After 58 years of independence, the state of the Nigerian oil industry has remained pathetic among other oil producers.
Up till this moment, the industry lacks relevant and contemporary regulations. In other words, the industry lacks global competitiveness, which automatically puts it at the mercy of subjective interests, STANLEY OPARA writes
The refusal of President Muhammadu Buhari to assent to the Petroleum Industry Governance Bill (PIGB) after a wait of almost two decades, has brought the issue of reforms in the oil sector of the economy into sharp focus and public scrutiny.
Coming at a time when expectations were high that after the prolonged pause of being stuck in the National Assembly the Petroleum Industry Bill (PIB) was close to significant, albeit incremental fruition, the decision of the President was an anti-climax that has set the industry and indeed, the entire economy into fresh anxieties and uncertainties.
While the justification for the denial of presidential assent could be plausible and germane, the implications are diverse and could be far-reaching.
This therefore triggers the need for deep reflections, introspection and fresh perspectives on the fate of both the reforms contemplated by the PIGB and indeed the entire oil and gas industry of the country.
The ensuing debate around this development could however, not have come at a better time.
Given the current cerebration of the country’s 58th anniversary and the impending general elections, there is the need to reconsider and offer options for national development, as the current situation with the PIGB cannot be allowed to slip away or be mired in the waters of politics without extracting subliminal values therefrom.
Speaking at the recent national Development Dialogue Series (DDS) organised by the OrderPaper Advocacy Initiative, the Senior Partner, Energy & Commercial Transactions, Primera Africa Legal, Israel Aye, said opportunities in the global oil/gas space were fading fast, which makes the situation of Nigeria to be pathetic as it is not prepared to reap the current benefits of the industry given its weak and outdated legislations.
He said the United States, which was a huge consumer of oil from Nigeria and other oil-producing countries, is turning into the undisputed global leader in oil and gas production.
He said: “Solar Photovoltaic (PV) is on track to be the cheapest source of new electricity in many countries. China is changing its energy landscape; moving rapidly to gas and renewables. The future is electrifying, spurred by cooling, electric vehicles and digitalisation.
“Hydrocarbon resources abound. Unconventionals are becoming conventionals. Buyers are becoming sellers. Importers are becoming exporters. There is uptake of clean energy at rapid pace.
“It is important to remember that oil reserves are declining, and we are at sub-optimal production levels (oil and gas); and significant funding gap needs to be addressed to sustain and grow production.”
The mid-stream sector of the petroleum industry is also facing its crisis following the country’s falling refining capacity; increase in illegal refining; rising pipeline vandalism, falling gas processing infrastructure; rising depot and gas plants accidents, among others.
Gas-wise, Aye said Nigeria currently has non-bankable gas sales agreement, non-competitive oil and gas handling tariffs, characterised by the Nigeria Gas Company’s monopoly of gas transmission pipeline and on-going gas flare.
Till date, he said Nigeria is faced with inadequate transmission infrastructure, adding that: “Not passing the laws to reform the petroleum industry casts a cloud of uncertainty on the industry.
This is because we can model risks, but we cannot model uncertainty.”
The Nigerian system, regrettably, is supported by obsolete laws: Petroleum Act 1969; Petroleum Profits Tax Act 1959; Deep Offshore & Inland Basin (Production Sharing Contracts) Act, and Sundry ad hoc legislations
However, other African countries are making giant strides in the quest to better regulate their oil industry and optimise the dividends from the industries.
For instance, there is the Petroleum Exploration and Production Act 2016 in Ghana; the Petroleum (Exploration, Development & Production) Act 2013 in Uganda; the Petroleum Act 2015 in Tanzania; and Petroleum Law (Law No. 21/2014) 2014 in Mozambique. This is aside reforms and legislative amendments in several other countries.
In the same vein, Former World Bank Vice President, Oby Ezekwesili, said it was unfortunate that Nigeria overtook India in May 2018 to become the country with the world’s highest number of people living in extreme poverty amid enormous oil and gas reserves.
She said: “The number of people living in extreme poverty in India is falling while the opposite is true in Nigeria.
Extreme poverty rises in Nigeria by six people each minute, while the number of extreme poor in India drops by 44 people a minute.
“Indian population of 1.3 billion people, now has 5 percent of its population living in extreme poverty. Nigeria, population of about 191 million has 44 percent in extreme poverty
“Nigeria and Congo are the only Organisation of Petroleum Exporting Countries (OPEC) countries with high poverty rankings.”
On the management of the country’s oil revenues, she said it was regrettable that huge expenditure were incurred on fuel subsidies (under recovery) backed by generally increasing fuel consumption figures and a constitution that does not encourage savings.
Lamenting on the level of lawlessness in the sector, Ezekwesili said: “There is no transparency in the Excess Crude Account (ECA) administration by the federal government., as not all ECA withdrawals are captured by the Federation Account Allocation Committee (FAAC).
Expert Advisory Panel, Nigeria Natural Resource Centre, Tunji Lardner, said with the absence of the requisite laws to coordinate the oil/gas sector, issues like lack of transparency/accountability; low participation by indigenous players; political interference with the Nigerian National Petroleum Corporation; inefficient downstream operations; funding constraints; weak and dependent regulator; overlapping institutional roles; revenue management issues; outdated laws; and environmental degradation, will continue to plague the Nigerian oil/gas space.