Nigeria lost $250bn investment due to absence of legislation – operators

Stakeholders who converged at the ongoing public hearing on petroleum industry administration, fiscal and host community bills, including Executives of international and indigenous oil companies have expressed concerns over the loss of investments worth $250 billion due to absence of supportive legislation for the oil and gas industry reform.

Some of the participants who made presentations include: chief executives of Chevron, ExxonMobil, Shell, Oil and gas workers unions, traditional leaders from the oil producing region, civil society organizations (CSOs), among others, applauded the ingenuity of the 8th Assembly on the reforms of the oil and gas industry.

Members of the OPTS, comprising of 28 indigenous and international operators of 90% of oil and gas sector, who applauded the ingenuity of the National Assembly on the bill, frowned at the stringent provisions for relinquishment of licensed area as well as retrospective legislation on relinquishment of fees after seven years.

While expressing concerns over the impact of a c toxic legislation on existing and prospective investments, the operators stressed the need to ensure that the legislation becomes applicable when the bill is signed into law.

They also kicked against punitive legislation on revocation of licence due to delay in submission of data as well as $2/mmbtu on gas flare, rather recommended $0.5 or its equivalent in naira at the prevailing exchange rate, per 1,000 standard cubic feet of gas flare in the case of routine flaring.

The operators also canvassed for 10 years for operation of acreage before relinquishment of licence and seven years, noting that such provisions did not take current funding challenges into consideration.

According to joint Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and Nigerian Union of Petroleum and Natural Gas Workers (NUPENG), Nigeria has so far lost some “$250 billion of investments due to its inability to legislate the proposed reforms in its oil and gas industry as follows: $15 billion yearly – in investments withheld or diverted by investors to other countries because of the uncertainty as investors do not know which rules will guide their investments and another $14.7 billion potential earnings in seven years, from 2010-2017 had the PIB been passed into law in 2009,” the unions noted.

It further observed that the tax burden on the operators may render many Deepwater and gas projects less attractive, adding that the use of 20% of revenue/OPEX could be used by oil and gas companies as an inventive to downsize, reduce the Nigerian employees on their payroll and increase the use of contract staff and casualisation to reduce their OPEX and increase their cost efficiency factor (CEF). Therefore recommended computation of CEF by increasing the percentage of revenue used in the computation to at least 30%.

The oil workers also aligned with the OPTS and Independent Producers over overbearing powers conferred on National Petroleum Regulatory Commission, just as they kicked against indiscriminate award of oil blocs/licenses to former or serving public officer or members of government who obtain interests in the licence through an abuse of public office.

In order to ensure adequate funding of the host community development fund, the unions noted that the 2.5% operating budget was inadequate, while the oil and gas companies raised concerns that the bill imposes additional financial burden on those who are already paying taxes, fees and royalties, 3% to Niger Delta Development Commission, 2% education tax and 1% NCD.

On its part, Federal Inland Revenue Service (FIRS) proposed single tax rate for both offshore and shallow water areas to discourage aggressive tax planning through cost shifting and reduce undue complexities in tax administration.

The Service also proposed 50% rate for determination of petroleum tax profits in the bid to give government fair take against the existing 24% rate.

On the other hand, FIRS recommended 30% tax rate on gas with a more favourable production allowance for deep offshore gas, just as it opposed extension of incentives to crude oil transportation.

While declaring the public hearing open, Speaker Yakubu Dogara expressed regrets over the inability of the 6th and 7th National Assemblies to “conclude legislative consideration of the PIB.

“This, in my opinion, was as a result of insufficient consultations, weak ownership of the Bill, absence of requisite political will as well as the extremely divergent and competing views of the government and other major stakeholders on the provisions of the Bill.

“However, at the National Assembly, the most important set back was that the PIB was difficult to handle by the relevant committees because it was a massive and complex document that was to repeal and re-enact almost all our petroleum laws into a holistic legislation. Because of its sheer size and complexity, the Bill was difficult to consider by the legislative committees in both chambers.

“The implications of the delay in concluding the oil and gas industry reform which commenced since the year 2000 has been very colossal for our country running into several billions of dollars that would have accrued to Nigeria and our economy coupled with the loss of our erstwhile continental competitiveness.

“It was because of these reasons that the 8th National Assembly especially the House of Representatives made the completion of the oil and gas industry reform one of its cardinal legislative objectives.

“Today’s event is in keeping with our covenant with Nigerians to lay to rest this difficult but surmountable challenge that has been the bent of our oil and gas industry. To ensure a thorough and expedited conclusion of the reform, this House decided to split the reform Bills into logical smaller Bills. This way, the individual Bills can be expeditiously considered and passed one after the other,” Dogara assured.

KEHINDE AKINTOLA, Abuja

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