The long delayed Petroleum Industry Bill (PIB) aims to make state oil firm NNPC more competitive and transparent, encourage outside investment, promote local oil companies and increase gas supplies to the dilapidated domestic market.

But international oil companies (IOCs) worry the bill will impose higher levies while failing to address key issues of under-funding, corruption and security.

Following are some questions and answers about the plans.
 

The PIB intends to increase royalties and taxes significantly on deep offshore projects but the government's take on new smaller onshore fields will be lowered.

The original agreements for most deepwater projects were made in 1993 when oil prices were around $20 a barrel, Nigeria was under military rule and the country was desperate to develop its oil and gas industry. Although the government's take has increased since then, even the changes in the PIB won't make Nigerian deepwater charges internationally uncompetitive.

Lower charges on new smaller fields could unlock more potential from Nigeria's oil and gas reserves and the government hopes it will see the emergence of more local firms, however these breaks will not impact fields already producing oil.
 

IOCs aren't pleased with the higher costs imposed on deep offshore projects and are entitled to give input when the government decides to impose new royalties and higher taxes.

Nigerian deep offshore projects have been highly profitable for IOCs because unlike onshore there were no royalties and few security issues. The Nigerian National Petroleum Corporation (NNPC) does not partner IOCs in offshore projects, making it easier to access investment from other IOC partners.

Although deep offshore terms may be similar to competitors, like Angola, experts have said they are not comparable due to Nigeria's unique working conditions, often hampered by secondary costs related to corruption and security problems.

Some of the IOCs have viewed the previously generous deep offshore terms as compensation for these problems.
 

A prerequisite for a successful overhaul of Nigeria's energy sector is curtailing endemic corruption, analysts say. Experts are skeptical that the transparency promises in the PIB will be implemented in full and that they can prevent corruption.

Nigeria says the PIB will create a legal framework, which could be used as a blueprint for industry competitors. The PIB intends to make Nigeria's energy sector the most open and transparent in Africa, by eliminating confidentiality.

All texts of licenses, contracts and revenue payments to government will be publicly available. The amount of oil being produced and the value of that oil must also be disclosed.

There have been complaints in the past of the government giving away oil field development contracts or the bidding process being tampered with. The PIB states bidding for licenses will be open with all decisions based on equal rules for all.
 

A Presidential amnesty last year saw thousands of militants lay down their weapons. The PIB intends to build on this.

Incentives to encourage Nigerian firms should provide more local jobs. The presidency has a proposal to give the Niger Delta region a 10 percent share when the IJVs are set up but the details of how this investment would be made are not clear.
 

The PIB plans for six incorporated joint ventures (IJVs) to be created out of the current six large joint ventures. NNPC or foreign partners could then sell part of their stake. IJVs will be created in 30 months after the law is passed.

The PIB permits privatization of the NNPC but does not set out plans for selling stakes in the state-run company.

The government is keen for IJVs to offer Nigerian companies a capital base but Chinese and Indian state-companies could use this as a way in to the Nigerian production process.

NNPC currently owns 50-60 percent of these joint ventures and will not want to give up its majority share. It is likely therefore to limit stock sales.

Companies would be able to buy stakes in IJVs like any other share, offering IOCs the opportunity to raise funds. The share holders would then receive dividends from profits.

There are loose plans for 10 percent of the IJVs to be set aside for the Niger Delta communities. Since these communities would not be able to provide future investment it is likely the government would need to provide guarantees. If the government imposes responsibility for guarantees on other stakeholders it is likely to act as a deterrent to investors.