The Petroluem Industry Bill (PIB) seeking to regulate and restrore accountability and transparency in the oil sector strikes at the heart of decades of high flying corruption and foreign fleeching of the nation's oil resources. Regional Editor (News), Olawale Rasheed x-rays how this legacy of OBJ and Yar'Adua has become an albatross for President Goodluck Jonathan.This is a story of patriotism subverted by entrenched national and multi-national interests in the oil sector. It is the story of a bold move to stop mind buggling corruption wracking the very core of Nigeria's economic base ' the oil sector. Existing regulations (or the lack of them) in the petroleum sector have largely allowed a combination of western oil companies and their Nigerian collaborators to fleece the nation of trillions of dollars over the last 50 years.Industry watchers posit that between 1956 when crude oil was first discovered in Nigeria, 1958 when it made the first export of 12,000 barrels, and last year when Nigeria clocked 50, defective regulation of the sector has made it impossible for the nation to maximally tap from the benefits inherent in its joint venture operations with multi-national oil companies.As Nigeria looks back at its status as a leading oil producer in the world, the constant reminder of its under-development and high poverty level has been embarrasing. That shame of mass poverty in the midst of oil wealth prompted an unusual move from an unusual quarter in year 2000.A firm decision was taken to initiate a holistic review and reform of the oil sector to restore the nation's firm control and root out the scourge of deep seated corruption. That was the first planned reform of the sector since independence, This step yet to be accomplished is now an albatross on the nation's political leadership.Contrary to earlier reports, the architect of the controversial proposal for the reform of the oil sector was former President Olusegun Obasanjo who after a year in office, concluded in 2000 that nothing could move the country forward unless transparency was restored in the oil sector. Findings from the inner caucus of the former president revealed that they were very conscious of the difficult fight they were about to embark on as the planned reform actually touched on national existence for which local and international forces had defined and undefined stakes.Friday Edition can report that the decision of former President Obasanjo then was not that of a revolutionary bent on nationalising the oil sector and return the wealth to the masses. Those in the know said the General, after his travails in prison, and his second ascension to the Presidency, convinced his caucus that the situation in the oil sector was unsustainable and detrimental to the long and short term interest of both the elite and the masses.That understanding was said to have accounted for the setting up of the Oil & Gas Reform Implementation Committee in 2000 to carry out a comprehensive reform of the oil and gas industry. It produced a report which was submitted to the government. But due to the powerful interest involved, the internal politics of the ruling party and the strategic nature of the sector to local and international interests, the committee work dragged from 2000 to late 2006 by which time the nation had become engulfed in the third term controversy. The third term controversy and the Atiku/Obasanjo feud largely stalled most laudable reform activities of the second term of the Otta farmer.What Obasanjo handed over to late President Umaru Yar'Adua was the report of the presidential committee on the oil and gas sector reform. Unknown to Obasanjo, the late president had a philosophy that was very close to socialism, especially in relation to national wealth and resources. Those in the know are quick to note that while Obasanjo had hoped to restore a measure of sanity in the sector, the late Yar'Adua pushed for a whole sale overhauling, thereby pitching him against entrenched forces that in turn reportedly launched a kill or mess up campaign against the reform efforts.By 2007, when the late Yar'Adua took over, he dusted up the report and re-launched the initiative, sending shock waves locally and internationally. The original report from the Obasanjo committee contained a draft bill but this was re-worked and firmed up under the guardianship of the nation's highly revered citizen in the oil sector, Alhaji Rilwan Lukman, who was the Petroleum Minister then. The key involvement of Lukman, a key player in the international oil politics, was then considered a final realisation by the nation's elite that the deals in the oil sector should be normalised and regularised.The bill presented to the National Assembly in 2008 had ambitious goals namely, vesting oil and gas resources in the Sovereign State of Nigeria; managing petroleum resources in line with good governance and transparency; complying with 2007 Extractives Industry Act by all institutions in the industry, including the National Oil Company (NOC); observance of international environmental provisions and obligations; maximising economic benefits for the nation through revenue accruals; ensuring minimal political interference; and, more critically, seeking to reduce to the barest minimum the stranglehold of International Oil Companies' (IOCs) on the petroleum industry.More specifically, the bill hopes to achieve the following, namely subjecting transactions in the oil sector to public scrutiny; removing confidentiality from oil transactions; establishing flexible fiscal provisions guaranteeing an optimal returns for government through the simplification of revenue collection; clear principles for the working of the Incorporated Joint Ventures; supporting domestic gas utilisation through effective implementation of the National Gas Master Plan and reforming oil field acreage management system untouched for the last fifty years.The agenda was however largely worrisome to many players who saw the bill as akin to semi-nationalisation of the oil sector. This resistance forced the Yar'Adua administration to hold further consultations with the stakeholders leading to 56 changes made to the proposed law.These changes, Sheu Ladan, late Group Managing Director of the Nigeria National Petroluem Corporation (NNPC), insisted were consistent with the general principles underpinning the PIB namely: the need to remove obsolescence and out-dated provisions in the current laws; encourage alignment with international best practices; remove opaqueness and lack of transparency in the current statues; and enhancing good governance practices and processes and dynamics of the oil and gas industry.From 2008, when the bill was submitted to the National Assembly, entrenched interests angry about the stiffness of the bill, have ganged up to kill it.The Chinese/Asian angleThe nation's oil sector was dominated in the past 50 years by the western oil companies led by Shell Corporation. If the reform package was passed as submitted in 2008, the West would have lost its stranglehold on the nation's oil sector. Shell in particular may lose about 80 per cent of its oil acreage holding.Reports indicated that some elements within the administration expects the western oil companies to divest from Nigeria in protest and thus pave the way for Chinese and other Asian companies to come in.While the reports are unconfirmed, records showed that former President Obasanjo had actually opened the nation's oil sector for investors from China, India, Singapore and South korea.By the time the reform bill created a gap between Nigeria and the international oil companies, Chinese interests were alleged to have crawled in, reassuring Nigeria of its readiness to invest and operate under the new law, even if the western oil companies like Shell, ExxonMobil and others pulled out. A top Shell official indeed once accused some Nigerian government officials of trading their oil business quotation to the Chinese.While the Yar'Adua administration lasted, there was a strong push to pass the bill into law and damn the resistance and complaints of the western oil cartels. Findings showed that the government of Nigeria then hoped to fill whatever vacuum might be left by western divestment by signing on the Chinese and other interested Asian companies.The Chinese, on their part, became key actors as the dragon nation was eager to build on the opening earlier granted it under former President Obasanjo. This further angered the oil multi-nationals which believed that Nigeria was playing dirty by romancing the Chinese. Hence, as at the time the late Yar'Adua's health crisis set in, there was no love lost between key stakeholders in the oil sector and the Nigerian government.That Nigeria was then preoccupied with the succession crisis gave lobbyists and angry stakeholders sufficient time and opportunity to fight the reform proposals at the two chambers of the National Assembly.The western fight backWhile the late Yar'Adua was bedridden, the angry stakeholders, both local and international, unleashed their arsenal, deploying all available resources to remove offensive clauses in the bill that they found injurious to their business interests. From infiltrating the federal lawmakers to seeking consular support, the multi-national oil corporations picked up the gauntlet, vowing never to allow the bill to sail through as it was proposed by the executive in 2008.The first weapon deployed was the withholding of further investment in the oil sector citing uncertainty with regards to the proposed reforms. Royal Dutch Shell openly said it had some $40 billion worth of potential investment in deepwater oil projects in Nigeria on hold amid uncertainty. Mutiu Sunmonu, Country Chairman for Shell Nigeria, said it was difficult to make commitments without clarity over the terms of the Petroleum Industry Bill.'Just looking at deep water alone, we have a portfolio of about $40 billion worth of projects' But we will not be able to make a move on these until we have a landing on the PIB. That is potential investment that we are not able to sign off on at this time,' Sunmonu said.The full picture of the fight back from the multinational oil companies came to light when Wikileaks published the American diplomatic despatches with a particular one focussing on the interaction between the American Ambassador, to Nigeria then and the Executive Vice President of Shell in Africa, Ann Pickard.Pickard told the ambassador that if the House passed the PIB in the coming weeks, 'we need to move quickly' to obtain any necessary changes before it becomes law. Fortunately, she added, 'We are working with the House and the House appears to want to work with us.'She continued that if the Senate passed the PIB, 'We aren't worried.' Unfortunately, she explained, 'We think the Senate will pass a bad bill' but it won't really matter.' She added that she would be at the Nigerian House and the Senate later that day and would let the Embassy know if there were any unexpected developments.The Ambassador reportedly asked if Shell had had engagements with the Nigerian government outside the National Assembly, such as with the Ministry of Finance and the Central Bank of Nigeria. Pickard said,'We are meeting with them at all levels.' She noted that an IMF team, headed by Charles McPherson, was in Abuja to look at the PIB and that Shell would be meeting with them as well.In contrast, she said, 'We are worried about the World Bank's political agenda and it is not clear what their agenda is.' She said the World Bank was working on how to make the International Joint Ventures [IJVs] 'bankable' so that they would be able to go to international and domestic banks for financing.On stoppage of gas flaring, the Shell chief gave conditions. Pickard said the PIB required an end to gas flaring by 2010, a condition she said the industry would not be able to meet due to lack of investment and security. Shell, she said, would have to spend $4 billion to do this, but Nigeria would also have to fund its part and that was a risk. Shell, she said would shut in oil production in fields where it was uneconomic to end gas flaring, and it would let others have the gas for free where it is economic to do so.Despite the desire to water down the bill, Pickard summarised the PIB's potential benefits: The creation of fully integrated and independently functioning international joint ventures (IJVs) would solve the oil and gas industry's longstanding funding problems if the proposed IJVs were done right. The proposed division of responsibilities between the NNPC and the Directorate of Petroleum Resources (DPR) also would be good. The international oil corporations currently do not know if the NNPC is their partner or regulator.Revealing the common front among the oil companies, Pickard was quoted as saying that there was 'total alignment with the international oil companies at every level.' She acknowledged that Shell had more exposure to the loss of acreage than any other company. 'We could lose 80 percent of our acreage,' she said. She pin-pointed one of the main grouses of the West with the bill, declaring that the problem came from the fact that the PIB would redefine how a company could hold on to its exploration and production blocks, limiting what could be kept to two kilometres around each well. Everyone offshore loses a lot.In a bold pursuance of corporate and national interest, the American Ambassador was said to have asked what the Embassy could do to help with the Joint House Committee on Petroleum Upstream and Downstream and Justice that is working on the PIB. Here the Shell chief opened up, even more frankly, quoted as saying 'We have not been able to meet with President Yar'Adua for nine months. They have him protected.'She said it would be helpful if the Embassy would continue to deliver low-level messages of concern. In particular, she thought it would be helpful for the Embassy to call on the then Speaker of the House Dimeji Bankoke to see where he stood on the bill. Beyond that, she would like to keep the Embassy in reserve and use it as a 'silver bullet' if the House passed the bill. The Ambassador noted that the American, British, Dutch and French embassies had already made a joint call on then NNPC General Managing Director, Dr Mohammed Barkindo.While the cable revealed Shell leadership's role in watering down the bill, it also revealed the interest of the American government in not just securing oil supply, but in protecting American companies operating in Nigeria. The Americans agreed that Shell's views of the PIB and the alignment among the oil majors and with the Nigerian oil companies tracked closely with the views of ExxonMobil, American oil company.The main difference, the cable noted was that 'Shell tends to minimize the different tax concerns and financial vulnerabilities of the individual IOCs. Shell is much more vulnerable than the other IOCs because its operations are concentrated in less favourable joint ventures concessions that are located in the violence-prone Niger Delta. ExxonMobil and Chevron's operations are concentrated in more favourable production sharing contracts (PSC) in the relatively violence-free offshore areas.'A reform bill in tattersThree years after the reform bill got to the National Assembly, late Yar'Adua, if he were to return to this earth is likely to reject the bill. Late Ladan, who died recently is likely to be in the same boat. Highly revered Lukman, the chair of the Oil and Gas Reform Implementation Committee, is sure to be murmuring about the failing bid to reform the oil sector.One thing has happened though-what the international oil corporations want are in place. China and other Asian interests have been beaten back by their western competitors. The reform bill is in tatters.Major features of the bill have been removed or watered down. For example, the oil majors can retain unused acreages perpetually contrary to the original proposal that unused acreages be returned to government and be offered to petroleum companies interested in exploration. The proposed commer-cialisation of NNPC, in line with international best practices, has been dropped with all attendant problems of operations.A recent report listed the following as some of the pervasion of the original bill by both the senate and the House namely, fixing the value of gas on the basis of gas sales; reducing the percentage of additional royalty rate; reducing Deep Water National Hydrocarbon Tax from 30 per cent to 25 per cent; lower taxes for indigenous companies from 50 percent to 40 per cent; exempting companies from payment of dividend on withholding tax; lower provisions for electronic management system proposed by government transparent revenue collection; maintaining the status quo of measuring volumes at the fiscal sales point rather than at the point of production; introducing production allowance for companies' income tax (CIT), which will reduce the companies tax liability.Others include non- segregate midstream and downstream costs, for the purpose of tax computation and permits production allowances on incremental production from existing Oil Mining Lease (OMLs); removal of provision for the creation of the National Frontier Exploration Agency that is expected to continue oil exploration in the North and some parts of the South-East.In effect, the core of the reform which originated from a seven-year committee work has been upturned by the National Assembly. The reworked bill in the Assembly is basically as the oil majors want it.Jonathan's challengeWhile Obasanjo and Yar'Adua who masterminded the bill are not from Niger Delta, the incumbent president is a popular son of the oil producing zone. While Yar'Adua's oil minister is not from the Niger Delta, Jonathan's minister is not only from Bayelsa but was also a former director of Shell in Nigeria. The anxiety of many is how the president will handle this delicate assignment.Feelers from the administration showed that the president and his team are interested in getting the bill passed without further delay. Unconfirmed reports even had it that some oil majors originally opposed the oil minister's re-appointment over her pro-reform stance. The Presidency is however in a dilemma. Which bill is the administration going to push for passage-the original one, the Senate version or the House version'The president had also reportedly ordered a review of the bill to ensure that all interests are taken care of. Critics of this approach are quick to note that this directive is a euphemism for compromise with the oil majors.But can the president ignore the feelings of these powerful oil corporations' How can the administration fight shady corruption in the oil sector while still in the good book of these western nations' How are the Gulf Oil nations manage their sector while still in good terms with the western world'These and many more are questions many are finding hard to answer. One thing is however clear- the only remedy is to start all over again from the original revolutionary bill submitted in 2008.
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