Nigeria: New talks on petroleum reform
THE GOVERNMENT's controversial Petroleum Industry Bill (PIB), which had been due to become law early this year, is set to be reworked following criticism from the producing companies
Although the new petroleum minister, Diezani Alison-Madueke, has asserted her commitment to the reforms, enactment of the PIB before presidential elections next April is now looking increasingly uncertain.
With the death of the president, Umaru Yar'Adua, in May – after months of illness when the country was run by acting-president Goodluck Jonathan, who is now president – and the dismissal by Jonathan of Yar'Adua's oil adviser, Rilwanu Lukman, in March, the PIB has lost its two most powerful supporters. Jonathan also dismissed the managing director of state-owned Nigerian National Petroleum Corporation (NNPC), Mohammed Barkindo – an ally of Lukman – and replaced him with a relatively inexperienced former executive, Shehu Ladan. Then, last month, Ladan was dismissed and replaced by Austin Oniwon, previously NNPC's head of refining and petrochemicals.
An early move by Alison-Madueke was to arrange meetings with the producing companies and legislators "to straighten out the areas of disagreement" over the PIB – which changes the relationships between NNPC and the producers, changes the tax system, and allows the authorities to replace existing contracts (PE 5/10 p4). Nigerian press reports last month said some companies were preparing to take legal action against the government to keep their earlier production-sharing contracts, with relatively favourable terms, in force until they expire.
With the PIB threatening future investments, particularly in the vital deep-water areas, some suggest Jonathan might decide to split the all-encompassing bill into a series of more-focused measures. Plans to break-up NNPC into separate functional units, and to create a petroleum directorate and a new inspectorate, should not be controversial. Reform of the country's downstream and gas markets, due to be pioneered by new regulatory bodies, might be feasible and could bring early benefits, although the move would be unpopular if gasoline prices increased.
The most difficult areas are fiscal reform and the plan to convert the existing joint ventures between NNPC and producing companies into incorporated joint ventures. Although the plan was welcomed initially – because operators would be freed from NNPC's financing constraints – it ran into trouble when NNPC said it intended to become a fully privatised commercial company, with control over the ventures.