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The passage of the Petroleum Industry Reform Bill (PIRB) was recently listed as a milestone in achieving the policy objective of the 7 Big Wins, a road map of the Nigerian oil and gas industry, which aims at restructuring and repositioning the industry.
The passage of the bill has been stalled by the continued deliberation and long process involved in getting approval by the Senate.
The PIB is envisioned to give a better structure to the Nigerian oil & gas industry by providing a clearer legal and regulatory framework, while also making the country an investment destination for both domestic and foreign investors, and boosting government revenue.
Clear Legal and Regulatory Framework
The bill comprises several objectives which all aim towards positioning the industry as one with relatively high repute and standards, in order to promote global competitiveness and foster foreign investment.
Having clear and distinguished sectorial segments each with tailor-made institutional structures, will further promote transparency and accountability in the upstream, midstream and downstream segments of the industry.
Also, the confidentiality review with regards to licenses, leases, contract and revenue amongst others serve as a way of promoting insight into the process which should be deemed fair and appropriate.
However, the veto power vested on the Minister of Petroleum Resources over major policies and regulatory matters may be subject to individual sentiments and therefore, not an objective approach, thereby questioning the intended transparency.
In a bid to restore peace in the Niger Delta region of the country by significantly tempering the frequency of pipeline attacks, the bill has made some provisions that may foster the relationship between the host communities and the oil companies.
It is imperative to note however, that several negotiations in the region have resulted in reduced disruptions, as oil production hit 2MMbpd in February 2017.
But how sustainable can this be? The bill should clearly state detailed and exact information on the provisions made for host communities alongside a clear and transparent implementation process in order to avoid any form of disruptions and negative interference to the proposed objective.
The bill should also address other minor militant groups in the host communities, in order to bridge the gap of seclusion and prevent further attacks even as the agreements proposed have been adhered to.
The bill has also placed a priority on promoting the development of the Nigerian content, as key operations and development plans will be subject to approval upon the inclusion of the Nigerian content alongside other requirements.
We note the opportunity given to local producers which presents a competitive edge over their foreign counterparts.
The initial argument however, may be the production of sub-standard products/equipment compared to imported products.
The continued efforts at benchmarking local products to international standard may spur increased quality and hence, result in improved quality and higher growth in the sector.
Upon the implementation of the bill, we expect increased investment inflow in the sector, as the delayed passage of the bill has stalled continued investments in gas and deep water projects by major International Oil Companies IOCs (IOC), due to the uncertainties surrounding the terms involved.
We therefore look forward to increased exploratory and production activities, alongside increased revenue to the government from royalties and petroleum taxes.
Also, we expect that the implementation of the bill will tackle the issue of corruption that has plagued the industry for so long, by providing greater transparency and accountability in all sectorial division of the industry.
We therefore have a medium to long term optimistic outlook on the industry, driven by the full implementation of the bill and also the revision of some salient issues raised thus far in this document.
The fiscal system which is a key segment of the PIRB has been drafted into the National Petroleum Fiscal Policy document. This will be addressed in our subsequent policy commentary.