THE PETROLEUM

INDUSTRY BILL

Name: Siyanbola Oladayo Akinola

Matric Number: 180724
Department: Petroleum Engineering
Course: ECO 723

The Nigeria Petroleum Industry has no doubt contributed tremendously to the overall growth
of the Nigeria Economy. It is the mainstay of the Economy, pivoting other sectors and
accounting for about 90% of the countrys foreign exchange earnings. The country also
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derives about 41% of her Gross Domestic Product (GDP), and 88% of the Federal
Government (FG) collectable revenue.
Despite this impressive profile, however, the Nigeria oil and gass contribution to National
Gross Domestic Product (GDP) has continued to decline. According to Energy reports in
2008, the sector accounted for less than 38 of National Gross Domestic Product (GDP). This
has been as a result of direct consequence of the noticeable absence of indigenous
participants in the Industry, given that over 80% of the goods and services needed for projects
were imported from foreign countries.
Available statistics shows that, only 190 million dollars pot of the 4.7 billion dollars spent in
the Industry in 2002 remained in Nigeria, the rest were spent abroad on procurement of goods
and services for the Industry. More recent studies also shows that the Nigerian Government
invests as much as 10 billion dollars per annum in the sector. The Nigeria National Petroleum
Corporation (NNPC) asserts that while only 14% is invested in Nigeria content, 25% invested
in Indonesia, 50% in Norway and 70% in Malaysia and Brazil. This is sad development and
therefore calls for serious attention.
This among other issues necessitated the need for a bill to address this issue among others.
The idea of the Petroleum Industry Bill (PIB) began in 2007 following the recommendations
of a Presidential Committee setup to carry out oil and gas sector reforms in Nigeria. The
reforms were expected to form the nucleus of Nigerias aspiration to become one of the most
industrialized nations in the world by the year 2022. For the country to realize this tall dream,
it was envisaged that the major source of revenue to the Federation account (the oil and gas
sector) must be repositioned for greater efficiency, openness and competition built on
corporate governance as obtained in other resource rich nations.
The broad objectives of the PIB set up in the first section of the bill include:

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Enhance Exploration, Exploitation and Production: The PIB will eliminate funding
bottlenecks, increase investments in the sector and increase acreage available for

investment.
Increase domestic gas supplies: The gas sector in Nigeria holds out significant
economic potential to Nigeria. The reserve base is world class whilst demand is
growing rapidly. The bill also seeks to stop gas flaring or venting from December 31 st

2012.
Create a peaceful business environment: The Bill seeks to align the interest of the
host communities to those of the oil companies and the government. The petroleum
host communities fund which will be funded with 10% of the net profit of the oil
companies operating in the economic and social infrastructure of the host

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communities. This will help in reducing the rate of vandalism or unrest.

Fiscal Framework for increased revenue.
Create a commercially viable National Oil Company.
Deregulate petroleum product prices.
Create efficient regulatory entities.
Promote Nigeria Content.
Protect Health, Safety and Environment.
its objectives, the need for the Petroleum Industry Bill for the development of the

energy sector is important and discussed below.

The Petroleum sector is believed to have been stagnant for decades in a dynamic hydrocarbon
international marketplace that has built economies of United Arab Emirate, Saudi Arabia, and
Malaysia among others.
The PIB seeks to rejuvenate the sector by establishing a legal, fiscal and regulatory
framework for the petroleum industry in Nigeria. With this framework, the sector is bound to
see massive investment in it. The PIB also seeks to promote indigenous participation and
local content in the sector. This in turn will boost the economy and increase the countrys
GDP has seen in countries like Brazil that enacted local content legislation in 2003 and has
since has it GDP grew from 663.8 billion dollars in 2004 to 2.249 trillion dollars.
The Industry is experiencing vandalization of facilities and theft of crude oil. It is reported
that the country loses 400,000bbls in a day of crude oil to theft. This has resulted in the
decline production rate of crude oil and gas and thereby affecting the growth of the sector.
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With the PIB and its objectives of creating a peaceful environment, vandalization and theft
will be reduced to it minimum.
Although the PIB is a landmark opportunity to herald a new era of reform in the oil and gas
industry, different stakeholders have raised concerns about certain provisions of the most
provisions.
Fiscal provisions increase cost of doing business.
Retroactive reversal of contracts.
Duplication of roles
Deadline of gas flaring
Regulatory Independence.
However, the failure to pass the PIB which has scaled the 2 nd reading at the National
Assembly has and will lead to reduction of investments in the Nigeria Petroleum Industry.
With the rise of other attractive petroleum industries in Africa (Angola, Ghana e.t.c), Nigeria
must understand investment are fungible and will eventually flow to alternative countries.
Nigerians must therefore rally round to ensure that the National Assembly pass the bill into
law.

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