By Jeph Ajobaju, Chief Copy Editor
Petroleum sector reform bill jointly drafted by the Villa and federal lawmakers is expected to reach the Senate next week, beginning the end of six decades of stalemate in the attempt to regulate oil exploration in Nigeria.
Speeding up passage of the bill partly arises from pressure to meet requirements the World Bank set for the country to obtain a $1.5 billion loan, negations for which have stalled as the lender wants clarity on economic reform.
Civil society groups have also added their voice to the demand for oil sector reform.
Sources told Reuters on Wednesday that President Muhammadu Buhari has signed the draft bill for it to be formally presented in the Upper House.
The legislation has been in the works for the past 20 years.
The main laws governing oil and gas exploration in the country have not been fully updated since the 1960s because of the contentious nature of any change to oil taxes, terms and revenue-sharing.
But Reuters adds that reforms and regulatory certainty became more pressing this year as low oil prices and a shift towards renewable energy made competition for investment from oil majors tougher.
The alignment of both National Assembly (NASS) chambers with Buhari’s All Progressives Congress (APC) party has also given the reforms the best chance of passage in years.
Buhari officially signed the draft bill late last week, and his team has already been building support for it in the NASS.
The sources, who asked not to be named because of the sensitivity of the issue, said the NASS has already chosen teams of members who will work most closely on individual portions of the bill.
Both the Senate and the House of Representatives must approve it before Buhari can sign it into law.
The Ministry of Petroleum Resources sent the draft to Buhari in August, after months of consultation between government officials, oil and gas companies and other industry stakeholders.
Proposals in the bill
Excerpts from the bill seen by Reuters included provisions that would
- Streamline and reduce some oil and gas royalties.
- Boost the amount of money companies pay to local communities.
- Pay for environmental clean-ups.
- Alter the dispute resolution process between companies and the government.
- Push companies to develop gas discoveries and a framework for gas tariffs and delivery.
Commercialising gas, particularly for use in local power generation, is a core government priority.
One of the sources described even the government’s reduced take of oil revenues, through taxes, royalties and other fees, as “aggressive” compared with other nations.
Some African countries are also trying to cut red tape and taxes in order to make developing their oil and gas reserves attractive to companies.
The bill was presented to Buhari in one piece with four chapters, the sources said.
An effort to pass reforms by breaking them into several bills in 2018 failed; just one portion made it to Buhari’s desk, and he never signed it.
Pumping its oil has historically been hugely profitable, but changes late last year that hiked Nigeria’s take of oil earnings, and a VAT increase, frustrated companies.
Meeting World Bank demands
Reforming the economy, including the oil industry, is one of the key requirements the World Bank wants Nigeria to meet to get a $1.5 billion loan the lender has delayed to grant.
Fiscal uncertainty has stalled a decision on a multi-billion dollar expansion by Royal Dutch Shell and its partners, while Chevron, Total, and ExxonMobil are selling various Nigerian assets.
Shell, the largest international operator in Nigeria, said last month that a botched reform effort would be “putting at risk and making unviable most of the planned projects.”
“We hope that the final bill would be one that would unlock potential investments that Nigeria’s rich resource base truly deserves,” a spokesman for Shell said.
Pressure from civil society
Civil Society Organisations (CSOs) have backed the deregulation of the petroleum industry downstream sector and want support legislation factored into the Petroleum Industry Bill (PIB) soon to be submitted to the NASS.
A consortium of CSOs urged Abuja to repeal the Petroleum Equalisation Fund Act and the Petroleum Products Pricing and Regulatory Agency (PPPRA) Act to show commitment to full deregulation.
The group arrived at the decisions at a one-day webinar, where it also asked the authorities, especially the Central Bank of Nigeria (CBN), to ensure a level-playing field for all importers of refined fuel instead of placing the Nigeria National Petroleum Corporation (NNPC) at an advantage.
A statement issued by Nigeria Natural Resource Charter (NNRC) National Coordinator, Tengi George-Ikoli, implored the NNPC to “take urgent practical steps to reverse the fortunes of the loss making refineries as revealed in its published 2018 Audited Reports of its subsidiaries.
“The refineries remain cost centres that the Nigerian government can ill afford given the impact of Covid-19 pandemic and other fiscal pressures on its economy.”
The CSOs asked the government to create an enabling environment for the private sector to contribute to the efficient running of refineries so that Nigeria can reach its domestic refining goals.
It urged Buhari to demonstrate his “honest commitment” to deregulation by repealing laws that may hatch back to “a subsidy regime and pre-deregulation state.”
The NNRC said these include the PPPRA Act, the PEF(M)B Act, Section 6(1) of the Petroleum Act, Schedule 1 of the Price Control Act, so as to “demonstrate to the Nigerian people that the ‘declaration of full deregulation’ is merely a statement of intent and not yet honoured.”