Minister, NNPC’s GMD Consulting With IOCs to Reach an Agreement
By Teddy Nwanunobi
The desire to attract more oil investments has propelled the Federal Government to refine the Petroleum Industry Bill (PIB) with some key changes in the Bill that is currently before the National Assembly.
For instance, the Bill would now lower the royalties for new production from deepwater oilfields to 5 per cent from 7.5 per cent.
It would also boost the production level that triggers higher royalties from 15,000 barrels per day (bpd) to 50,000 bpd.
The Bill, for the onshore and shallow water oilfields, is expected to reduce the hydrocarbon tax to 30 per cent for converted leases, down from 42.5 per cent that was in the original Bill.
It would be recalled that the Federal Government had, in 2019, fast-tracked a law to boost its take of offshore oil revenue.
Industry experts, at the time, were of the view that the move could put billions of dollars of offshore oil investments at risk.
The Federal Government has decided to change its stance in an attempt to balance its immediate revenue demands with the need to lock-in long-term investment for its oil industry.
What the Federal Government has done by sweetening the terms of the sweeping oil reform bill is nothing but to attract the much-needed investment to Nigeria’s oil industry.
The proposed changes, according to Reuters, signal a shift by Africa’s largest oil producer and show the impact of an increasingly competitive environment in the energy business after 2020’s global oil price collapse and an expected shift to renewables.
Reuters also claimed that the changes in the Bill would also guarantee that assets and liabilities of the Nigerian National Petroleum Commission (NNPC) would transfer to a limited liability corporation.
This will help oil companies to collect money owed by the NNPC.
But neither the Ministry of Petroleum Resources nor the NNPC has reacted to the reported changes.
The reform bill has been in the works for two decades, but the contentious nature of changes to Nigeria’s oil sector, which provides 90 per cent of foreign exchange and nearly half the national budget, have thwarted previous versions.
“In January, a fist fight broke out between local community leaders during one of the public hearings on the bill.
“But with political alignment between President Muhammadu Buhari and the National Assembly, the measure is expected to pass this year, though likely not before late May, the people said,” Reuters reported.
Oil industry executives pushed for more changes, particularly around gas development and “fiscal term stability” which provides assurance that there will not be any unexpected changes in the royalties and tax regime.
The executives said that “terms are not sufficiently competitive to stimulate the desired new investments.”
Oil companies have noted that Nigeria got just 4 per cent of the $70 billion invested in sanctioned projects in Africa between 2015 and 2019.
Valuechain understands that the International Oil Companies (IOCs) are concerned that the provision on royalties is very high.
But a source from the NNPC, who confirmed the report to Valuechain, disclosed that the duo of the Minister of State for Petroleum, Timipre Sylva, and the Group Managing Director (NNPC), Mallam Mele Kyari, have been consulting with the International Oil Companies (IOCs), with the aim of reaching an agreement.
“For a bill that is before the National Assembly, we wouldn’t want to be making comments on it. It’s just like a case in court. But there are some disagreements, and the GMD and the Minister have been having some engagements with the IOCs. But I’m not privy to the agreements they have reached so far. But they have been meeting with them so that there would be an alignment,” the source told Valuechain on phone.
