The Space for Change, a human rights and advocacy group, has called on the National Assembly to expunge the provision in the new Petroleum Industry Bill, which gives the President discretionary power to award licences and leases for oil exploration and mining in the country.
This was part of the group’s recommendations in its recent report entitled, ‘PIB: A Review of its Fiscal Competitiveness and Investment Friendliness,’ in its Policing the Policy series.
The report, which was made available to SUNDAY PUNCH, by the group’s Executive Director, Victoria Ibezim-Ohaeri, stated that granting the President such discretionary power was inconsistent with the PIB’s objective to promote transparency and competitiveness.
It stated, “The upstream licensing regime of the PIB is clear on the provisions regarding expected work commitments, validity periods, revocation and relinquishment terms, government participation, licence/lease award and assignment process and progression from exploration to production. A major source of potential conflict is the president’s discretionary power to award licences and leases.
“This is inconsistent with the PIB’s objective to promote transparency and competitiveness, especially when there are no stipulated guidelines or peculiar circumstances under which the president’s discretionary power will be exercised. “Perception is growing that such discretionary awards only serve to grease and sustain political patronage. That provision should accordingly, be expunged.”
The licences and leases include the Petroleum Exploration Licence, the Petroleum Prospecting Licence and the Petroleum Mining Lease.
PEL is awarded for the non-exclusive right to carry out petroleum exploration and is valid for three years; PPL, which is valid for five years for onshore and shallow water acreages and eight years for deepwater and frontier acreages, is awarded for the exclusive right to carry out petroleum exploration operations and to carry away and dispose of any crude, natural gas or bitumen discovered during prospecting operations.
PML gives a lessee the exclusive rights to carry out upstream petroleum operations, which include activities to; develop and produce petroleum deposits as well as restart or continue petroleum production and it is valid for at least 20 years.
The report also noted that the fiscal terms contained in the new PIB did not provide economic incentives for the development of gas and deepwater projects.
It however pointed out that incentives exist in areas such as production allowance to encourage further exploration in already producing areas; three-year tax holiday for gas projects aimed at the domestic market and capital allowance to encourage further investment.
The group also urged federal lawmakers to resolve some fiscal uncertainties in the PIB that constitute risks for petroleum investors.
“The omission of key items of the fiscal terms like fees/bonuses, royalties and the terms of PSCs is a potential source of fiscal uncertainty which can deter much needed investments to boost Nigeria’s declining petroleum reserves,” it stated.