Follow Us on Google
From Uche Usim, Abuja
Oil and gas analysts have described the recently signed Petroleum Industry Act (PIA) as one that has some good offerings, but cannot address the energy transition challenges that have made it harder to fund fossil fuel projects globally.
The analysts, whose views are contained in Organisation of Petroleum Exporting Countries’ (OPEC) selected oil market related news and statements from August 27-30, further explained that the PIA cannot protect the new regulatory institutions from a predatory elite that continually interferes in government business and treats the national oil company as a patronage tool.
Wood Mackenzie, Research Director, Gail Anderson, said: “The Act provides for a new entity, Nigerian National Petroleum Corporation (NNPC) Limited to be created within six months but does not specifically provide for privatisation. A clause calling for the sale of 30 per cent of NNPC was removed in 2020. NNPC Limited will be able to draw on numerous sources of finance, and vested interests will likely continue to fuel the expansion that has seen NNPC take control of federation assets without remuneration.
“The legislation provides few signs that the new Nigerian Upstream Regulatory Commission or the Nigerian Midstream and Downstream Petroleum Regulatory Authority will operate independently of the government. “At the end of the day, both regulators will do what they are told. The Act is also vague on what assets and liabilities will be transferred to the new Nigerian National Petroleum Corporation (NNPC) Limited, leaving International Oil Companies (IOCs) in a difficult position as they are trying to divest equity in the joint ventures they operate with NNPC.
“If the liabilities ended up shifting towards the government, they would have a lot less certainty as to how and when those liabilities would be paid back”.
He added that the timetable for assigning the assets and liabilities clashes with elections scheduled for early 2023, which suggest the complicated issues may not get the attention they need.
“NNPC’s arrears and “funding shortfalls” with all joint ventures date back long before 2016 and are estimated to tally $12 billion. The Act requires Nigeria’s petroleum and finance ministers to determine what should be transferred within 18 months and the rest will go to the government, which will develop a framework for payment. If the ministers and the attorney general don’t decide in good time, the IOCs could end up with a different set of ministers to deal with that will drag the process out for longer.”
