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Petroleum Industry Bill: The Cabal’s Conspiracy

News Introduction: 
The National Assembly is famous for enacting laws via the passage of bills brought to it but this time around, the petroleum industry bill, PIB, appears to be a fly in the legislative ointment. - By Emmanuel Afonne

From the day it was presented to the National Assembly in 2008, former petroleum minister, Dr. Rilwanu Lukman was so confident that it would receive accelerated hearing from both the Senate and the House of Representatives. He had thought that the time had come for the needed reform in Nigeria’s petroleum industry but three years after its submission, the confusion and secrecy trailing it suggests that the forces battling the passage of the petroleum industry bill, PIB, are controlling the country’s legislators. Since the discovery of oil in Nigeria in 1958, British and American companies have dominated the nation’s oil exploration. Shell Petroleum Development Corporation, SPDC, EXXON-Mobil, Texaco, Agip, Chevron, Total and Elf have been the front liners. They are multinational oil companies in Nigeria with a difference, as their activities on Nigerian soil date donkey years. But now companies from China, Saudi Arabia and India are eager also to do business in Nigeria.The Chinese government had few years ago tabled a mouth watering offer to Nigeria to allow her to explore oil in the country. In the offer, the Chinese president, Hu-Jintao, told the Nigerian government that China would build Nigeria’s railways and some other infrastructures in order to partake in the country’s petroleum industry.The Chinese president was precise in his goal. He even took a tour of Nigeria. The principal purpose of his visit was to attract oil for the booming Chinese economy. It was upon this interest that the late President Musa Yar’Adua’s administration decided to look for ways to incorporate China in the Nigerian oil and gas reform. Dr. Rilwanu was the foot soldier. But the existing laws of the land would not allow the leasing of oil wells to prospective countries including China because most of the oil mining leases, OMLs, are in firm grip of the existing multinational oil firms in Nigeria. These firms have held them for over 42 years and to change the situation, an overhaul was needed in the country’s oil law. This, in part, was the genesis of the PIB.The proposed reform in the oil industry is to be substantially, free from government control in a deregulated environment at the same time unbundling of the Nigerian National Petroleum Corporation, NNPC, and creation of incorporated joint ventures, IJVs. Government is also targeting to derive more revenue from petroleum products, while proposing to ensure transparency. This has to do with the principle of the Nigeria Extractive Industries Transparency Initiative, NEITI. Improved metering was part of the proposed bill but along the line, it disappeared. Dr. Lukman, the architect of the bill knows how these laws that are to be modified works around the world, having been one time head at the Organisation of Petroleum Exporting Countries, OPEC. His quarrel was that the laws guiding the oil industry have become rusty and as such needed to be reviewed.The former petroleum minister was targeting to turnaround the outdated amended Petroleum Profit Tax Act, the Deep Offshore and Inland Basin Production Sharing Contract Act of 1999, the NNPC Act and PPPRA Act, the Oil Pipelines Act, Associated Gas Re-injection and Regulation Act as well as Petroleum Technology Development Fund Act among others. His intention was to address the hiccups experienced over the years due to the absence of proper laws for the industry through the PIB. This was to meet global standard.The former minister was right in his thinking. Current minister of petroleum rsources, Dieziani Alison Madueke has embraced Dr. Lukman’s dictate even when she agrees that some of the gray areas pointed out by stakeholders have led to the numerous amendments of the PIB. For instance, on the commercialisation of NNPC, the minister has agreed hook, line and sinker that the new NNPC is supposed to run along side private sector commercial lines. “I asked for a working document on how a commercialised NNPC will actually run, coming from a private sector. It is not just the actual activity of the company that will change but also the revenue stream  accruing to government and the way they will accrue to government, as opposed to everything going to the federation account. We will now be deriving revenue as government from a commercialised body and pay taxes and dividends and royalty, while some portions will still obviously go to the federation account”. According to Dieziani, these are issues that would be carefully looked at before the PIB is promulgated into law.The minister appears to be in support of government’s stand but there are allegations that the Bayelsa State-born minister could also be working in tandem with international oil companies, IOCs.It may interest whoever cares to know that the gas sector will become the focus of Nigeria’s economy if the PIB is passed into law. If Dieziani’s words are anything to go by, over 300,000 jobs would be created from the gas sector alone in the next five years. With the passage of the bill, information about licenses, leases, contracts and changes to any document pertaining to the petroleum industry would no longer be confidential. Another major benefit of the bill includes, measures to ensure government increases its gains from a growing number of on-shore developments. The review of the royalties on gas through creation of new fiscal rules is also in the offing. Furthermore, oil companies would be encouraged to refine at least 50 percent of their production in Nigeria by the end of the decade. Incentives to encourage development in host communities and marginal fields are also not left out.Looking at this development from the outside, one would think that all is well. The controversies are better seen than imagined. The IOCs are raging with anger over some of content of the bill. Their position is clear on the matter. The strongest argument presented by them seems to be the PIB proposal that seeks to convert the current joint ventures, JVs, into incorporated joint ventures, IJVs, an arrangement that absolves the government from any financial involvement in the running of the IJV operations and conferment of excess arbitration powers on the regulatory agencies created in the bill. The Nigerian Petroleum Inspectorate will regulate all matters relating to the upstream, which includes oil and gas, petroleum exploration and production. The National midstream Regulatory Agency would be responsible for all matters linked to the Midstream, which includes pipeline transportation, storage, refining and liquefied natural gas, while the Petroleum Product Regulatory Authority is expected to be in charge of matters relating to the downstream, that is, petroleum product and natural gas distribution to final consumers.High stake politics has however been playing out in the industry with the Chinese lobbying to acquire substantial part of the deal. Information available to Newsworld reveals that the Chinese National Offshore Oil Corporation, CNOOC, had earlier eyed some oil blocs and was reported to have made a $50 billion offer to the federal government to acquire 49 percent equity, translating to about six billion barrels of oil.The general perception has been that the federal government has not been leading the best deal under the JVC since NNPC currently holds a majority stake of 57 percent across board and is supposed to provide its share of the funding in proportion of its equity share and contracts. It has also been suspected that the JVCs are entirely funded by the Nigerian government when the cash calls are paid. No wonder, former president of the Nigerian Bar Association, NBA, Olisa Agbakoba called for the scrapping of the NNPC, describing it as a drainpipe to the country’s economy. Agbakoba did not mince words in releasing the bombshell. He suspects that the NNPC as an organisation would do everything possible to stifle every effort made to get the PIB passed.Agbakoba who, delivered  a goodwill message last week, at the inauguration of 89 special and standing committees of the House of Representative, declared that the NNPC has milked the country dry in collaboration with the international oil companies in the country. The former NBA boss could be drawing attention to the high-level politics the NNPC and the oil majors are playing towards the passage of the PIB. He said over N7 trillion is lost yearly to oil majors operating in the country. “NNPC owes so much money, the question is why? Questions like, do we need the NNPC in the first place? Should be asked. In my view, I will urge you to consider a law that would scrap the corporation. For example the 60-40 equity arrangement between the NNPC and the oil majors in the country is a fraud and it should be addressed,” Abgakoba demanded.Another eye-opener was Agbakoba’s revelation on how the IOCs short-change the Nigerian economy through legal services, banking, insurance and shipping. He used ExxonMobil as an example. It was revealed that while the oil major spends over $1billion for its legal services in a year, no Nigerian law firm was patronised. He further regretted that out of over 5,000 ships involved in the lifting of crude oil in the country, no Nigerian ship was involved. Agbakoba is making reference to the local content formula. Whether the corporation likes it or not the learned gentleman has bared his mind. He also opened another vista to the controversial bill and its likely opposers.The question raised by Agbakoba on how the NNPC makes money for Nigeria reminds us of the silence of the PIB on metering. Newsworld scooped that the improved metering, which was meant to keep records of the number of barrels of oil produced per day is conspicuously missing in the amended PIB.Senate president, David Mark, last Wednesday spilled the beans telling Nigerians what was wrong with the bill. He repeatedly fingered the NNPC for delaying the passage. This is evident in the allegation levelled against the agency for sabotaging the proposed end to gas flaring, which was earlier contained in the PIB. Mark, while inaugurating the senate committee on petroleum said, “the problem with the PIB was that when it showed up, there were so many versions.” He added that, “as many as three or four versions were in the hands of senators and members of the House of Representatives.” The senate president may not know how much his honest revelation has saved the country.The question now is who tinkered with the original PIB submitted to the National Assembly and how did it get to the law makers?Trouble started for the bill after it had gone through the first and second readings, including public hearings in both the Senate and House of Reps between July 27 and 31, 2009.The petroleum ministry in connivance with the NNPC had allegedly submitted an inter-agency memorandum at the public hearings seeking fundamental changes to the PIB. These changes by the NNPC and its supervising ministry were never contained in the policy documents approved by the Federal Executive Council, FEC. It was gathered that the memo has been the source of confusion trailing the bill. The inclusion of a mid-stream sector is another insult to injury in the proposed bill. A petition by the Bureau of Public Enterprises, BPE, opened a can of warms. It was furious that the bill was tampered with without the knowledge of some stakeholders who participated in the formulation of the bill. National Council on Privatisation, NCP and FEC were said to be unaware of the changes made. Radical changes in the fiscal regime which was not concluded by the stakeholders were also reflected in the amended proposed bill sneaked in by the NNPC and its co-travellers. Their aim was to remove the powers of the NCP and get rid of private-sector-participation initiative over all matters concerning the proposed reform in the oil and gas sector. The implication is that both NNPC and ministry of petroleum will supervise the proposed restructuring that affects them.These memos were also targeted at the BPE. The memo to the legislators proposed that “the federal government will not privatise any company or allow any private sector participation in the oil and gas sector”. The amendment also laid siege on the public enterprises privatisation and commercialisation Act of 1999 without the approval of FEC and NCP.Even a blind man could see that the PIB is heading for oblivion if nothing urgent is done to call some individuals and organisations to order. It appears the NNPC and the oil majors in the country are competing to turn the entire effort into an academic exercise but civil society organisations, CSOs have promised them good run for their money. The organisations had in the past questioned the rationale behind the trip embarked by some lawmakers of the sixth assembly to Ghana, which was facilitated by the oil majors. It was alleged that the journey was arranged as part of an effort to influence the law makers to tinker with the bill with an aim to tamper with any clause that could make the country an influential holder of the oil and gas sector.Based on the sensitive nature of the bill, which the petroleum minister said cost the federal government N481million to prepare, a group, Social Action, has fingered the lawmakers as part of the problem the bill faced. Spokesperson of the group, Vivian Belonwu, had explained that previous versions of the PIB made available to CSOs by the National Assembly, clearly contained the clause which seeks to end gas flaring but was flabbergasted how it was eliminated from the proposed bill. A situation which she said was allegedly aided by the lawmakers to continually allow oil companies freedom to flare gas at the detriment of host communities whose right to healthy living have been constantly denied by the oil companies.The CSOs are bent on exposing the rot in the oil and gas industry. The complaint lodged against the federal government on the whereabouts of $4.92 billion un-reconciled revenue clearly shows that the ministry of petroleum, the NNPC as well as its subsidiaries have a case to answer. The executive secretary of NEITI, Mrs. Zainab Ahmedm, would need a lot of convincing to believe that the supposedly missing revenue was done in error. If not, reasons would be given on the shortfall linked to payment discrepancies recorded between CBN’s documented receipts for transactions, which charted what the oil companies paid to the government.A typical instance is the $4.73billion recorded as outstanding payment for domestic crude given to the NNPC. Others are the $10.4 billion recorded as profit tax from the oil companies, which the oil companies claimed they paid $10.54 billion, leaving a shortfall of $241.67 million. There is also the $4.68 billion recorded by CBN in royalties payments for the award of oil blocs, while the oil companies show payment of only $4.36 billion leaving a balance of about $322 million unaccounted for. More exposures showed discrepancies  in the $207 million unconfirmed payments by the Nigeria Liquefied National Gas, LNG, to the NNPC for some transactions. This is against what the companies said they remitted during the period in question (2005 audits). Discrepancies were also noticed in the payments of about $50.615 million and N1.2 billion from statutory contributions to the Niger Delta Development Commission, NDDC by the oil companies. On the contrary, NDDC claimed that $135 million and N8.36 billion were paid in by the companies, against the record of $120 million and N8.2 billion by the companies.Also, it would be recalled that a panel of the senate committees on upstream petroleum, in Uyo, Akwa Ibom State sometime ago accused the NNPC of undermining its work on the PIB by circulating fake copies of the proposed bill.Senator Lee Maeba, chairman of the panel of the upstreams oil and gas committees, was quoted then as saying at the Uyo retreat that: “The NNPC group managing director is taking the Petroleum Industry Bill so personal and it is putting up conducts and actions that are capable of undermining the integrity of this committee and if a line is not clear from the president as to whether this is an NNPC bill or a presidential bill, anytime from now we shall be compelled to stop action on this bill. “We have traced it to NNPC. The Corporation is doing everything to undermine the integrity of the committee. This is a Nigerian bill; it is not an NNPC bill,” he continued with his unkind words for the top notch of the NNPC. “He has put up so many bills, he is putting so much confusion to the committee and even now, he has sent a team from the NNPC to this place. This is an in-house committee why did he send NNPC people to this place and those are the actions that are undermining the integrity of this committee and it is wrong,” Senator Maeba fumed.Maeba’s attack on the NNPC boss appears to be nothing compared to the N450 billion the northern governors have ordered the NNPC to return to the national treasury. The money represents sales of crude oil taken at source by the corporation, which should not be so. They contended that the nation’s indigenous oil corporation should not have deducted the said money from source. There are insinuations in some quarters that the PIB is dreaded by the eggheads in the NNPC and the IOCs because it contains features seen as toxic to their interest and these are:•    PIB vests oil and gas resources in the sovereign state of Nigeria. •    Management and allocation of petroleum resources will be in accordance with the principles of good governance, transparency, and to promote sustainable development and economic value to Nigeria.•    All institutions in the industry including the National Oil Company, NOC, to be guided by the provisions of the NEITI Act of 2007.•    Honours international environmental provisions and obligations.•    Encourages community relations and the development of Nigerian content.•    Allows unhindered access for entry into and participation of companies in the industry in accordance with the law.•    Evolves a transparent, investor-friendly legislation.•    Maximises economic benefits to the nation through revenue accruals.•    Meets the nation’s energy needs at competitive levels •    Ensures minimal political interference, as it provides for independent regulators, etc.Despite the power play, the Nigerian Extractive Industries Transparency Initiative, NEITI added its voice to the PIB hullabaloo. It came in form of advice to the National Assembly. It urged them not to pass the bill currently with them and declared that some cabals have succeeded in tampering with the fiscal provision which is aimed at reducing government revenue from petroleum operation by a minimum of $3 billion annually through dubious means.It explained that the current rates of Nigerian government’s share of revenues are PSC 48 percent, JV 82 percent, while international rates of government share of revenues stood at minimum of 56 percent and maximum of 90 percent. It further noted that the House of Representatives report proposal provides a minimum 45 percent for PSC and 60 percent for JV.Underscoring the importance of the PIB, the executive chairman, Federal Inland Revenue Service, FIRS, Ifueko Omoigui Okauru, on Monday solicited the support of the House of Representatives for a wholesome review of tax laws and other related enactment as part of its legislative agenda. Specifically, she wants the House of Representatives to expedite action on the passage of the Petroleum Industry Bill, PIB, as this will put more money into the country’s pockets.Okauru stated this when she paid a courtesy visit on the  Speaker of the House, Honourable Aminu Tambuwal, that the leadership should also put into considerations tax related matters in the proposed amendment of the nation’s constitution.“We are looking at wholesome review of our tax laws in the spirit of reforming the entire tax administration in the country, most of which are still colonial in rendition thereby making difficult to interpret.“Tax, we all know, is a major sustainable source of revenue, engenders social contract between the citizens and the government, keeps government accountable, provide a medium for communication with the governed, increasing global awareness of its relevance as key to sustainable domestic resource mobilisation,’’ she said.In her appeal for speedy consideration and passage of the petroleum industry bill, PIB before the National Assembly, Okauru noted that it had the potentials of ensuring more revenue generation for the development of the country.She explained “We are aware that in part of your legislative agenda, tax is squarely a major issue to address under your leadership. We recognise the issues that are still being addressed like the PIB.“Given the complexity of the PIB, I seize this opportunity to salute the hard work and thoroughness of the work of members of the House of Representatives and the Senate of the Federal Republic of Nigeria on the bill.“For us, at the FIRS, we await the passage of this all important bill, as it is core to our efforts at being part of the efforts to increase the nation’s earnings.”If as stated by Mrs. Okauru, the introduction of the Integrated Tax Administration System, ITAS, reengineering and modernisation projects of the Service had shore up revenue collection to N2.4 trillion from January to July 2011, the passage of the PIB and efficient implementation could lift the country out of its economic woes.

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