BusinessDay

‘Government should enforce ‘Drill or Drop’ clause in PIB’

With the Federation Account receiving less revenue due to the decline in global relevance of fossil fuels as the world gradually transits to renewable energy, oil and gas experts in Nigeria have called for efficient use of mining assets by operators for the country to maximise its current potentials before fossil fuel loses its current value.

While speaking on the diminishing status of oil and gas in the global energy requirements in the next 20 years, industry professionals and advocacy groups are, in separate interviews, charging the Federal Government, lawmakers, interest groups, operators and other industry stakeholders to wrap up the Petroleum Industry Bill (PIB) for presidential assent so that the country can have a new governing law that will improve investment, increase production, efficiency and transparency in oil and gas industry

On the current controversy trailing the revocation of some marginal oil fields’ licences by the Department of Petroleum Resources (DPR) and the petition to the House of Representatives Committee on Public Petition by Eurafric Energy Limited, one of the affected lease operators, Ademola Adigun, an oil sector governance reform expert, said the issue had become a test case why the PIB must be quickly signed into law because the ‘Drill or Drop’ provision in the law would prevent process abuse and usurpation of regulatory responsibilities or powers.

Adigun decried a situation where oil companies sit on mining leases for years without getting them into production capacity as ‘wasteful and unproductive’ for a country that is facing severe revenue challenges.

The country is under heavy borrowing to meet its developmental needs. So, the Nigerian government must do all it can to use the country’s oil and gas assets to build an economy of the future, according to Adigun.

“One of the greatest things that has happened, which is in the PIB, is the idea of ‘Drill or Drop’. We have had a history. I think the first attempt to Nigerianise the oil and gas sector was in 1990, when the Babangida government awarded oil blocs to some Nigerians who were thought to have financial capabilities to make the necessary investments. Of the award, only about three or four have been mined, that is Famfa, Conoil, and some other two.

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“Now, a lot of people get these licences or win these bids then go sell it off. They sell it off to those who lack capacity and the whole thing stalls and we suffer as a country. We have two problems in the sector right now; we have declining take from the barrel and we have declining returns from crude. Now, we are limited to 1.45 million barrels a day by OPEC quota and unable to ramp up 2.1 million barrels per day.

“If the oil blocs lie fallow and people are not producing from them, we are losing revenue from the field, we are losing job creation opportunities from the field, and we are losing what should be the contribution to the GDP as well as field development fee. It’s a whole basket of having something you cannot use, it is, therefore, better you drop it for other companies with the capacity to explore,” he said.

On what DPR must do to the new marginal fields awardees who fail to get the blocs into production with a timeframe specified by the regulator, he noted that the PIB had addressed that, saying it is one of the reasons politicians and individuals with vested interests must put national interests above personal and sectional interests and allow the PIB to be signed into law after almost 20 years.

On the propriety of the reported call by the House of Representatives for the reversal of the revocation of unproductive marginal fields’ following a petition to the Committee on Public Petition by Eurafric Energy Limited, he noted that Nigeria must be a country that respects the law and its institution while noting that the Public Petition Committee of the House had no power to force that demand on the DPR.

According to Joe Nwakwe, immediate past chairman, Society of Petroleum Engineers, there is a clear distinction between regulation and governance, calling for caution in not to send a wrong signal to investors because of interference with regulation.

“I have not seen the comment by the House of Reps, what I suspect is that they may be pointing the DPR attention to the Court case over the matter. But it is clear that the Petroleum Act gives the power to award and revoke oil blocks to the Minister of Petroleum Resources and that power has been delegated to the DPR in this matter,” he said.

His view was corroborated by Adebayo Alamutu, Aa petroleum engineer, who maintained that the House of Representatives Committee on Petition may be doing more harm to the nation’s economy and reputation before the investors with its usurpation of power.

“First, there is no controversy in this matter. The minister has delegated the power to award and revoke oil blocs to the DPR, which is the regulator. The DPR on the other hand has said that it revoked the Dawes oilfields from Eurafric, Tako and Petralon 54 JV over lack of competence and needless rendering of national assets unproductive for many years.

“Now it has, in the best interest of the country, awarded the oilfield to a company it considered competent to make the field viable by generating revenues for Nigeria, and the House of Representatives will now reverse this? It is not only against the dictates of the Petroleum Act, it is against development. It is so dangerous to what we preach as a country on division of power. It will be so scary for the investors,” he said.