Gas study group: L-R; Susan Bello:(Media Consultant) Gerald Konwea (Cliqit) Mfom Utin (GASIN)
Nigeria is said to have lost over $80billion in investments to other countries in the 18 years that the Petroleum Industry Bill was dangling. Experts said the moment Nigeria announced it was going to change its petroleum laws, that the investment community regarded the old laws as dead. The result is that there would be no law in operation in the eye of the international investment community to back new investment decisions. Such investments would simply go to Nigeria’s competitors.
Now, over 20 carefully selected civil society organisations (CSOs) and communication groups have said enough is enough and have thus resolved to fight to the finish to ensure that laws come on board and also to see through the implementations, using the latest activist strategies in the world.
For this reason, the CSOs have been training between Port Harcourt and Lagos in the past two months, all in their determination to ensure that the four components of the former Petroleum Industry Bill (PIB) are passed, signed and put into action as fast as possible.
The trainings are meant to turn each of the participants into highly knowledgeable persons that would engage with anybody on the oil and gas policies of the FG in Nigeria and win concessions. They can now use technical skills and knowledge to press for every single provision in the four laws for proper implementation. The CSOs and media experts have been under the tutelage of some of the best crops of former oil and gas insiders such as Brown Luis Ogbeifun (PhD) that led the Petroleum and Gas Senior Staff Association of Nigeria (PENGASSAN) for many years.
The groups are leveraging platforms provided by FOSTER (Facilitator For Oil Sector Transformation) guided by the likes of Michael Uzoigwe (PhD),and Charles Majomi who have brought in top law professors and industry lawyers from some of the best institutions of higher learning such as Lucky Worika (Uniport dean of Law), Israel Aye of Primera African Legal. The likes of Faith Nwadishi of KIF, Kabari Sam (PhD) of CERHD, Gerald Konwea of Cliqit, Mfon Utin (PhD) of GASIN, Lawrence Dube of Citizens Trust, Akin Oke of Cord Aid, and many more now seem eager to lead the charge to get things moving in the oil and gas sector by pushing the four PIBs especially as the life of the 8th parliament is running fast to the end.
The CSOs have realised in the two months of camping in Echelon Heights in PH and Kuramo Waters in Victoria Island that the hope of the oil industry right now lies on their weary shoulders. This is because government seems to have failed over 18 years and looks ready to keep failing in the bid to transform Nigeria from an oil extraction industry to an oil and gas economy. It was also realised that in most deals signed in the oil industry, Nigerian officials never went to the negotiating table with deep technical understanding of the industry from how oil is found to its drilling, processing, selling, etc to how oil money is best utilised, being an exclusive and not inclusive process-product. Experts say it’s when you use oil that you are an oil economy, not when you play only in its extraction.
The CSOs now know clearly that though the FG has released a gas policy, policies are not actionable or easily enforceable but laws are. Besides, when governments leave, policies tend to crash, except they are coded into laws. The new army of advocates now knows the greater dangers of policy delay, realising that it takes up to 10 years for effect of policy changes to bear full fruits. The impact of the deliberate loss Nigeria inflicted on itself was made sharper when it was realised that the country has lost over $3 trillion in theft or waste, a tidy sum that could have at least formed a pool of lendable wealth fund that would at least have given strength to the naira and reduced interest rates to near zero. This would have created wealth through investments and PPP. Nigeria has thus pursued high tax rate instead of high tax base.
It is now clear that Nigeria cannot get the oil/gas industry moving again without fixing the four bills because the failures eventually get down to naira and kobo; to garri and tea, the experts pointed out. The current state is that the Nigerian National Petroleum Corporation (NNPC) is everything while the Ministry of Petroleum is a civil service set up where most of the directors are said to lack capacity of the workings of the industry because a director could be transferred from another ministry with zero oil knowledge. Also, at the moment, the NNPC not defined to be either a policy maker, regulator, commercial or operations entity.
Understanding the new Bills
The 18-year-old PIB was broken into four by the present National Assembly that had vowed to get it through.
PIGB: The Petroleum Industry Governance Bill is an attempt to break up the structure to specialized entities. This is waiting for assent.
PIAB: The Petroleum Industry Administrative Bill sets the rules of engagement; the licensing rules and bidding. Experts say we have an industry in decline; our reserves are depleting, not adding up. PIAB proposes to institutionalise the bidding process; to take away arbitrariness from the process. Its right to give the President some concessionary powers to grant license such as DR Congo did to China. Now, DR Congo is rated the fastest growing economy in Africa. The idea is to get value of an oil field, give it to another country and tell them what to do to you by a number of years, say 20. Inclusiveness should mean having a sense of ownership and participation by communities who bear the brunt of exploitation.
The CSOs want to press for a way out, which is to use marginal fields to pacify the host communities; they can choose their partners.
Key differences that can emerge in a PIAB era include: Nigerian government was said not to have anything to approve in mergers of multinationals as done in some other countries in merger deals. Now, under PIB, Nigeria would have to approve mergers. Petroleum Act did not allow you to use your license to secure loans. Now, the discretionary powers of the minister can be challenged. The law now requires the minister to explain why he withheld assent. There are clauses to challenge the actions of the Minister if one was affected illegally.
PIFB: The Petroleum Industry Finance Bill is to solve the financing troubles of years past. Experts point to two schools of thought: The rent-seeking approach, which is to get optimum rent or tax from investors. The other is the value-added approach, which proposes attracting investments to develop the sector such as NLNG did with 20 years waiver. If you use tax incentive to attract massive investments, you could create other values such as jobs, wealth, income taxes, sales tax, community development, etc.
PIHB: The Petroleum Industry Host/Impacted Communities Bill is dynamic. It seeks to resolve the crisis in host communities once and for all. Experts however say definition of a host community is not clear. They expect uproar to explode especially when it comes to impacted community which may touch from Bayelsa to Kano states. A neutral body (may be National Boundary Commission) may be needed to define host community status; oil bearing, oil impacted, oil producing. There may be need for multi-stakeholder conferences to determine this. For now, it has been left to the Settlor (producers) to decide but the CSOs want to oppose this clause.
Also, issue of funding, put at 2.5 percent to the communities was pointed out as too broad. It was not made clear where this money would come from since the law said it is from profit whereas Nigeria operates the ‘Win, Work and Walk-away’ system. The coming debate would be where this profit is coming from where communities would be paid? Here, again, CSOs want marginal fields/small fields to go to communities as compensation, in addition to anything else. The Belema oil experiment seems to justify this line of thinking. Deals are always entered into blindly without a study to know the volumes of oil involved. Government should have commissioned study to know what is involved.
The CSOs want to demand for models in other countries where the profit system being envisaged has worked and where exactly the profit is to come from. This is because the government collects the bonus stamp which looks like taking profit upfront. They may now leave the communities to struggle with the oil companies whose profit nobody can track. Also, the CSOs want more of community participation in ownership and operations of an oil field.
The environment is tricky because of the principle of the polluter pays. This may mean that wherever the pipeline goes, the owner must pay. CSOs want a fund to draw from to solve the environment in a better way than the existing Ecological Fund that FG official treat as their sinking fund. The new law sets obligation to clean up, no matter the cost, and wants to deprive the polluter (especially pipeline breakers) from benefiting, thus the onus to prove causation.
The CSOs want to know who the Settlor is; JVC or PSC? These issues must be cleared at the public hearings which the National Assembly has since scheduled. The IOCs seem to be happy with the PIFB, and there is nothing wrong in that, so long as it helps to attract more investments.
Key considerations
The activists have been made to understand that the PIFB has come to liberate and reorganise the oil industry and move Nigeria from a mere extractive industry zone to an oil economy. The industry was said to be ‘vertically integrated’; too huge, too expensive. BIFB now wants to break it up into upstream, downstream, oil, gas, etc. If there is a transmission company, small producers can hook up and deliver to the running pipeline. People can be part of the business, the experts said. It is thus important to set the fiscal framework for small participants; incentivise the petroleum economy to make Nigeria competitive; and to manage transition process to petroleum economy. This will create time period to stop old regimes. It is important for Nigeria to decide what it wants to achieve with gas: is it fertilizer or power. The nation according to the IATA need much fertilizer because Nigeria’s fertilized soil is said to be the least in the world (just 7 inches) needing fertilizer.
Caution: Nigeria must avoid what is now termed the ‘Venezuela Triangle’: Having the highest oil reserves but being hit worst country economically. This is caused by poor management, resource nationalism, hubris (extreme pride), and lethargy. Nigeria is said not to be far from this. Saudi Arabia has cut tax from 85 per cent to 50 per cent to incentivise investment. See, less on tax, more on creating value.
Nigeria must now know that international capital is mobile; when you tweet it a bit, capital flees. Indonesia courts blocked BlackRock and Australia went away. A top oil company is now to moving $50Bn to spend in US because of what happened in Indonesia in terms of policy. That is the nature of international policy.
The CSOs say they want to help out in policy interpretation and consistency to stop capital flight and shoddy operations. They intend to do this by not only criticising but by showing what ought to be. This requires taking technical to the non-technical. They will now call out wrong-doers with the appropriate language. This is what brings respect, attention and correction. This is for the good of the nation.
Conclusion
The overall objective is to enthrone an oil/gas economy that works for all citizens and is in step with global trends. It is to get the best for oil communities and engender peace and stability for a new economy that guarantees prosperity for all.
Ignatius Chukwu
