The Federal Government announced on Monday that it was going to split the PIB into smaller laws enable it pass through legislation. The Petroleum Industry Bill (PIB) has been in the cooler since 2008 as oil majors, Northern State Governors and legislators reject several provisions in the act. The APC government now believes the easiest way to let it pass will be to not just split the bill but to also strip out several controversial portions of it. We summarized the key highlights of the proposed bills.
Split PIB into multiple passable versions
The Government now believes the easiest way to get the PIB to pass will be to split it into smaller versions that strips out controversial aspects of the former bill. The newer versions will focus mostly on fiscal and regulatory measures in Nigeria’s energy sector. By splitting the bill into several versions, the non controversial aspects of the bill can pass legislation thus ensuring that investments continue to flow into the country. Nigeria is currently facing an economic crisis that precipitated by the fall in oil prices amidst an oversupplied market.
NNPC Will Be Split Into Two
We further learnt that the NNPC will be split into two. The Nigerian Petroleum Assets Management Co (NPAM) and the National Oil Company (NOC). The NOC will be an “integrated oil and gas company operating as a fully commercial entity” and will be run like a private company. We also understand that the NOC will be partly owned by the government and at some time in the future may also list on the Nigerian Stock Exchange and most likely the London Stock Exchange. The NOC will also be starting out with about $5 billion in startup capital or funds large enough to fund its cash call obligations with its joint venture partners.
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The NPAM is likely to be the regulatory arm of the new NNPC and is expected to manage assets ”where the government is not obligated to provide any upfront funding”. These include oil licenses run under production-sharing agreements in which independent oil companies cover operating costs and pay tax and royalties on output.
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The current PIB is said to include several tax provisions that have been largely criticized by oil major doing business in Nigeria. According to Oil majors, they believe that the tax provisions of the PIB will render all deepwater projects and all dry gas projects non-viable. According to sources, the current PIB draft includes a provision that will have oil companies pay 50% profit tax for onshore and shallow water areas and a 25% for frontier acreage and deep-water areas.
It is expected that the watered down version will address these issues and allay the concerns of investors who have so far denied Nigeria of an estimated $15 billion annually in lost investments.
Oil Minister’s Powers
The new version of the bill was not clear on what the powers of the Oil Minster and the President will be. Currently the President can allocate oil blocks at will and the Oil Minister is not answerable to the Senate either. It is however expected that the watered versions of this bill will still need to curb excessive powers of the Minister and the President in overseeing the industry.
Sweeping regulatory powers
According to Reuters, a new Single Industry Regulator, Nigeria Petroleum Regulatory Commission (NPRC) will be setup and will likely replace the Department of Petroleum Resources (DPR), PPMC, PPRC and other splinter regulatory agencies littering the oil sector. The NPRC is expected to oversee everything from oil license bid rounds to fuel prices. They will also likely have powers to seize items and make arrests without a warrant.