago, the PDP has been split into two groups, sparking a crisis that has deeply fractured the ruling party.
The new group which is made up of seven governors and one former vice-president, Atiku Abubakar, is demanding that President Goodluck Jonathan should not seek re-election in 2015. Many Northerners say Jonathan’s running again would violate an unwritten agreement within the PDP that power should rotate between the North and South every two terms.
Governor Rotimi Amaechi of Rivers State, who has been embroiled in a long-running feud with President Jonathan, has joined the breakaway faction along with six governors from the North.
Jonathan has held talks with the so-called new PDP but they ended without resolution and experts believe the internal squabbles could run on for months, possibly until elections.
Analysts say the row could erode the political will to push through vital reforms including the long-delayed PIB that could unlock billions of dollars of oil and gas investment.
Some northern governors have also criticised the proposed ultimate powers given to the petroleum minister in the awarding and revoking of licences as well as the proposed 10 percent tax to benefit oil-producing states.
Jonathan became president on May 6, 2010 following the death of President Umaru Yar’Adua. He promised to end the country’s chronic power shortages, end long queues and price fluctuations at filling stations, and ensure the passage of the PIB.
But electricity shortages have worsened, with current generation at around 4,000 megawatts, well under the 16,000 megawatts Jonathan promised would be available by 2013.
And under his administration, Nigerians are paying more for their fuel following the partial removal of subsidies last year, and the country still imports the vast majority of its petroleum products.
A splinter group that leads states with some of the highest voter turnout, determined to stop Jonathan running for another four-year term, has become the administration’s first major internal challenge.
“If Jonathan does not manage to quell the PDP rebellion, the fracturing of the party in the face of a stronger opposition may significantly weaken his chances in 2015,” said Hansen.