Nigeria: The Petroleum Industry Bill
Any chance of progress?
June 25, 2014
Nigeria’s long-awaited Petroleum Industry Bill (PIB) has gained notoriety among international investors, not only for its years of delay but also for its content. The PIB is supposed to address all the problems in Nigeria’s oil and gas sector at once: to establish a new legal framework, to create efficient and effective regulatory agencies, to reform the scandal-prone national oil company and to develop a new set of guidelines governing operations in the up and downstream sectors.
Most controversial in the proposal are the envisaged discretionary powers for the Minister of Petroleum Resources, the establishment of a new Petroleum Host Communities Fund (PHCF) and, particularly from the perspective of international investors, the provisions on taxation, which might render major investment projects unprofitable.
Amid an ever more competitive oil and gas landscape in sub-Saharan Africa, the need for reform is, in principal, recognised by all. Foreign investors and international oil and gas companies (IOCs) see a particular need for incentives to invest with regard to deepwater exploration, allegedly Nigeria’s growth sector, where in 2012 the Total-operated 180,000pbd Usan field (divested to China’s Sinopec later in the year) has so far been the last to ramp up offshore. More advantageous conditions are also a decisive factor for attracting substantive additional investments in the gas sector, where the currently rather uncompetitive gas pricing scheme and the gas supply obligation (in the absence of adequate infrastructure) stirred investor criticism.
Political Dynamics at Play
Given what is at stake, how likely is it that the PIB will become law anytime soon? To begin with, one should take into account that the bill has already been around for quite some time. The current legislative initiative, which started in July 2012, is the second attempt to get it passed. Before, a first try initiated in December 2008 had eventually failed due to political intrigues, wrangling between legislative chambers and the executive as well as lack of public support.
The bill in its current form has already passed the 1st and 2nd readings in the House of Representatives and the Senate, and both chambers held their mandatory public hearings in the course of 2013. At the moment, the bill is back at the respective committees, where deliberations have to conclude, after which each house will receive its separate version. The final step will then be to go through the two versions on a clause by clause basis and merge them to one single document to be resubmitted to the president.