‘IOC May Continue Divestment From Nigeria Despite Petroleum Industry Act’ – RMAFC

The Revenue Mobilization Allocation and Fiscal Commission has warned that the Petroleum Industry Act 2021 might not be able to reverse the trend of divestments by foreign oil corporations, engaged in the Nigerian oil and gas industry.

According to PUNCH, since President Muhammadu Buhari signed the PIA into law in August 2021, operators in the oil sector, including government officials, have been confident that the Act will bring significant benefits to the sector since it was passed into law.

However, international oil companies (IOCs) operating in Nigeria have been divesting their assets outside of the country both before and after the PIA was passed, as the RMAFC, an agency of the Federal Government cautioned that the Act might not stop the divestments by the IOCs.

This latest development was disclosed in its recent reports on the PIA 2021 and its Impact on Federation Revenue: RMAFC Perspective, which was obtained in Abuja on Tuesday.

Shell Producing Development Company, TotalEnergies, Chevron, ExxonMobil, and Eni are the top five IOCs present in Nigeria.

Reasons Why IOCs Are Divesting

In response to the divestments by IOCs, the RMAFC explained why the international oil companies were divesting from their onshore and shallow water assets despite the reduced taxes and royalty rates in the PIA.

The commission pointed to a decline in field production and an increase in crude oil theft which is currently an organised crime.

The report stated: “Before the passage of the PIA, the IOCs were divesting from their onshore and shallow water assets due to hostile environment attributed to community restiveness and security challenges in the Niger Delta

“Productions from some of the fields are already declining. The PIA as it were may not likely stop this trend. Increased crude oil theft, which is now an organised crime.

“As a result, the IOCs are likely to be more interested in deep water assets where the tax and royalty rates are lower with no community disturbances and no crude oil theft.

“A typical case is Mobil Producing Nigeria in Akwa Ibom offshore.”

Challenges Of The Oil Sector

The Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Muda Yusuf, commented on the problems in the oil sector and how they were affecting operators, stating that insecurity was a key worry.

He said: “The worsening insecurity in Nigeria is a major problem for investors in the economy. Investors in the oil and gas sector continue to lament the challenges posed by insecurity, oil theft, unstable policies and inappropriate fiscal regimes.

“The downstream sector continued to be weighed down by the pricing regimes and the regulatory environments which have continued to dim the growth prospects in the sector.

“The subsidy regime continues to be a major burden on the oil and gas sector, especially the downstream sector. There are issues of transparency, absence of level playing field, weak corporate governance and poor competition framework.”