Nigeria: Oil Majors Raise Concerns As National Assembly Begins Hearing On PIB

The oil majors and other players in the industry expressed disatisfaction with some provisions of the Petroleum Industry Bill, 2020.

Some major oil producing companies and other players in the industry have raised concerns over some provisions of the Petroleum Industry Bill (PIB), 2020.

This was at the first day of the public hearing, a necessary stage of the consideration and passage of the bill.

The legislation, which was transmitted to the National Assembly last year after it had suffered setbacks for about 20 years, proposes the scrapping of the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Product Pricing Regulatory Agency (PPPRA).

It also proposed the creation of the Nigerian National Petroleum Company Limited - after all the assets and liabilities of the NNPC have been identified by the ministers of petroleum resources and finance.

The PIB also seeks to establish the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

At the hearing organised by the Joint Committee on Petroleum Upstream, Downstream and Gas, was the Oil Producing Trade Section (OPTS) who expressed dissatisfaction with some provisions of the bill.

The chairman of OPTS, Mike Sangster, made his presentations on behalf of Total, Chevron, Exxon Mobil and Shell companies.

Major concerns

Top of thier concerns was deepwater developments, which he said have contributed significantly in maintaining Nigeria's oil production levels by offsetting the decline in the Joint Venture production.

Mr Sangster complained that the PIB shows that the Deepwater provisions do not provide a favourable environment for future investments and for the launching of new projects.

To ensure investors are encouraged to finance Deepwater projects, the PIB should grant Deepwater oil projects a full royalty relief during the first five years of production or a graduated royalty scheme as detailed in their submission, he said.

He also proposed that PIB should remove Hydrocarbon Tax considering that companies will still be subject to CIT.

The group said the bill does not address the key challenges facing gas development in Nigeria, such as inadequate midstream infrastructure, regulated gas pricing, huge and long outstanding debts, etc., thereby potentially jeopardising the realisation of government's aspirations for the domestic gas sector.

It, therefore, suggested that PIB "provide a clear path for transitioning to free market-based pricing, not add additional compliance conditions on domestic gas delivery obligations as a precondition for export gas supply and allow pre-existing contracts and agreements to run their course".

The PIB, Mr Sangster continued, "does not clearly preserve the terms of existing investments".

"OPTS recognises the government's right to change laws. However, to maintain Nigeria's reputation amongst investors, it is important for the PIB to explicitly preserve base businesses and rights for existing Joint Venture licenses and leases and Production Sharing Contracts, which form the basis for future growth.

"Operators should be allowed to retain the entirety of their lease areas and new terms should apply only to new contracts, licenses and leases," he added.

For a section of the bill which proposes that companies operating consolidated upstream and midstream assets separate and incorporate their midstream assets as distinct legal entities, he said "an imposed segregation along upstream and midstream for existing assets could jeopardise the integrity of past investments for assets that were technically and commercially designed to operate on an integrated basis".

The OPTS said the PIB should include a savings provision to allow post-conversion continuity of activities undertaken by a single legal entity, instead of being segregated as independent companies.

"Where assets are required to be segregated, a provision for the specific exemption of associated taxes should be considered such as; Capital Transfer Tax, Capital Gains Tax.

"PIB should consider harmonising the taxes into a single tax system and allow for consolidated filing and tax reporting and also seek to harmonise tax practices and ensure capital allowances and allowable deductions are consistent with existing tax legislations, Companies Income Tax Act (CITA)."

Other concerns

The Women in Energy Network were also present to state their concerns. The group, among others, noted the absence of gender participation in the bill.

They cited Sections 3, 14, 15, 18, 22, 26, 37, 41 and 71, among others as they asked the lawmakers to change words like 'he', 'his' and 'him' to 'they', 'their', and 'them'.

Funmi Ogbue, who made the presentation, said women have a role to play not just in technical aspects but in ensuring good governance.

This is even as she proposed that 35 per cent of the board be made up of women and the members should consist of women from the host communities (with the right qualifications).

She said the provision that oil companies should contribute 2.5 per cent of their operating cost to the host community development trust fund is exorbitant in view of other taxes they are presently paying.

"WIEN believes that 2.5 per cent is too expensive. WIEN posits that a total of not more that 1 per cent consistent with other statutory provisions like the Nigerian Local Content Act 2010 replace the current figure captured in the PIB.

"And the PIB include alternative sources of energies such as renewables."

Meanwhile, in his opening remarks, the Senate President, Ahmad Lawan, explained that the National Assembly's determination to pass the Bill is driven by the need to "overhaul a system that has refused to operate optimally in line with global standards, resulting into loss of continental competitiveness, transparency, accountability, good governance and economy loss for the petroleum industry and the country".

The hearing is expected to continue on Tuesday.

This article originally appeared on Premium Times

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