Page 5 - AfrOil Week 39

AfrOil COMMENTARY AfrOil

These changes may make the royalty regime the end of the year. However, the legislation still
more palatable to international oil companies has several hurdles to surmount.
(IOCs) working at Nigerian fields. Two of those hurdles are structural in nature.
Abuja’s adoption of the Deep Offshore and Buhari’s administration finalised its first draft of
Inland Basin Production-Sharing Contract Act the PIB earlier this year, and the Federal Min-
last year sparked a certain amount of contro- istry of Petroleum Resources submitted it to
versy, with some industry observers describing the House of Representatives, the lower house
the measure as a revenue grab. Others – includ- of Parliament, in August. According to press
ing Ed Hobey-Hamsher, a senior Africa analyst reports, the bill was then submitted to the upper “
at Verisk Maplecroft – predicted that the new house, the Senate, in September. Both of these Nigeria’s
regulations would backfire in the end by dis- houses must sign off on the PIB before it can be
couraging IOCs from renewing or expanding sent to the president for signature, and as of press president has
their Nigerian operations. time, neither had done so.
In other words, the legislation is still under said he hopes to
Regulatory line-up discussion. Indeed, sources familiar with the see the National
With respect to agencies, the PIB aims to elim- matter told Reuters last week that the National
inate, reconfigure and/or replace at least three Assembly had set up several special teams to Assembly pass
state bodies overseeing various aspects of the review individual sections of the bill.
hydrocarbon sector. One of these is the Depart- The sources did not say whether any of these the PIB in time
ment of Petroleum Resources (DPR), which is teams were considering amending the bill. The-
responsible for ensuring compliance with laws, oretically, though, the final version of the PIB for him to sign it
regulations and guidelines that apply to the oil may differ in some respects from the first draft into law by the
and gas industry. The DPR will see most of its submitted in August.
tasks reassigned to a new commission, Reuters Reuters noted, though, that both chambers of end of the year
said. Parliament were dominated by Buhari’s All Pro-
Also on the chopping block are the Petroleum gressives Congress Party. As such, the bill has a
Products Pricing Regulatory Agency (PPPRA), good chance of being passed without any major
which sets prices for refined fuels and monitors changes and in good time.
and regulates fuel supply and distribution. If so, Nigeria will have passed a new oil law
Additionally, Abuja intends to scrap the after more than 20 years of discussions, argu-
Petroleum Equalisation Fund (PEF), which ments and dead ends. Hopefully, the PIB will be
uses cash distribution to keep motor fuel prices up to the challenges the country is now facing,
uniform all over the country, and transfer any such as relatively low crude oil prices, uncertain
remaining funds to a new agency that will demand, environmental concerns and domestic
help cover the cost of building new natural gas gasification initiatives.
infrastructure. For his part, Timipre Sylva, the Minister of
In short, the federal government appears to State for Petroleum, told members of the Senate
hope that the restructuring will lead to positive on September 28 that he hoped the legislation
changes in the midstream gas transport sector, would pass quickly.
as well as the downstream fuel sector. If Nigeria delays further, he said, it may not
be able to make the most of its oil reserves. Since
The path to final approval global oil consumption is slated to decline by
Nigerian President Muhammadu Buhari has 50% over the next 20 years, the country ought to
said he hopes to see the National Assembly pass sell its crude while demand remains at current
the PIB in time for him to sign it into law before levels. ™

Nigeria touts gas as transport fuel

The initiative would allow the country to utilise more of its gas resources and lower fuel prices

NIGERIA recently embarked on fuel reforms Buhari has refused to do this, and authorities
to help bolster supply security and attract more are instead offering incentives to spur the use of
investment in refining. But these reforms have cheaper natural gas as a vehicle fuel.
been roundly condemned by consumers.
The government took advantage of record- State support
low gasoline prices during coronavirus Under its National Gas Expansion Programme,
(COVID-19) lockdowns to end decades of published last month, Nigeria’s central bank
fuel subsidies. Now that prices have recovered, is offering a NGN250bn ($648mn) stimulus
though, the government is under pressure to package which it hopes will encourage gas use
reverse course. So far, President Muhammadu in vehicles.

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