The State Chairman, Trade Union Congress of Nigeria (TUC) Rivers State, Comrade Hyginus Chika Onuegbu in this interview, argues that Nigeria cannot afford further delay, while politicians indulge in unnecessary bickering over the passage of the Petroleum Industry Bill (PIB) into law with about $ 7.5 billion still in the hands of oil and gas companies operating in Nigeria, in under-payments, under-assessments of taxes, royalties, rents and other levies. EXCERPT:
The Civil Society Steering Committee (CSSC) of NEITI last week demanded among other issues that the present government; complete the passage of the Petroleum Industry Bill (PIB), which has languished at the National Assembly for eight years. Sir, could you please tell us why the ongoing reforms in the oil and gas sector have not provided the enabling environment for both new local and foreign investors to invest?
The current reforms in the Nigerian Oil and Gas sector, which started 14 years ago, specifically on April 24th 2000, with the inauguration of Oil and Gas Industry Committee (OGIC) by the administration of former President Olusegun Obasanjo, has been politicised. Even when the OGIC committee submitted the Draft National Oil & Gas Policy in 2004 and was approved by the administration of the Late President Musa Yar’Adua, who also re-inaugurated the OGIC on September 2007.
We are worried that even when the OGIC submitted their report and it was approved in 2008, leading to the forwarding by the late Yar’Adua’s administration, the 2009 Petroleum industry Bill (PIB), which was unfortunately not passed by the 6th National Assembly. The irony of the delayed exercise was when President Goodluck Jonathan’S administration was advised to re-start the whole process over again when the administration in January 2012 set up the Special PIB Task Force led by Senator Udo Udoma to work with relevant government bodies to produce a new version of the PIB for presentation to the National Assembly.
The PIB Technical Committee, which was headed by the then Director of Department of Petroleum Resources (DPR) Osten Oloronsola, submitted its report in June 2012 to the Presidency, which was approved by the Federal Executive Council of Nigeria on 11 July 2012. And the Presidency upon the approval of the Federal Executive Council (FEC) forwarded the 2012 PIB to the National Assembly on 18th July 2012.
The drama in the exercise continued to linger when the Senate and the Federal House of Representatives set up their separate ad-hoc Committees on the PIB and the ad-hoc Committees all completed their public hearings on the PIB in 2013, which as I speak is still at the ad-hoc committee stage, hence the wait and watch attitude being exhibited now by local and foreign investors in the oil and gas industry.
Are you saying that no new investors are willing to come into the oil and gas sector until the PIB is signed into law?
Yes. The investors have continued to adopt a wait and see attitude, refraining from making any new investment pending the passage of the PIB into Law because, since 2009 when the Yar’Adua’s government first introduced the PIB, no new Final Investment Decision (FID) has been taken on any oil and gas project in Nigeria, not even on the government-promoted Brass LNG project. It is worrisome that while we are dithering in Nigeria, there are new oil discoveries all over Africa, drawing in investors just as new technology is making hitherto unreachable and uneconomic hydrocarbon deposits accessible in Europe and North America thus attracting investors to those environments.
The dangers in the current dispensation is that Nigeria therefore cannot afford the luxury of time while politicians indulge in unnecessary bickering over such an important bill on a sector that is the main stay of our economy accounting for over 90 per cent of our foreign exchange earnings, about 40 per cent of the Gross Domestic Products (GDP) and 80 per cent of government revenue. We believe that the PIB represents a great opportunity for Nigeria to ensure a solid foundation on which the future of oil and gas operations in the country will rest. Also, that the petroleum resource, which Nigeria have been endowed, work for and benefit the Nigerian people.
And as critical stakeholders, I challenge the oil and gas workers under the aegis of the National Union of Petroleum and Natural Gas Workers (NUPENG) and Petroleum and Natural Gas Senior Staff Association (PENGASSAN) to work very assiduously through its NUPENGASSAN Joint Committee on the PIB to articulate the Oil and gas workers position.
Sir, is there any inciting political issue which needs amendment that is stalling the passage of the 2012 PIB into law?
Well, to the best of my knowledge, the A part of 2012 PIB is a 223 page document, which comprises 363 sections divided into 9 parts with five schedules. It provides for the legal, fiscal and regulatory framework for the oil and gas industry. The B part creates two regulatory entities, the Upstream Petroleum Inspectorate (UPI) and the Downstream Petroleum Regulatory Agency (DRA), while the C part provides for Host Community Fund.
The D part upholds in its entirety the Nigerian Oil and Gas Industry Content Development Act 2010, while the E part split the NNPC into three entities; two incorporated, and one not. The F part of the PIB subjects the Petroleum industry to heavy political manipulations and interference, which could lay foundation for unrivalled corruption , especially a section that gives Presidential power to grant licenses and leases without competitive process or any other process; Excessive powers of the Minister of Petroleum including the power to determine rentals and royalties by regulation; recommend all persons to the boards; chairman most of the boards ;make regulations without public hearing etc.; power to receive gifts by the agencies; non application of fiscal responsibility and public procurement acts for many agencies.
The G part of the PIB introduces new fiscal framework for the oil and gas industry and new Royalties regimes, while in the H part, no mention of refining or refining operations was made other than in Section 220 (2)(b), which mentions that regulations may be made for these operations, meanwhile there is a refinery Bill in the senate.
Could you please explain further, the necessity of signing this 2012 PIB into law?
The outcome of signing the 2012 PIB into law will determine the future of the Nigerian oil and gas industry , as well as the Nigerian workers, because it would be the most influential and important legislation after the Nigerian constitution. This is because, the oil workers believe that the objectives of the PIB and Nigeria’s national interest are best secured in the area of transparency and accountability, fiscal terms, institutional framework: Minister, and regulator, refinery and other downstream activities, labour issues and membership of Institutions, Boards and Committee.
Could you please tell us why you felt the PIB will make our leaders more accountable and transparent when signed into law?
Thank you. One of the major areas of grave concern about Nigeria’s petroleum industry has been the opaque nature of the industry because many processes and activities are shrouded in mystery that controversies usually arise even amongst government agencies on matters such as the country’s daily production or revenue arising from there. We have also had occasions when Nigerian Presidents and their Petroleum Ministers award lucrative oil blocks to themselves or their cronies and it is commendable that the PIB provides that agencies and companies established under the proposed law shall be bound by the Nigeria Extractive Industries Transparency Initiative. There is a section of the PIB that however insist that to ensure greater transparency, it is important that the provision covers not only the agencies and companies created under the PIB but all companies in the petroleum sector.
Also, we observe that the PIB proposes to exclude the successor companies to the Nigerian National Petroleum Corporation (NNPC) namely, the Nigerian Petroleum Assets Management Company Limited (NPAMC), the National Oil Company (NOC) and the National Gas Company (NGC) from the operations of the Fiscal Responsibility Act (FRA) and Public Procurement Act (PPA).And these laws were enacted to check some inherent corruption and misappropriation of funds in public entities and as such should apply to all government agencies and institutions most especially those related to the Petroleum industry. We believe therefore that subjecting the NNPC successor companies to the FRA and PPA will further entrench transparency and accountability in the organisations, but we are against the provision under the PIB granting the President powers for discretionary award of petroleum licenses and leases.
Why are you against the provision?
We are against the provision because it is a recipe for cronyism and corruption and we therefore call for it to be expunged. This is because, it is imperative that the PIB builds on the modest efforts of NEITI and goes further to erase the black hole perception of our oil and gas industry. To do this, the PIB must guarantee accountability and safeguard against bias by stipulating clear transparency rules.
What is the position of the oil and gas industry players in the 2012 PIB?
One of the proposals in the PIB, which has attracted the most strident, of comments from industry players is that aspect which deals with a new fiscal regime for the industry, particularly, the upstream players. Clearly, the Nigerian Government is desirous of increasing its revenue from oil and gas, which under the PIB, there is a provision that sought to increase the Government take. However the industry players argue that increasing the government take will hurt the Nigerian oil and gas industry; stifle investment and eventually constrain government revenue. There is also disagreement between the Government and the industry players on the exact amount of the increase in Government take and how it compares with other countries. It is obvious that the Nigerian government needs more revenue to tackle the huge developmental challenges confronting us as a nation.
What then is the position of the workers’ union?
NUPENG and PENGASSAN as key stakeholders in the Nigerian project and as one of the main groups that fought for this democracy during the dark days of military dictatorship, is also desirous of dividends of democracy. Painfully, however, we are yet to see like most Nigerians, what government has done particularly in the 14 years of civilian rule with the huge oil revenue accruing to it. Our concern is that the late Hugo Chavez of Venezuela got into power at about the same time that we restored democracy in Nigeria in 1999, and within this period, Venezuela has reduced poverty by 50 percent.
The Venezuelan government has vastly improved access to healthcare and education for its citizens and built over two million housing units for the poor. This is in addition to having several refineries and sales outlets for refined products even in the US and heavily subsidising the price of petroleum products for its citizens. The oil workers’ unions in the oil and gas industry having engaged both sides of the argument, advice that the Government should critically examine the implications of the proposed changes in the fiscal regime to ensure that Nigeria does not inadvertently discourage investment in the oil and gas sector while aiming for higher Government take. The Unions also advise that the Government and the upstream players should as a matter of utmost urgency, reconcile their figures of Government Take.
This they could do by using the facts and figures provided by the upstream players in their audited accounts to determine the model to be used so as to arrive at agreeable figures for costs, profits, royalties, taxes and fiscal investment. This reconciliation is necessary to determine the competiveness or otherwise of the Government Take proposed by the 2012 PIB. Also, the reconciliation will also assist the National Assembly and indeed other stakeholders, in taking an informed position about the fiscal regimes in the 2012 PIB as it’s our considered view that the PIB should allow for the optimization of returns to Nigeria from its oil and gas resources without stifling investments and growth of the industry.
What then, as an expert in the oil and gas sector would you suggest the Government should put in place to ensure the sustainable growth of the industry?
I suggest that the government needs to strike a balance between taking a higher stake from industry operations and ensuring the sustainable growth of the industry. This is because the PIB does not contain any royalty rates, or amounts for fees and rents leaving it to Ministerial regulations. We believe this should be addressed immediately as not only does it give the Minister of Petroleum wide discretionary powers to prescribe rent, royalty and fee rates and amend same but royalty rate is one of the key basis on which investors base their investment decisions. I am of the view that to achieve the lofty objectives of the PIB, the institutions to drive the reforms and govern the industry are key and therefore the institutional reforms proposed in the PIB must be of global best practice and are capable of delivering the long sought efficiency required for industry operations.
The global best practice for oil and gas administration is to have a policy formulating body, a government ministry or department; an independent regulatory body and a national oil company for commercial operations as it is obtainable in Norway and Brazil for example, where there are three distinct bodies administering the hydrocarbon sector contrary to the proposal of a National Petroleum Directorate (NPD) in the OGIC Report , the Nigerian Oil and Gas Policy and the 2008 PIB and the present 2012 PIB proposals.