Oil region experts, leaders welcome PIB with cautious optimism

The PIB Act is a deliberate design by state captors to further their egoist and bachanalian self-interests.

News of the historic passage of the Petroleum Industry Bill (wholesome) since the past 20 years in the Senate on Thursday, July 1, 2021, has swept through the oil region with cautious optimism, but experts and leaders in the region have shown worry over what they call implementation shakedowns that often ruin good programmes in Nigeria.

Whereas popular opinion insists on the 10 percent demanded by the south-south governors, industry insiders however, fear that the 3 percent is huge burden on the operational budget of oil companies and could serve as disincentive to investment in an era when the industry has for decades chased away investments.

The general consensus however, is that it is better to get the law going so that the good aspects can kick off while amendments can come later. It is good to operate the law and see how it goes, they say.

In the industry, the consensus seems to be that the region has no choice, nor luxury of time not to accept this. A source said: “Crude is almost gone, oil companies at global level are transforming to energy companies, fossil oil is gone, gas has about a decade to flourish. So, no time for good or bad PIB. The consensus is that we run with this so as to exploit the much we can before we totally lose out and the PIB is the only way to allow private capital to come in.

Others say host community aspect is the most sensitive but that the 3 percent from every oil company’s capital budget (capex) is better than nothing. “Remember one percent on same capex already goes to the NDDC, one percent of contracts goes to Nigerian Content Board, FG remits to NDDC, 13 percent overall revenue goes to states, all GMOUs remittances go to Cluster Boards, etc. We can manage with these for now, if local accountability is there,” they said.

They argue that the real gain is in freeing the Nigerian National Petroleum Corporation (NNPC) to be a regulator while another national oil company will be an investor or operator. Now, the Minister is to have less interference in direct management of oil but still has huge powers in some areas. “We can always amend it along the journey, but it’s good to start, after 20 years,” they further said.

Some say the government is simply passing the buck as it has the responsibility to develop the areas where its revenues come from.

Joe Olobari (Ex-SPDC staff)

The devil is in the detail. While it seems a major win for host communities, the success or failure of the initiative lies in the modalities for administering such funds on a community to community basis.

As one who has been in the industry and one from a community in the Niger Delta, I have seen communities torn apart by mere expectations. Often, they turn round to blame the intervener.

This is critical because the 3 percent sliced off operators’ budget to NDDC has had questionable success, for lack of a better expression.

From the industry perspective, an additional three percent from the capex of each operator is quite a dip in investable fund in a region that is fast becoming less attractive.

It simply raises the cost of production of a barrel! You cannot do that when at the same time you are driving low production cost. It does appear that there is some disconnect with the realities of the industry. Or the

The Senate may be simply shying away from making government judiciously use funds for the development of communities from where the revenue it spends is derived.

Eladebi Kingsley Egbuson (Economist)

(Eguson is the current GM of Bayelsa Plastic Industry. He had worked at Business Development Capacity in Century Group known as CESL, and also in Belema Oil.)

The three per cent for host community is good enough for a start to test the waters. This is a taxation on oil firms; and it adds to the cost of Petroleum Profit Tax. The incident of taxation is predictable when it is a burden on the entrepreneur. Looking at PPT (Petroleum profit tax)

It is a tax on the income of companies engaged in upstream petroleum operations in lieu of CIT.

Another problem to arise from this three per cent which is not enough as agitated by the South-South representatives is how much of these communities are defined as host communities. Oil fields span across community frontiers. And where the flare or wells are located are just pin holes that drain from reservoirs that are large underneath several communities. Did the definition of host communities cater for such radius and effects as enormous as the environment apart from where the oil well is located?

For example, 51 percent of gas for Bonny LNG comes from Bayelsa, but is the host community definition in the bill catering for the gas drain from other states? Or do the gas installations in associated oil wells sufficient to define host communities in the PIB? I foresee increasing hostilities to this bill.