NNPC, Shell disagree over Petroleum Bill

2010-02-24
THE PUNCH Newspaper-Martin Ayankola and Obinna Ezeobi


The Nigerian National Petroleum Corporation and its key Joint Venture partner, Shell Petroleum Development Company of Nigeria, on Tuesday disagreed sharply over the Petroleum Industry Bill that seeks to generate more revenues from oil resources for the government.

Shell‘s outgoing Regional Executive Vice-President, Exploration and Production, Africa, Ms Ann Pickard, had warned that Nigeria’s oil production was shrinking and that the Petroleum Industry Bill would worsen the situation. But in a swift reaction, the NNPC said that the PIB would make the industry perform better, describing Shell‘s comments as misplaced and at variance with the realities of modern fiscal system.

Pickard, who was speaking in Abuja on “Nigeria‘s position as a key player in global oil and gas markets,” at the Nigeria Oil and Gas 2010 conference, said, ”Nigeria‘s oil and gas production has not only failed to grow, it has fallen every year since 2005.

“Its share of global oil production is shrinking with it. It has fallen over 30 per cent since 2005.”

She added, “Angola for example has eclipsed Nigeria in performance over the last decade. It has drilled more exploration wells than Nigeria every year since 1999 except one. In 2009 alone, the industry invested $8bn in Angolan deepwater; double the amount invested here. As a result, by 2020, Angolan offshore production is likely to at least double that of Nigeria.”

She said that the Nigerian oil industry had been performing below expectations because of the inability of government to translate all the positives in the industry into coherent policies and actions.

According to her, the Petroleum Industry Bill is a clear example of this.

“The simple, passionately stated priorities of government have been completely lost in a cumbersome document that lacks insight into the very basics of our industry. When I hear comments like ‘we won‘t fiscalise criminality‘ and ‘we are better of leaving oil in the ground,‘ I shudder. The PIB threatens to make the present bad situation worse. If passed in the form currently proposed, its mistakes will take years to correct,” Pickard said.

But the Group General Manager, Public Affairs, NNPC, Dr. Levi Ajuonuma, in a statement issued on Tuesday said, “What Shell wants us to do is to keep subsidising the production of gas, which they end up exporting to their home countries to guarantee their national energy security. Nigeria is still subsidising gas for export because the cost of producing gas is recovered from oil revenue. There is no country in the world that does not get value for its natural resources. But we are getting negative value from gas in Nigeria.”

According to the corporation, “The big question is if Nigerians are willing to forego subsidy from petroleum products, which they consume, why should Shell or any other international oil company operating in this country expect Nigeria to keep subsidising the gas that they export to other countries? That and many more abnormalities are what the PIB is seeking to correct.”

On the argument that the proposed bill would make the Nigerian Production Sharing Contract terms the harshest in the world, despite the so-called high risk environment, the NNPC remarked that such statement was contrary verifiable empirical evidence.

Ajuonuma said, “Currently, Nigeria has one of the lowest government takes in the world for PSC, which stands at 42 per cent; whereas the international average worldwide is 75 per cent. In Angola, it is 78 per cent; in Norway, it is 76 per cent; even Ghana, which has not even started, is proposing about 80 per cent. What is even being proposed under the PIB is 70 per cent, which is still less than what Angola is getting today. So how can that be harsh?

“For 10 years, we allowed them to operate the Liquefied Natural Gas in Bonny without paying a kobo as tax to the government because of a tax holiday; all to encourage investment. Now Nigeria wants to maximise its gas potential to the fullest.”

He stated that the PIB was seeking to ensure that Nigeria and Nigerians reaped the full benefits of their God- given resources.

He said, “Research shows that 80 per cent out of every one United States dollar invested in the oil industry goes offshore. That is why PIB is talking about local content. Under PIB, no oil company can import cooks and stewards from their country to work in Nigeria as expatriates.”

 

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