It’s been five years since the Petroleum Industry Bill was introduced in Nigeria. The legislation was created to increase transparency and to promote efficiency within oil industry sectors and organizations, the Oxford Business Group reported.
Still, the Senate Committee has yet to reached an agreement as to what exactly the enactment of the bill would change. Oil industry investors, workers and regulators amongst others will be directly impacted by the implementation of the Petroleum Industry Bill, which also sets out to create new businesses and redirect governing responsibilities.
According to the Oxford Business Group, the Senate is currently in its second reading of the legislation. In late May, Senator Nkechi Nwaogu, Senate Committee chair announced that the bill is expected to reach Parliament by the end of the year. However, negotiations concerning stakeholders and details of the bill are still taking place.
“Many people tend to view natural resources as national resources, which would explain the strongly held views that the proposed fiscal framework under the PIB is a legitimate claim to an increase in the domestic take of oil and gas revenues,” Seun Faluyi, Global Oceon managing director told the Oxford Business Group.
Major changes that the bill would influence include the state’s hydrocarbons firm, the National Petroleum Corporation (NNPC), separating into three entities that would each operate as “commercially viable businesses,” the report said. The NNPC would also be relieved of oversight duties that under the bill would be split into upstream and downstream operations.
This process, the Oxford Business Group reported would help relax downstream sector subsidy restrictions which affect market pricing incentives. The bill would also introduce a new fiscal structure that would allow the Nigerian government to see more cash as well as businesses and communities involved in oil production and extraction.
While the Oxford Business Group reports that many in the oil industry have accepted most changes that are to come, investors and international oil companies aren’t as open to new fiscal framework that would encourage an adjustment to levies, and a 10 percent tax proposed to benefit oil production in the south of Nigeria.
“[Additional taxes] lead to an increased government take from 73% to a projected 82% of projects in an apparent move to increase the local distribution of oil profits,” Anthony Long of US-based law firm King & Spalding told the Oxford Business Group.
According to the Oxford Business Group, ExxonMobil Nigeria managing director Mark Ward is wary about the fiscal framework that could jeopardize $33 billion in planned investments to be dispersed over the next five years.
“Nigeria’s joint venture oil fiscal terms are already among the highest in the world, not considering the high risks and cost due to security and bunkering,” Ward, also chairman of the Oil Producers Trade Section of the Lagos Chamber of Commerce said. “There is enormous investor uncertainty with apparent divergent interest.”
Overall, the Petroleum Industry Bill is expected to positively impact the oil industry, in addition, create new opportunities for small and medium-sized businesses.
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