As the fate of the much–anticipated Petroleum Industry Bill (PIB) continues to hang in the balance, the ranks of international oil companies (IOCs) divesting oil assets in the country has swollen as Shell is putting up for sale four onshore oil blocks in the heart of the eastern Niger Delta, an area particularly hard hit by crude oil theft this year.
Shell, which has sold a series of blocks since 2010 for more than $2bn, is also selling the Nembe Creek Trunk Line, a key oil transport artery, which the company has had to shut repeatedly this year, no thanks to oil theft.
Clearly, these are not the best of times for the nation’s oil industry whose contribution to the Gross Domestic Product (GDP) saw a decline this year. The year on year GDP contribution of the industry dropped from 15.8 percent in first quarter of 2012 to 14.75 per cent in Q1 of 2013, according to data from the National Bureau of Statistics.
Only last week, Ngozi Okonjo-Iweala, minister of finance, reiterated that Nigeria loses $1 billion revenue every month to oil theft, adding that the current oil production figure was lower than the actual production level in 2012 and lower than the projected output of 2.528 million barrel per day in the 2013 budget.
In what seems to be a realisation of the serious threats to the industry, the production estimate for 2014 budget has been put at 2.38 million, about 6 percent decrease from this year’s ambitious target.
Aside from Shell, Chevron is also in the process of selling three onshore oil blocks, while ConocoPhillips’s sale of its Nigerian operations to Oando last year is expected to be concluded soon. Not a few oil industry analysts have said that more IOCs would divest from the industry if the issue of security and the long delay in passing the PIB are not decisively addressed.
Business Monitor International (BMI), which recently released its latest findings on Nigeria’s volatile oil and gas sector from its newly published Nigerian Oil and Gas Report, stated that the adoption of the Petroleum Industry Bill (PIB), which it expects between the fourth quarter of this year and first quarter of 2014, would be a strong signal for investors that Nigeria’s hydrocarbons sector is ready to move forward.
The British agency’s expectation could well be a tall order as the PIB remains stuck in parliamentary limbo and is unlikely to be passed until after elections in 2015 as the country becomes engulfed in a political crisis.
It would be recalled that the PIB suffered another setback as legislators postponed a public hearing earlier scheduled for last week, due to hajj operations. A couple of months ago, hearing on the bill was suspended due to the death of Senator Pius Ewherido.
To be sure, the uncertainty over when the PIB will be passed, as well as the form it will take, will continue to push back investment decisions, and some projects could be cancelled until the fiscal terms have been clarified.
The jeremiad by IOCs over the fiscal terms in the current PIB, which they say is one of the harshest regimes in the world, is yet to be addressed. Other issues include the proposed ultimate powers given to the president and the petroleum minister in the awarding and revoking of licences and the proposed 10 percent host community fund for oil-producing communities, which recently polarised the National Assembly into North versus South.
We are very much concerned about the uncertainty and lethargy that the delay in the PIB passage has brought to the oil and gas industry. We therefore urge the executive and legislature to do the needful to reverse the dwindling fortunes of the industry.