MATTERS ARISINGContinued from Tuesday June 12, 2012THE idea here is to empower Nigerian companies and Nigerians generally in their quest to become stakeholders in Nigeria's oil and gas industry. Nigerian Content Development Monitoring Board (NCDMB) is to ensure full compliance and fast track speedy implementation of the law for the benefit of Nigerians.Challenges in passing the PIBThe myriad of problems militating against the passage of the PIB include inter alia; the following:' Multiplicity of Bills at the National AssemblyIt has been suggested that there are currently three (3) versions of the oil reform bills before the National Assembly, the version submitted by the Joint Committee of the National Assembly on the PIB, the one adjusted by Minister of Petroleum Resources Mrs. Alison-Madueke and the original bill submitted by the Petroleum Ministry in 2008 drafted by the Oil and Gas Industry Committee (OGIC).Confirming the multiplicity of the PIB versions before the Senate, the Senate President, Senator David Mark at the inauguration of the Senate Committee on Petroleum (downstream) remarked that the existence of different versions of the PIB had been the major stumbling block to its passage by the two arms of the National Assembly. And this has led to fears that the bill that will be eventually passed by the National Assembly will be doctored/watered down.Recently, Nigeria Extractive Industries Transparency Initiative (NEITI) raised an alarm that Nigeria stands to lose 3 Billion dollars annually because of doctored/watered down PIB.My own take here is that the National Assembly should harmonise all the bills, take the good parts and pass same timeously.Lack of political will by the Federal GovernmentFor some inexplicable reasons the Federal Government lacks the courage and political will to push through the PIB. Though with the setting up of the PIB Special Task Force recently by the Federal Government to fast track the passage of the PIB, we hope that the PIB will finally see the light of the day.Multinational oil companies 'Multinational oil companies have a lot of issues with the PIB itemised thus:-' Previous Joint Venture Agreements ' As I mentioned earlier, Joint Venture Agreements between NNPC and Multinational Oil Companies may need to be restructured to allow them to raise capital. Multinational Oil Companies want the status quo to be maintained in respect of Pre-PIB Joint Venture Agreements with the NNPC/Federal Government because they are afraid that tampering with the Joint Venture Agreements will cede too much control to the Federal Government. Even though their fears are unfounded and highly speculative, it now seems as if the Federal Government is about to allay their fears, backpedal and bow to pressure from Multinational Oil Companies and will not tinker with previous Joint Venture Agreements.Host community's equity participation-This is another area of contention in the PIB. The Multinational Oil Companies are angling for eight per cent as opposed to 10 per cent equity stakes for host communities in respect of profits from oil produced in their areas. I hope a consensus is reached with multinational oil companies in respect of percentage equity stakes accruable to host communities.Fiscal regime -The multinational oil companies are not happy with the fiscal regime and increased Royalty Payments in the PIB. They are complaining of the high fiscal regime and aggregate multiple taxation under the PIB. The Federal Government is seeking to get the right balance in respect of the taxation issue so as to carry the multinational oil companies along.Bidding rounds-The Multinational Oil Companies want a competitive, open, non-discretionary licensing and tender process under the PIB. Previous bid rounds have had some shortcomings. This may have prompted the International Oil Companies (IOCs) who are Nigeria's traditional partners in the oil and gas business to shun all the bid rounds, leaving them to local and Asian investors. The IOC's were particularly irked that Chinese and Indian firms were given the controversial Right of first refusal (ROFR) to some of the juicy acreages at the disadvantage of other local and foreign investors that were interested in bidding for the same blocks. For instance, most of the investors boycotted the May 11 2007 licence bidding exercise as they felt that with the ROFR granted to some companies prior to the exercise, the Federal Government might have concluded some of the transactions before the actual date and were only presenting them with a 'fait accompli'. It is cogent and imperative and I hope that the Federal Government addresses the short comings of previous bidding rounds in line and consonance with international best practices before the proposed 2012 licensing round to bring the oil companies back to the fold.Other legislations-The whole essence of the PIB is to consolidate all laws into one single document called the PIB. Some stakeholders are still seeking piece meal and ad hoc amendments to oil and gas laws instead of one single regime. For instance, the National Oil Spill Detection and Regulation Agency (NOSDRA) Amendment Bill 2012 being sponsored by Senator Bukola Saraki. The NOSDRA Amendment bill 2012 seeks to create a more proactive oil spill management and regulation system. It sets out to punish severely irresponsible environmental degradation caused by oil and gas exploitation.My take here is that Senator Saraki's noble and well thought out amendment should be subsumed under the PIB.Reflections on past draft versions of 'the PIB'Some provisions of the 'the PIB' were poorly drafted and not well articulated and some salient important issues not addressed at all and/or included in past draft versions of 'the PIB'.For instance:' Fiscal regime for gas not touched and/or addressed at all;' Fiscal regime for offshore drilling is poorly drafted and omitted ultra deep offshore drilling;' Blueprint for NNPC privatisation is completely superficial 'need to include strong provisions for commercialising and privatising NNPC in line with international best practices;' The role of Minister of Petroleum Resources in the post PIB regime is not properly defined ' for instance:' Who oversees the reform implementation process'' Should the minister's discretionary power to award and revoke licenses be retained'' Should the minister's role be restricted to policy making and setting directives for the industry only'Stakeholders have also argued that approval process for licenses be simplified;' Multiple agencies- Past draft versions of 'The PIB' provides for the creation of multiple agencies to regulate each sub-sector- for instance in the downstream sector creating overlapping mandates for the Inspectorate, Directorate and Petroleum Products Regulatory Agency - this is costly and weakens regulatory oversight - need for the Inspectorate to be a single, independent regulator for upstream, midstream and downstream.My take here is that 'the PIB' is not a perfect document and that there is need to tidy and tinker with certain aspects of 'the PIB' to address and eliminate any identified loophole and or grey areas in 'the PIB'.The way forwardPIB is a step in the right direction, a watershed reform that will change the landscape of oil and gas industry in Nigeria.I hope the Federal Government will have the political will to implement the PIB to the letter with courage and honesty.Critically, it is cogent and imperative that the PIB is passed timeously into law by the National Assembly because non-passage of the PIB is impacting negatively on the Nigerian economy.The PIB, government sources said, would have increased government's revenue to more than N105.4 trillion naira (USD $680 billion dollars) annually. It is left for the audience to imagine the potential loss the Federal Government has been suffering on a daily basis over a period of 10 years due to non-passage of the PIB by the National Assembly talk less of the other sectors in the economy. While oil industry executives have stated that over $50 billion dollars of potential investments are on hold amidst uncertainty over the passage of the PIB.Lack of transparency, accountability and corruption has been the bane of oil and gas operations in Nigeria. In order to sanitise and ensure probity in the sector in alignment with President Goodluck Jonathan's transformation agenda, the Minister of Petroleum Resources, Mrs. Diezani Alison- Madueke, recently introduced far- reaching reforms by the setting up of special task forces with various mandates consisting of eminentNigerians (the PIB special task force, the technical committee for the PIB, the special task force on good governance and controls at the NNPC, the Petroleum revenue special task force and the National refinery special task force).Although a laudable initiative, I personally feel that these are temporary stop-gap measures and doubt the special task forces will stem the rot in the oil and gas industry without the passage of the PIB.Mrs. Alison-Madueke recently stated that the PIB, which is an executive bill cost the Federal Government a whopping N481 million to prepare. Undoubtedly, a heavy price Nigerians have to pay for the Energy reform bill.In consequence, PIB's failure is obviously not a viable option.The PIB would be a good and excellent law and open up investment opportunities, unbundle the NNPC for better performance and result and create a transparent, accountable and corrupt free energy regime.I highly commend the Federal Government's PIB reform initiative. President Goodluck Jonathan in his national broadcast in commemoration of Nigeria's democracy day on 29th May 2012 promised that the new PIB would be ready in June 2012 for onward transmission to the National Assembly. The ball will now be in the court of the National Assembly to do the needful and pass the PIB.' Okwuosa is with The Chancery Associates Barristers, Solicitors & Notaries Public Energy & Maritime Consultants in Lagos.
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