Bill Aims to Improve the Health of Nigeria’s Oil and Gas Industry

Nigeria is Africa’s most populous country and has enough natural resource and human potential to place it among the world’s top 20 economies by 2020. Much of its economic potential is thanks to its thriving oil and gas sector, which accounts for 40 percent of its GDP. Despite these vast quantities of resource wealth, some 70 percent of Nigerians—or nearly 122 million people—continue to live off less than $1.25 per day.

This poverty amidst plenty is due to many factors, including poor governance, corruption, and impunity, but also lack of capacity and transparency in the management of the country’s oil and gas sector. While Nigeria’s government has tried to reform this sector through the passage of a Petroleum Industry Bill, the bill has been sitting at the National Assembly for the last six years. Meanwhile, billions of dollars in oil and gas revenues are going unaccounted for every year, pushing the lives of millions of Nigerians further into poverty.

What is the Petroleum Industry Bill?

The Petroleum Industry Bill, or PIB, seeks to address the many structural, operational, regulatory, and investment challenges facing Nigeria’s oil and gas industry. More specifically, this includes determining the following:

• who the key actors are and how they are involved;
• the extent to which there is compliance with oil and gas regulations; and
• the ability of various agencies to even gain access to this market in the first place.

The PIB was first conceived by the Nigerian government in 2000 and introduced to the National Assembly eight years later. There have been different versions of the PIB generated over the years, largely due to varying interests among multinationals, local oil companies, civil society groups, and the government. Each seeks to influence the bill’s text in their own ways. The latest version was sent to the Assembly in 2012.

Why has this bill been sitting at the National Assembly?

The bill is undergoing various committee reviews at the level of National Assembly, House of Representatives, and Senate following a series of public hearings on the PIB in 2013. There are many reasons for the delay in passing the bill, key among them the North-South politics of the country. Nigeria faces a deep geopolitical divide between both regions, which often stalls progress with key legislation and policies in the country.

In the case of the PIB, many Southerners believe legislators from the North will not support the passage of the bill because it would bring additional benefit to the country’s southern Niger Delta region. This area is the backbone of Nigeria’s oil and gas industry and holds some of the world’s richest oil deposits. (Passing the PIB would directly benefit these residents through the proposed Petroleum Host Communities Fund, which is essentially a version of the PIB focused on promoting the economic and social infrastructure of communities within the largely Southern petroleum producing areas.)

What is at stake?

The economic implications in delaying disposition of the PIB are significant, though exact financial figures remain sparse.  What is certain is that several billion dollars in planned investments in offshore deep-water projects by international oil companies’ investments is being held back while the PIB remains pending. This delay by prospective investors further contributes to the poor performance of the country’s oil and gas sector.

What will change if the PIB is passed?

The PIB seeks to guarantee Nigeria better revenue from oil sales and a more accountable and transparent use of the revenue and agreements with international oil companies, such as Shell, Chevron, and ExxonMobil and Agip. This would impact the provision of much-needed public services and programs for the Nigerian people.

It would also help establish the Nigerian Gas Company (NGC) as one of the new entities derived from the unbundled Nigerian National Petroleum Corporation—the institution that oversees the bulk of the country’s oil and gas sector management. By making the NGC a separate and partially privatized entity, it would accelerate gas supply to the economy’s power and industrial sectors and help improve domestic gas supplies for local energy consumption.

This would result in enhanced domestic gas use, support electricity infrastructure, improve electricity supplies, and cut down dependence on energy from biomass. Nigeria relies heavily on wood as a major biomass source, which is having negative implications for forest sustainability and environmental impact.

What is the Open Society Initiative for West Africa doing to help?

OSIWA has engaged the PIB process through projects with several partners, namely Spaces for Change and the African Center for Leadership, Strategy and Development. These groups have mobilized local communities through rallies in the Niger Delta to better understand the provisions of the bill.

We also commissioned the report Energy Policy and the Petroleum Industry Bill: A Comparative Study of the Energy Policy, the Oil and Gas Policy and the Petroleum industry Bill 2012, which scrutinizes the PIB 2012 and its relationship with Nigeria’s energy policy and the oil and gas policy. This was done to determine its potential impact on energy development in the country. A high panel discussion was held in December 2013, which brought together a range of stakeholders (civil society groups, government agencies, oil and gas experts, the Nigerian Extractive Industries Transparency Initiative, and the media) to deliberate on the research findings and to enhance efforts to ensure the passage of an effective PIB.