Oil Majors Cautiously Awaits Outcome Of Harmonized PIB Next Week

International Oil Companies -ioc - Top 10 - Energy News | Oil and Gas News

…Says Security, Taxes Will Determine Next Move Senate

Yemisi Izuora

International Oil Companies, IOC’s operating in Nigeria seem to be acting cautiously and impatiently waiting for the National Assembly to retouch grey areas not properly addressed in the just passed Petroleum Industry Bill, PIB.

The operators are expecting a proper review of plethora of taxes and royalties and other issues around security of producing assets and sanctity of contracts.

At a round table discussion on Wednesday at the ongoing Nigeria oil and gas conference, NOG 2021, chief executives of Chevron, ExxonMobil, Shell and TotalEnergies, though openly applauded the passage of the Bill but were very circumspect in their statement.

They advised the legislature to be wary and attentive to key demands that have over time frustrated their investments.

They called for fiscal policies that will significantly address security, over bloated tax bouquet and production cost.

Oriental News Nigeria understood that the two Committees on the PIB, in the Senate and House of Representatives would by next week Tuesday July 13, conclude harmonisation of differences in the Bill.

The agreed version of the draft would be sent to President Muhammadu Buhari, before end of next week for consideration and assent.

Senator Bassey Akpan, Chairman Senate Committee on upstream during the panel discussion confirmed that position.

But during their individual remarks major oil company chief executives at the panel discussion expressed common views that the outcome would determine their next line of considerations.

Akpan, said a lot of work and robust engagement with industry players went into the Bill and fair considerations were offered to all stakeholders and in particular the oil bearing communities with the establishment of Host Community Fund, to address decades of neglect.

Speaking further on the Fund, he said though the actual percentage accruable to the Fund is yet to be agreed by both Committees, it will still go a long way to give the inhabitants a sense of belonging and end incessant blocking of producing assets and shutting down oil companies offices.

He said what the PIB has done is to compel oil companies to contribute either the 3 per cent or 5 per cent of their Capital Expenditure, CAPEX, to the Fund.

Senator Bassey clarified that the PIB if harmonised and assented to the contribution would involve their CAPEX from last year.

He further said that with the Fund in place all previous Memorandum of Understanding, Corporate Social Responsibilities would be collapsed to allow the Fund run seamlessly.

On the concerns of the IOC’s in the area of Deep Offshore and Inland Basin Act, he said the recommended tax and royalties would eventually provide better deal for the majors.

When he took the stage, Osagie Okunbor, Managing Director, the Shell Petroleum Development Company, SPDC, applauded the passage of the Bill and commenced the National Assembly for robust engagement through the period of consideration.

Okunbor, said the absence of the Bill has caused serious set back for the industry.

He lamented the industry has been significantly challenged by insecurity which has led to consistent breach of the Trans Niger Pipeline, TNP.

According to him, reconciliation factor reveals that 50 per cent of crude oil passing through the asset is lost and only 44 per cent could only be accounted for.

Okunbor, observed that incentivizing the communities through the Fund will not only stop deferred production due to unrest but will empower them to be more productive.

He however, hoped that the outcome will address critical issues of plethora of taxes and royalties in the industry.

“I want to state that most government agencies when they need money will introduce various types of tax and royalties and compel oil companies to pay. At this point we hope that the PIB, will put a stop to this” he said.

On his part, Mike Sangster, Managing Director and Chief Executive Officer, Total Upstream Companies in Nigeria, said the engagement between NASS and operators was useful to speed up passage of the Bill.

Sangster, said there is need to stimulate Investment in the industry as Nigeria’s oil reserve would take up to 50 years to deplete.

He complained about cost of production adding that Nigeria is most expensive country to operate, as well as insecurity adding that oil majors spend much in providing security.

Speaking like his colleagues Rick Kennedy, Chairman and Managing Director, Chevron Nigeria/Mid-Africa said his company has reduced gas flare by 95 per cent, but the company is expecting to see the harmonised version of the Bill to be able to make further decisions.

Richard Laing, Chairman and Managing Director of Mobil Producing Nigeria Unlimited, expressed the hope that the Bill when finally harmonised will adress key industry concerns with regard to security, sanctity of contracts among others.

Laing, represented by Oladotun Isiaka, said the company has invested much in technology to enable it reduce production costs and improve on data gathering and feedback from producing assets.

It will be recalled that the Senate last week passed the long-awaited Petroleum Industry Bill (PIB), following approval of recommendations of the report of the Senate Joint Committee on Petroleum, (Downstream,) Petroleum (Upstream) and Gas.

Presenting the report, Chairman of the committee, Sen.Mohammmed Sabo (APC-Jigawa), said the Bill consisted of five distinct and logically connected chapters.

Sabo listed the chapters to include governance and institutions, administration, host communities development, petroleum industry fiscal framework and miscellaneous provisions, comprising 319 clauses and eight schedules.

He said the Committee carried out its assignment effectively and conducted a public hearing to collate inputs from critical stakeholders and the Nigerian people.

Sabo said the Committee also reviewed the Bill and all the memoranda submitted by stakeholders during the public hearing adding that the Committee equally embarked on on-the-spot assessments of impacted oil exploration communities.

This, he said was to critically examine issues raised by Senators during the second reading of the Bill and consulted widely on the justifications for passing the Bill into Law.

Sabo said the Bill when passed into law “will strengthen accountability and transparency of Nigerian National Petroleum Corporation(NNPC) Ltd as a full-fledged CAMA company under statutory and regulatory oversight with better returns to its shareholders and the Nigerian People’’.

On the Frontier Basins, he said the committee’s recommendation recognised the need for the country to explore and develop the country’s frontier basins.

This, he said was to take advantage of the foreseeable threats to the funding of fossil fuel projects across the world due to speedy shift from fossil fuel-to other alternative energy sources.

“To this end, the Committee recommends funding mechanism of 30 per cent of NNPC Ltd profit oil and profit gas as in the production sharing, profit sharing, and risk service contracts to fund exploration of frontier basins,” Sabo said.

On host communities’ development, he said` `to ensure adequate development of the host communities and reduction in the cost of production, the Joint Committee recommends five per cent of the actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities for funding of the Host Communities Trust Fund”.

According to him, in the past 10 years, the country has only attracted less than five per cent of the over 100 billion dollars capital investment inflow into Africa’s oil and gas industry.

He added that all stakeholders were in total support of the passage of the Bill as there was no dissenting voice opposing its passage.

He described the Bill as laudable and commendable saying that its passage would bring the long awaited change in the oil and gas industry.

However, Sen.Ahmed Baba Kaita (APC-Kastina) moved a motion for the reduction of funding of host community trust fund to 3 per cent as against the 5 per cent earlier recommended by the Committee.

The motion which was adopted, resulted to dissenting views by Senators James Manager(PDP-Delta),Bassey Akpan(PDP-Cross-River), George Sekibo(PDP-Rivers) among others.

Sekibo, having cited order 17 of the Senate rule called for division to contest the decision to reduce funding of host community trust fund to 3 per cent.

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