The need for oil sector reforms
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- Written by Sani Ummaru
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The stunted growth as well as low level of heavy investment in Nigeria’s oil and gas industry among other factors that has hindered the sustainable growth of the industry will soon be a thing of the past. To address the problems, the federal government in its wisdom submitted a Petroleum Industry Bill (PIB) before the National Assembly which was prepared and packaged by stakeholders in the oil and gas industry.
For more than 50 years of activities in the sector, Nigeria’s oil and gas industry have been dominated by foreigners to the detriment of Nigeria and its citizens. The situation denies Nigeria the ownership and control of its God’s given hydrocarbon endowment. However, the scenario will undoubtedly change as the PIB has already passed second reading at both the House of Representatives and the Senate as well as went through public hearing where all stakeholders made submissions that seek to improve the Bill when passed into law.
Most stakeholders who spoke during the public hearing expressed optimism that the PIB if passed into law would go a long way in transforming the industry for the common good of all investors, government and the citizens. They acknowledged the need to reform the oil and gas industry in line with the best practices as done in other countries.
NNPC Group Managing Director, Dr. Mohammed Sanusi Barkindo said the PIB if passed into law will enable Nigeria to assume ownership of its resources and create a modern effective and efficient petroleum legal framework. He said passage into law of the PIB will open up the nation’s oil and gas sector to new local and international investors and foster competition, growth and sustainable development in line with international best practices.
The law will enhance transparency and establish good governance practices and processes while reinforcing linkages between the oil and gas industry and other sectors of the Nigerian economy. It will also support the energy objectives of government as enshrined in the seven-point agenda of Mr. President.
Confidentiality encourages corruption and as such the PIB removes confidentiality on a scale not seen in the world before. With the passage of the PIB, Nigeria will move from being one of the most opaque petroleum nations in Africa to one of the most open and transparent in the world. Since the PIB is aimed at streamlining and strengthening petroleum administration, then one wonders why its opponents will not see the point that the future of energy to developing economies like Nigeria was a matter that concerns all.
Reforms in the oil and gas industry should be viewed as a subject of interest to all and sundry given the inherent benefits to the nations and its citizens. The exercise is imperative for the nation’s oil and gas industry to survive and grow.
The Analyst, Mr. Mohammed Rabe said any sector desirous of thriving must have sound legal framework as well as transparent and accountable processes and procedures that will stand the test of time. Rabe said the part of the PIB that seeks to establish the Incorporated Joint Ventures (IJVs) is of great interest to Nigeria since it will solve the financial bottleneck of cash call and promote a faster development and expansion of oil and gas fields.
In the IJVs, the national oil company and the foreign companies will now join into a single company of which they will be shareholders. The number of shares will reflect the current interest in the joint ventures. This will undoubtedly increase Nigeria’s control over its resources in the JVs.
The argument of the IOC’s that NNPC cannot use its share of the reserve in any JV to secure loan to finance its project simply because its government’s owned company does not hold water. Since NNPC has high equity in most of the JVs, it’s only natural that it uses its share of crude reserve to look for loan for its projects as done in other countries.
For example the Saudi Aramco is owned by the Saudi government and all IOC’s operating in the country are only contractors being paid for their services. I believe if the IOC’s are resisting Nigeria’s ownership of its resources, then government has no option than to use its constitutional powers to enable the nation own its hydrocarbon resources in the interest of the citizens.
Another important aspect of the PIB that make the reforms in the oil sector desirable is the national content provision in the Bill, since no project can be approved without a comprehensive Nigerian content plan that guarantee purchase of local goods and services as well as employment of Nigerian citizens among others.
Since the oil and gas sector is the number one revenue spinner for the country, Nigerians await patiently as lawmakers debate on the PIB to make it a law. The reform in the oil and gas industry is in the interest of Nigeria and its citizens and should be embraced by all.
Ummaru writes from Garki, Abuja
Articles
The need for oil sector reforms
Category: Comments Written by Sani Ummaru Hits: 1085
The stunted growth as well as low level of heavy investment in Nigeria’s oil and gas industry among other factors that has hindered the sustainable growth of the industry will soon be a thing of the past. To address the problems, the federal government in its wisdom submitted a Petroleum Industry Bill (PIB) before the National Assembly which was prepared and packaged by stakeholders in the oil and gas industry.
For more than 50 years of activities in the sector, Nigeria’s oil and gas industry have been dominated by foreigners to the detriment of Nigeria and its citizens. The situation denies Nigeria the ownership and control of its God’s given hydrocarbon endowment. However, the scenario will undoubtedly change as the PIB has already passed second reading at both the House of Representatives and the Senate as well as went through public hearing where all stakeholders made submissions that seek to improve the Bill when passed into law.
Most stakeholders who spoke during the public hearing expressed optimism that the PIB if passed into law would go a long way in transforming the industry for the common good of all investors, government and the citizens. They acknowledged the need to reform the oil and gas industry in line with the best practices as done in other countries.
NNPC Group Managing Director, Dr. Mohammed Sanusi Barkindo said the PIB if passed into law will enable Nigeria to assume ownership of its resources and create a modern effective and efficient petroleum legal framework. He said passage into law of the PIB will open up the nation’s oil and gas sector to new local and international investors and foster competition, growth and sustainable development in line with international best practices.
The law will enhance transparency and establish good governance practices and processes while reinforcing linkages between the oil and gas industry and other sectors of the Nigerian economy. It will also support the energy objectives of government as enshrined in the seven-point agenda of Mr. President.
Confidentiality encourages corruption and as such the PIB removes confidentiality on a scale not seen in the world before. With the passage of the PIB, Nigeria will move from being one of the most opaque petroleum nations in Africa to one of the most open and transparent in the world. Since the PIB is aimed at streamlining and strengthening petroleum administration, then one wonders why its opponents will not see the point that the future of energy to developing economies like Nigeria was a matter that concerns all.
Reforms in the oil and gas industry should be viewed as a subject of interest to all and sundry given the inherent benefits to the nations and its citizens. The exercise is imperative for the nation’s oil and gas industry to survive and grow.
The Analyst, Mr. Mohammed Rabe said any sector desirous of thriving must have sound legal framework as well as transparent and accountable processes and procedures that will stand the test of time. Rabe said the part of the PIB that seeks to establish the Incorporated Joint Ventures (IJVs) is of great interest to Nigeria since it will solve the financial bottleneck of cash call and promote a faster development and expansion of oil and gas fields.
In the IJVs, the national oil company and the foreign companies will now join into a single company of which they will be shareholders. The number of shares will reflect the current interest in the joint ventures. This will undoubtedly increase Nigeria’s control over its resources in the JVs.
The argument of the IOC’s that NNPC cannot use its share of the reserve in any JV to secure loan to finance its project simply because its government’s owned company does not hold water. Since NNPC has high equity in most of the JVs, it’s only natural that it uses its share of crude reserve to look for loan for its projects as done in other countries.
For example the Saudi Aramco is owned by the Saudi government and all IOC’s operating in the country are only contractors being paid for their services. I believe if the IOC’s are resisting Nigeria’s ownership of its resources, then government has no option than to use its constitutional powers to enable the nation own its hydrocarbon resources in the interest of the citizens.
Another important aspect of the PIB that make the reforms in the oil sector desirable is the national content provision in the Bill, since no project can be approved without a comprehensive Nigerian content plan that guarantee purchase of local goods and services as well as employment of Nigerian citizens among others.
Since the oil and gas sector is the number one revenue spinner for the country, Nigerians await patiently as lawmakers debate on the PIB to make it a law. The reform in the oil and gas industry is in the interest of Nigeria and its citizens and should be embraced by all.
Ummaru writes from Garki, Abuja