FACTBOX below story
* Ambitious oil bill gives Jonathan chance of legacy
*
Parliament has tense relationship with president's team
*
Bill is watered-down but would revive investment
*
Industry expects law to finally pass next year
By Joe Brock
ABUJA,
Aug 6 (Reuters) - Nigeria's landmark energy bill could revive Africa's biggest
oil industry and improve President Goodluck Jonathan's reputation, but
rebellious lawmakers will seriously test his resolve to push it through in its
present form.
The
Petroleum Industry Bill (PIB) would bring root and branch reform to an industry
that produces 80 percent of government revenues but has been plagued by
corruption and mismanagement for decades.
The
bill has been stuck in parliament for more than five years, casting a cloud of
regulatory uncertainty over the sector and driving billions of dollars of
investment away to rival oil producing nations. If the uncertainty is left
unresolved, oil revenues could soon start falling.
The
wide-ranging bill would change working terms for oil majors like Shell and
Exxon and partly privatise the national oil firm, but has been held up as
government and oil firms argued over terms.
Nigeria
is among the world's top ten oil exporters and a key supplier to the United
States, China and Europe because its light, sweet crude is ideal for making
motor fuel. It is home to the world's seventh-largest gas reserves and has more
proven oil in the ground than the rest of sub-Saharan Africa combined.
If Jonathan can pass the bill, it could help restore a presidency battered by
an Islamist insurgency in the north, an abortive attempt to remove a popular
fuel subsidy and a raft of corruption scandals, since he won an election last
year.
"As
a president who came to power with a landmark reform agenda, the passage and
implementation of the PIB will provide a key gauge of Jonathan's performance in
office," said Roddy Barclay, West Africa analyst at Control Risks, a
consultancy.
"Having
suffered numerous damaging public setbacks in recent months, making headway on
this key piece of legislation would go some way to restoring his international
standing."
REBELLIOUS
PARLIAMENT
Jonathan's
explicit endorsement of the bill gives it a better chance of passing than
previous versions, but his increasingly tense relationship with parliament
means he is likely to have to concede ground or face embarrassing delays.
Parliament
returns from recess to debate the PIB in mid-September but several lawmakers
have told Reuters that the PIB won't get an easy ride and they intend on making
major changes.
"We
will not be subjected to pressure to pass the PIB. It will not get a speedy
passage but a thorough passage," Zakari Mohammed, spokesman for the lower
house, told Reuters.
Jonathan's
team had made it clear they are expecting a swift passage of a draft he has
signed off on.
The
president and his close ally Oil Minister Diezani Alison-Madueke will be given
greater powers in the latest draft, which is likely to be a sticking point with
many lawmakers who believe the executive arm of government is already too
dominant.
"We've
seen the powers given to the oil minister in the PIB and there is no way we're
going to allow our heritage to be handed over to any individual," one
member of the House of Representatives told Reuters, asking not to be named.
Relations
between parliament and Jonathan's administration have soured this year, as rows
flared up over the budget and several parliamentary probes into oil corruption.
"We
want this to pass, and it will, but not just the way the president and the oil
minister want. No way," the lawmaker said.
There
is however always the possibility lawmakers could improve transparency in the
bill, which analysts say falls far short of what was hoped.
Besides
giving powers to the oil minister, Jonathan's committee also added a clause
that would allow the president to give oil licenses out at his own discretion,
a backward step parliament is likely to reverse.
"This
unfavourable sentiment towards the president and oil minister may actually be
positive towards giving Nigeria a reasonably acceptable PIB," Clement
Nwankwo, director at the Policy and Legal Advocacy Centre in Abuja, said.
Nwankwo,
who works closely with the national assembly, believes the PIB won't pass for
around 9 months.
Whatever
the bill ends up looking like, passing it would at least end the uncertainty
which has prevented Nigeria from holding an oil licensing round for five years.
It
may also attract investment into natural gas, helping end chronic power
shortages. That would provide the kind of legacy Jonathan indicated he wanted
before winning last year's vote.
FACTBOX-Nigeria's Petroleum Industry Bill
ABUJA, Aug 6 (Reuters) - Nigerian President Goodluck Jonathan has approved the
latest draft of the Petroleum Industry Bill (PIB), which has been years in the
making, and parliament will begin debating it in mid-September.
Here
are some of the 223-page bill's main points:
PIB
OBJECTIVES
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Enhance exploration and exploitation of oil and gas in Nigeria for the benefit
of the people
*
Optimise domestic gas supplies, particularly for power generation
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Establish a tax framework that encourages further investment in the petroleum
industry while boosting revenues
*
Make state-run oil and gas entities commercially oriented
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Deregulate and liberalise the sale of refined fuel
*
Promote transparency
NATIONAL
OIL COMPANY
*
The state-owned Nigerian National Petroleum Corp (NNPC) will be divided up into
three entities: the National Oil Company (NOC), the National Gas Company (NGC)
and the National Petroleum Assets Management Corp.
*
The NOC and NGC will be partly privatised within 6 years of the law passing.
The asset management company will hold all the joint ventures with oil majors,
which make up the majority of Nigeria's oil assets. It will remain
government-owned, with the oil minister as chairman of the board.
*
The three entities will be incorporated under the companies act. Within six
years the government must divest up to 30 percent of the authorised shares of
the NOC and up to 49 percent of the NGC to the public on the Nigerian Stock
Exchange.
TAX
*
Oil companies will pay the following tax rates on profits:
50
pct for onshore and shallow water areas
25
pct for frontier acreage and deep water areas. This is up from 20 pct in a May
draft of the PIB
*
Industry experts say the law will allow foreign oil companies such as Shell,
Exxon, Chevron and Total to offset many of their costs and the terms in the PIB
are much more favourable than previous versions.
*
There is little clarity over royalty payments, which had been in previous
versions of the PIB.
*
There is no longer a provision to measure oil for royalties at the oil field,
rather than at the export terminal, as there was in earlier drafts. This means
widespread oil theft might become easier.
OIL
MINISTER
*
The oil minister will supervise all the oil institutions, including the
regulator, which used to be independent.
*
Any person or company who fails to comply with an order made by, or on behalf
of the minister is liable to a fine or jail sentence.
PETROLEUM
HOST COMMUNITIES FUND
*
Communities in the oil-producing Niger Delta have long wanted a better deal
from the oil and gas wealth in their area.
*
Oil companies will contribute 10 percent of net profits from their Nigerian
operations to the fund for Niger Delta communities, less royalties, deductions
and allowances, hydrocarbon tax and income tax.
*
There is little clarity on how the money will be paid or whether the
communities will receive it directly or via the government, which opens the
possibility of political interference.
*
The host fund will cover the cost of repairs to any oil facilities damaged by
vandalism, sabotage and civil unrest. This is currently paid for by oil
companies.
OTHER
MAIN POINTS
*
The pricing of petroleum products in the downstream product sector will be
deregulated to ensure market pricing and removal of economic distortions.
*
The president will have the power to grant oil licences, something industry
experts see as a bad for transparency.
*
Gas flaring, a major issue for local communities, will be banned at a date to
be decided by the oil minister. It was to be banned by the end of this year in
an earlier version.
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