Despite decades of sluggish progress, the Petroleum Industry Bill (PIB) currently being debated by the National Assembly could be the game-changer in unlocking private capital that has the ability to innovate and boost capacity for the domestic gas market.
Initiated over 20 years ago, the PIB is expected to reform Nigeria’s cloudy oil sector but the bill has been in limbo. While the country foot-drags on the bill, pressure continues to mount on fossil fuel, which accounts for about 90 percent of Nigeria’s export.
With expectations concerning the passage of the PIB rising in 2021, most experts say with the right approach and implementation, the new PIB before the senate president of the Ninth Assembly, Ahmad Lawan can transit Nigeria from an oil giant to a gas giant.
Nigeria holds Africa’s largest gas reserves of more than 202 trillion cubic feet, but flares, or burns, most of the gas it produces along with oil because it lacks the right regulation or infrastructure to process it.
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“The new PIB will create a regulatory certainty which will attract the right kind of investment for most docile gas fields,” Former President, Nigerian Association for Energy Economists (NAEE), Wunmi Iledare said.
“Although the PIB is not perfect just like any other law, however, it’s the right starting point to allow private capital to intentionally explore for Nigeria’s gas,” Iledare told Businessday.
Nigeria has never been short of big ideas and projects when it comes to gas; Brass LNG, and Olokola LNG have been awaiting final investment decisions for years. The $12 billion Trans-saharan Gas Pipeline Project (TSGP), expected to help Nigeria achieve zero gas flaring by 2020, remains an illusion, 19 years after it was conceived.
Yinka Akinbowale, an energy lawyer with Sofidam Energy Resources Limited said passing the PIB will unlock more opportunities for Nigeria’s economy if properly implemented.
Some stakeholders have said if Nigeria were to be fully exploiting its gas resources, it could potentially be adding as much as $17 billion annually or as much as 6 percent to its less than $500 billion economy, helping to uplift millions of its citizens, 47.7 percent of whom live in extreme poverty.
Ademola Adigun, the team lead at FOSTER said the PIB will not only attract more investment in Nigeria’s gas sector but also address issues concerning gas flaring which remains a major fundamental problem in the sector.
“The PIB won’t solve all of Nigeria’s energy problems, however, the law is a step in the right direction which will allow Nigeria to attract more royalty in the gas sector,” Adigun told Businessday.
Paragraph 10(5) of the 7th Schedule in the present PIB before the national assembly stated that “royalty based on production for natural gas and natural gas liquids shall be at a rate per centum of the chargeable volume in the relevant area based on the terrain as follows, onshore areas: 7.5percent; shallow waters: 5percent; deep offshore areas: 5percent; and frontier basins: 5 percent.
“Additionally, the royalty rate for natural gas produced and utilized in Nigeria shall be a flat 5percent of the chargeable volume,” the PIB stated.
The Bill proposes to replace the existing petroleum profits tax with hydrocarbon tax, at the rate of 50 per cent for petroleum operations onshore, and in shallow water fields; and 25 per cent for petroleum operations in deep-water, bituminous and frontier acreages.
Hydrocarbon tax shall apply to crude oil, condensates and natural gas liquids produced from associated gas.
