The federal government has reiterated commitment to ensuring the quick passage of the new petroleum industry bill (PIB), stressing that it will provide a framework for increased economic activities across every sector of the nation’s economy.
The minister of state for Petroleum Resources, Chief Timipre Sylvia, disclosed this while addressing participants during the Nigerian Association of Petroleum Explorationists’ August 2020 Webinar Series with the theme “Fiscal Regime Design, Government Revenues & Investors’ Interest In Nigeria Oil & Gas Sector,” on Thursday.
Chief Sylvia, who was the guest speaker at the event, stated that the government is not unaware that the COVID-19 pandemic has, indeed, taken its toll on the global Oil & Gas Industry, with cascading impacts to other sectors.
In the face of the new economic reality, the minister said: “The Petroleum Industry Bill (PIB) will provide a framework for increased petroleum industry activities in terms of developing gas for the domestic market and increasing oil production under competitive terms, and support the goal of a stronger non-oil economy for the benefit of all Nigerians.
“Consequently, we are developing strategic survival measures. We have also designed fiscal terms in the proposed PIB based on conservative oil prices outlook.”
He added that the federal government is committed to its diversification plan to non-oil economy, stressing that it has become a national imperative, hence the need to create the enabling environment which can only be facilitated by the enactment of the PIB.
On the uncertainties facing the global oil and gas industry in general and Nigeria in particular, due to the COVID-19 pandemic as well as calls for the elimination of fossil fuels as source of energy backed by the Paris Agreement on climate change in 2015, the minister said there is an urgent need take proactive actions.
He described the new challenges as a wake-up call for Nigeria to increase efforts to reduce her dependence on oil.
“We must re-jig our petroleum industry and energy framework in order to chart a new course,” he stated.
Chief Sylvia expressed optimism that the new PIB been proposed will the framework for the rejuvenation of the industry.
“In order to secure the future of the petroleum industry in Nigeria fiscal and other terms must be based on a more conservative economic outlook.
“A framework must be created for the Nigerian Petroleum Industry to grow and invest in additional petroleum production even under difficult economic conditions.”
Expatiating, he said, “This conservative economic outlook is based on a long-term oil price of $50 per barrel in constant dollar terms. It is assumed that on a world-wide basis, peak oil production will occur by 2030 and peak gas production by 2040. By 2050 the world oil production will be considerably less than today.”
Speaking of initiatives designed to attract investors, the minister said, “In cognisance of the foregoing, we are not unmindful that the industry players are of the view that the current level of taxation on onshore and shallow water operations is excessive and therefore the proposed Petroleum Industry Bill should include a significant lowering of these taxes for new investments and for existing operations.
“Also, a lowering of royalties is contemplated, particularly for low levels of production per field.
“It is therefore our hope that the future is more positive and attractive for the Nigerian Petroleum Industry.”
On the role of the PIB in alleviating the situation, Sylvia stated that the government will need maximum fiscal environment to deal with the COVID-19 crisis.
“For this reason, we are proposing grand fathering in the new PIB. This, I believe will preserve current government take while also guaranteeing investors returns. It also guarantees that Investors can continue with existing operations while earning favourable returns.
The minister explained that the proposed PIB framework will be based on core principles of clarity, dynamism, neutrality, open access and fiscal rules of general application. Adding that at the same time, investments in new acreages will be encouraged with attractive competitive terms in order to achieve an economic growth.
“Investors in existing assets will be able to sign conversion contracts to obtain better terms for existing production and to be able to explore and produce part of the existing blocks under the new block terms.
“Investors that also want to continue operating under current fiscal terms can elect to do so.
“Host communities will be adequately covered to foster sustainable prosperity within the communities, provide direct social and economic benefits from Petroleum Operations to the host communities,” he said.