After 17 Years Consideration; Senate Finally Passes PIGB 

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The Nigerian Senate on Thursday passed the Petroleum Industry Governance Bill, PIGB, after about 17 years of considering the Petroleum Industry Bill, PIB.

During the day’s plenary, the bill was read the third time before the chamber.

While considering clauses of the bill, the lawmakers disagreed on who would have the responsibility to guard against environmental degradation.

Some senators had wanted the ministry of petroleum resources to be responsible for taking care of oil spills and other forms of environmental degradation.

The senator representing Imo west, Hope Uzodinma, argued that the ministry of environment should be allowed to take care environmental conditions to ensure that the standard is maintained.

He said this would be in line with the new world order in cognisance to climate change.

Also speaking, the senator representing Rivers south-east, Magnus Abe, said the matter should not be left in the hands of the oil industry because they were after profits.

According to him, “I think our recent experiences in this country, we all know the situation of the Niger Delta as a result of the lack of regulation in the oil industry.

“If we leave this matter in the hands of the oil industry, we will end up in a situation where we will spend our time fighting over issues that we should not be concerned with.

“I want to align myself with those who have suggested that environmental issue should take precedence over the bottom line so our people are safe.”

The senators however agreed that the proposed Nigerian Petroleum Regulatory Commission should work with the ministry of environment to protect the oil producing communities.

The senators also agreed that the chairman, Nigerian Petroleum Regulatory Commission should be appointed by the president and not the minister.

Commenting on the bill, Senate President, Bukola Saraki said the lawmakers had broken the jinx of passing the bill, adding that it would ensure transparency and accountability and create and an enabling environment for the petroleum sector.

He said, “This is a Bill #PIGB that has been here for many years, we made a commitment and it’s being fulfilled.

“This Bill is not only for Nigerians but for our investors. We are proud of what has been done.”

NVS recalls that the Chairman, Senate Committee on Petroleum, Upstream, Senator Tayo Alasoadura, had on Saturday, stated that the Bill, if passed, would benefit all Nigerians.

According to him, the Bill would help to create more jobs for Nigerians, and foster an environment conducive for business for petroleum operations when made law.

The lawmaker had said: “Government revenue from oil industry will increase. This means more funds in the hands of government to engage in developmental activities.

“The downstream sector will become fully deregulated. In other words, subsidy will be totally removed.

“This means more jobs for Nigerian local contractors, especially those from the oil producing regions.”

In the same vein: the Organization of Petroleum Exporting Countries and a group of non-OPEC countries, including Russia, agreed to extend existing production targets to Apr. 1, 2018, in efforts to reduce world oil inventories and stabilize oil prices.

In November 2016, OPEC agreed to its first production cuts in a decade. The initial production-cut agreement also marked the first time in 15 years that non-OPEC producers signed onto a joint agreement with OPEC.

Despite production-cut targets of 1.8 million b/d effective since January, oil inventories have fallen slower than expected. Saudi Arabia and Russia both recently advocated a 9-month extension.

“There have been suggestions (of deeper cuts), many member countries have indicated flexibility but…that won’t be necessary,” said Saudi Energy Minister and OPEC Pres. Khalid al-Falih. He did not rule out the possibility of another extension of the production targets.

Al-Falih said OPEC members Nigeria and Libya still are excluded from the production targets.

He told reporters in Vienna that Saudi oil exports were set to decline to help accelerate market rebalancing.

“Rebalancing has been partially achieved,” al-Falih said during a May 25 news conference with Russia Energy Minister Alexander Novak. He said efforts toward sustained market stability “deepen institutionalization of cooperation between OPEC and non-OPC countries.”

Novak said the latest statistics show 102% compliance by OPEC and non-OPC producers with the initial agreement announced last year. He said the 9-month extension signals “a new era” of bilateral cooperation.

A joint meeting of a monitoring committee on the production-cut targets is scheduled in 2 months in Russia.

Analysts comment

“The bottom line is that Saudi has managed to get a consensus ahead of the meeting for this meeting to take place in a non-confrontational way,” Harry Tchilinguirian, oil strategist at French bank BNP Paribas told the Wall Street Journal. “We’ve never had this consensus going into this OPEC meeting for a long time.”

Tchilinguirian expects oil prices will go above $60/bbl this year, noting he did not change his forecast after the the announcement.

Wood Mackenzie Ltd. also left its forecast intact that calls for Brent crude oil prices will average $55/bbl this year.

Ann-Louise Hittle, WoodMac’s vice-president for research macro oils, said, “OPEC’s decision is a big one because it shows a commitment to support oil prices into 2018 and potentially for all of next year.”

She expects a “firmer oil price will…further support the US tight oil industry into 2018,” which help US onshore drillers make plans.

“The extension through to the first quarter of 2018 makes it clear to the oil market that OPEC intends to continue to support oil prices at the expense of market share, at for the time being,” Hittle said, adding that she expects to see market fundamentals tighten in this year’s second half.

Andrew Slaughter, executive director for the Deloitte Center for Energy Solutions, said the 9-month extension was warranted over a 6-month extension to maintain a stronger oil-price environment and to draw down oil inventories worldwide.

“Inventory drawdowns could become visible as early as August or September, although it could take until the first quarter of next year to return to a more normal historical range,” Slaughter said. “Deeper cuts would have likely weakened the incentive for high compliance across OPEC while encouraging non-OPEC producers to accelerate production growth.”

He expects US production increases will not offset OPEC cuts despite rig count growth.

“The number of drilled and uncompleted wells has also increased by about 500 in recent months, which represents an economic opportunity for US producers to maintain or grow production with better economics than with full-cycle costs,” Slaughter said.

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