In writing for the need of final passage of the Petroleum Industry Bill (PIB) in Nigeria, I think it is necessary to give a brief history of the petroleum industry. It is true to say that the advent of the oil industry, can be traced back to 1908, when German entity, the Nigerian Bitumen Corporation (NBC), commenced exploitation activities in the Araromi area, West of Nigeria. These pioneering efforts ended abruptly with the outbreak of the First World War in 1914.
However, oil prospecting efforts resumed in 1937, when Shell D”Archy (the forerunner of Shell Development Company of Nigeria) was awarded the sole concessionary rights covering the whole territory of Nigeria. Their activities were also interrupted by the Second World War, but resumed in 1947. Concerted efforts after several years and an investment of over N30 million, led to the first commercial discovery in 1956 at Oloibiri in the present Bayelsa State and two years later (1958) oil was also discovered at Ubulu-Uku, Aniocha South Local Government Area of Delta State.
Furthermore, the discovery opened up the oil industry in 1961, bringing in Mobil, Agip, Satrap (now Elf) Tenneco and Amoseas (Texaco and Chevron respectively) to join exploitation efforts both in the onshore and areas of Nigeria. This development was enhanced by the extension of the concessionary rights previously a monopoly of Shell, to the new comers. The objective of the government in doing this was to the pace of exploration and production of petroleum. Currently, more companies, both foreign and indigenous have won concessionary rights and are producing, Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) in July 1971 at a time when member-countries were consolidating on oil policies in their respective states with a view to exercising great control in the exploitation of their hydrocarbon resources.
On the issue of the PIB, it is a truism to say that the Bill is mainly to increase government revenue with minimal or no extra expenditure. In the words of Alhaji (Dr.) Rilwanu Lukman, a one-time oil minister, “the PIB represents the largest overhaul of the government. Petroleum revenue system in the last four decades went through four control objectives, to simplify the collection of government revenue; to cream off windfall profits in case of high oil prices; to collect more revenues from large profitable field in the deep offshore waters; and finally to create Nigerian employment and business opportunities by encouraging investment in small and gas fields.
To this end therefore, the final passage of the bill should be seen as a welcome rarity because it would place Nigeria in putting oil affairs in the correct and natural perspectives.
Speaking at the 8th Aret Adams annual lecture series, the current Minister of Petroleum cum oil administrator, Mrs. Diezani Alison-Madueke stated that when the bill is passed, the gas sector will become the crux of our economy going forward. We have much more gas reserves than we have in crude. The PIB is a long and indepth bill, a historic, critical and extensive Bill encompassing the 16 hirtherto existing laws with the oil and gas industry.
Once the PIB, is fully passed, transparency in the oil and gas industry would be achieved. It is a truism to say that the oil and gas industry has been characterized by too much opaqueness, high level of confidentiality. To this end therefore, the PIB would remove opaqueness in a scale that has never been seen. Consequently, data would be accessible for all interested persons. One of the benefits of the Bill would be in the creation of over 300,000 jobs in the industry in the next four to five years, compulsory execution of corporate social responsibility (CSR) for host communities, end of gas flaring and commercialization of the NNPC, among others.
A careful study of the bill reveals at a glance that it establishes the legal and regulatory framework, institutions and regulatory authorities for the Nigerian Petroleum Industry. It went further to stipulate guidelines for operations in the upstream, midstream, and downstream sectors and for other purposes relevant to same.
With the passage of the PIB in place, the texts of all licences, leases and contracts and any of the changes to such documents will no longer be confidential. I think and believe Nigeria will move in one step from one of the most opaque petroleum nations in Africa, to one of most open and transparent in the world. This is because payments to the government of Nigeria will be through public information. It will not be through any secret or hidden agenda.
According to the immediate past President Umaru Musa Yar’Adua, (of blessed memory) the new bill will form foundation for a revival of an industry where attacks on pipelines and constraints on investment have fuelled a growing sense of crisis among energy companies. However, executives from Nigeria’s biggest producers, which include ExxonMobil, Royal Dutch Shell, Total and Chevron said the proposed new terms were so stringent that they risked deterring investment rather than encouraging it.
In addition, the Bill aims to inject new vigour into the NNPC by reforming its opaque, octopus-like structure to create discrete units to handle tasks such as exploration and production, regulation and research. The PIB is to restructure joint ventures between the NNPC and Western majors to allow them to raise private capital, rather than rely on a notoriously unreliable annual injection of cash from Nigeria’s government.
The benefits of the bill include measures to ensure the government increases its take from a growing number of deep-water developments. Review of the royalties on gas by creating a new fiscal regime separate from rules governing oil. Changes to the way tax breaks are applied for new developments. Oil companies will be encouraged to refine at least 50 percent of their production in Nigeria by the end of the decade. In addition, new rules to boost employment of Nigerians in the oil industry. Also incentives to encourage development of marginal fields as well as improve community programmes in the Niger Delta.
It may be necessary to state at this point that Nigeria was the 11th and final country to join the Organization of Petroleum Exporting Countries in 1971. Nigeria’s 25 billion barrels of proven oil reserve place it among the world’s top oil-producing nations. One can boldly and proudly say that Nigeria plans to boost its oil reserves to at least 40 billion barrels after recently discovering large oil deposits in deeper offshore waters, according to OPEC and the Nigeria Ministry of Petroleum Resources.
It is abundantly clear that the United States is Nigeria’s top export partner. Nigeria in 2002 ranked as the U.S. fifth-largest oil supplier. However, its exports have dropped by 8 percent since 1997, according to the Central Bank of Nigeria. The U.S. office of Trace characterizes Nigerian-American commercial relations as “essentially strong”, noting that U.S. imports from Nigeria, mostly oil, totalled $5billion for the first half of 2001.
In spite of relative abundance of natural resources, the expansion of Nigeria’s oil sector has been affected by its out-dated items of equipment and the slow movement of goods through Nigeria’s major ports, according to the U.S. office of Trade in 2002. Furthermore, the U.S. government attributes these problems, which continue in 2003, according to the U.S, Department of Energy to mismanagement during the dictatorship of General Sani Abacha from 1993 to 1998.
Finally as part of efforts to boost the activities of the oil industry, the PIB will change the role of the NNPC. This is because the bill gives NNPC (currently funded by the Federal Government) the opportunities to create a viable and self-financing oil company.
Charles Ikedikwa Soeze, fhnr, fcida fcai, cpae, son, emba
is a mass communication scholar and
Chief Officer (Administration) in the Human
Resources Development Department (HRDD) of the
Petroleum Training Institute (PTI), Effurun, Delta
State, Nigeria. charlessoeze@yahoo.ca
(08036724193).
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