Oil industry experts have warned that unless Nigeria quickly passes its oil sector reform law, the Petroleum Industry Bill (PIB), to fully harness the vast potentials of its hydrocarbon resources, the country may be left behind with the resources abandoned in the ground when the world moves away from the oil age.
The PIB, a proposed law intended to transform the way the nation’s oil sector is managed in line with global best practices, has been in the making for about 20 years now.
Its non passage has created huge uncertainty, stagnated investment and development of the sector, resulting in the loss of billions of dollars which could have accrued as revenue to the government and better the lives of citizens.
The bill came close to becoming law during the last administration with the 8th Assembly passing it, but President Muhammadu Buhari withheld assent. However, Minister of Petroleum Resources, Mr. Timipre Sylva, has assured that the present administration is committed to passing the bill which he said would be transmitted to the National Assembly soon.
Speaking on Thursday at the Nigeria Natural Resources Charter (NNRC) and Business Day Dialogue on Petroleum Sector Reforms, industry expert, Mr. Joseph Nwakwe, said, just like it happened in the coal age, Nigeria might face a situation where her oil is abandoned in the ground when the oil age passes.
Addressing governance gaps revealed by the NNRC’s 2019 Benchmarking Exercise (BER) relating to fiscal issues, Nwakwe said Nigeria’s proven reserves remain undeveloped because we haven’t been able to attract the level of investment needed.
He said, “To develop the resource we need an attractive fiscal regime otherwise Nigeria might be headed for a situation where our oil is abandoned in the ground like coal when the rest of the world moves on.”
Speaking on what would make for a good PIB, the expert said the bill must be one that does not just help attract capital, but ensure fiscal stability and also have a framework to transform the industry from a mere extractive, to a value adding.
He stated further that a good PIB must emplace revenue management that addresses price volatility and ensure we save for future generation, as against the present situation where the country is vulnerable to oil price shocks without an appropriate savings mechanism.
“We need a bill that will address equitable distribution of the resources. We need to use the fiscal arrangement to address community issues and have an industry where people can feel safe to go to work in the Niger Delta region,” he added.
Speaking on how well Nigeria has fared on exploration licensing under the context of the NNRC’s Precept 3, industry analyst, Mr. Isreal Aye, simply said the results are obvious as the sectors management have remained primitive.
Aye explained that Nigeria presently has an extractive industry where the International Oil Companies (IOCs) simply extract and export our oil, resulting in the absence of wealth creation because of the lack of value addition.
He regretted that Nigeria’s acreage management is about the sloppiest in the world where the regime is mostly left at the discretion of the minister of petroleum resources.
Aye says he expects the PIB to provide for a smarter acreage management regime, abolish discretion powers and encourage at least a yearly bid round exercise. He added that the bill should address financial security in respect to licensing and emplace a regime that allows firms secure loans using their acreage licenses in order to address financial constraints faced particularly by indigenous companies.
Also speaking at the virtual dialogue, Chairman of Dubri Oil, Dr. Uduimo Itsueli, said based on lessons from the Covid-19 pandemic, he expects that the PIB has provisions for palliatives for companies that may be impacted by similar disasters in the future.
He added that the bill should provide for the streamlining of oversight agencies to make for ease of doing business in the sector as well as identify a specific agency that would take over management of projects, such as electricity, hospitals, water, hitherto provided for host communities by oil companies, upon the company’s exit from an asset.