Abuja - Nigeria's long-awaited oil law, when it finally
comes, looks likely to be a botched job that gives favourable tax terms to
foreign oil firms while doing little to satisfy calls for transparency and
reform of a corrupt and wasteful sector.
A new draft of the long-awaited petroleum industry bill
(PIB) is close to being finalised, potentially ending years of uncertainty that
has blocked billions of dollars of investment.
Licensing rounds, contract renewals and investment have been put on hold for five years pending the new bill to regulate Africa's top oil and gas industry.
Passing the bill will
allow such work to resume.
But provisions that would have forced the government to
publish how much oil it pumps and all the payments it receives from oil firms -
in an industry where secrecy is blamed for corruption - have been stripped from
the bill.
"I expect the petroleum industry to be happy. I expect
many Nigerians to be upset," said Pedro Van Meurs, an oil and gas expert
who has consulted with the government on the PIB.
"Transparency provisions related to corporate income
tax, hydrocarbon tax and production sharing were deleted. This should be a
source of concern."
The PIB is meant to change everything from fiscal terms to
overhauling the Nigerian National Petroleum Corporation (NNPC). Its
comprehensive nature caused years of disputes between lawmakers, ministers and
oil majors.
The latest copy proposes some changes that will improve
transparency: keeping royalty payments secret will not be allowed, for
instance. Oil company profit taxes proposed in the bill are also in the public
domain for the first time.
But it does not require disclosure of oil sales, of other
taxes like income and hydrocarbon tax, nor of payments to the government,
including signature bonuses. Openness on such subjects is vital to clean up the
energy sector, say campaigners.
President Goodluck Jonathan commissioned a task force in
January to fast-track a new copy of the PIB, which makes the passage of this
condensed version more likely, even if the national assembly debate on it takes
a while.
"Passage of any piece of legislation brings a level of
certainty to the industry that has been absent for years," said Gordon
Bottomley, Nigeria analyst at Ergo, a New York-based advisory firm that has
been closely tracking the PIB.
"(But) the reorganisation of... Nigeria's oil and gas industry is going to be far from painless. And this bill, in terms of transparency, appears less than desirable."
New powers for minister
The bill also gives the oil minister new supervisory powers
over all industry institutions, including a new regulator to police downstream and
upstream, raising concerns about checks and balances. Lawmakers had rejected
drafts that did this in the past.
It says anyone who "interferes" with the minister
will be fined or imprisoned. And it allows the oil minister and the directors
of state institutions to receive gifts, which will not please civil society
groups calling for an end to graft.
Foreign oil companies like Shell, Chevron and Exxon will be
relieved that tax changes are more favourable compared with previous versions.
This could be a sticking point with lawmakers seeking a better deal for
Nigeria.
Analysts say that the taxes foreign firms pay on profits
onshore, which will be published under the PIB, will amount to a big cut from
the taxes that are now levied in secret.
Furthermore, the cut will apply both to existing fields and
to new fields, unlike in earlier versions of the law which cut taxes only on
new fields, the analysts say. Van Meurs says the government could lose 20-50%
of its tax revenue per barrel on existing assets.
National oil company
Detail is thin on plans to partly sell off the mismanaged
NNPC, seen by experts as the biggest barrier to progress.
Nigeria exports some 2 million barrels per day (bpd) but
could double that with a better-managed state oil firm able to pay for its
share of joint ventures, foreign oil majors say.
NNPC was last month described by parliament as
"answerable to no one" in a probe into a $6.8bn fuel subsidy fraud.
It is accused by oil traders of owing billions in unpaid bills.
The NNPC rejects allegations of corruption or insolvency.
The PIB proposes a new National Oil Company (NOC), which
will within three years be partly listed, in theory leading to much-needed
accountability.
But the PIB isn't clear on what assets the NOC gets. The old
NNPC would still exist and keep joint ventures and production sharing contracts
with oil majors, which cover the majority of Nigeria's known oil and gas
reserves, for an indefinite period.
"For arguably the most important element of the bill,
it is worrying the section on NNPC is both brief and vague," an executive
at an oil major operating in Nigeria said.
There is also no domestic gas pricing in the bill, which is
key to unlocking the world's seventh-largest gas reserves.
Left in doubt are onshore licences Oil Minister Diezani
Alison-Madueke is in the process of renewing. She signed a 20-year one with
Exxon worth trillions of dollars in February and has promised to do the same
with Shell and Chevron by June.
It has not been made clear whether they will include clauses
exempting them from the PIB, in which case a huge portion of the oil business
would not be governed by the new bill.
"It's meant to be single framework for everything in oil and gas. If you are going to have it but then do a special deal for, say, Exxon ... That would be a huge departure from what the bill was meant to be," said Antony Goldman, head of PM Consulting.