Nigeria risks losing a pile of money spent on international consultants, organising public hearings and thousands of hours work on the Petroleum Industry Bills (PIB) as the race for 2019 elections takes the shine away from important legislations that will stop an estimated $15billion annual investment loss to the economy.
According to Nigeria’s legislative practice, the onset of a new parliament triggers the end of all pending bills regardless of time and money spent on developing them, hence stakeholders are calling on the lawmakers to pass these critical bills even if they are imperfect and amend them later, rather than letting all the work already done on them go to waste.
It was difficult passing an omnibus petroleum industry bill in the past 17 years until it was broken down into four aspects: the Petroleum Industry Governance Bill (PIGB), the Fiscal Regime Bill, the Upstream and Midstream Administration Bill and the Petroleum Revenue Bill otherwise known as the host community aspect – with a decision to pass the less controversial ones first.
The lawmakers have successfully passed the Petroleum Industry Governance Bill (PIGB) in May this year and have transmitted it to President Muhammadu Buhari for his assent. However, two months later, the president is yet to assent to the bill, which will trigger significant reforms of the country’s oil and gas sector. If the president vetoes the PIGB, there is fear that, with the deterioration in the relationship between the National Assembly and the Presidency, it could signal the end of the bill. There is also the concern that the focus on politics as the 2019 elections gets nearer would not allow the National Assembly focus on the PIGB if it is returned to them.
Already, both chambers of the National Assembly have organised public hearings on the three other bills. The bills are now awaiting third reading in the house. However, the house has been adjourned until September 25, while members are locked in a supremacy battle and high level politicking that gives little room for consideration of critical bills like the petroleum industry bills, on which billions of dollars of foreign investments in the oil and gas sector hang on.
“If they do not complete work on the bill, before the end of their tenure in 2019, they will have to start afresh and all the work done on the bills will be lost. This is not good news for the sector at all,” Uche Obi, SAN, managing partner of Lagos-based Alliance Law firm told BusinessDay by phone.
On the implications of such a development, Obi said “It will cause further delay in investment activities in the oil and gas sector and all the things that we are trying to achieve by an early passage of the bill will be lost, it will cause uncertainty in the system and a lot of investments in the petroleum sector will be lost.”
Ayodele Oni, energy lawyer and partner at Bloomfield Lawfirm speaking on the loss to the nation said that other hidden costs involved in considering bills may not be immediately visible.
“Besides the cost involved in paying international consultants, there are transport fares, organising logistics support which are claimed, human and material costs including road accidents, and not to mention the thousands of hours spent in the process, it does not bode well for the country at all if the bills are not passed,” Oni said.
However, Oni holds out a thin hope that the lawmakers could amend their rules to enable them continue work on previous bills from the past legislative session as he said this may have happened to the PIB itself but if this current assembly fails to pass it, the implications for the economy will be huge.
Global extractive industry watchdog, Publish What you Pay (PWYP) estimates that Nigeria, which is Africa’s largest crude oil producer loses $15billion annually for failing to put in place a proper legislation for its oil and gas industry which contributes over 60 percent of its Federal budget and 90 percent of export proceeds.
Nigeria has been unable to attract significant investment in over a decade and projects including the 120,000bpd Zabazaba-Etan project; 140,000bpd Bosi project; 110,000bpd Uge project and 100,000bpd Nsiko Deepwater projects have not progressed. The one billion barrel Owowo field development is also waiting on the right fiscal terms among other conditions for it to reach a final investment decision.
Meanwhile, the oil sector is at an inflection point globally with countries that were major buyers now morphing into major suppliers, the rise of electric cars hangs on the sector as a threat and competition from new low-sulphur crude grades is growing. Also in places where oil demand has traditionally come from including China and India, there’s an increasing switch to renewables.
The International Energy Agency on Friday, August 10, raised its estimate of world oil demand growth next year to 1.5 million barrels per day (bpd) from 1.4 million bpd forecasting that much of this volume will come from non-OPEC oil output growth.
For many upstream oil companies, the preoccupation is to raise output while reducing costs and improving financial position. The IEA estimates that major oil companies have increased their oil and gas output by 11 percent since 2014 while cutting spending by 49 percent. This implies that they will increasingly look to invest in countries with certain, competitive fiscal terms, something Nigeria’s tardiness with its petroleum sector bills does not guarantee.
ISAAC ANYAOGU
