The Nigeria Petroleum Industry Legislation as Passed by the Senate
especially for power generation and industrial development;
3. Create a peaceful business environment that enables petroleum operations;
4. Establish a fiscal framework that is flexible, stable, progressive and competitively attractive;
5. Create a commercially viable National Oil Company; 6. Deregulate downstream petroleum business; 7. Create efficient regulatory entity; 8. Engender transparency and accountability; 9. Promote active Nigerian Content and make Nigeria the hub of the western African petroleum province, and
10. Promote and protect Health Safety and Environment.
Apart from content issues with prior versions, one of the major drawbacks to passage was the bogus packaging of the PIB as a single legal instrument.
Consequently, although this 2015 attempt contains enhanced quality work on content, the bill has been split into logical smaller pieces for submission to the 8th National Assembly, a complete departure from all prior efforts.
This way, the pieces can be expeditiously considered and passed one after the other. And where amendments are required in the future, the relevant piece can be separately considered rather than opening up the whole Act for review.
Accordingly, the following pieces of legislation will be considered for the Nigeria Petroleum Industry Bill - 2015.
1. Petroleum Industry (Governance & Institutional Reforms) Bill
2. Petroleum Industry (Upstream Petroleum Administration Reforms) Bill
3. Petroleum Industry (Downstream Petroleum Administration Reforms) Bill
4. Petroleum Industry (Fiscal Framework & Reforms) Bill
5. Petroleum Industry (Revenue Management Reforms) Bill.
A. Petroleum Industry (Governance & Institutional Reforms) Bill
A1.0 Principles & Structure
It is widely acknowledged that major reforms in the governance and institutional structure for the sector are necessary and urgent.
A major drawback of the existing framework is the lack of clarity of roles, self- regulation, conflicts and unnecessary overlaps.
For example, while the Minister is in charge of the Ministry of Petroleum Resources, and indirectly supervises the Department of Petroleum Resources (supposed to be an independent Regulator), he is also the Chairman of the Board of the Nigerian National Petroleum Corporation (NNPC) by law.
The Minister therefore operates in a quasi- executive capacity across all facets of government involvement in the industry giving ample room for sustained failures in governance and performance.
In addition, and in particular, the country is being robbed of huge revenues as a result of mismanagement of the NNPC, the intrusive control of the government in the affairs of the corporation, the confusion with the Regulator as well as funding difficulties. These continue revenues are needed primarily to grow the sector as well as support the much talked about diversification of the economy.
The key objectives of the Petroleum Industry (Governance & Institutional Reforms) Bill are to:
a) create efficient and effective governing institutions with clear and separate roles for the petroleum industry;
b) establish a framework for the creation of commercially oriented and profit driven petroleum entities that ensures value addition and internationalization of the petroleum industry;
c) promote transparency in the administration of the petroleum resources of Nigeria;
d) create a conducive business environment for petroleum industry operations.
In defining the new petroleum industry institutional landscape, the following principles were used to guide the overall framework:
a) Clear delineation of government roles and responsibilities across the industry (Policy formulation, Regulatory oversight and Commercial operations);
b) Simple and lean structure, devoid of unnecessary overlaps;
c) Streamline the coordination role of the Minister;
d) Creation of a single strong industry regulator;
e) Unbundling of the existing NNPC to two Commercial entities limited by shares - the NOC, and the National Assets Management Company;
f) Ensuring strong governance, transparency and accountability in all institutions.
Based on these principles, the institutions proposed in the Petroleum Industry (Governance & Institutional Reforms) Bill are as follows:
1) The Minister, who shall be responsible for policy formulation and coordinating the affairs of the petroleum industry on behalf of the Federal Government.
2) The Petroleum Regulatory Commission, who shall be the industry Regulator and Watchdog, responsible for licensing, monitoring, supervision of petroleum operations, enforcing laws, regulations and standards across the value chain.
3) The National Petroleum Company, who will operate as a commercial entity, fully integrated across the value chain.
4) The National Assets Management Company, who shall ensure maximum value for the Federation through prudent management of the Federation’s oil and gas investments in assets where Government is relieved of upfront funding obligations; eg. PSC assets.
These institutions constitute the key structures necessary to assure effective governance and efficiency of the petroleum industry. It is recognised however that the following agencies do exist and contribute in one way or the other to the running of the industry.
1. The Nigerian Content Development &Monitoring Board (NCDMB) whose Act came into effect in April 2011 and already undergoing some amendment, hence remain as is.
2. The Petroleum Technology Development Fund (PTDF) has responsibility for providing funds for human capacity development in the industry. A separate bill has been developed for this to institute appropriate legislative framework which was never in place.
A2.0 Institutions, Roles, Governance and Controls
In line with the proposed structure of the industry, mandates, deliverables and control mechanisms, in particular for the effective governance of the various institutions are clarified in greater detail in the Bill.
This narrative simply provides high level characteristics of each of the new institutions proposed in the Petroleum Industry (Governance & Institutional Reforms) Bill.
A2.1 The Minister
The Minister of Petroleum Resources will exercise general coordination powers and provide full diplomatic cover on all petroleum-related matters on behalf of the country.
A2.1.1 Mandates
Specifically, the Minister shall:a) be responsible for the determination, formulation and monitoring of Government policy for the petroleum industry in Nigeria;
b) exercise general coordination over the affairs and operations of the petroleum industry subject to the provisions of this Act;
c) report developments in the petroleum industry to the Federal Executive Council;
d) advise the Government on all matters pertaining to the petroleum industry;
e) represent Nigeria at meetings of international organisations that are primarily concerned with the petroleum industry;
f) negotiate and execute international petroleum treaties and agreements with other sovereign countries, international organizations and other similar bodies on behalf of the Government
g) promote the strategic interest of Nigeria in the global oil and gas industry.
The Minister will be empowered to source professional support on fixed term basis as needed without drawing resources from the Regulatory authority (e.g the DPR) or the National Oil Company (e.g. the NNPC) as currently is the case.
Consideration was given to creating a new institution within the Ministry to cater for this but was subsequently discarded as it does not fit with the civil service framework.
A2.1.2 Funding
Funding of the office of the Minister shall be by appropriation by the National Assembly.
A2.2 mission The Petroleum Regulatory Com-
A single and one stop shop Petroleum Regulatory Commission is hereby proposed for the petroleum industry, consolidating such roles currently largely resident in the Department of Petroleum Resources (DPR), the Petroleum Products Pricing Regulatory Agency (PPPRA), and some environmental regulations driven by the National Oil Spill and Detection Agency (NOSDRA).
A2.2.1 Mandates
The core mandates of the Commission are as follows:
a. promote the healthy, safe and efficient conduct of all petroleum operations;
b. promote the efficient, safe, effective and sustainable infrastructural development of the petroleum industry;
c. ensure compliance with all applicable laws and regulations governing the petroleum industry;
d. determine and ensure the implementation and maintenance of technical standards, codes and specifications applicable to the petroleum industry;
e. subject to the provisions of this Act, execute Government policies for the petroleum industry assigned to it by the Minister;
f. promote an enabling environment for investments in the petroleum industry;
g. ensure that regulations are fair and balanced for all classes of lessees, licensees, permit holders, consumers and other stakeholders; and
h. implement such other objectives as are consistent with the provisions of this Act.
In addition to the above and other roles detailed out in the bill, it shall:
i. undertake and promote the exploration of the frontier basins of Nigeria.
Detailed tasks, responsibilities and deliverables are listed in the Bill.
A2.2.2 Governance & Controls
The size and powers of the Commission requires effective governance and controls to assure delivery as envisaged, in addition to reducing abuse to the absolute minimum.
At the same time, there is need to ensure maximum independence of the new Nigeria Petroleum Regulatory Commission and limit political interference in particular on technical decisions.
To this end, the Commission is proposed to be governed by a 9-man board comprised of politically autonomous individuals with proven integrity, relevant competencies and experience to effectively deliver on core functions. These are: a) a non-executive Chairman; b) one non-executive Commissioner; c) the Executive Vice Chairman, who shall also be the accounting officer of the Commission; d) three Executive Commissioners; e) a representative of the Ministry of Petroleum Resources who shall not be below the rank of Director;
f) a representative of the Ministry of Finance who shall not be below the rank of Director;
g) a representative of the Ministry of Environment who shall not be below the rank of Director;
All appointments shall be made by the President and confirmed by the Senate. It is expected that the Board will operate outside the 4-year electoral cycle to safeguard continuity. The Board shall:a) be responsible for the general direction and supervision of the Commission; b) oversee the operations of the Commission; c) provide general guidelines for the carrying out of the functions of the Commission;
d) review and approve the business, strategic and operating plans of the Commission;
e) Consider and approve the budget of the Commission and monitor its performance;
f) Approve the audited and management accounts of the Commission and undertake consideration of the management letter from the external auditors;
g) determine the terms and conditions of service of employees of the Commission;
h) stipulate remuneration, allowances, benefits and pensions of staff and employees of the Commission in consultation with the National Salaries, Incomes and Wages Commission;
i) structure the Commission into such number of departments as it deems fit for the effective discharge of the functions of the Commission; and
j) carry out such other functions and undertake such other activities which in the opinion of the Board, are necessary to ensure the efficient and effective administration of the Commission in accordance with the provisions of this Act or as may be delegated to the Commission by the Minister.
A2.2.3 Funding
The Commission shall ensure that all monies accruing from upstream leases, bonuses, lease renewal fees, assignment fees and concession rentals charged under any Act, enactment or any subsidiary legislation or regulation made pursuant to this Act are paid into the Federation Account.
However, the Commission shall establish and maintain a fund (‘the Fund’) from which all expenditures incurred by the Commission shall be defrayed. Such funds shall only be limited to the following sources:
a) appropriation to the Commission from time to time by the National Assembly;
b) fees charged for services rendered to holders of licences, permits or other authorizations;
c) penalties and fines levied by the Commission
d) income derived from publications produced by the Commission and from reviews of environmental impact assessment reports and environmental evaluation reports and other