In spite of global energy transition and federal government promise to diversify the economy, the Group Managing Director (GMD) of the Nigeria National Petroleum Corporation (NNPC), Mele Kyari, said Nigeria will continue to run a monocultural economy for the next 30 years.
Kyari said this at the two days public hearing by the joint committee on Petroleum downstream, upstream and gas declared opened by the President of the Senate, Ahmad Lawan.
He said the absence of robust legislation to guide the sector has continued to bedevil it leading the nation to lose huge revenue.
He expressed confidence that the proposed Petroleum Industry Bill (PIB) would change the narrative by boosting growth in both the upstream and downstream sectors of the oil industry.
His words “First there are a number of things happening in this industry today. The energy transition is real. Companies have the 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 where we were 20 years ago.”
In his presentation at the public hearing, Chairman Oil Producers Trade Section (OPTS) on the PIB, Mike Sangster 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 deepwater exploration and the benefits it would offer Nigeria.
According to him, “It is our belief that through collaboration with relevant stakeholders, Nigeria can enact and implement 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 per cent and 42 per cent higher than the global average respectively.
He further disclosed 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 enhanced Nigerian content and local capacity development. Significant discoverings but undeveloped resources still exist in Nigeria’s Deepwater sector but are challenged with the tightening of fiscals and uncertainty in gas terms.
“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 5 years of production and a 1% royalty for natural gas, natural gas liquids as well as the condensate/ liquids from such development would encourage investment in Deepwater gas projects.”
President of the Senate, Ahmed Lawan assured stakeholders on 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.
Lawan said: “Can we do it differently, in 2008 or thereabout. 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 stakeholder, the Host Communities (HOSTCOMS) and other stakeholders disagreed over the 2.5 per cent 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 10 per cent funding as against 2.5 per cent in the proposed Bill.
He recalled that 10 per cent was offered the communities under the late Umaru Musa Yar’ Adua administration and must be sustained. He maintained that anything short of that 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 was 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% is too expensive. WIEN posits that a total of not more than one per cent 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 overtaxed which will attract even more Foreign Direct Investment to the sector and country at large.”
The Minister of Petroleum Resources, Timipre Sylva, called on the National Assembly to expedite the process 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.