elect Muhammadu Buhari plans to tax them could
be waiting a long time as he makes ending
corruption and reforming the opaque national oil
company, Nigeria National Petroleum
Corporation, NNPC, his most urgent sector
priorities, reports Reuters.
NNPC has been described in Nigeria as the shrine
of corruption.
Four party sources from Buhari's All Progressives
Congress (APC) told Reuters the issue of fiscal
terms, seen as crucial by the industry, will have to
wait on current thinking about oil and gas policies
for Africa's leading producer.
Crude output has stagnated close to 2 million
barrels per day over the past few years, owing
partly to underinvestment.
"We need to address the structural issues and
leave the fiscal for now," Senator Bukola Saraki,
whose APC party controls both houses of
parliament after a landslide win, told Reuters.
"A more transparent NNPC is needed with
reasonable accounting," he said.
General Muhammadu Buhari
Buhari owes his March 28 victory against
incumbent Goodluck Jonathan partly to a
perception that Jonathan allowed corruption to
get out of control — especially in the oil sector.
A string of multi-billion dollar oil corruption
scandals tainted the NNPC and other bodies that
handle energy.
By contrast, Buhari was seen as one of the few
Nigerian leaders to have cracked down on
corruption during his military rule in 1983-1985.
Many Nigerians hope he will again.
"The worry is that there's going to be a lot of time
wasted in witch-hunting…That could take a year in
which nothing else will happen," said a Nigerian
investment banker focused on upstream oil and
gas projects, who declined to be named.
APC leader Bola Tinubu, whose support was
instrumental in Buhari's victory and wields huge
influence, told Reuters a transitional committeee
would be set up.
"No way will we discuss that now," he said.
Jonathan's administration re-drafted a Petroleum
Industry Bill (PIB) in 2012 that had been in the
works for a decade.
The PIB was meant to change everything from
fiscal terms to overhauling the NNPC,
environmental rules and revenue sharing, but its
comprehensive nature caused disputes between
lawmakers.
Yet the main thing the oil companies were
worried about was tax. The bill proposes 20
percent tax on offshore projects and 50 percent
for onshore. Shell, Exxon and other majors had
all complained publicly that the terms are unfair,
given the risk associated with operating in
Nigeria.
Uncertainty over the fiscal terms of the bill have
been holding back billions of dollars of
investment, especially into capital-intensive
deepwater offshore, leading some to propose the
bill be broken up into several pieces debated
separately.
"It doesn't need to be an omnibus, you can take
things piecemeal," one APC source said.
Hopes that doing so would resolve the fiscal issue
quicker look slim, since the voting public are
much more concerned about cleaning up graft
than making oil majors happy.
The average Nigerian benefits little from the
country's huge energy resources while politicians
wear gold watches and build monster homes in
the capital Abuja.
Also, says Control Risks' Thomas Hansen, "the
cabinet needs to strategise first and fiscal terms
are likely to take longer and require discussions
with the (international oil companies)."
APC sources say the new administration will first
sack and replace the top management of the state
oil company. Then it will review its accounts to
restore credibility.
A bill will be drafted to break the NNPC into four
entities, as already prescribed in the latest PIB
draft. But it will also, crucially, remove the oil
minister from the NNPC's board of directors to
curb political interference, one APC source said.
Others said more generally that the minister's
current powers would be heavily trimmed.
Oil and gas will have separate companies for
upstream, with a third covering pipelines and
refining, and a fourth will be an inspectorate. It
could be submitted to parliament in the first
quarter of next year, one parliamentary APC
source said.
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