October 10 2009
The Producers Forum – upstream sector of
the Petroleum and Natural Gas Senior
Staff Association of Nigeria (PENGASSAN)
held its quarterly meeting on the
10/10/09 in Lagos and the issue of the
PIB was discussed extensively. The
following resolutions were reached on
the PIB.
1.
That the National Assembly should
take into cognizance the concerns and
interest expressed by all the
Stakeholders in the Oil and Gas Industry
before passing the bill into law.
2.
No Nigerian (whether working in the NNPC
Group or in the International Oil
Company)shall lose his/her job as a
result of this bill and all existing
pension plans must be maintained.
3.
The main stray of the Nigeria
economy is the oil and gas business and
this was over 50 years ago.
The forum
resolved that Oil workers would down
tools and resist a bill that will
jeopardize the Oil and Gas Industry just
like the Nigeria Railways line and
Nigeria Port Authority etc.
4.
All Nigeria employees of equity
holding companies in the JVs and PSCs
shall be deemed to be employees of the
new IJV with effect from the date of
the incorporation of the IJV on terms
and condition no less favorable than
those they enjoyed prior to
incorporation.
5.
The new Integrated Joint Venture
(IJV) Companies should be allowed full
autonomy as exploration and production
of oil and gas companies operating in
the country. The presence of government
controlling major shares would be
reduced to usual government
establishment where internal policies in
appointment of board members and
adhering to international code of
operation would be compromised.
6.
That government should be
involved in the exploration and
production of oil and gas business
rather than integrating with the Joint
Venture.
Signed:
Comrade Victor Olley
Comrade Peter O. Akpenka
Forum Chairman
Forum Secretary
Below is a
copy of the Forum's position on issues
addressed to the senate Committee on
Upstream Petroleum Resources
August 30, 2009
Distinguished Senator Lee Meaba
Chairman, Senate Committee on Upstream
Petroleum Resources
National Assembly
Complex
Three Arms Zone
P.M.B 141
Abuja,
Nigeria
The Producers Forum is one of the
four sectors that make up PENGASSAN. The
other sectors include Marketing,
Services, and NNPC/Government Agencies.
This Forum consist of Nigerian senior
staff in the upstream sector of the oil
industry, with membership drawn from all
the JV operators i.e. Shell Petroleum
Development Company, Exxon Mobil
affiliates Esso Exploration and Mobil
Producing Nigeria Unlimited, Nigeria
Agip Oil Company, Total, Addax, Conoco
Phillips, and Chevron all of which are
member branches of the Petroleum and
Natural Gas Senior Staff Association of
Nigeria, PENGASSAN.
Whereas PENGASSAN has earlier presented
her position at the public hearing which
we are in agreement with, we seek to
further lend voice to the PENGGASAN
submission at the public hearing and
enrich the scope and breadth of the
public debate with the goal of making
the bill not only a change but a value
adding one.
The Producers’ Forum is of the strong
conviction that what the nation needs
most is the release of the abundant
energy of the citizenry, taking maximum
advantage of the sophistication, acumen
and ingenuity of our people in the
running of businesses, while Government
concentrate on regulation and
formulation of policies and creating
favourable climate for economic growth.
Government participation in business has
neither favoured growth nor bolstered
prosperity. This is exemplified not only
by the number of collapsed public
corporations, but the monumental waste
that went with it. Our most recent
history has shown that about the only
thriving businesses are those managed by
private initiatives. One of the essences
of this bill is to avoid this pitfall by
promoting transparency and reducing
political influence/interference in
business. The Producers Forum therefore
desires a participatory change that will
bring optimum benefit to Nigerians and
also sustain the rate of investment and
growth in the industry. This will lead
to expansion not only in the upstream
but also in the downstream sector, which
has not experienced the desired
expansion. This is the only way Nigeria
will avoid the colossal waste of the
past and ensure that we derive maximum
value for our resources and effort.
Being the people that have borne the
brunt of all the community agitations
and youth restiveness of so many years,
we are concerned that the PIB, which
offers the opportunity of bringing these
agitations to end, was very silent on
this matter that can easily decide the
future of the whole nation.
As practitioners and people with the
foremost experience of the upstream
sector operations in the country, this
Forum as a matter of obligation hereby
list the following concerns and
recommendations which we believe if
considered, will make the bill more
robust and usher in an era of
sustainable prosperity for the nation.
INCORPORATED JOINT VENTURES
Government antecedents in business
leaves much to be desired, and as such
creates much concern and suspicion when
these apparent attempt at a legislated
business marriage/merger is contemplated
with all the possible scenarios of
politics interfering with business. Over
time, Government has not been able to
draw the line between politics and
business decisions. It is for this
reason that many lucrative companies
which government had controlling shares
ran aground. Memories of Government
failure in institutions or commercial
oriented corporations such as the
Nigeria Airways, NAFCON, NITEL, Nigeria
Railway Corporation, Nigeria Port
Authority etc to mention but a few, give
no guarantees of success but failures,
underscoring the fact that government
has never been good at business
management. The IJV provisions also
contradict one of the Federal Government
objectives in the bill, which
is to foster an enabling business
environment with minimum political
influence. Political influence as
represented by the overwhelming
influence of the NPC in the proposed IJV
boards through Government appointments
will impair investor confidence and will
also discourage international finance
corporations (IFCs) from lending money
to the IJV, thereby stalling expansion
projects and sustenance of existing
capacity.
Recommendation
In view of the above, the Forum
recommends that the NNPC/NPC divest it
own equity to other stake holders, e.g.
Nigerian workers, host communities and
the Nigerian public, thereby bringing
the equity holding ratio to 39% for NPC,
20% to other Nigerian stake holders and
41% to the IOCs or foreign technical
partners. These also will help put the
Nigerian private sector in the right
frame for eventually taking over the
government share; while government
influence shall be limited to effective
regulation and policy making for the
industry. This is how to attain both in
the short term and long term government
objective of minimum influence.
DOWNSTREAM DEVELOPMENT AND LOCAL
CAPACITY
PENGASSAN conditional approval of a
deregulated petroleum pricing regime is
hinged on the premise that the bill will
engender increased local refining
capacities and businesses in this sector
leading to an affordable and stable
price for the Nigerian populace, but of
concern again to Producers Forum is that
the bill is lacking in specific
provisions cum targets for this very
important sector of the industry. The
PRODUCERS FORUM is of the view that the
success of the bill lies heavily in the
measurable achievements in
this sector of the industry; any failure
of this sector is tantamount to the
failure of the entire objective of the
bill.
Recommendation
The Forum
recommends
that specific mandatory crude refining
and gas processing targets be set for
the IJV, and the separate equity holding
companies. The Forum hereby recommends
that
each IOC members of the IJV must refine
a minimum of 50% of their total crude
oil output in the first 5yrs after the
enactment of the bill and after ten
years not less than 70% of all
processing must be done in-country. In
addition the house should review
enabling laws required for the setting
up of business in the downstream sector
to ease the start-up of industries in
this sector and make specific provisions
for tax holidays and or incentives to
encourage private investment in refining
and other downstream businesses.
CAPACITY
BUILDING
IN THE UPSTREAM SECTOR
PRODUCERS FORUM is concerned that no
mention is made in the bill for any
capacity building institution for the
industry either for low, middle or
high-level knowledge capacity.
Institutions like PTI and the new
Petroleum University were curiously
omitted. Omission of these institutions
defeats the overall objectives of the
Federal Government of Nigeria for
developing Nigerian human technical
capacity.
Recommendations
1.
Institutions under the new bill should
have the resemblance of Robert Gordon
University, in Aberdeen, in terms of
academic content and standards to
provide all shades of manpower levels in
the industry. This will to a very large
extent, reduce the flight of the
much-needed capital for our development.
2.
The PIB should have provisions that
allocate certain percentage of human
capital development/training of the PTDF
to host communities of IJVs who suffer
the consequences of aggressive oil and
gas exploitation in her annual training
program in a conscious effort to
re-orient the people to different means
of livelihood. The bill should provide
for the publication of the list of PTDF
beneficiaries showing details of state
and local government of origins of the
beneficiaries of such scholarship for
the sake of transparency.
3. The Bill should also domicile
technical data derived from all
operations within country to check
capital flight, promote research and
increase local technical competence. The
bill should make it mandatory for most
technical works to be done in country
with a phased time frame towards
achieving the NCD objectives.
MULTIPLE LICENSING & ACREAGE WITHDRAWALS
The PRODUCERS FORUM is concerned about
the continuation of gas flaring in the
oil industry and the associated waste in
resources and the colossal environmental
impact associated with it. The Forum is
also concerned about the PIB provisions
to stem the tide through
separate/multiple oil and gas licenses
and leases. These provisions raise
significant issues where different
operators exploit different hydrocarbons
(oil or gas) on the same lease, the
operational risks; the Safety, Health
and Environmental hazards/conflicts
resulting from potentially misaligned
operational strategies could be
unmanageable.
Recommendation
The Forum recommends
that preference be given first to the
company that has the prospecting license
in the award of the mining license.
Employment and WELFARE (Workers
as Stakeholders)
The
PRODUCERS FORUM is concerned that
workers are not
among the stakeholders recognised
in the bill; the PRODUCERS FORUM
strongly recommends that the bill should
specifically recognise workers as
stakeholders in the industry.
The Forum is also
concerned that the bill is silent on the
fate or status of Nigerian workers
currently employed by the IOCs in the
proposed IJVs. The PRODUCERS FORUM
however commends the provisions in the
bill, which guarantee that the existing
conditions of service of the former NNPC
staff will be carried into the IJV.
Recommendation
The Forum recommends
that a clause be inserted in the
Incorporated Joint Venture to
specifically mention that all
Nigerian employees of equity holding
companies in the JVs and PSCs shall be
deemed to be employees of the new IJV
with effect from the date of the
incorporation of the IJV on terms and
conditions no less favorable than those
they enjoyed prior to incorporation, and
that no Nigerian shall lose his/her job
as a result of this bill.
Also all existing pension plans must be
maintained.
CONTRACT STAFFING AND AGENCY WORKERS
The
bill is lacking in provisions for the
system of contract staffing in the
industry, which currently does not
protect the rights of Nigerians to
“equal pay for equal work” as applicable
to employees of the equity holding
companies or the proposed IJV. The
current practice violates the human
right
Laws
and contravenes the International Labour
Organization (ILO) convention which
Nigeria is a signatory to. The nation
currently looses tax revenue derivable
from this group of workers whose
compensation does not reflect the actual
value of work that they provide.
Recommendation
The Forum recommends
that the human right provision for
equity in compensation be included to
discourage the deliberate
miss-classification of regular position
as contract positions. The bill must
provide for “equal pay for equal work
of same value” right from the first
day of engagement, irrespective of the
duration/nature of the employment
contract. All workers in the industry
must be equally compensated for work
done.
Expatriate Quota and Local manpower
Training
The Forum is concerned about the absence
of specific provisions on expatriate
quota and local manpower training. The
issue of unfair Expatriate quota
application in this industry is not the
case of lack of sufficient extant laws
to protect local manpower, but simply
lack of sufficient political will to
implement the law. By existing laws, an
expatriate should be an expert with
skills that local manpower does not
posses, such expatriates are supposed to
be engaged in the short term basis to
provide such skills while serving as
mentor/trainer to local manpower under
studies seconded for a defined time
frame. Unfortunately, Government looked
the other way while this country was
exploited by all manner of unqualified
expatriate staff deployed to fleece this
country, with resultant abuse of this
provision with its attendant impact on
employment and capital flight.
No country in the world leaves its
borders to all manner of foreigners
while her citizens wallow in utter
joblessness and penury. This Forum
expected that the PIB would find ways to
ensure that the right experts are
deployed and that the process is made
more transparent.
Recommendations
1. The Forum recommends that all request
for expatriate staff must meet the
primary objectives of the need for
foreign expert staff, and as such all
experts must meet the local professional
body expectations who will verify the
expertise level of the expatriate staff
locally and through their foreign
professional body affiliates. As such
professional bodies such as Nigerian
Society of Engineers, Society of
Petroleum Engineers etc must certify
these expatriate as experts indeed
before they are offered emigrant status
as is done in other countries.
2. The Forum also recommends that a
clause should be added to give the DG of
the National Petroleum Directorate in
concert with the associated professional
body powers to approve ANY expatriate
expert to be employed to work in the
downstream, mid stream and upstream
sector before a concurrence from the
Ministry of Internal
Affairs/Immigrations or the relevant
government agency can be sort.
There is also an urgent need to make
data on expatriates in the industry
mandatorily accessible and transparent.
MULTIPLE TAXATION:
The new bill we believe is also intended
to increase the amount of investment in
the industry, especially in the upstream
sector. However, the provisions in the
Bill as it currently stands run counter
to this ideal especially in the gas
sector which is an emerging industry.
The multiple taxation of the IJV
companies is certainly a discouragement
to doing business. The current
provisions provide little margin on
returns on investment, and look
Certain to kill the business through
dearth and withdrawal of investment.
This will impact on our members through
job losses, as a result of reduced
levels of economic returns.
The argument that the proposed level of
taxation is comparable to what obtains
elsewhere seem to fly in the face of
logic; such argument does not factor in
our peculiar business
Climate, the associated risks to
investments as well as the frequent
policy changes. All of these add up to
make our country unattractive. To be
competitive and make our land haven for
true investors, we need to make
conscious efforts to make it more
lucrative to counter balance our
inherent peculiarities. The PIB as
proposed will only benefit this country
on the short term; we may lose to our
competitors on the long run.
Recommendation
The Forum recommends
that the National Assembly should
therefore review the sections that deal
with taxation and the overall fiscal
framework and ensure it is balanced to
encourage domestic and foreign
investment, in a bid to secure our
economic future in this industry and as
a nation. Our tax regimes should be
competitive with other nations with
considerations for our peculiar
operational conditions.
COMMUNITY PARTICIPATION AND OWNERSHIP.
The bill lacks definite provisions for
Community participation and ownership in
the business. That lessons learnt from
the recent insecurity in the Niger Delta
should not be ignored in this season of
amnesty and seeming peace. One of the
lessons of the Niger Delta crisis is
that host communities don’t see
themselves as having any stake in the
industry. Therefore the bill apart from
the recognition and equity participation
of host and impacted communities in the
bill, a certain percentage of workforce
should also be reserved for the
host/impacted communities in order to
buy their genuine participation, stake
and ownership. The bill should
specifically recommend that the MOUs of
the proposed IJVs should include
communities in the owner structures
similar to the Eleme/Indorama
Petrochemical ownership model and the
Solid mineral Act both of which have
specific and defined provisions for
community participation.
Recommendation
The Forum recommends
that the bill should specifically state
that the MOU(s) of the proposed IJVs
should include communities in the owner
structures similar to the Eleme/Indorama
Petrochemical ownership model and the
Solid mineral act both of which have
specific and defined provisions for
community participation.
The Legal Environment for the PIB
The Success of the PIB shall be measured
largely by the increased industrial
activity in the oil and gas downstream
processing sector, followed by the
sustained or increased capacity in the
upstream sector. However, this bill when
passed, will like previous bills, depend
on other supporting laws to succeed. One
of such bills that ought to come into
force before this transition is the
Freedom of Information bill (FOI), which
unfortunately may end up attaining the
record of the longest, or most delayed
bill in the National Assembly. A
transparent environment backed by law
will ensure that processes and
businesses are not only transparent but
that information about the integrity of
the process shall be made accessible.
This will further promote corporate and
individual trust among stakeholders and
attract/encourage potential investors to
the industry.
Access to information must not be
limited to a few institutions especially
in a deregulated economy, which Nigeria
is gradually becoming. Despite the
acclaimed success in the Nigerian
banking sector, even Fitch is of the
view that “transparency is weak in
Nigeria…. local GAAP do not require the
same levels of detailed disclosures as
IFRS...” (From the Sunday Vanguard
August 16, 2009, p 5.) Put this side
by side with the recent scandals
resulting from allegations of missing
funds totalling millions of dollars in
the oil sector, the passage of the FOI
bill is all the more a must do. Do we
need an anti-trust law? The Producers
forum believes strongly that the nation
also needs an anti trust law now;
perhaps one fashioned after the USA
model.
CONCLUSION
The Producers Forum supports the bill to
the extent that it will increase the
business capacity in the sector, with
steady but gradual divestment of
government and increased ownership by
Nigerians with attendant increased
employment and revenue to government and
Nigerians, in an atmosphere of
transparency, participation by
representation and defined ownership
status of host communities so that
beyond the amnesty, peace and
comprehensive development both physical
and human will continue in an atmosphere
of trust and sustainable good will.
Distinguished Legislators, the nation
should count herself lucky to have you
at this momentous time that you all can
make all the difference and be counted
as those who resisted all pressures to
rescue this nation from endless years of
rot and sleaze. Just like your humble
selves, we just could not hide under
political convenience to deny this
nation of experiences garnered from
years of operating in this industry that
mean so much to this nation.
As you sit to deliberate on this no mean
task, we pray that you be guided by the
higher purpose and calling of
guaranteeing a better tomorrow for
generations coming behind. For one
thing, no bill has generated such public
interest like this one in this present
dispensation. This is because it will
determine the future of this country.
You must rise above political, ethnic
and religious sentiments as you do this
service to our Fatherland. We have
history to serve as witness to us all.
Signed:
Comrade Victor Olley
Comrade Peter O. Akpenka
Forum
Chairman
Forum Secretary
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