Nigeria’s Ministry of Petroleum will present the Petroleum Industry Bill (PIB) to H.E. President Muhammadu Buhari for approval within the next few days, according to three sources close to the draft.
The document is expected to provide a framework to boost oil and gas output while enhancing sector attractiveness for international investors, thus increasing foreign direct investment. The tabling of the Bill is particularly urgent, given the uncertainty created by the COVID-19 pandemic.
A draft summary of the law establishes the streamlining and the reduction of some oil and gas royalties, with the underlying objective to encourage international operators to invest in exploration and production, taking advantage of Nigeria’s extensive petroleum reserves.
The Bill includes a strong environmental and social component as it proposes encouragement for environmental clean-ups and other green initiatives.
Gas monetization is another key government priority reflected in the new Bill. It includes measures to encourage companies to explore and produce gas from discoveries, as well as a framework for gas tariffs and delivery. A gas-to-power strategy for local electricity generation is a particularly important topic for the country’s administration.
The latest oil and gas code, passed in 1969, still governs the petroleum sector in Nigeria. Sources close to the negotiations are suggesting the Bill should be approved by the President, with changes if need be, with the final step being a final approval by the National Assembly. The local industry community is fairly confident given the alignment between the assembly and the President, as the former is controlled by Buhari’s All Progressives Congress party.
The PIB has been in the making for over 20 years. A first attempt at passing a new Bill took place in 2008 when former President Umary Yar’Adua sent it to the National Assembly. The main idea behind the 2008 version was to increase transparency in the petroleum sector, namely in the National Nigerian Petroleum Corporation (NNPC), as well as increase the country’s share of revenue in oil projects. The passing of the bill failed due to objections from both the international operators and the NNPC over some of its content.
In 2015, Ibe Kachikwu, then Minister of Petroleum Resources, requested the Bill to be amended to facilitate the process. Therefore, the draft was broken into several parts with the hope to accelerate the approval.
At the same time, senators from the Niger Delta area raised concerns about the non-inclusion of requests from their communities. They pointed out that pre-existent tensions present in the Niger Delta could potentially get worse if the Bill didn’t include specific measures to address local issues. Consequently, the passing of the Bill was suspended yet again.
The passage of the current Bill has been listed as a top legislative agenda priority by Nigeria’s Ninth National Assembly. The Chairman of the Senate Committee on Media and Public Affairs, Senator Ajibola Basiru, has hinted that he would not hesitate to cut his holidays short to examine the Bill once its forwarded by the country’s executive arm. The Senate’s annual vacation is supposed to end on September 15th.
“The PIB is a priority in the legislative agenda of the ninth Senate, and we have been working with the executive to ensure expeditious presentation and passage in the interest of Nigeria. In fact, we delayed our recess in anticipation of the presentation of the bill before proceeding on recess,” he said.
The Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva, noted that he had been in touch with the lawmakers who had assured him the draft would not stay for more than six months in the National Assembly before its passage to law. Regarding the content of the law, Minister Sylva is confident that the Bill ensures investors’ interest while preserving the government’s take.
Current operations will not be negatively affected by the implementation of the new law as operators will be able to sign conversion contracts, thus obtaining better terms for existing assets. Exploration and production in currently operated blocks will be able to be led under the new terms once the Bill has passed.
The PIB places a strong emphasis on developing a domestic gas market in Nigeria which currently only holds a few operators in the gas subsector. Minister Sylva assured the framework was designed to encourage investment while putting the conditions in place to avoid the formation of a monopoly.
In terms of oil production, Nigeria publicized its goal to reach the three million barrels per day mark. Although the COVID-19 pandemic, alongside the Organization of Petroleum Exporting Countries cuts, has hindered the country’s efforts to reach that objective, the upcoming marginal field bid round as well as promising prospects from Bonga South and West oil and gas fields should enable Nigeria to attain that target, even more so if and when the PIB is passed.
The content of the final draft is paramount in regards to shaping Nigeria’s future oil and gas industry, in an unstable post-COVID environment. Royal Dutch Shell, who delayed a multi-billion expansion plan due to governmental uncertainty, explained that a poor reform could put a number of planned projects at risk and even make them unviable. On the other hand, a well-designed Bill could trigger major investment into petroleum-rich Nigeria.
As one of Africa’s leading hydrocarbon markets, Nigeria’s revamped petroleum Bill is set to be a game-changer, with several key goals underlined: local capacity expansion, strengthening of a gas domestic market and investor attractiveness boost, among others.
