New PIB Resolves Controversy over Fiscal Regime, Gas Pricing


The much-awaited new version of the Petroleum Industry Bill (PIB) submitted to President Goodluck Jonathan on Friday may have resolved all the contentious issues on fiscal regimes and domestic gas pricing, probably ending years of opposition by local and foreign investors who had kicked against the original version of the reform bill.

THISDAY gathered that with the International Oil Companies (IOCs) getting better tax deal under the new bill, years of uncertainty in the operating environment, which robbed the country of massive investment, may have also ended.

New investment decisions have been put on hold for over five years, with foreign companies relocating their investments to Ghana, Angola and Libya pending the passage of the bill.

The new bill submitted to President Jonathan seeks to establish an omnibus legislation that will set transparent rules for the management of the oil and gas industry, as against the existing myriad of legislative instruments.

Minister of Petroleum Resources Mrs. Diezani Allison-Madueke submitted the bill to President Jonathan at the Presidential Villa in Abuja. The National Assembly may get the new bill within 14 days after the Federal Executive Council would have deliberated on it.
President Jonathan had in January mandated a task force to fast-track a new version of the bill.

Under the new PIB, the NNPC will be replaced by a new National Oil Company (NOC), which will within three years be partly listed in the Nigerian Stock Exchange (NSE) and other foreign exchanges to guarantee transparency.

However, the new bill also gives the minister of petroleum new supervisory powers over all industry institutions, a provision, which the National Assembly had rejected in the old bill.

The new bill has also resolved all the issues relating to corporate income tax, hydrocarbon tax and streamlined the number of regulators in the industry.
It also proposes some changes that will improve transparency in the sector and also provides for favourable royalties and company profit taxes.

Section 1 of the Third Schedule of the 207-page bill, which was exclusively obtained by THISDAY, provides for favourable fiscal regimes for local and foreign companies.
The new reform bill provides for a production allowance for crude oil production by a company to be determined appropriately.

“(a) For onshore – the lower of $30 per barrel or 30 per cent of the official selling price, up to a cumulative maximum production of 10 million barrels and the lower of $12 per barrel or 30 per cent of the official selling price for volumes exceeding 10 million barrels up to a cumulative maximum production of 75 million barrels; (b) for shallow water areas – the lower of $30 per barrel or 30 per cent of the official selling price, up to a cumulative maximum production of 20 million barrels and the lower of $12 per barrel or 30 per cent of the official selling price for volumes exceeding 20 million barrels up to a cumulative maximum production of 150 million barrels; and (c) for deep water areas – the lower of $15 per barrel or 30 per cent of the official selling price, up to a cumulative maximum production of 250 million barrels per PML,” states the new bill.

For gas fiscals, Section (2) (a) of the Third Schedule states that “there shall be a production allowance for natural gas fields of 50 per cent of the value of the natural gas production or $ 1 per million Btu, whichever is lower:”

“(i) For onshore, up to a cumulative maximum of 1000 billion standard cubic feet; (ii) for shallow water, up to a cumulative maximum of 2000 billion standard cubic feet; and (iii) for deep water, up to a cumulative maximum of 3000 billion standard cubic feet per PML. (b) there shall be a production allowance for the development of dry gas fields of 100per cent of the value of the natural gas production or $ 1 per million Btu, whichever is lower: (i) for onshore, up to a cumulative maximum of 1000 billion standard cubic feet; (ii) for shallow water areas, up to a cumulative maximum of 2000 billion standard cubic feet; and (iii) for deep water areas, up to a cumulative maximum of 3000 billion standard cubic feet per PML,” the bill states.

Section (3) also provides for a production allowance for condensate production from gas fields of $ 20 per barrel or 30per cent of the official selling price, whichever value is lower.

“(a) For onshore, up to a cumulative maximum of 100 million barrels; (b) for shallow water areas, up to a cumulative maximum of 200 million barrels; and (c) for frontier acreages and deep water areas, up to a cumulative maximum of 300 million barrels per OML,” the bill added.

The reform bill also states that allowances provided in this Schedule shall be allocated to companies on the basis of the entitlement of the relevant barrels.

On the issue of gas pricing, which was also contentious in the old bill, the new PIB provides under Section 229 (b) that the prices of gas to be “charged for each licensed activity shall reflect the costs incurred for the efficient provision of that activity; (c) prices charged shall permit a reasonable return for licensees on their investments; and (d) prices shall not discriminate between customers with similar characteristics, such as similar size or a similar consumption profile”.
However, Section 232 provides for transitional pricing arrangements that allow for a gradual transition towards pricing arrangements that comply with the pricing principles outlined in Section 229.

On the gas flare, Section 253 (2) provides that “any licensee or lessee who flares or vents gas without the permission of the minister in the circumstances mentioned in subsection (1) (b) of this section shall be liable to pay a fine which shall not be less than the value of gas”.

The new bill outlaws all forms of discretionary award procedure in the allocation of oil and gas blocks as it provides that as it recommended that “there shall be no grant of discretionary awards.”

Also, as part of the steps being taken to address the problem of inadequate domestic gas supply, the new bill empowers Nigerian Petroleum Inspectorate to impose gas supply quantities on oil companies for domestic consumption.But the fiscal regimes contained in the old bill had been the main bone of contention as operators insisted that they could hinder long term investment in the upstream oil industry.

Clause 421 (2) iii of the old version of the reform bill provided for a royalty rate of 25 per cent as against 20 per cent for production that exceeds 20,000 barrels per day for deep water operations.

In the case of gas produced in deep water, the bill proposed 25 per cent as against seven per cent royalty for production that exceeds 120 million standard cubic feet per day. The controversial bill also provided additional royalties for the government for crude oil sales exceeding $40 per barrel, while providing for company income tax of 30 per cent and 70 per cent tax on hydrocarbons.

However, the bill reduces assessable tax for onshore and shallow water from 85 per cent to 70 per cent.

The operators view the tax regime as unfriendly to investors and also argued that the multiplicity of taxes in the bill could make investment in Nigeria’s oil and gas globally less- competitive.

The old bill contained multiplicity of 11 different forms of taxes.
Some of the taxes included the payment of three per cent of each oil company’s budget to Niger Delta Development Commission (NDDC); and two per cent fee payable to Nigerian Maritime Administration and Safety Agency (NIMASA).

It also provided for the payment of the Petroleum Profit Tax (PPT), which is to be split into Nigerian Hydrocarbon Tax (NHT) and three per cent Company Income Tax (CITA).
The bill also increased royalties to 50 per cent; while gas flare penalty was increased to $3 per 1000standard cubic feet per day of gas.

It provided for two per cent education tax; payment of two per cent gross profit on infrastructure and payment to the Nigerian Petroleum Exchange (NiPeX).
The bill was also said to have provided for too many regulators, which foreign operators said could hinder international arbitrations.

The new bill seeks to check crude oil theft by providing for the establishment of a Special Investigation Unit (SIU) to maintain surveillance on critical oil and gas installations, premises and vessels.

Under the new bill, the SIU, to be created by the Nigerian Petroleum Inspectorate (NPI), will have the power to seize any item or substance reasonably believed to have been used in the commission of an offence.

Submitting the new bill to President Jonathan, Allison-Madueke had expressed confidence that the new team that worked on the document did a good job, which would address local supply as well as strengthen NNPC to stand as a viable and globally competitive outfit.

She had said it took the committee over six months to come out with what she considers a perfect document in the interest of the country given the enormity of the revision they undertook, which spanned fiscal regime and reconfiguring of NNPC.

http://www.thisdaylive.com/articles/new-pib-resolves-controversy-over-fiscal-regime-gas-pricing/119099/.

The new petroleum industrial bill will definitely resolve the controversy over Fiscal regime and gas pricing. This will enhance equity participation in the oil and gas sector and tackle the issue of corruptin that has bedevilled that sector since the discovery of oil in this country.

Who actually says this GEJ administration lacks direction and focus?

It is only ignorant people that can not differentiate between,clearing a field,tilling the ground,planting of seeds,nurturing and weeding,manuring,plant and seed maturation and finally harvest. Nigerians are so used to quick fix approaches that has never led us anywhere.

This is a welcome development. I wish GEJ the best in his courageous push for change. Christians on this forum,una no go church? I saw posts where I was labelled GEJ agent,I made the thread on intimidation because I believe am been hounded because I am part of the clique of ladies on this forum showing political awareness and interest.

On the issue of gas pricing, which was also contentious in the old bill, the new PIB provides under Section 229 (b) that the prices of gas to be “charged for each licensed activity shall reflect the costs incurred for the efficient provision of that activity; (c) prices charged shall permit a reasonable return for licensees on their investments; and (d) prices shall not discriminate between customers with similar characteristics, such as similar size or a similar consumption profile”.
However, Section 232 provides for transitional pricing arrangements that allow for a gradual transition towards pricing arrangements that comply with the pricing principles outlined in Section 229.

On the gas flare, Section 253 (2) provides that “any licensee or lessee who flares or vents gas without the permission of the minister in the circumstances mentioned in subsection (1) (b) of this section shall be liable to pay a fine which shall not be less than the value of gas”.

The new bill outlaws all forms of discretionary award procedure in the allocation of oil and gas blocks as it provides that as it recommended that “there shall be no grant of discretionary awards.”

The operators view the tax regime as unfriendly to investors and also argued that the multiplicity of taxes in the bill could make investment in Nigeria’s oil and gas globally less- competitive.

The old bill contained multiplicity of 11 different forms of taxes.
Some of the taxes included the payment of three per cent of each oil company’s budget to Niger Delta Development Commission (NDDC); and two per cent fee payable to Nigerian Maritime Administration and Safety Agency (NIMASA).

It also provided for the payment of the Petroleum Profit Tax (PPT), which is to be split into Nigerian Hydrocarbon Tax (NHT) and three per cent Company Income Tax (CITA).
The bill also increased royalties to 50 per cent; while gas flare penalty was increased to $3 per 1000standard cubic feet per day of gas.

It provided for two per cent education tax;  payment of two per cent gross profit on infrastructure and payment to the Nigerian Petroleum Exchange (NiPeX).
The bill was also said to have provided for too many regulators, which foreign operators said could hinder international arbitrations.

The new bill seeks to check crude oil theft by providing for the establishment of a Special Investigation Unit (SIU) to maintain surveillance on critical oil and gas installations, premises and vessels.

Under the new bill, the SIU, to be created by the Nigerian Petroleum Inspectorate (NPI), will have the power to seize any item or substance reasonably believed to have been used in the commission of an offence.

Submitting the new bill to President Jonathan, Allison-Madueke had expressed confidence that the new team that worked on the document did a good job, which would address local supply as well as strengthen NNPC to stand as a viable and globally competitive outfit.

She had said it took the committee over six months to come out with what she considers a perfect document in the interest of the country given the enormity of the revision they undertook, which spanned fiscal regime and reconfiguring of NNPC.

I have high lighted some of the areas I know they will not read before coming up with their rubbish arguements and name calling to rubbish the new bill that will finally break the jinx we are xperiencing in cleaning the sector and attracting good foreign and local investments.

The new bill outlaws all forms of discretionary award procedure in the allocation of oil and gas blocks as it provides that as it recommended that “there shall be no grant of discretionary awards.”

Also, as part of the steps being taken to address the problem of inadequate domestic gas supply, the new bill empowers Nigerian Petroleum Inspectorate to impose gas supply quantities on oil companies for domestic consumption.But the fiscal regimes contained in the old bill had been the main bone of contention as operators insisted that they could hinder long term investment in the upstream oil industry.

The willingness and the accelerated approach of the govt in respect to the PIB shows that this govt really wants to sanitize the oil industry,because the simple truth is that despite all said and done if that bill was not submitted to NASS for passage into law then everything being said to be done in that sector could as well be said to be null and void,with this bill comes the transparency and accountability that we as Nigerians crave for in that sector,this could be said to be another step in the right direction by the executive,it is now up to the legislative to give this bill an accelerated hearing.

Mandelaguy: The new petroleum industrial bill will definitely resolve the controversy over Fiscal regime and gas pricing. This will enhance equity participation in the oil and gas sector and tackle the issue of corruptin that has bedevilled that sector since the discovery of oil in this country. http://www.thisdaylive.com/articles/new-pib-resolves-controversy-over-fiscal-regime-gas-pricing/119099/. Who actually says this GEJ administration lacks direction and focus?

GEJ is the current President of Nigeria and all Nigerians should wish him success. When the details of the PIB becomes public, we'll have a chance to properly review it and the NASS will try to improve upon it before passing its final version.

What some people find objectionable with posts such as yours is that they do not discuss the issues at hand but tend to focus on the person of the President. For instance, you make a statement about the proposed PIB without having read the bill or having any idea what the final version will look like, and then magically reach the conclusion that your statements mean that the GEJ administration has focus. You fail to see that the new PIB may very well be a watered down version designed to appease the usual suspects.

Most Nigerians believe that the primary focus of the administration should have been the complete victory in the BH war and bringing the fuel subsidy thieves to book. There is no wonder you are fast developing the reputation of being a sycophant. I believe you are bright enough to make more meaningful contributions on NL without giving your readers the opportunity to think that you are one of the paid agents El-Rufai has been talking about.

You sir, are better than what your posts project.

@Ndu_chuks. Tank for the compliment and the subtle correction,but I made the statement about direction because it is evident from content of the bill( Atleast the part this day high lighted) that this administration has the zeal for change and sanity to be restored in the sector. Mind you,all of us are seriously watching and will pass judgement if the bill fails to deliver on it's promises when passed into law,bearing in mind the key areas pupita tried making us take more note of,it cannot be changed overnight. On the issue of BH,I am very aware that the war against terrorism,especially urban terrorism is not an easy war to win,but definitely,it will be won if the elders,youths,uncles,aunts,wives should join hands together and fight with govt. I have no apologies if I sound like a sycophant,I said what I believed in because all these negative press is not helping the national cause at all.

Check out all the debates on power reform and synchronising gas supply from NGC and power sector and the arguements of foreign investors on pricing and fiscal regime,you will not open your mouth to ask why I said the administration has direction. A directionless govt will not bother about this bill,or what happens to local content,foreign direct investment,indigenous participation or listing of NNPC and a free hold in the power,oil and gas sectors respectively,bearing in mind that govt does not run corporations. So,digest information welll before hasty corrections and unsolicited compliments!

Mandelaguy: @Ndu_chuks. Tank for the compliment and the subtle correction,but I made the statement about direction because it is evident from content of the bill( Atleast the part this day high lighted) that this administration has the zeal for change and sanity to be restored in the sector. Mind you,all of us are seriously watching and will pass judgement if the bill fails to deliver on it's promises when passed into law,bearing in mind the key areas pupita tried making us take more note of,it cannot be changed overnight. On the issue of BH,I am very aware that the war against terrorism,especially urban terrorism is not an easy war to win,but definitely,it will be won if the elders,youths,uncles,aunts,wives should join hands together and fight with govt. I have no apologies if I sound like a sycophant,I said what I believed in because all these negative press is not helping the national cause at all.

The main point in my last post was that the kudos to GEJ may be premature. ThisDay wrote that the new version of the Petroleum Industry Bill (PIB) submitted to President Goodluck Jonathan on Friday, stated that International Oil Companies (IOCs) will get a better tax deal and many the contentious issues on fiscal regimes and domestic gas pricing, were re written to favour local and foreign investors who had kicked against the original version of the reform bill.

This does not sit well with me and does not warrant any kudos to GEJ, until we know what the details of the bill are. BTW constructive criticisms should never be summarily dismissed without full consideration for their values. I maintain that you are bright enough to engage in meaningful dialogue, without being disagreeable. I am quite sure that you know fully well that your kudos to GEJ in this case was premature.

Noting do you sha, so carry on.

ndu_chucks:

The main point in my last post was that the kudos to GEJ may be premature.

[b]Exactly. That the PIB is an essential bill cant be ignored. We have gotten to this stage before (at least twice) and before we knew it it was completely scuffled. Past experiences has proven to us that having the good and nice ideas isnt our challenge in this country of ours but the inner strength to carry it through to a logical conclusion. The retardeen gave us a Gas Plan (a beautiful one for that matter), can we confidently say that these plan is ongoing? is it not missing out on the various milestones the govt set for itself the same way the power sector is though that seems to be moving also.

OBJ also had his own power plan. Infact he went ahead in building many power plants at the same time however because of corruption it seems the good intention wasnt materialised.

The bill (a new version entirely) has just been given to the president (starting the process all over again). i am not too much excited about that and wont call that any acheivement whatsoever. OBJ also surpassed this phase. Until its passed by both houses, and signed unto law by the president which i see as a big achievement, will hold on on my Kudos. [/b]

We have gone through this phase twice before so kini Big deal here that we have to sing GEJ's praises? Until I watch GEJ putting his signature on paper after the whole process in the legislature, there is nothing dance etighi for yet.

The pricing regime is perfect to work with and have investors initiate actions. Competition will drive the prices down eventually, we just have to start something.

ndu_chucks:

The main point in my last post was that the kudos to GEJ may be premature. ThisDay wrote that the new version of the Petroleum Industry Bill (PIB) submitted to President Goodluck Jonathan on Friday, stated that International Oil Companies (IOCs) will get a better tax deal and many the contentious issues on fiscal regimes and domestic gas pricing, were re written to favour local and foreign investors who had kicked against the original version of the reform bill.

This does not sit well with me and does not warrant any kudos to GEJ, until we know what the details of the bill are. BTW constructive criticisms should never be summarily dismissed without full consideration for their values. I maintain that you are bright enough to engage in meaningful dialogue, without being disagreeable. I am quite sure that you know fully well that your kudos to GEJ in this case was premature.

Noting do you sha, so carry on.

Since when did insulting someone's personality, family and tribe count as constructive criticism?

We sabi talk d talk we even sabi write wat we can talk bt one tin we no sabi do na to d work. I see gud intension on dat bill but wen it wl get to our legislators na der monkey go go market ino go cumbk. Most of our legislators go dey sleep as if d bill is nt too important 2 d nation.

I reserve my comment until dis bill is passed, Implemented and most especially translated to a better life for d ordinary man in d village. 4 d first time Good one by gej n his galfriend diezani..ayam watching

Why did GEJ take back the bill instead of asking the contenders to go to the national assembly and make their presentations?

Where is the bill in its entirety. Until i see it in its entirety i wont draw any conclusions. These soundbites are to deceive by throwing bits of info at us. I bet we never get to see the full bill in its entirety.

Atheist:-D:
Where is the bill in its entirety. Until i see it in its entirety i wont draw any conclusions. These soundbites are to deceive by throwing bits of info at us. I bet we never get to see the full bill in its entirety.

Agree
This bill has been circulating around since 1999
Word has it that it has been similarly watered down in its different variants
Was it not January's protest that pushed this submission out
Make we hear word bo!

ndu_chucks:

GEJ is the current President of Nigeria and all Nigerians should wish him success. When the details of the PIB becomes public, we'll have a chance to properly review it and the NASS will try to improve upon it before passing its final version.

What some people find objectionable with posts such as yours is that they do not discuss the issues at hand but tend to focus on the person of the President. For instance, you make a statement about the proposed PIB without having read the bill or having any idea what the final version will look like, and then magically reach the conclusion that your statements mean that the GEJ administration has focus. You fail to see that the new PIB may very well be a watered down version designed to appease the usual suspects.

Most Nigerians believe that the primary focus of the administration should have been the complete victory in the BH war and bringing the fuel subsidy thieves to book. There is no wonder you are fast developing the reputation of being a sycophant. I believe you are bright enough to make more meaningful contributions on NL without giving your readers the opportunity to think that you are one of the paid agents El-Rufai has been talking about.

You sir, are better than what your posts project.

Billionaire 7th, Mandelaguy 12th, Pupetta 17th and Louise88 23th. The Month of June 2012 gave birth to plenty monikers on this thread.

Face the thread and stop whining about the registration dates of nairaland ID's . . .

Billyonaire: The pricing regime is perfect to work with and have investors initiate actions. Competition will drive the prices down eventually, we just have to start something.

Drive down which price? the price of crude? Are you just quoting the famous line of Nigerian politicians?

This bill is the only thing worth demonstrating over in Nigeria.

It will mark a watershed in Nigeria's development and propel us toward a truly explosive phase of development, such as we have never seen before.

There will be no opportunities for the Farouks and subsidy mongrels to feed fat off the back of the ordinary Nigeria. Reason? For the first time in our corrupt history, TOTAL transparency would be brought to the oil sector; all loopholes for theft and magic accounting would be blocked and NNPC will be killed with a battle axe.
Even better would be the effect on local content, benefits to host communities and our GDP. When the bill is passed, our earnings from oil would climb steadily to a whopping 6 times what we currently earn from the sector! Wahayyyyyyyyy!!!!!!

The PIB is epochal.

Fresh Air!

ochukoccna:
Agree
This bill has been circulating around since 1999
Word has it that it has been similarly watered down in its different variants
Was it not January's protest that pushed this submission out
Make we hear word bo!

I wonder why wikileaks puts GEJ as the main man behind it then? With Rilwan Lukman (Dr. Fuel Scarcity) a surprising background killer of the bill.
Red eye na bad tin!

How about the 10% to communities, has it been remove ' to make it favourable to IOCs'

The major contending issue about the bill over the years has been the perceived "anti North" syndrome.
I remembered when the bill was first read on the floor of the Senate, many senators especially of the northern extraction
wanted the bill to be thrown out. The debate was very heated and it took the dexterity and experience of the Senate president
to rigmarole the debate and allow for the bill to scale first reading.
Before the second reading reading, different versions of the bill had surfaced. This is anomaly, because as an executive bill which has not even gone through second reading and have its principle debated, you rarely have alteration. But in this case, you have different alteration. And eventually, different versions of the bill.
Of course, the Minister of Petroleum, the Attorney-General of the federation and as well as Presidency as at then, kept quiet and rather than setting thing straight they play the "Northern Agenda" role and scuttled the bill. Needful to say, the bill was compiled and worked on by President Olusegun Obasanjo administration but was left for President Umar Yar'Adua administration to send to the National Assembly.
When President Jonathan took over, one of the first thing he did was to push for the passage of the PIB. It was rebuffed. I can recall also that Minister of Petroleum, Mrs Madueke lobbied vigorously the national assembly to ensure the passage of the bill before the expiration of last administration, but the lobby met a stone-walled opposition.
Now that we had subsidy brouhaha, the same elements that scuttled the PIB law will be forced to pass the law.
The challenge before all Nigerians is to ensure that the Nigerians do not play to the gallery and allow the National Assembly to smuggle, inseert and watered down the strength and legislation of the bill. The same way the watered down the power of the EFCC in the EFCC law and the Electoral Bills in the past.
I commend the president on this bold step and as well as Mrs Diezani Madueke for her doggedness; despite being in the eye of the storm always, she refused to be intimidated.

This is a welcome development. I wish GEJ the best in his courageous push for change. Christians on this forum,una no go church? I saw posts where I was labelled GEJ agent,I made the thread on intimidation because I believe am been hounded because I am part of the clique of ladies on this forum showing political awareness and interest.

you sure say u b lady? or ur ID just dey read "Lady"

With this PIB bill passed in the N/A, soooooooooooooooooo many things will be taken care of winthin the Niger Delta region.Hurray GOODLUCK.