The International Oil Companies (IOC), Monday warned that that the Petroleum Industry Bill (PIB) may reduce Nigeria’s global competitiveness if passed in its current form.
This is against the high hopes that the passage of the Bill would lead to increased revenue for the federal government.
The IOCs represented by the Oil Producers Trade Section (OPTS) gave the warning in Abuja during a public hearing on the PIB, organised by the Senate Joint Committee on Petroleum ,Upstream, Downstream and Gas.
According to Chairman of the OPTS, Mike Sangster, “We fear that if the PIB is passed in its current form, it will not meet the government’s objectives of making Nigeria the leading destination for oil and gas investment and the recent scarcity of investment. Only $3billionn out of $70billion (representing 4 per cent) in Africa will continue.
“This lack of competitiveness is caused in part by the high cost of doing business in Nigeria, with overall project costs and operations costs being 69per cent and 42per cent higher than the global average respectively. Nigeria’s Government Take also remains high and uncompetitive, exceeding that of most comparable prolific basins.
“A PIB, which safeguards existing projects and introduces competitive terms, is required to fully utilise the country’s resources for the benefit of all Nigerians,” he said.
Speaking further, Sangster said that after a diligent review of the PIB, the OPTS lauds the “Federal Government’s efforts to introduce a comprehensive bill to address a number of issues affecting the operation of the industry.
He said that the OPTS observed some positive provisions in the PIB which include: “Lower headline tax rates for onshore and shallow water oil development activities, gas production not subject to the new Hydrocarbon Tax (HT), and maintenance of current tax consolidation principles for the purpose of Companies Income Tax (CIT).
He listed other benefits of the bill to include “optional conversion to new PIB, recognition of ongoing Deep water negotiation and commercialization of the Nigerian National Petroleum Corporation (NNPC).
Sangster added: “However, we have also observed that there are a number of issues in the PIB that remain of concern to the industry.
“These issues have the potential to hinder the realisation of the PIB’s laudable objectives, to reduce Nigeria’s competitiveness and to deter the much-needed investments – especially tin Deepwater – to grow new projects,” he said.
The areas of concern according to the OPTS chief are Deepwater development, lack of key enablers for domestic gas development, preservation of base businesses & rights and segregation of Upstream and Midstream deemed assets.
Others are administrative complexities and absence of a robust dispute resolution framework, capital allowances and deductions and preservation of earned rights and investments integrity for Marginal Fields.
However, Senate President Ahmad Lawan, said that the PIB will ensure that Nigerians benefit optimally from crude oil production and sale of fossil fuel reserves.
According to the Senate President, the National Assembly in its consideration of the Bill would ensure that the law guarantees improved revenue earnings for the country.
Lawan said: “Let me say this, we (National Assembly) will pass this bill not without ensuring that it is a bill that satisfies certain conditions.
“Nigeria is blessed with these resources; we want Nigeria to benefit optimally from them. In fact, we are in a hurry because we have lost so many years of benefits that we could have had.”
Minister of State for Petroleum, Timipre Sylva, noted that apart of the current COVID-19 crisis that has cause the strongest recession experience, the oil industry is faced with other critical challenges.
He said: “Several nations have announced their intent to comply with the Paris agreement 2016 and adopted climate change policies by 2050 or 2060.
“This means that the usefulness of fossil fuel will diminish significantly. Indeed UK, South Korea, China, Brazil and some other nations fall within this category.
“Global financing of fossil fuel projects have also been affected with many investor nations and other major players within the financial ecosystem have reiterated their intention to stop funding projects fitting this description in 2025.
“This will inevitably impact the ability of industry players to access the needed funds with which we will bring assets into production and by extension reduce government’s revenue ordinarily.”
Group Managing Director of try NNPC, Melee Kyari, lamented that the oil industry has not seen significant investments and developments since year 2000 till date.
“When we started the journey to PIB in 2000 through the oil and gas reform committee, that was the beginning of uncertainty in the industry. Since 2000 till this moment, I can also confirm that the industry has not seen significant investments and developments,” he said.
