The Petroleum Industry Bill - a Basic Guide

The Petroleum Industry Bill - a Basic Guide

The Petroleum Industry Bill - a Basic Guide

"Your Brother's Pocket Cannot Keep Your Wealth" -- African Proverb

1.What is the PIB?

The Petroleum Industry Bill, PIB, is a piece of legislation initially intended to address endemic structural, policy and managerial issues in the Nigerian oil and gas sector. Its goals were to enhance the value of the asset for the Nigerian people by plugging loopholes in policies and management and improving transparency and efficiency of the sector.

It was an attempt to redress observed weaknesses and abuses by operators and stakeholders, eliminate corruption and restructure the industry to make it more responsive to social and economic needs of Nigerians and foreign investors with basic key concerns such as equity, responsibility and sustainability targets.

The PIB as originally drafted has gone through massive tampering, alterations, amendments, duplications, disputes over authenticity, delays and damaging debates. It is now singularly the most divisive legislation, pitching mostly Northern legislators who feel it represents a declaration of economic war on their poorer region, and their colleagues from mostly the South-South who feel it represents a fairly packaged deal which is non-negotiable.

2. Why is the bill so controversial?

There are many provisions in it many interests dislike. Foreign oil companies and even foreign nations see it as an unwelcome intrusion into their traditional monopoly over the industry and an assault on their stranglehold over production and profits. The NNPC see it as an effort to force it to be more open and transparent, a virtual death sentence for an institution which thrives on lack of openness and accountability. Northern legislators see it as further enriching a zone which already takes more than it is entitled to, and impoverishing their region. South-South legislators think it makes too little provision for more. Government thinks the legislation is poorly understood by Nigerians, and has become unduly politicised.

3. Are there provisions in it anyone likes?

The Jonathan administration will want the bill passed as it is. In particular, it does not want provisions for the 10 percent host community fund reduced or removed, and it wants the huge powers conferred on the office of the Minister of Petroleum Resources to remain. South-South legislators want the provision for host community fund retained, and if possible, increased. They want the bill to be passed as presented, unless changes in it give the region more of the proceeds from oil and gas. Northern legislators like the provision for exploration funds, but want it to be radically improved.

4. Are these issues non-negotiable?

Nothing is non-negotiable in politics, but many positions have hardened over time. A lot of regional and parochial interests have been whipped up in support of various positions. Basically, the battle lines appear to be drawn around Northern and South-South legislators. Other legislators are intensely interested as well, but there are less resources at stake for their own interests than those from these two regions.

5. Why would the North fight if its people have majority of oil blocs?

6. Why would anyone fight against the 10 percent provision for host communities?

Ordinarily, there should be no reason to resist allocating more funds to areas where petroleum resources are extracted from. Common sense, good politics and equity demand that areas from where resources emanate from should benefit from God's bounties, which means they get more than communities further away. There are also environmental and other consequences which additional funds should mitigate. The grouse with the host community fund is that it is an addition to 13 percent derivation, funding of NDDC, Ministry for Niger Delta, cost of the amnesty programme, statutory allocations and other benefits derived from the operations of the industry which go to oil producing states. The combined effect of all these funds should make the region the most affluent, and Nigerians from the Niger Delta among the most well-off. This is not the case. Funds are grossly abused and diverted by governments, and majority of citizens in the region are as poor as the poorest peasant from Jigawa state. "Communities" tend to become a small circle of elites who retain huge resources using strong arm tactics of all types, and there is no guarantee that more funding for "host communities" will translate into better living conditions for the poor in the region. Ten percent is also a huge chunk of the resources that could be shared among all Nigerians to address poverty. The host community fund does not address the issue of equity: It complicates it.

7. Can the resistance against host community fund be sustained?

It is doubtful. In the end, it may be negotiated against raising the funds for frontier exploration, but the debate over it would have caused much damage. Its supporters see any resistance against it as arrogant posturing from a parasitic part of the nation which has no moral or any other right to deprive the community from enjoying the full benefits of "its" resources. Its opponents see it as increasing evidence of structural inequity which characterises the Nigerian federal system. Along with the removal of the onshore-offshore dichotomy, some of the provisions of the PIB are seen by other parts of the country, particularly the North, as a short-sighted and ultimately damaging scramble for the nation's resources by one section.

8. Why is the frontier exploration fund important?

Northern legislators believe that with sufficient funding, oil and gas which they believe abound in the North will soon be exploited. This will reduce the region's dependence on petroleum revenue from the South-South, and improve the nation's overall economic assets. They think the current provisions are inadequate, but they may negotiate improvements of the fund by making concessions in other areas of the PIB. They will continue to insist that oil exploration in the South-South was historically funded from resources from other parts of the nation; and the rest of Nigeria is entitled to explore and exploit "their" own resources using revenue from petroleum.

9. Does the North need petroleum?

Everyone needs petroleum resources if they can get it, but it does not come without huge a price. The North has immeasurable assets in solid mineral resources, huge population and very rich agricultural land. This is what it should try to develop. In the meantime, it has a right to demand that proceeds from petroleum resources be used to exploit oil and gas in the region.

10.What will be the fate of the PIB?

Everyone will get something out of it. The bill has to be passed in one form or the other, because it is important to provide a new, comprehensive framework for managing and sharing the nation's petroleum resources. The debates and quarrels around it, however, expose the weaknesses of a Nigerian state which is yet to come to terms with the basics around the nature of its federal arrangement.

The Petroleum Industry Bill - a Basic Guide

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