By Clara Nwachukwu
LAGOS — International Oil Companies, IOCs, have warned that about $202 billion worth of oil and gas investments in Nigeria are under threats if the fiscal terms in the Petroleum Industry Bill, PIB, were retained the way they are.
The declaration came, even as the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke,insisted that the new PIB provided for a refreshing fiscal regime with very strong incentives for enhanced exploration in the frontiers, particularly the Inland Sedimentary Basins as well as providing strong support base for the complete activation of the Gas Master Plan.
President Jonathan and Petroleum Minister, Diezani
But the oil majors believe that the new fiscal terms will increase the cost of doing business particularly in the deep offshore region. Already, the IOCs maintain that the costs of doing business are already the highest in the world, in terms of multiple taxes, including hydrocarbon tax, company income tax, higher rents and royalties, and levies such as the Niger Delta Development Commission levy, host community fund, and education and a host of others.
Accordingly, they argued that the fiscal terms as contained in the bill were not favourable as it heightens uncertainty and endangers returns on investments.
The oil majors, who broke their silence on the bill last week through Shell, which declared it was lopsided, are apparently fighting back to retain higher returns on their investments, seeing as the Federal Government is seeking to increase its take from oil and gas resources, and in turn, enhance the contribution of the sector to the nation’s Gross Domestic Product, GDP, currently at below 35 per cent.
Projects which may be jeopardised
Speaking at a conference by the Petroleum Club in Lagos, yesterday, Chief Executive Officer of the ExxonMobil Group in Nigeria, Mr. Mark Ward, identified ongoing projects which may be jeopardised if the fiscal terms were not revised as: $104 billion for oil production between 2012 and 2015; $30 billion for gas development in the next five years; $29 billion on the Production Sharing Contracts, PSCs and $39 billion on the Joint Venture, JV projects over the next five years
Accordingly, he warned: “Most of the projects will not go ahead due to the onerous fiscal terms. It will render all deep water projects uneconomic and it will not meet the Federal Government’s aspirations, as the cumulative effect leads to unattractive economic environment.”
Ward, who spoke in his capacity as the Chair of the Oil Producers Trade Section, OPTS, of the Lagos Chambers of Commerce and Industry, LCCI, warned that members may be forced to abandon some of these multi-billion dollar projects, targeted to be delivered between 2012 and 2017.
Toll on operations
The ExxonMobil boss further argued that the intrigues surrounding the PIB had already begun to take a toll on the nation’s oil production which has declined by about 40 per cent in the past couple of years.
He added that as it were, the industry might continue to operate without new investments for the next 10 years, which will impact on the nation’s economy, which depends more than 90 per cent on oil and gas revenues.
Ward noted that the operators were working in line with the Federal Government’s aspirations, especially with regard to increasing reserves and daily production to 40 million barrels and four million barrels respectively. In addition, he said the majors were equally supporting government’s efforts to boost power generation for improved supply through the Afam and Okpai power plants expansion programmes, and required government to reciprocate accordingly.
He said: “You can imagine the direct impact of this investment on the economy. So, it is very important to consider a good atmosphere to spur investment and boost the economy,” adding that while government reserved the right to review its laws, it has to do so within the bounds of existing contracts to retain investors’ confidence.
Unfavourable to indigenous operations
Similarly, Chairman of Indigenous Producers, Mr. Abdul Razaq Fadahunsi, also argued that the PIB before the National Assembly would impede the growth of indigenous producers.
He said: “The new PIB raises concerns on whether the growth and aspirations will be achieved. And the worries of the indigenous independent producers are whether they will continue to have access to acreages and their chances of survival due to the onerous commercial terms.”
Fadahunsi also noted that the PIB was initially proposed to aid the growth of indigenous producers, adding that the current provisions are anti-growth, adding that in view of the efforts by his members, they should be encouraged rather than discouraged.
PIB not a regional bill
Looking at the Bill from a patriotic stand point, Dr. Sanusi Bala, an economist and public affairs analyst, said the bill should not be sectionalised along political divide.
He called on Nigerians to support government in its policies, saying: “The time has come for all Nigerians to work together to ensure that this Bill is passed quickly. We cannot afford to waste more time delaying the passage of this Bill, considering its potential to improve the economy and participation of Nigerians in the sector.”
Bala, who referred to a recent criticism of the PIB by an advisory panel set up by the Northern Governors, said he was sad that such well intentioned legislation would suffer unjustified opposition. He pointed out that the original PIB languished in the sixth legislative session for years as a result of some individuals placing selfish interests above national interest.
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