Extractive resource-rich nations are fast realizing the name of the game; reform or expire. At the moment, a lot of these countries are midwifing or implementing one form of reform or the other. While some are faltering, the serious ones are boosting economic growth by opening development of their vast energy resources through far-reaching energy reforms.
The reforms are not just about extracting more but also about the management of the accruing resources. For instance, the 2011 Ghana’s Petroleum Revenue Management Act (PRMA – Act 815), is set for amendment less than three years after it was enacted simply 
because they feel they deserve more. Areas identified in the law for amendment include the calculation of the Petroleum Benchmark Revenue and allocations to the Ghana Petroleum Funds (the Ghana Stabilisation Fund and the Ghana Heritage Fund) (GHF) and Annual Budget Funding Amount; membership of the Public Interest and Accountability Committee (PIAC) and the qualifying instruments which Ghana Petroleum Funds (GPF) should be invested in.
Etienne Ngoubou, Gabon’s oil minister said recently that a new oil law which will be more transparent than the country’s previous law will come into play in early 2015. The new law is expected to be enacted this year but will now take effect on contracts from 2015. Kenya is also making progress on its energy bill. It has pushed the first draft of its revised laws on the petroleum sector for parliament’s approval to June this year.
Nigeria’s snail pace
Nigeria’s Petroleum Industry Bill (PIB) which seeks to overhaul the nation’s beleaguered oil and gas industry is still faced with uncertainties. The preparation of the working document from which the first Petroleum Industry Bill 2008 emerged began in 2000. The bill first found its way into the legislative chambers in 2008. The bill passed first reading stage in 2008, second reading in 2009, clause by clause consideration in 2010 and third reading in 2011. Ever since then, it has been a question
of moving through the revolving doors at the National Assembly without any meaningful progress. Opposition to the passage of PIB is gradually waning but there is still subtle stiff resistance by some stakeholders combined with excessive political intrigues and other regional and parochial interests that might delay the passage of the bill further.
It takes just will power
Reforms are about will power. In December 2012 after Mexico elected Mr. Pena Nieto, his focus was on pushing
through a series of sweeping reforms. The country focused on overhauling its state-owned energy sector taking on and defeating “sacred cows” such as labor unions and the 1938 ban on foreign oil companies.
Nieto got his strategy right from inception. On coming to power, he extracted an agreement from the main political parties to promote a series of reforms. He had the support of the ruling Institutional Revolutionary Party (PRI) and the opposition conservative National Action Party (PAN). Thus, when some leftists padlocked doors to the lower chamber to stop the lawmakers from debating the bill after Senate’s approval of the energy bill, it only amounted to a slight delay.
Mexico’s reforms, among other things, swept aside 75-year-old restrictions against foreign investment in the state-controlled energy sector that has stifled development. Key components of the energy reform, which required amending the national constitution, will permit private contracts for global giants such as Exxon Mobil and BP to explore and drill for oil and gas. The government also will be able to auction oil and gas licenses, mostly for deep-water projects, and collect taxes and royalties for the amount extracted. There are forecasts that Mexico’s economy will revive this year and grow by 4 percent to 5 percent on average in the future.
There’s cause for Nigeria to fret
The Mexican market is closely linked to the United States market. The reason for the close relationship is Mexico’s geographic proximity to the United States which has made them important trade partners. More than $1 billion worth of goods cross the United States-Mexico border each day. With the energy reforms, Mexico’s oil production would provide United States with more access to cheaper oil due to proximity.
In 2012, the United States imported 406,000 bbl/d of crude oil from Nigeria, the lowest volume since 1986. This represents about 50 percent drop from the average volume of 983,000 bbl/d imported in 2010. Nigeria fell from being the fifth largest foreign oil supplier to the United States to the sixth in 2012, following Canada, Saudi Arabia, Mexico, Venezuela and Iraq.
The declining trend continued in 2013. EIA data from January to August 2013 show that the United States imported an average of 293,000 bbl/d of crude oil from Nigeria, accounting for slightly less than 4% of total United States crude oil imports. During that time period, Nigeria was the eighth largest foreign oil supplier to the United States. The trend will get worse when the reforms in Mexico begin to deliver more crude oil production.
Energy reforms in Mexico has also led to an upgrade of its credit rating and economic prospects leading to increased investment which will allow for faster development on the energy sector. International capital flows are already starting to cause major changes in Mexico and some of these capitals would have found their way into the Nigeria energy sector.
FRANK UZUEGBUNAM
