• Wednesday, May 22, 2024
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Oil region experts, leaders welcome PIB with cautious optimism

The new PIB Act: Robbing Peter to pay Paul

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.

Read also: Oil rises near $69 as OPEC sees demand picking up

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.

Leesi Gborogbosi (CEO, Gabriel Domale Consulting)

(Gborogbosi heads a Management Consulting Firm, and is an expert in finance, strategy, corporate governance, cost reduction, transformation and collaboration between host communities and oil companies)

Dr Leesi

The problem with politicians is that they never consult their people and the experts that they have. Participation by host communities should be based on total budget and not on budget class – because that will give room for flexibility by oil companies to their advantage.

Why are host communities given three per cent and not a minimum of 15 percent?

We are no more in the era of corporate social responsibilities of companies providing community projects. We are now in an era where host communities want to become strategic partners. They want to participate in the value chain of the oil and gas industry.

If the desire for stakeholders in the oil industry is to develop the oil and gas host communities, then the host communities must be given the preference and nurtured into full participation in the value generation and resource management in the oil and gas industry.

This is the time for collaborative relationship between host communities and oil companies.

As we continue to ignore host communities, we deliberately institutionalise non-collaborative behaviour.

Many show the Indorama-Eleme Petrochemicals model as a success model to copy but in the company’s supply chain, how many Eleme persons are driving trucks or in the trucking business?

They are not participating in the value chain – the supply chain.

Darlington Nwauju (Spokesperson, Niger Delta Rights Advocates, NDRA

On the bright side of the passage of the five chapters & 319 paragraphs PIB, the regime of losses recorded in the industry will be checked. Records captured by the industry’s anti-corruption agent, NEITI shows that

$10.4billion or more has been lost to under remittances by IOCs due to lack of a structured governance framework in the Oil and Gas industry.

Again, the three per cent holder equity for the direct development of oil bearing communities is encouraging even though we would have wished for at least 5percent of such funds to help quicken the regeneration of the devastated Niger Delta environment.

Next, the approval of 30 percent for the development of other frontiers will in no mean way awaken business opportunities and stimulate the local economy.

On the other hand, with the unbundling of the NNPC into a full business entity, market forces in the upstream, midstream and downstream sectors will now determine prices and promote legal competition and activities that will trigger business opportunities. The implication of this of course is that prices of fossil fuel, domestic gas, DPK, AGO will certainly go high.

The NDRA therefore draws attention of the Executive to the likelihood of a spike in the prices of goods and services and government must therefore be proactive in the provision of palliative measures to mitigate large scale suffering of the masses.

Finally, today’s passage of the PIB also brings to an end 18years of wastage of tax payers’ money by expenditure on consultations and retreats by the National Assembly over the Bill.

Conclusion:

It is clear that with heavy awareness programme and steady communication system to explain the PIB provisions and with clear plans of seamless implementation, the bill and the law that follow would sell in the oil region. But, if conflict entrepreneurs get into the saddle ahead, the Bill may encounter community hitches.