Wednesday, February 16, 2011

Nigeria: Petroleum Industry Bill suffers setback

By Oluwaseyi Bangudu

The initial momentum by government to pass the Petroleum Industry Bill (PIB) may have waned, as the focus of elected officials is now mainly on the forthcoming elections.

Despite the promise by government that the Bill will be passed by the current National Assembly, events in the last few months point to the contrary.

According to Bismarck Rewane, managing director, Financial Derivative Company, the Petroleum Industry Bill remains stuck.

“Oil and gas reforms are unlikely in the face of elections. The Nigerian president once again reiterated his wish that the Petroleum Industry Bill (PIB) will be passed in this session of the National Assembly. The petroleum minister had pronounced earlier that it would be passed last September. It is probably inconceivable that the bill in its present form will be debated and passed at the current session of the National Assembly,” Mr. Rewane said.

The Petroleum Industry Bill has been undergoing setbacks since the draft bill was made available in 2009. The government has repeatedly said the passage of the Bill is imminent, yet, revisions and debate have hindered the process since then.

Earlier in the month, the president said he expects wide-ranging reforms to the mainstay oil and gas industry to be passed into law before the end of the current parliament in May, according to a Reuters report.

The legislation process has been held up for years, going from revision to revision and committee to committee as the industry’s decision-makers and government officials negotiate over its terms.

Industry watchers say billions of dollars of potential investment, especially from foreign oil companies, in the oil and gas industry are on hold as a result of the uncertainty over the proposed legislation.

A Reuters report stated that a joint Senate committee which has been considering the bill for the past year has concluded its work, since last year, paving the way for the upper house to begin voting on the legislation clause by clause.

“The joint committee on PIB has laid the report (the PIB) on the table in the Senate. We have concluded work on it. It is now the property of the Senate,” the report quoted Osita Izunaso, a co-chairman of the joint committee.

Mr. IZunaso had also reportedly gone ahead to say that in the next few weeks, the Senate will consider it clause by clause.

Crucial decisions already on

Despite the delay, some major multinational oil companies have already started selling some of their oil blocks while some are shifting their operations towards deep offshore and divesting some of the onshore assets.

Shell, which is in the process of selling more of its oil blocks, recently sold some of its Nigeria assets to a consortium led by local companies. In a statement issued by the company, it agreed to transfer its interest in three production licences and related equipment in the Niger Delta to a consortium led by two Nigerian companies.

“This sale of assets supports the Nigerian government’s goal of expanding opportunities for local energy companies,” Mutiu Sunmonu, managing director, SPDC, said.

Experts say the Petroleum Industry Bill (PIB) will re-write Nigeria’s age old relationship with its foreign oil partners, altering and varying everything, right from the fiscal framework for offshore oil projects to the involvement of indigenous firms in the sector.

Dragan Trajkov, an oil and gas analyst at Renaissance Capital, a finance investment bank, said the potential PIB and the passed Local Content Bill may have influenced their decision.

“We do believe that the potential PIB and the already passed Local Content Bill might have had some impact on their decision. Especially the fact that the early version of the PIB was proposing that the majors may be required to relinquish some of the undeveloped fields,” Mr. Trajkov said.

He, however, said while this may not be a major determining factor, it would be a contributing one.

Proponents of the bill say it will enable the Nigeria National Petroleum Company (NNPC) to become more transparent, encourage local and foreign investment, particularly promote local oil company involvement in the industry, and increase gas supplies to the ramshackle domestic power sector.

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