The recent assent into law of the Petroleum Industry Act (PIA) 2020 by President Muhammadu Buhari, has continued to generate fiery debates and reviews by interest groups and civic society groups on some of the controversial provisions of the new law.
The provisions that have attracted much interest and attention in the debates include those concerning the 30 percent allocation of the Nigerian National Petroleum Corporation (NNPC) annual profit in the Frontier Exploration Fund for the frontier basins development and the allocation of 3 percent of the oil industry annual operating cost for Host Community Development Fund.
Since the passage of the Petroleum Industry Bill (PIB) by the National Assembly, and the subsequent assent into law of the PIA by the President last week, concerns have been expressed by interest groups, particularly from the oil bearing communities, about the adequacy or otherwise of some the provisions.
For most commentators from the oil communities, the 3 percent allocation approved in the PIA is I adequate to take care the myriad of problems associated with the exploitation and production of oil in the Niger Delta region.
Others have however argued that the issue of inadequacy of the 3% allocation for host oil communities development was misconceived, as the full value of the annual revenue expected arrangement is yet to be determined.
Speaking on the issue shortly after the assent to the PIA, the Group Managing Director of the NNPC, Mele Kyari, faulted the argument against the allocation for the Host communities development fund.
He said 3% of the $16billion industry operations expenditure in year 2020 amounted to over $500million, which is bigger than the allocation for the Niger Delta Development Commission (NDDC) in the year’s Federal budget.
To further the debate, some representatives of civic society organizations shared their perspectives on the PIA in their exchanges on a discussion platform, “Let’s Talk Extractives”,. dedicated for discussions on extractive industries issues.
The Executive Director, Centre for Transparency Advocacy (CTA), FaithNwadishi, wondered what the exploration of the frontier basins has contributed to the Federation account, despite all the huge investments by the NNPC and its partners over the years.
Apparently agreeing with Nwadishi, the Executive Director, Spaces for Change, Victoria Ibezim-Ohaeri, said the knowledge of such contributions was important, since the return on investment would provide the basis for future projections of profit/success based on past trends and performance indicators.
“Starting with the frontier basins, can we have the data on past spending on the frontier basin development and their performance so that we can juxtapose that with actual finds/discoveries and anticipated returns?” Ibezim-Ohaeri asked.
In the absence such data, Ibezim-Ohaeri suggested that Nigeria should look at the examples and draw inspiration from other jurisdictions that have relegated constitutional prescriptions to advance their economic objectives without the supporting mathematical foundations.
Her view was that Nigeria was likely not to find any good example, because “irrational investments are paths avoided by wise nations.”
“Where else does only the state bear the burden of new oil finds? We need examples. Its important to provide evidence for definite assertions, because mass gullibility (industry literacy) brought Nigeria to this unfortunate bus stop,” she noted.
Also, she was of the opinion that the frontier exploration fund would amount stealing from the Federation Account and therefore renders its provision in the PIA unconstitutional, considering Section 162(1) of the constitution on the three tiers of government.
“In the final analysis, the frontier exploration funds actually shortchanges the federating units that benefit from 13 percent derivation, who also happen to be host oil communities,” she said.
For the Country Representative, Publish What You Pay Nigeria, Peter Ebule, the two intertwined issues appear to have been misconstrued, perhaps deliberately, in some quarters.
The value of the 30% allocation for frontier exploration fund and the value the 3% allocation for the oil host communities development fund, Ebule said, appear to be misconstrued, particularly on the perceived lopsided geographical application of the 30%.
He said even if the application of the 30% frontier exploration funds before the PIA was considered a ‘sinkhole investment’, because of the narrowed investment in the Southern Chad Basin and the likes, Ebule asked why the expansion of the geographical application could. not be influenced to make it more profitable?
“We can also lead the conversation on how to apply part of the funds towards expanding the country’s Energy Frontiers in sync with the present and evolving global energy transitions beyond hydrocarbons.
“Do we think it will be a wasteful venture to get the government invest part of the funds in sincerely developing the Anambra Basin, for instance, considering its proven gas reserve and the place of gas in the present and near-future global energy dynamics?”
On the other hand, Ebule wondered why the country cannot deliberately take an informed position to enlighten the public on the nonlinear values of the 30% and the 3% respectively?
He said if this was done, he was convinced the country would have reduced public misconception to a large extent.
“What the government does with the fund is up to them. But we just have to enlighten the open minded, and influence the government to apply resources profitably,” Ebule said.
For petroleum industry expert and analyst, Henry Adigun, his does not really share the concerns expressed by others on the frontier funds for a number of reasons.
First, Adigun said he was of the view that the PIB actually limits the amount to be spent for frontier exploration activities, contrary to what obtained before the new law.
“It (the expenditure on frontier exploration), has been going on forever. I see the PIB on that premise as limiting expenditure on it,” Adigun said.
Again, Adigun said he supports the drive to get as much oil from the ground as the country can get now and sold to earn revenue, in view of the count down to the end of the oil era.
On return on investment from the frontier exploration activities, Adigun said he was of the view whether it was deepwater oil concessions that cost over $2billion to develop, or many other incentives for gas development, the state has always borne the burden of new oil finds.
Besides, Adigun said he agrees with those holding the view that Nigeria needs to expand its oil reserves, considering that oil will not be forever.
“Soon, it (oil) will become a “dead” asset. But I am also realistic to note that we have few revenue earners beyond crude oil and that we need crude sales properly managed to find funds for the new economy.
Alluding to the anger fueled by a significant misconception on the management of the frontier exploration fund, which many misconstrue would just be given to Northern States, Adigun said the PIB introduced checks on profit oil and license regime revenues.
“That limits the amounts and as well makes it difficult for exploration without some certain criteria. The tax oil elements suggests some form of fiscal burden on the NNPC to first be profitable,” he said.
On the 3% allocation, Adigun said those criticizing the provision should focus their energy more to support implementation, saying it was better 3% than zero.
“I would rather focus on ensuring that the 3% gets to the people than angry that another part of the country “seemingly” gets more.
“There is too much politics around the PIA than it’s worth. We must celebrate gains. And there are several in the Act,” Adigun said.
For Victoria Ibezim-Ohaeri, the debates must ensure the people understood not only what 3% allocations mean and how it would be disbursed, but also the mechanism for disbursement and the power dynamics to address pressing concerns of stakeholders.
“Does the new law address the existing information and power asymmetry between companies and communities? Does it bridge the gaps that have fueled tension and hostilities for decades?” Ibezim-Ohaeri said.
The implementation of the PIA, she said, would worksl effectively if the underlying sources of tension and fears in the Niger Delta and frontier basins were nipped in the bud.
“There’s need to have the mathematics that support the return on investment after spending 30% of profit oil without any appropriation. Its not enough to hush dissenting voices without answering the questions they are asking and addressing their legitimate demands.
“This approach has been used for too long to hush dissent and that is why Nigeria is now blessed with a new law called HALF BREAD IS BETTER THAN NONE after two decades of advocacy.
“In the coming weeks, we will share the data showing what 3% represents in practice. We will compare what host communities are currently getting from GMOUs, FTOs, CSRs and community development assistance programmes and contrast with 3% of operating expenditure under the PIA,” she said.