In spite of global energy transition Group Managing Director (GMD) of the Nigeria National Petroleum Corporation (NNPC), Mele Kyari, said Nigeria will continue to run a monolithic economy as it would continue dependence on oil revenue to run the nation’s economy.
Kyari said this at the two day public hearing by the joint committee on Petroleum downstream, upstream and gas declared opened by the President of the Senate, Ahmed Lawan.
He said the absence of a robust legislation to guide the sector has continued to bedevil the sector leading the nation to lose huge revenue and develop the sector optimally and maintained that the Petroleum Industry Bill (PIB) should be given due attention.
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Kyari said the sector has been stagnated and would need the bill as the PIB to open the sector and improve government revenue just as the Petroleum sharing contract Act and improved revenue for the government.
Hie words: “First there are a number of things happening in this industry today. The energy transition is real. Companies have strength not just in terms of the kind of business that they do but because of the choices they have now.
“We have seen Petroleum in many unexpected quarters across the globe. Many of the consumer countries are finding oil in their country.
“Thirty years ago the top three companies will be oil and gas companies. Today the topmost company is a supermarket. This is today realities that we are facing. Because this industry is transiting, people are looking for options and alternatives.
“For us as a resource dependent country, it is important to take that benefit today. We know that in thirty years to come we will still be resource dependent in the sense that we are a developing country, we have 70 in per cent of our population below 30 years of age.
“We have an economy that is growing locally exponentially that is true, globally people are transiting to environments where efficiencies are high where the cost of productions are low; where legislations are flexible and where investments can seat longer.
“This is where we should belong to Mr Chairman, as we take advantage of the local situation, we are also aware of the global community. We are not going to see other investor coming in, as long as we remain a very high-cost environment
“Passing the PIB will make our environment more competitive, compare to l where we are 20 years ago would make us more competitive.
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“The PIB will make us come to reality as a country. That reality is to take advantage of the bill that will enable us developed a mix that is will enable us to be in the processes and enable the country to .”
In his presentation to the public hearing, Chairman Oil Producers Trade Section (OPTS) on the PIB said buttressed the submission of Kyari on the absence of a reliable regulatory bill as the PIB has denied the nation the required competitiveness that would have driven the sector for optimal operations.
However, he maintained that the bill in all its good intentions omitted deep water exploration and the benefits it would offer that nation
According to him, “It is our belief that through collaboration with relevant stakeholders, Nigeria can enact and implement an efficient and effective legislation which will go a long way to reposition Nigeria’s Petroleum Industry to reach its full potential. The PIB presents a golden opportunity to achieve this objective.
“Nigeria has the largest hydrocarbon reserves in Africa, with significant untapped potential to drive the country’s economic and social growth.
“Nigeria is also endowed with a large population of young, talented human resources, assuring a future workforce. However, Nigeria faces ever increasing competition for investment and, despite having the largest reserves, only $3 billion out of the 70 billion committed in Africa for projects sanctioned between 2015-2019 were attributed to Nigeria, representing a meagre 4 per cent.
“This lack of competitiveness is caused in part by the high cost of doing business in Nigeria, with overall project costs and operations costs being 69 percent and 42 per cent higher than the global average respectively. Nigeria’s government take also remains high and uncompetitive, exceeding that of most comparable prolific basins. PIB, which safeguards existing projects an introduces competitive terms, is required to utilise the resoursces for the benefit of all Nigerians.”
He continued that “Deepwater developments have contributed significantly in maintaining Nigeria’s oil production levels by offsetting the decline in the Joint Venture production.
It has also enabled Nigerian content and local capacity development. Significant discovered, but undeveloped resources still exist in Nigeria’s Deepwater sector but are challenged with the tightening of fiscals and uncertainty in gas terms.
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These will require the right balance of government take, incentives and enablers critical to future competitiveness in the global context.
“Unfortunately, our review of the PIB shows that the Deepwater provisions do not provide a favourable environment for future investments and for the launching of new projects.
”To ensure investors are encouraged to finance Deepwater projects, the PIB should grant Deepwater oil projects a full royalty relief during the first five years of production or a graduated royalty scheme as detailed in our submission.
“PIB should also remove Hydrocarbon Tax considering that companies will still be subject to CIT. Deepwater non-associated gas resource development is particularly challenging and requires targeted measures to get projects off the ground.
“A full royalty relief during the first five years of production and a 1 per cent royalty for natural gas, natural gas liquids as well as the condensate/ liquids from such deveIopment would encourage investment in Deepwater gas projects.
President of the Senate, Ahmed Lawan, assured stakeholders at the first day of the hearing that the PIB will be passed by April while the Senate will secure a presidential assent by May 29.
The President of the Senate said while the bill before entered the national assembly in 2008 as a solo bill, the bill presently before the Ninth Assembly is a hybrid.
Lawan said “Can we do it differently, in 2008 or there about. In 2011 it was also another botched attempt, in 2015, it did not work, we decided to give it a landmark bill, have a hybrid.
“Even before the bill comes here the committees should understand what it takes, it is not to say when it comes here we should just rubber stamp it. No, the idea is for us to be able to build a consensus around the bill between the national Assembly and the executive.
While the executive and the legislature concerned themselves with the exigency of passing the bill, a critical stakeholders, the host community (HOSTCOMS) and other stakeholders disagree over the 2.5 percent proposed funding for the host Community Development Trust Fund.
National Chairman, Host Community of oil producing areas, Dr Benjamin Style Tams in his presentation demanded for 10 per cent fund for the development fund.
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He argued that this figure was offered the communities under the Umaru Musa Yar’ Adua administration and must be sustained because anything less would amount to returning to the old order.
He expressed shock and wondered what rationale informed the continued reduction of the host communities fund from 10 per cent in 2008 to five per cent, in the Eighth assembly and now further reduced to 2.5 in per cent in the extant bill.
While Tams queried the reduction of HOSTCOMS the Women In Energy Network (WIEN) said even the 2.5 per cent contribution to the host communities is too much and proposed one per cent contribution to the host community development trust fund.
President of Women in Energy Network, Mrs Funmi Ogbue said: “WIEN believes that 2.5 per cent is too expensive. WIEN posits that a total of not more than one percent consistent with other statutory provisions like the Nigerian Local Content Act 2010, replace the current figure. This will improve investors’ perception about the industry being already over taxed which will attract even more Foreign Direct Investment to the sector and country at large.”
The special report on the PIB by the Research Girls Women and Development Centre in Collaboration with Partnership Initiative in the Niger Delta (PIND) said the legislation committee critical development company within the region that could make contribution to the fund.
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According to her these organisations include Niger Delta Development Commission (NDDC), Nigerian Content Development Fund and the Education Tax Funds.
Olumide Falana who presented the special report on the PIB also said her organisation recommend that five per cent of the endowment fund should be strictly deployed for capacity building human capital to be able to better manage project implementation.
The Minister of Petroleum Resources, Tinmipreye Silva, called on the National Assembly to expedite the process of the of the bill’s passage.
In his reaction to the Bill, Senator Matthew Urhoghide, said the bill should be reasonable to meet the aspiration of all stakeholders.
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