Profit vs. Equity: The knotty 10% question in a Hostcom Bill

The Petroleum Host and Impacted Communities Bill currently undergoing legislative enactment proceedings at the National Assembly has become vexatious and is thus attracting the keen attention of industry players, oil-producing states, activists, as well as international oil companies (IOC). It has become vexatious because a key aspect of the Bill, the late President Musa Yar’Adua’s dream of seeing host communities, which lay the golden egg but neglected over the years, benefit from the crude oil exploited from their grounds, through a 10 percent equity ownership of oil assets, has been distorted.

Over the years, operations in the oil and gas sector have been shrouded in secrecy. There have been uncertainties occasioned by lack of legal and regulatory framework, loss of revenues, corruption, leakages and faulty fiscal regime to guide and regulate the sector. It was in an attempt to correct this that led to the production an omnibus Petroleum Industry Bill, which became so controversial that the only way to resolve the mess it created was to break it up into bits.

First up and already passed is the Petroleum Industry Governance Bill, (PIGB), which seeks to provide for governance and institutional framework for the petroleum industry.
Other cluster bills still expected include the Upstream Petroleum License and Lease Administration Bill, as well as, the Downstream Oil and Gas Administration Bill.

The Petroleum Host and Impacted Communities Bill is aimed at addressing issues relating to community participation, security, and the ecological debt incurred by host communities from oil extraction.

Different forces, particularly from the north, have vehemently kicked against the issue of host communities contained in the bill as it sought to provide a special fund for oil producing communities under the guise of host communities, whereas the Niger Delta Development Commission (NDDC) Act has already provided for thirteen percent derivation fund for such communities.
Hence, for lawmakers outside the Niger Delta, this would amount to double allocation to the oil producing areas.

Industry observers allege that IOCs have tried to influence the progress of the PIB in whole and even now, in parts. They also allege that there have been financial inducements leading to the delay in the passage of the bill for 13 years.

Many say the politics behind the Petroleum Industry Bill (PIB) is more than what is needed to be done to get a bill passed.

A source speaking under condition of anonymity said: “The IOCs have openly come out to show bickering with the Federal Government over fiscals in the original PIB.

“Their displeasure, according to them, is the plan to get them to pay some percentages of their profit to the host community. They see this as double taxation which would impact negatively on their profit margins.
“If the interests of the agitating people of the oil producing communities are not protected, or rather, guaranteed, by whatever reforms are carried out by the government, how can one expect to have a smooth and conducive operational environment to provide a workable and transparent governance of the industry?” He queried.
Inyang Dan Abia, member, the national executive committee of The Pan Niger Delta Forum (PANDEF), a Niger Delta umbrella body of leaders, elders and stakeholders, speaking with business a.m, said the IOCs have been meddling with the process since inception.

According to him, the reason why the PIB has not been passed until this moment is due to the undue influence of IOCs.

“The Bill was ideally meant to give the host communities ownership of the activities of petroleum investments in Nigeria.

“The Petroleum Host Community Trust Fund was meant to use the 10 percent equity participation that former President Yar’Adua gave to the communities. This was to give the oil communities a taste of what is going on in their land and give them a sense of belonging.

“The idea was that from the 60 percent that the federal government is holding, 5 percent is released for the host communities and from the 40 percent that the International oil companies (IOCs) are holding, five percent is released to the host community. This is so that the IOC will have 35 percent.

“Then 10 percent will belong to the oil producing communities, in which case, the earning from this participation will be used in setting up a Trust Fund called Petroleum Host Community Trust Fund for the development of the community.

“Asides this, it gives the oil producing communities the opportunity to be decision makers.

“Don’t forget that only the federal government and the IOCs signed the Profit Sharing Contract, (PSC). So, if the bill is anchored on 10 percent equity participation, there would be an opportunity for the representatives of the oil community to also participate in PSC.

“They have no role to play here. They are trying to say five percent of the profit should be used in this fund. How can you say you want to give five percent of profit to people who have no way of knowing what is going on? I think there is some collusion between the IOCs and the National Assembly.

“One, they are saying that they will be the one to set up the fund and that they will be the people to appoint the Board of Trustees. We are saying “NO”.

“The management should be the community people and not the oil companies. Of course, you heard the senate president asking the IOC not to unduly influence the lawmakers.

“Oil companies will want to do things that will make them maximize the profit because 10 percent equity participation means they will now lose five percent of theirs. If the National Assembly allows them to have their way, it would be very bad for this country,” he added.