FISCAL MANAGEMENT IN THE UPSTREAM OIL AND GAS ECONOMY WITH AN OVERVIEW OF PETROLEUM INDUSTRY BILL (PIB) TRAINING/WORKSHOP:
ORGANIZED BY TONCIA ENERGY CONSULTING AND PROFESSIONAL SERVICES LIMITED
FOR MEMBERS OF THE COMMITTEE ON PETROLEUM RESOURCES (UPSTREAM), HOUSE OF REPRESENTATIVES, NATIONAL ASSEMBLY UNDER THE AUSPICES OF PETROLEUM TECHNOLOGY DEVELOPMENT FUND, PTDF, IN DUBAL – UAE
MARCH 14 – 18, 2017.
COMMUNIQUE
INTRODUCTION
In furtherance of its institutional mandate and policy, the PTDF facilitated a policy review and capacity development training/workshop which was organized by Toncia Energy Consulting and Professional Services Limited for Members of the Committee on Petroleum Resources (Upstream), House of Representatives, National Assembly, from March 14 to March 18, 2017, in Dubai, United Arab Emirate. The theme of the training/workshop was Fiscal Management in the Upstream Oil and Gas Economy with an Overview of the Petroleum Industry (PIB). The objective of the training/workshop is to strengthen the knowledge base and capacity of participants in the petroleum industry to enable them contribute effectively in the process of the passage of the Petroleum Industry Bill (PIB).
Participants benefited from numerous presentations, overviews, technical sessions and exchange of ideas on the petroleum industry and their pitfalls and constraints vis – a – vis international best standards and some of the major provisions of the Petroleum Industry Bill (PIB) which is presently before the National Assembly.
OBSERVATIONS
The major observations of the training/workshop on the petroleum industry are as follows:
1. That the operating environments of oil production in Nigeria are characterized by both onshore production (land and swamp) and offshore production (shallow and deep);
2. That, in general, oil production fields vary from marginal, giant and supergiant, but Nigeria’s fields are characterized mainly by marginal (small) fields and a few giant fields, but without any supergiant field;
3. That the key regulators in the Nigerian petroleum industry are: FIRS, SIRS, NNPC, DPR, NCS, NCDMB, NDDC and NIMASA;
4. That the current major operational problems in the industry concerns are acceptable metering accuracy, operating conditions, and meter type/maintenance/calibration, metering points, effective monitoring, contractual agreements between parties, and Government regulations and taxations.
5. Based on the NEITI (2013) report, it has been identified that there are concerns with
the administration of royalty payments and reporting in the Nigerian oil and gas industry. The key issues relate to (i) poor metering of production, and (ii) Effectiveness of monitoring system.
6. Gas flaring
RECOMMENDATIONS
In the light of the foregoing, the training/workshop agreed on the following recommendations:
(a) Offshore concessions
Recommendation:
That, in view of the prevailing state of technology, current royalty terms should be revised to include royalty payments up to water depths of 3000 m;
(b) Restructuring of NNPC
Recommendation:
That the NNPC should be restructured possibly on the model of LNG, in view of the urgent need to improve its efficiency and effectiveness;
(c) Administration of royalty and bonuses
Recommendation:
That payment of royalty should be based on fiscalised production volumes at the wellhead or/and flow station;
That selling price of Nigerian crude to always reflect the quality/grade of the oil;
That using a centrally advised official selling price for the sales of all Nigerian crudes be considered;
That improving the current two-term payment of bonus to a five-term payment at rates tied to the reserves of the asset be considered;
That improving the current monitoring system of the oil and gas industry be considered;
That revising the existing metering guidelines and system (e.g. metering points) as per the attached proposals and international best practices for both onshore and offshore operations be considered;
(d) Gas flaring
Recommendation:
That the existing mechanisms should be strengthened in favor of monetizing associated-gas as against paying penalties;
(e) Informing NASS Leadership
Recommendation:
That appropriate awareness should be created for the leadership of the National Assembly on key issues concerning the petroleum industry, the draft PIB and the recommendations which emanated from this training/workshop;
(f) NASS oversight
Recommendation:
That the National Assembly should vigorously strengthen its oversight mechanisms on all aspects of the petroleum industry in view of the current overriding impact of the industry on the national economy;
Conclusion/Appreciation
The need and appropriateness of the training/workshop cannot be overemphasized in view of the fact that the petroleum industry plays pivotal role in the Nigerian economy. The PIB is designed to strengthen the industry and tackle its current constraints as analyzed in the training/workshop. By and large, the training/workshop has significantly improved the capacity of the participants to participate in the legislative process for the passage of the PIB.
The training/workshop expressed profound appreciation to the PTDF for appreciating the importance of PIB and facilitating the training/workshop. The training/workshop also appreciated the organizer, Toncia Energy Consulting and Professional Services Limited for its excellent organizational ability. Finally, the training/workshop also thanked the Hon. Speaker for his usual understanding, and particularly for releasing Hon. Members of the committee on Petroleum Resource (upstream) to travel out of the country for the training/workshop despite pressing need for attention of Members at home while considering national budget is ongoing.