Abuja - The long-awaited oil law, when it finally comes, looks likely to be a botched job that gives favourable tax terms to foreign oil firms while doing little to satisfy calls for transparency and reform of a corrupt and wasteful sector.
A new draft of the long-awaited Petroleum Industry Bill (PIB) is close to being finalised, potentially ending years of uncertainty that has blocked billions of dollars of investment.
Licensing rounds, contract renewals and investment have been put on hold for five years pending the new bill to regulate the oil and gas industry. Passing the bill will allow such work to resume.
But provisions that would have forced the government to publish how much oil it pumps and all the payments it receives from oil firms - in an industry where secrecy is blamed for corruption - have been stripped from the bill.
"I expect the petroleum industry to be happy. I expect many Nigerians to be upset," said Pedro Van Meurs, an oil and gas expert who has consulted with the government on the PIB.
"Transparency provisions related to corporate income tax, hydrocarbon tax and production sharing were deleted. This should be a source of concern."
The PIB is meant to change everything from fiscal terms to overhauling the Nigerian National Petroleum Corporation (NNPC). Its comprehensive nature caused years of disputes between lawmakers, ministers and oil majors.
The latest copy proposes some changes that will improve transparency: keeping royalty payments secret will not be allowed, for instance. Oil company profit taxes proposed in the bill are also in the public domain for the first time.
But it does not require disclosure of oil sales, of other taxes like income and hydrocarbon tax, nor of payments to the government, including signature bonuses. Openness on such subjects is vital to clean up the energy sector, say campaigners.
President Goodluck Jonathan commissioned a task force in January to fast-track a new copy of the PIB, which makes the passage of this condensed version more likely, even if the national assembly debate on it takes a while.
Jonathan said on Tuesday the new PIB would be sent to the national assembly next month.
"Passage of any piece of legislation brings a level of certainty to the industry that has been absent for years," said Gordon Bottomley, Nigeria analyst at Ergo, a New York-based advisory firm that has been closely tracking the PIB.
"(But) the re-organisation of ... Nigeria's oil and gas industry is going to be far from painless. And this bill, in terms of transparency, appears less than desirable."
New powers for minister
The bill also gives the oil minister new supervisory powers over all industry institutions, including a new regulator to police downstream and upstream, raising concerns about checks and balances. Lawmakers had rejected drafts that did this in the past.
It says anyone who "interferes" with the minister will be fined or imprisoned. And it allows the oil minister and the directors of state institutions to receive gifts, which will not please civil society groups calling for an end to graft.
Foreign oil companies like Shell, Chevron and Exxon will be relieved that tax changes are more favourable compared with previous versions. This could be a sticking point with lawmakers seeking a better deal for Nigeria.
Analysts say that the taxes foreign firms pay on profits onshore, which will be published under the PIB, will amount to a big cut from the taxes that are now levied in secret.
Furthermore, the cut will apply both to existing fields and to new fields, unlike in earlier versions of the law which cut taxes only on new fields, the analysts say. Van Meurs says the government could lose 20-50 percent of its tax revenue per barrel on existing assets.
NATIONAL OIL COMPANY
Detail is thin on plans to partly sell off the mismanaged NNPC, seen by experts as the biggest barrier to progress.
Nigeria exports some 2 million barrels per day (bpd) but could double that with a better-managed state oil firm able to pay for its share of joint ventures, foreign oil majors say.
NNPC was last month described by parliament as "answerable to no one" in a probe into a $6.8 billion fuel subsidy fraud. It is accused by oil traders of owing billions in unpaid bills.
The NNPC rejects allegations of corruption or insolvency.
The PIB proposes a new National Oil Company (NOC), which will within three years be partly listed, in theory leading to much-needed accountability.
But the PIB isn't clear on what assets the NOC gets. The old NNPC would still exist and keep joint ventures and production sharing contracts with oil majors, which cover the majority of Nigeria's known oil and gas reserves, for an indefinite period.
"For arguably the most important element of the bill, it is worrying the section on NNPC is both brief and vague," an executive at an oil major said.
There is also no domestic gas pricing in the bill, which is key to unlocking the world's seventh largest gas reserves.
Left in doubt are onshore licenses Oil Minister Diezani Alison-Madueke is in the process of renewing. She signed a 20-year one with Exxon worth trillions of dollars in February and has promised to do the same with Shell and Chevron by June.
It has not been made clear whether they will include clauses exempting them from the PIB, in which case a huge portion of the oil business would not be governed by the new bill.
"It's meant to be single framework for everything in oil and gas. If you are going to have it but then do a special deal for, say, Exxon ... That would be a huge departure from what the bill was meant to be," said Antony Goldman, head of PM Consulting.