Yesterday, when the Petroleum Industry Bill (PIB) that has had an almost 21-year journey through Nigeria’s National Assembly was passed by the two houses, the Senate President, Ahmed Lawan, exclaimed: “The demons have been defeated…We have passed the Bill!”
Perhaps that expression might have come a bit too soon and might have been a tad uninformed. A cursory reading of the document that appears to be the version passed reveals that the demons plaguing the PIB – and indeed the country’s energy sector – seem to exist within the document itself.
The first one is its recalcitrant stance in relation to the energy transition. The importance of crafting pathways to sustainable development for developing countries cannot be overestimated. Yet in a document two decades and some late, and which is expected to govern the country’s energy sector for at least another two decades, there is no such pathway indicated.
The new State company, Nigerian National Petroleum Corporation (NNPC) Limited has percentages of its profit allocated for various things including 30% to the Frontier Exploration Fund, dedicated to the exploration of frontier basins in Nigeria – essentially financing new oil and gas development. This is added to the fact that 10% of rents on petroleum mining leases and 10% of rents on petroleum prospecting licenses are to be remitted to this Fund.
One would have thought that a country committed to transitioning would at least dedicate, even if a small percentage of its oil revenue to fund the growth of its solar or offshore wind industry or perhaps direct it to research and development for alternatives like green hydrogen and biogas. Instead, the revenue pours itself back to the oil and gas cooking pot.
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Alternatively, the Bill could have channelled a percentage of gas flare penalties for this purpose or established a separate renewables fund, where upstream operators pay in a percentage of their profits. In some sense, this fund will be an opportunity for these companies, even if continuing to develop fossil fuels, to aid the growth of and transition to renewables.
One report by the Financial Derivatives Company (FDC) this year pointed out “With the global shift from fossil fuels to renewable forms of energy picking up pace, the passage of the PIB may just be too little, too late.” The PIB had the opportunity to recoup some of what it lost through an energy transition pathway, but appears to have failed on that yet again.
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Furthermore, it is bewildering that the Niger Delta Development Commission (NDDC) still has a place in this document, after it has proved to be a sinkhole for petroleum funds – another demon that the Bill harbours.
There are also speculations as to whether the versions of the Bill passed by both houses in such a hurry are the same, particularly with respect to the contentious aspect regarding percentages upstream companies are to remit to the host community development trust fund. There are questions as to whether the Bill that will be signed by the President will reflect 5% or 3%.
According to the FDC report, Nigeria has lost $15 billion in investments annually due to the delayed passage of the PIB. The FDC added, “It is unlikely that Nigeria would be able to make up for either the lost time or the lost investment.” This is hardly surprising considering the direction of the global energy sector and how much has changed in the last 21 years.
That said, the clarity that the Bill brings to issues like hydrocarbon taxation, host community funds and the promise of a possible initial public offer and public shareholding of what will be the new State petroleum company, is a win for investors. While it is certainly very late in the day, the overhauled governance and regulatory regime proposed under the Bill will instil confidence in investors and likely yield increased investment, provided that implementation is just as swift as the passage was yesterday.
Also, should NNPC Limited deliver on its proposed corporate governance structure under the Bill, the prospects for investments would be significant.
There seems to be shared optimism that the Bill will be signed in the form it is by the President sooner than later. One can only hope, however, since in 2018 when the Bill got turned around, there appeared to be almost as much optimism that the Presidency was just as interested in boosting the oil and gas sector with the new law.
Perhaps just as the old saying goes, that it is not over until the fat lady sings, the right thing to do may be to keep the fingers crossed while we wait for the “fat lady” in the Villa to sing. In any event, the demons of the PIB appear to be far from defeated – they are printed in black and white on the pages.