Nigeria should split its proposed petroleum industry law into parts to avoid further delays to reforms that have been stuck in parliament for seven years, said the head of the national oil company.
“As long as we continue to want to pass a holistic PIB, it’s going to be a major challenge,” said Emmanuel Kachikwu, managing director of the state-owned Nigerian National Petroleum Corp., on Wednesday. PIB refers to the Petroleum Industry Bill, which aims to consolidate a slew of oil and gas legislation and help make Nigeria’s oil industry more transparent.
“Once you begin to break it up into critical aspects, you begin to make a faster run to passing the PIB," said Kachikwu. He was speaking at a Senate hearing to vet his suitability for a yet-to-be identified cabinet position he’s been nominated for by President Muhammadu Buhari.
The proposed petroleum law, first presented in parliament in 2008, has been held up largely by political wrangling and objections by international oil companies, which say the government is demanding too big an increase in its share of the revenue. The delays have caused “a level of uncertainty that no international investor wants to grapple with” and cost the country $15 billion a year in lost investments, said Kachikwu.
Despite being Africa’s largest oil producer, the country of about 180 million people relies on imports for more than 70 percent of its fuel needs. The state-owned processing plants operate at a fraction of their capacity because of poor maintenance and aging equipment.
Kachikwu said the reorganization of oil taxes should provide scope for giving producers incentives to invest when prices are low and for increasing the rates they pay as prices recover. The tax changes for the oil industry can be incorporated into the national tax code, he said.
“The times when oil prices are so low that nobody is willing to invest in your country, you may give some incentives,” he said. “At the time when they’re so high and people are making outrageous profits, you may increase your taxes.”
Of four state-owned oil refineries, two units at Port Harcourt with a combined capacity of 210,000 barrels a day are currently producing at 67 percent of their ability, Kachikwu said. The Warri refinery in the south is shut down, while Kaduna, a processing plant in the northern part of the country that also hasn’t been operating, will reopen on Thursday after pipeline repairs have been completed, he said.
“At the end of December, we would sit down and say which ones have shown the capacity to consistently perform at levels that make optimal sense. Those that are not, we’ll have to shut down and do complete maintenance,” Kachikwu said.
Buhari, who came to power in May, fired the board and management of the NNPC, which has been dogged by allegations of losing billions of dollars of revenue since the 1970s, as part of a wider crack down on corruption in the industry.