The Minister of State for Petroleum Resources, Timipre Sylva has no capacity to supervise implementation of Petroleum Industry Act(PIA).
This was the position of Mr. Gbite Adeniji, Managing Partner ENR Advisory, during the management session at the 39th Nigerian Association of Petroleum Explorationists(NAPE) Annual International Conference and Exhibition, on Monday in Lagos, as well as other speakers present.
Mr. Adeniji, who spoke on the sub-topic: PIA: foundation ideas, intents and evolutionary history, disclosed that Sylva does not have technical capacity under the provision of the PIA to properly supervise the activities of Nigerian Upstream Regulatory Commission, the Nigerian Midstream and Downstream Authority.
He said, the Minister, under the present PIA regime, need specialists to work with him on a special basis given the dangers of transition.
He said further that a permanent team of smart and experience industry experts to work with him on the implementation of the PIA would bring about the desired change.
“The federal cabinet must stop being a contract- granting cabinet and become a policy making one. The tradition in the last fifteen years among the cabinet members has been focused on granting of contract to oil companies .
“The Federal Government is distracted with political preferences in award of contracts to cronies and friends.
“Energy transition portends doom that is likely to consume us if we continue to mismanage the transition period.
“The sector needs to be sensitive to strategic issues that could emanate from energy transition. Gas is critical to all sectors . Government needs to galvanise the potentials of leaders of the sectors, engage them in a manner that sees that the country is mobilised to plan for what needs to be done .
“The economic policy must be in consonance with energy policy . There must be a relationship between the energy commission, ministry and regulators to work together. There is a need for focus at the cabinet level to make sure that this sort of coordination happens.
“We need to broaden the economic framework especially in energy sector. The related sector must be working together. There must be multi-sectoral understanding about how we use oil to get other sectors working”.
He however charged the federal government to stop the wasteful petroleum subsidy, insisting that such funds could be expended into power sector to drive economic growth.
Temitope Samagbeyi, Tax Partner, Ernst and Young Consulting, while speaking on the sub-topic: “tax and royalties benefits and favourable fiscal terms embedded in the Petroleum Industry Act”, revealed that the scope of Nigerian Petroleum Tax(NPT) in the PIA, has no incentive to attract foreign direct investment into the country’s oil and gas sector.
He said, “The events in the Nigerian oil and gas industry have called to question the appropriateness of the Nigerian petroleum tax incentives in attracting foreign direct investments into the nation’s oil and gas sector.
According to him, the PIA replaces the Investment Tax Allowance (ITA) and Investment Tax Credit (ITC) with a production allowance per crude oil production.
He said, “The PIA does not make provision for Nigerian Hydro Carbon Tax (NHT) rate for deep offshore operations. Rather it improved incentives for investments in deep offshore including lower tax and royalty rates.
“Royalty across the industry terrains will range from 5% to 15% in addition to royalty based on price up to a maximum of 10%. According to PIA, hydrocarbon tax rate is 15% to 30% for onshore and shallow water areas and companies Income tax(CIT) rate IS 30%.
“Introduction of certain fiscal incentives as a way to prioritize midstream gas activities. Specifically Gas pipeline companies can benefit from a tax free period of 5 years in addition to the current Gas utilization incentives under CIT allowance.
Professor Elijah Ayolabi, Vice Chancellor, Mountaintop University and Professor of Applied Geophysics, stated that Nigerian energy policy must be formulated in such a way that it can drive the utilisation of petroleum products in a manner that would give energy access to every citizen and generate necessary income to run the economy.
He said, “It is dangerous for Nigeria to depend on revenue from other country. When we do that we put ourselves under pressure from outside, especially when taking decisions, formulating ideas and policies affecting our oil and gas industry.
“This attitude will affect our economy and make us susceptible to global community. In the next ten to twenty years, energy story is not going to be the same because the pressure would be on us to abandon our oil and gas industry.
“The pressure is already on major international oil companies(IOCs) which is why they are pulling out, because nobody is investing in the oil and gas.Even in the international market investors are not willing to put resources down into the oil and gas.
“The new thinking is on Information and Technology (IT), this is already happening because some people saw the future and were able to analyse and research global phenomenon. These countries are today leading in terms of economy .
He therefore challenged the federal government to collaborate with stakeholders to develop the country’s oil and gas resources and limit pressure from the global community about what we should be doing with our resources.