The Chairman of the Nigerian House of Representatives Committee on Petroleum Resources (Downstream), Mr. Peterside Dakaku, has confirmed that the Petroleum Industry Bill (‘PIB’) is set to become law by the end of 2014. The PIB, which has been dogged by uncertainty and setback, passed its first and second readings before the House of Representatives and is now at committee stage.
The PIB proposes an overhaul and comprehensive review of Nigeria’s legal and regulatory framework dealing with oil and gas. It was first tabled in 2008 and contains a number of key reforms:
- Review of the applicable fiscal regime
- New tendering process for licences and leases
- New licenses for exploration and development
- Establishment of independent institutional entities, including a restructuring of the state-owned Nigerian National Petroleum Corporation
- Establishment of a ‘Petroleum Host Community Fund
- Consolidation of current legislation on regulation and taxation of the industry
It is hoped the changes proposed by the PIB will increase accessibility to the Nigerian market with an open tendering process. Industry stakeholders are, however, concerned with the ‘harsh’ tax regime proposed in the PIB and other operational difficulties in Nigeria. The Oil Producers Trade Section, an association of energy groups, has warned that the controversial proposals may deter investment and make it difficult for international oil companies to operate in Nigeria. The considerable delays that have so far characterised the PIB are in part due to attempts to address this concern.
While the uncertainty as to whether the PIB will pass into law by the end of the year persists, the proposed development of industry policies, structures, funding and accountability remains very much in the public eye. Nigeria is expected to become Africa’s largest economy this year. In an industry reported to account for over 90% of its total export revenue, delivering certainty, public approval and incentives to investment will remain as challenging to Nigeria as it is important.