Passage of the PIB, at last

Both chambers of the Nigeria’s National Assembly (parliament) have passed a bill that overhauls nearly every aspect of the country’s oil and gas production, putting a project that has been in the works for two decades one step closer to presidential assent. It happened July 1. Legislators had been hashing out details of the bill since President Muhammadu Buhari presented an initial version in September last year, but an overhaul has been in the works for some 20 years.

The chambers had been expected to vote clause by clause on the more than 400-page long report, but instead quickly approved the full package. Each chamber made changes before approving the package, and the senate lowered the share of money for oil-producing communities to 3% while the House approved 5%. The chambers then sat together and accepted the senate’s recommendation.

The package also includes a string of changes sought by oil majors, including amended royalties and fiscal terms for oil and gas production, and the transfer of state oil company NNPC’s assets and liabilities to a limited liability corporation created by the bill. It also divided the stakes in the new NNPC Limited evenly between the finance and petroleum ministries, but would not allow for public share sales without further government approval.

Leaders agreed earlier this year to sweeten the terms for oil companies in an effort to attract much needed investment in an era of shrinking global cash for fossil fuel production. The country has sweetened the terms of a sweeping oil reform bill in a bid to attract much needed investment to its oil industry, people closely involved with the legislation said.

The proposed changes signal a shift by Africa’s largest oil producer and show the impact of an increasingly competitive environment in the energy business after 2020’s global oil price collapse and an expected shift to renewables.

Nigeria in 2019 had fast-tracked a law to boost its take of offshore oil revenue, a move industry experts said at the time could put billions of dollars of offshore oil investments at risk. Now it has changed its stance in an attempt to balance its immediate revenue demands with the need to lock-in long-term investment for its oil industry.

Key changes to the bill would lower the royalties for new production from deepwater oilfields to 5% from 7.5% and boost the production level that triggers higher royalties from 15,000 barrels per day (bpd) to 50,000 bpd. But company executives said that “terms are not sufficiently competitive to stimulate the desired new investments.” They noted that Nigeria got just 4% of the $70 billion invested in sanctioned projects in Africa between 2015 and 2019.

Last year, oil industry analysts had warned Nigeria’s oil output could fall sharply without reforms. Now they are saying the changes to the bill “show that (the government) listened. They recognise the need to attract investment, not just in the Nigerian context but globally in the energy transition. The competition is going to be more intense, and this is a move in the right direction to attain and attract investment.” However, they also said that not all the gas terms in the bill were good enough to spur development, which Nigeria has said it wants for its “decade of gas.”

There is one contentious change. It is section 240 that upholds the 3% recommended in the original bill for host communities in place of 5% recommended by the House of Representatives. This will not please host communities and may spark fresh unrests there.

We salute the this 9th National Assembly for delivering the PIB in record time, after almost 20- year delay. Warts and all, the draft legislation, if and when assented to by Buhari, will bring about sanity in an industry plagued by crass corruption and opaqueness.