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Nigeria's new oil industry bill ready to launch

Almost two decades after a Petroleum Industry Bill was first mooted and after numerous revisions, the country is poised to finally enact key elements of it

Only a presidential signature now stands between Nigeria's Petroleum Industry Governance Bill (PIGB) and the statute book, following its passage through the House of Representatives in January, some eight months after it was passed by the country's senate.

The bill, the first of three relating to the hydrocarbons industry, promises to revolutionise the way in which oil and gas licenses are allocated and is designed to draw a line under years of corruption associated with the sector by introducing more transparency to government processes.

"The PIGB will… promote openness and transparency in the industry-by clarifying the rules, processes, and procedures that govern the oil and gas sector. This should eliminate, or at worse, reduce corruption significantly and make the sector more efficient and more productive," Senate president Bukola Saraki said in a statement.

Nigeria Extractive Industries Transparency Initiative (NEITI)—an autonomous organisation that is part of the president's office and reports to him—has suggested that the absence of functional petroleum sector laws has cost the state more than $200bn in lost revenues over the years, largely through the syphoning off of oil income to foreign bank accounts.

"NEITI is optimistic that with the new governance law for the industry, these huge revenue losses to the nation as a result of process lapses and outright stealing will be strictly checked if not eliminated," the organisation said.

One notable change under the PIGB is the break-up of the Nigerian National Petroleum Corporation (NNPC). The creation of several new organisations is also significant. These include a National Petroleum Company (NPC), which will handle state stakes in upstream ventures, and Nigeria Petroleum Assets Management (NPAM), which will administer government interests in offshore production-sharing contracts among other responsibilities.

NPC is intended to operate as "a fully commercial entity", which will be permitted to raise funding for its share of upstream project costs independently from the government—something which will be welcomed by the international oil companies. Their projects have been subject to delays due to the absence of state funding and a lack of clarity in government decision making. NNPC has typically held stakes over slightly more than 50% in major projects.

The largest foreign firms operating in tandem with NNPC—Shell, ExxonMobil, Total and Eni—have steered clear of Nigerian licensing rounds in recent years. The government will be hoping that the new legislation will lure them back.

Stock flotation

The bill also allows for NPC to float some of its shares on the market, although the timeline for this is not clear.

The plan is for both NPC and NPAM to be established within six months of the bill passing into law. Transfer of NNPC assets to the new entities is due to happen in the 12 months after they have been set up.

The original draft Petroleum Industry Bill—which was kicked around among lawmakers for 17 years to no effect—was split into a number of separate draft bills in the early months of President Muhammadu Buhari's current term in office. This was part of an effort to make the legislation more digestible and to give it a better chance of becoming law. That strategy seems to be working.

Saraki said he expected the two most important of the outstanding bills—the Petroleum Host Community Bill (PHCB) and the Petroleum Industry Fiscal Bill (PIFB)—to be passed soon. The PHCB includes legislation designed to assuage unrest in the Niger Delta region by providing support for communities there, while the PIFB deals with oil taxes and how they should be disbursed.

Last year, as crude output improved, following months of disruptions due to unrest in the Delta, Nigeria agreed to cap crude production at around 1.8m barrels a day and was producing some 1.7m b/d at the end of last year, according to the government. NNPC said in January that its export sales of crude oil and gas stood at $239.1m in November, a fall of 25.7% from the previous month. Oil comprised 48% of the total and gas the remaining 52%.

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