OPS: How PIA will End Uncertainties in Nigeria’s Oil, Gas Industry

Despite few criticisms trailing the signing into law of the Petroleum Industry Bill last week, members of the Organised Private Sector (OPS), have described the legislation as a development capable of ending uncertainties in the future of the nation’s oil and gas industry, reports Dike Onwuamaeze

Last week’s signing into law of the Petroleum Industry Bill by President Muhammadu Buhari has been hailed by members of the Nigerian Organised Private Sector (OPS) who said the birth of the Petroleum Industry Act (PIA) would create a level playing field and open windows of opportunities in the nation’s oil and gas sector of the economy.

Reacting to the development, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Nigeria Employers’ Consultative Association (NECA), and the Lagos Chamber of Commerce and Industry (LCCI), were full of commendations for the federal government’s effort, which they said has brought about a renewed optimism for increased inflow of investments, a boost to revenue generation and job opportunities in the Nigerian economy.

They agreed that the new law has the potential to put an end to the decades of uncertainties concerning the future of the oil and gas industry in Nigeria by providing a robust legal framework that would support the reforms required to position the industry as an investment haven, which could attract investors from across the globe.

Moreover, the PIA as perceived by the OPS would also promote more competition in the country’s oil and gas sector in a manner that could bring about a more efficient system, more product choices, and lower prices in the long term.

The OPS remained optimistic despite the anger of the host communities over the three per cent compensation that was allotted to them as well as the criticism of state governments that the bill has left them with an empty can.

Buhari signed the PIB, a piece of legislation that would serve as the framework for the operations in the oil and gas industry into law on Monday, August 16, and ended the bill’s tortuous journey of more than 10 years.

The LCCI’s position was made public in a statement signed by its Director-General, Dr. Chinyere Almona on Thursday.

LCCI: PIA will Put an End to Uncertainties in the Oil, Gas Sector

Almona said that the signing into law of the PIA 2021 by President Buhari was a significant milestone in the administration of Nigeria’s oil and gas industry.

She said: “We commend the federal government, the National Assembly, and all other stakeholders for this breakthrough after several years of deadlock in previous attempts made by successive governments to develop a comprehensive and practicable legislative framework to regulate the oil and gas industry.

“The new law has put an end to the decades of uncertainties concerning the future of the oil and gas industry in Nigeria. The PIA provides a robust legal framework that will support the reforms required to position the industry as an investment haven that attracts investors from across the globe. With the emergence of a more structured industry, it offers a level playing ground that can attract massive Foreign Direct Investments (FDIs) into the country.”

Nevertheless, the LCCI noted that Nigeria could reap the full benefits of the PIA 2021 if the federal government would pay attention to the implementation of the provisions of this act in a manner that would ensure that all Nigerians enjoyed the benefits from the potential opportunities of the Act.

The chamber, in furtherance of the need to ensure that Nigeria would maximise the benefits that would accrue from the new legislation, proffered the following recommendations for a successful and inclusive implementation of the PIA 2021.

First, it drew attention to the need to create more understanding through public enlightenment about the three percent revenue allocation to host communities to forestall a misunderstanding of the government’s intentions, which could raise tensions in the oil-producing region.

“Beyond the enlightenment, there should also be a monitoring mechanism to ensure that the allocated funds are judiciously used for the development of the host communities,” Almona said.

Secondly, the LCCI advised that the government should be firm and clear in their communications about the removal of oil subsidies or otherwise since “policy statements influence business decisions. The divergent statements by different government officials on the removal of oil subsidies create uncertainty. This is unhealthy and not standard practice for a sector that hosts billions of dollars of investment.”

The chamber also warned that the unbundling of the Nigerian National Petroleum Corporation (NNPC) should be done in such a manner that it would not create unnecessary bottlenecks and bureaucracy in contract administration and project management in the oil and gas industry.

It added that the process of unbundling the NNPC should strictly be subjected to the dictates of the Companies and Allied Matters Act (CAMA) and the Code of Corporate Governance (CCG).

Almona said that “the chamber has always advocated a fully deregulated downstream sector of the oil and gas industry and the creation of a level playing ground where market forces are allowed to allocate resources through cost-reflective pricing.

“We, however, urge the government to engage with all relevant stakeholders and players in the sector to arrive at an inclusive deregulation policy that creates a competitive business environment where all investors can thrive,” adding that Nigeria needs “to do better with enforcing contracts within the oil and gas industry.”

The Lagos chamber also observed the appointment of an implementation steering committee by the federal government to drive the implementation of this Act was a step in the right direction that demonstrated the government’s commitment to a smooth implementation of the PIA and called on the “Presidency, the Ministry of Petroleum Resources, and other institutions responsible for the implementation of this new law, to put in place a robust mechanism and roadmap, with due consultation with private sector operators and other stakeholders to drive effective and efficient implementation.”

NACCIMA: Private Sector Key to the Realisation of PIA Objectives

In the same vein, the NACCIMA said that it welcomed the enactment of the PIA after a long journey of almost 13 years under three administrations.

The Director-General of the NACCIMA, Ambassador Ayo Olukanni, said: “After a long journey, the association commends this bold and strategic step to reposition the Nigerian oil and gas sector to restore investor confidence and attract much needed Foreign Direct Investment (FDI) and local participation.

“Hitherto this sector of the economy stagnated and some principal players placed new investments on hold or even divested existing assets due to perceived unstable legal and policy environment.”

Olakanni surmised that the thrust of the PIA included the unbundling of the NNPC and the commercialisation of its operations and disaggregate regulation from operatorship as well as the accommodation of diverse stakeholders especially the host communities were transformative.

He said: “A restructured NNPC and ownership structure will help to create a wider opportunity for and space for members and the oil-producing communities to participate. The NACCIMA is however, of the view that for the PIA to achieve its purpose, it needs to be implemented in a structured and disciplined manner in the long term. Such an implementation approach will ensure transparency and focus while reinforcing confidence among local and international players.

“It is also the view of the association that the private sector is in a prime position to drive the realisation of the objectives of the PIA and as such should receive the requisite support and policy enablement to play this key role in the upstream, midstream, and downstream segments.

“In the same vein, the association is committed to leveraging the PIA to realise the goals of the decade of gas agenda and become a leading player in monetising Nigeria’s gas assets, generate power, and boost the productive capacity of our industries.”

NECA: Continuous Engagement with Sector Player Non-negotiable

For the NECA, the presidential assent to the Petroleum Industry Bill was a landmark decision that is worthy of commendation.

The Director-General of the NECA, Dr. Timothy Olawale, noted that the PIA is expected to herald a positive change in the oil and gas industry. According to Olawale, the Nigerian business community is expectantly looking “forward to a more robust industry with growing investor’s confidence and creation of more employment opportunities for the generality of Nigerians.”

He averred that “the relevant changes to the governance, administration, the regulatory and fiscal framework of the petroleum industry will enhance transparency and further position the industry to contribute effectively to national development.”

The NECA observed that certain provisions of the PIA were far-reaching with various degrees of implication and consequences for operators in the industry and urged the government “to create a platform of proactive and continuous engagement with the operators in the sector for a smooth implementation of the provisions of the act.

“In addition, the government should, without delay carry stakeholders along in setting the implementation and monitoring actions to ensure maximisation of the benefits inherent in the Act”

Unfinished Business

However, an economist and former Director-General of the LCCI, Dr. Muda Yusuf, observed that the PIA might not be a perfect legislation because not all the concerns of major stakeholders have been addressed by the legislation but noted that it is surely an improvement over the current legislative framework.

Yusuf said: “I am aware that the oil companies were concerned about the adequacy of the fiscal terms in the PIB. The host communities also have reservations about the percentage contribution to host communities’ funds. But we can always improve on those provisions with time. Issues of this nature are typically work in progress.”

He described the PIA as a major instrument of reform in the oil and gas sector that has many significant implications for the oil and gas sector and the economy as a whole.

“It has a profound investment effect as investment sentiments in the petroleum sector are enhanced by the new policy regime. There is the macroeconomic effect, which is expected from the conservation of foreign exchange as more petroleum products are produced locally, there is the revenue effect on account of new private investments in the sector; there are the employment effects from new investments, and there are the expected foreign exchange earnings outcomes, which higher upstream oil sector investment will generate.

“The boosting of petroleum refining capacity, as well as petrochemicals production will have remarkable impacts on our balance of payment position in the medium to long term.”