Oil investors to face more risks in 2013

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A new global risk analysis report has said investors in the Nigerian oil and gas sector will face more risks in the coming year, with slow progress expected on the long-delayed Petroleum Bill.

According to the report, even if the bill is passed, its implementation will be uneven, adding to protracted corruption problems in the country.

London-based consultants, Control Risks, which carried out the analysis, added that “Nigeria is also considered a high risk politically”.

The report said, “Powerful vested interests continue to weigh over licensing and public procurement, leaving investors exposed to corruption and interference.”

The PIB, when passed into law, is expected to establish the legal and regulatory framework, institutions and regulatory authorities for the Nigerian petroleum industry.

It would also establish guidelines for the operation of the upstream and downstream sectors.

However, since it was forwarded to the National Assembly by President Goodluck Jonathan, it had been surrounded by controversy.

First, there was confusion about the real nature of the bill as many different versions were circulated.

Then, there were allegations that it had been doctored to vest control of the country’s oil and gas industry in a select few.

At the 18th edition of the Nigerian Economic Summit, last week, oil producing companies had argued that the tax rates contained in the PIB where too high.

They also criticised some of the provisions of the bill, warning that if those areas were not addressed, the bill might fail to achieve its goals when eventually passed.

However, the Federal Government had insisted that the tax rates were fair.

Despite the controversies, the bill has scaled through the first and second reading at the House of Representatives, and now awaits a third reading.

Apart from the political risks, the Control Risks report also acknowledged the security risk in the country.

The report rated Borno and Yobe states high with regards to their exposure to extreme risk, stressing that they represented “particular security risk”.

The Chief Executive Officer, Control Risks, Mr. Richard Fenning, explained that globally, uncertain operating conditions were increasingly the norm as complexity and volatility overshadowed efforts to manage risk.