Petroleum Industry Bill now a Clog on Wheel?

It remains to be seen if the National Assembly would this month pass the long-awaited Petroleum Industry Bill (PIB) as the Minister of State for Petroleum, Timipre Sylva, recently indicated.

The PIB, which has been in the National Assembly since 2008, awaiting passage into law, seeks to overhaul the Nigerian oil industry and offer new fiscal incentives to investors. Nigeria had the opportunity to achieve four million barrels per day of crude production and a domestic oil refining for regional exports if the PIB had been passed a decade ago.

Dogged by uncertainties and about $20billion estimated annual losses in investments in the Nigeria oil and gas industry, as the global shift from fossil fuels to renewable energy is on the rise, the possible passage this month of the PIB, if the minister’s assertion comes true, may not only be late in coming but insignificant as it’s unlikely that the country would be able to make up for lost time and investments.

Now as the PIB undergoes the last preparatory stage for its passage and it’s being modified to enhance its effectiveness in the deregulation of gas supply price to power plants, the Nigerian National Petroleum Corporation (NNPC) public offer and the adoption of a single regulator for the oil industry. Price deregulation of gas supply to power plants no doubt a key incentive for power output in Nigeria, but would likely translate into increased tariffs for electricity consumers and attract investments in the gas and electricity generating sector. The NNPC’s public offer in the sale of shares to the public will make the corporation to be able to source its own funding and go under higher levels of corporate governance, accountability, and audibility.  The adoption of a single regulator, on the other hand, though will permit more efficiency and enhance cohesion in the regulation of the entire industry value chain but could prove insignificant and too late in coming, considering that the PIB, as framed, provides for an Upstream Regulatory Commission for the upstream sector and a Midstream and Downstream Regulatory Authority for the midstream and downstream sectors, making two distinct regulators to wholly oversee and enforce standards in the oil industry.

While the International oil companies (IOCs) are squarely in the thick of the energy transition, the protracted delay in the passage of the PIB had made a number of them have a rethink the nation’s oil industry. Some are working on transforming into full clean-energy companies except for the Royal Dutch Shell that is talking to the Federal Government on divesting from its onshore oil fields to keep only its offshore and gas operations, giving the recurring incidents of theft, sabotage, and oil spillage as an excuse. The IOCs have argued that their Nigerian onshore business was incompatible with their long-term strategy to focus on climate change and net-zero carbon emissions by 2050 and had embarked on the gradual disposition of their onshore assets in the last decade. At one of Shell’s Annual General Meeting, the oil giant’s CEO, Ben van Beurden, told investors that “the balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions…We cannot solve community problems in the Niger Delta.”

Only a few would believe him, knowing that beyond the issue of insecurity and unrest in the Niger Delta, Shell is mainly exiting its onshore operations in the country over the un-baiting impasse in the passage of the PIB. 

Other IOCs, including Chevron and Mobil, are gradually also disposing of their Nigerian assets in response to changing goals and strategies induced by climate change and their intention to go green, throwing up such questions as what would become of the onshore assets of the IOCs. Will they be acquired by NNPC through the Nigerian Petroleum Development Company (NPDC), its upstream arm, or will Government invite bids from indigenous and foreign producers? If so, are indigenous producers having the capacity to acquire the assets, knowing that more divestments are expected across the continent in the future, and does it present an opportunity for indigenous players to enhance their continental footprint?  Only time will tell.

Nigeria had the opportunity to achieve four million barrels per day of crude production and a domestic oil refining for regional exports if the PIB had been passed a decade ago.