Five curious gaps that may undermine PIB’s gains

Some aspects of the Petroleum Industry Bill (PIB) are already controversial as the bill awaits presidential assent.

The controversies include the definition of area of operation to financial commitment to frontier areas particularly in the light of energy transition and host community share among others.

Both chambers of the National Assembly had passed the PIB bill last week, but some industry analysts say the proposed bill is riddled with controversies that could create problems for Nigerians.

Read Also: Oil region experts, leaders welcome PIB with cautious optimism

Financial commitment to frontier areas

Unlike other versions of the document, which passed through the lower and upper chambers, the legislators have set aside 30 percent of profits accruing from oil and gas operations by the Nigeria National Petroleum Corporation (NNPC) for oil exploration in the frontier basins.

The nation’s frontier inland basins are basically in the North and include the Niger, Chad, Bida, Dahomey, Sokoto, and Benue basins.

NNPC’s insatiable quest of finding oil in the north is built on a certain premise that the country is sitting on a huge natural resource in the Chad Basin, which is adjacent to Niger Republic, a country already exploring crude oil.

Believed to be President Muhammadu Buhari’s pet project considering that he started the agitation over 40 years ago, this journey is costing Nigeria millions of dollars despite a warning by petroleum engineers, investment ex­perts and geologists who insist the geography of the zone may not guarantee a commercial find.

The president, who has been resolute on the possibilities of oil discoveries in the North since he was petroleum commissioner over 40 years ago, gave NNPC a marching order to explore hydrocarbon deposits across the federation immediately after he assumed office on May 29, 2015.

The definition of area of operation

According to the proposed PIB, the definition of the host community is not only restricted to the areas but includes areas and communities where pipelines pass through.

There are fresh concerns on why the definition of the host community is now expanded to include even communities where pipelines pass, which many claims will benefit non oil-producing states rather than core oil-producing states.

For example, Cross River State is not an oil-producing community, but it has a lot of pipelines that traverse across the nooks and crannies of the state. The same applies to Edo State.

The lawmakers have also included in the Bill a new subsection that will include a grievance mechanism to resolve disputes between settlors and host communities as well as the ability of the settlor to make the adjustments to reduce expenditures where the available funds for administration are insufficient to fund ongoing operations.

The establishment of the host communities’ development trust is left entirely to the companies operating in the areas.

Host community share

According to the proposed law, three percent has been reserved for the development of host communities by the Senate as against five percent earlier proposed.

The House of Representatives, on the other hand, reserved five percent in the proposed bill, throwing up several issues that must be harmonised by the conference committee before final submission to the president.

The leader of the Pan-Niger Delta Forum (PANDEF), Chief Edwin Clark described the newly passed PIB, ready for harmonization as satanic, unjust, embarrassing, and has dashed the hope of the people of the Niger Delta.

Clarke said the entire people of the Niger Delta region, for and on behalf of the host communities, vehemently reject the 3percent and 5percent of operating expenditure granted to the host communities; the fraudulent and provocative 30percent provision for the frontier exploration fund.

He demanded that the PIB be reversed, reviewed and amended to ensure that the oil-bearing communities receive not less than 10percent of operating cost.

“If this is not done, the Niger Delta people may be forced to take their destiny into their own hands and all IOCs may find themselves denied access to their oil activities in such communities,” he added.

Energy transition

Despite decades of sluggish progress, the revised PIB like the ones that have preceded it ignores an open secret concerning how the world is undergoing an energy transition from fossil fuels to a system based on renewable energy sources.

While other countries are consciously planning for life beyond fossil fuels, Nigeria’s PIB is obsessed with applying 10 percent of revenue from acreage rents to subsidise petroleum exploration in frontier basins for reserves that may not be worth much after 2030, a development some experts say is elevating sectional political agendas over compelling commercial and climate change priorities.

Most experts say the current PIB tends to focus on solving past problems rather than meeting future challenges, or as the Columbia Centre for Sustainable Investment (CCSI) described it, “the PIB is a small step when Nigeria needs a leap.”

“The PIB, ultimately, fails to account for climate change, acknowledge the Paris Agreement, and address the need for diversification to adequately prepare Nigeria for the energy transition that is already underway,” CCSI notes in its blog.

The Paris Agreement, which was agreed in December 2015, sets the framework for immediate actions for international wind-down of coal, oil, and gas while also having long-term strategies to prevent dangerous climate change.

CCSI notes titled ‘Nigeria’s Petroleum Industry Bill: A Missed Opportunity to Prepare for the Zero-Carbon Future’ also stated that “rather than locking more capital into projects and infrastructure that will soon be obsolete, Nigeria should be promoting the stewardship of assets that propel the energy transition forward, not those that will be left behind.”

While Nigeria is still obsessed with oil funds, Norway’s National Oil Company (NOC) Equinor is currently an investor in Oxford Photovoltaics, a device for generating electricity directly from sunlight via an electronic process that occurs naturally in certain types of material, called semiconductors.

Equinor is also creating the world’s first fully decarbonised industrial cluster at an old chemical plant in Saltend, England.

Saudi Arabia is investing $30 billion in the renewable energy sector by 2025 in order to diversify the energy mix while Sweden has an ambitious goal to eliminate fossil fuels from electricity generation by 2040.

A prediction by Goldman Sachs estimated that investment in decarbonising the energy industry- renewables, carbon capture, hydrogen, and the upgrading of power infrastructure — will reach $16 trillion over the next 10 years.

Gender-inequality

While concerns also dog the host community segment of the bill, especially the many security crises and hostilities against operators, some activists also stressed that the bill is gender-biased.

The Executive Director, Centre for Transparency Advocacy (CTA), Faith Nwadishi, equally raised concern over gender balance, and host communities issues, noting that the development may affect projected objectives.

“We noted that not a single word of gender was mentioned in the bill. However, the word women were mentioned once in relation to host communities’ needs assessment,” Nwadishi said.