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Nigeria’s Senate President David Mark declared a
few days ago that the National Assembly would not succumb to pressures
from oil companies to pass a watered down version of the Petroleum
Industry Bill (PIB). This sounds very positive and patriotic, but how
true is this threat?

The PIB potentially promises to deliver far
reaching reforms to the Nigerian petroleum industry. The reforms
include: transforming the Nigerian National Petroleum Corporation from
a cost centre to a profit centre competing with Petrobras of Brazil and
Petronas of Indonesia; deregulating the downstream sector; boosting
funding to arrest decline in production; introducing globally
competitive fiscal systems; increasing revenue streams through gas
production; improving the overall transparency regime in the sector,
and so on.

Since the draft bill was submitted to the National
Assembly in 2008 by the late President Yar’ Adua its consideration by
the federal legislature has been shrouded in secrecy. More than three
different versions of the bill have been circulating. Even the Inter
Agency Team, which drafted the bill, did a u-turn at some point,
submitting a memorandum suggesting areas of amendment to their own
bill. Both chambers of the National Assembly held poorly coordinated
public hearing sessions. A few weeks ago, unconfirmed sources within
the National Assembly indicated that a particular version gave
multinationals in the oil industry significant concessions including
juicy fiscal terms on gas and off shore investments.

The promise of the PIB to improve transparency in
the sector is based on its compliance with the principles of the
Nigerian Extractive Industries Transparency Initiative (NEITI). It
prescribes that the reforms in the sector must comply with the NEITI
Act 2007. Many observers are unaware that Section 14(a) of NEITI Act
states that disclosure of audit information will only happen if such
information is not prejudicial to the proprietary interest and
contractual obligations of the audited entity. With this clause in
place, the NEITI Act retains the issue of confidentiality and so it is
worrisome to make the PIB compliant on such an Act.

Interestingly however, section 173(1) of the PIB
states that “Confidentiality clauses or other clauses contained within
any licenses, leases, agreements or contracts for upstream petroleum
operations that are for the purpose of preventing access to information
in respect of any payments. ……shall be null and void” Many observers
believe that this clause in the initial draft might have been tampered
with too.

The worrisome implication of this is that the so
called reforms to be ushered in by the Petroleum Industry Bill when
passed will likely accommodate a practice that has already been
abandoned in the oil and gas industry worldwide.

Of all the prescriptions of the PIB, the
fundamental issue of crude oil metering is conspicuously missing. Very
few suggestions on improved metering are contained in the Bill. It is
public knowledge that the NEITI audit 1999-2004 recommended a change in
the metering infrastructure to include measurements at the flow station
to ascertain the number of barrels of oil Nigeria is currently
producing and to compute royalties based on that figure as contained in
many MOUs entered with the Joint Venture Partners. However, crude oil
metering is currently done only at the export terminals, which provide
export figures only. Verifiable practice is that in many other oil
producing countries, precision metering begins at flow stations, but
not in Nigeria.

The inter ministerial task team put together to
implement the recommendations of the NEITI audit confirmed that it is
both technically and financially feasible to install precision meters
at the flow stations in Nigeria. The silence of the PIB on metering
means that the questions stakeholders are asking about the numbers of
barrels of oil we produce per day will remain unanswered.

One of the most interesting aspects of the
Petroleum Industry Bill was the introduction of equity payments to oil
bearing communities. This fairly popular memo was introduced by the
office of the Presidential adviser on Petroleum matters. It recommended
the idea of 10 percent equity ownership of the Joint venture by oil
producing communities.

The idea began as we were told, with the concept
of 10 percent of Joint Venture equity, that later became 10 percent of
profit and now finally $600 million annually as host community
dividends.

Could this be another community windfall or the
usual handout that will end up in the pockets of self appointed
community leaders?

A watered down PIB will mean reduced revenue to
government at all levels, an export oriented oil and gas sector with
minimal downstream multiplier effect on the economy (poor local
content), increased unemployment, low incentive for domestic gas
utilization leading to hiccups in power generation and
industrialisation.

Despite the threats of Senator Mark and our
“wise” legislators, it is crystal clear that the Petroleum Industry
Bill as it is being conceived and pursued cannot reform the Nigerian
oil and gas sector. After spending so much energy, time and resources,
we will suddenly find ourselves at the same point where we began. It is
called a national perambulation! Uche Igwe is an Africa Public Policy
Scholar at the Woodrow Wilson Centre writes from Washington DC, USA.