The next big hurdle for PIB
Expectations are high that the PIB passed by the Senate last week will be given accelerated consideration by the House of Representatives and immediate assent by the president, writes our reporter.
Agreat deal of attention has now shifted to the House of Representative and the presidency following the passage by the Senate, last week, of the Petroleum Industry Governance Bill (PIGB) 2017, the first part of the much anticipated Petroleum Industry Bill (PIB).
The expectation from stakeholders is that the bill would be given accelerated consideration and immediate implementation for maximum utilisation of the nation’s hydrocarbon resources.
Daily Trust reports that the passage of the bill is coming more than 17 years after the process commenced in April 2000. Bickering and politicking by successive governments delayed passage of the PIB until it was split in parts to allow the less contentious aspects to be dealt with gradually.
Chairman of the Joint Senate Committee on the PIGB, Sen. Tayo Alasoadura, while presenting the bill, said the PIGB was the first tranche of the PIB, adding that other parts concerning Upstream Petroleum Licence and Lease Administration, Downstream Oil and Gas Administration, Petroleum Fiscals, the Petroleum Revenue Management and the Petroleum Host Community Fund would soon be presented before the Senate.
The negative consequences of the absence of the PIB have been dire for the Nigerian economy. The Nigeria Extractive Industry Transparency Initiative (NEITI) in 2016 estimated that Nigeria had so far lost over $200 billion as a result of absence of the law.
The agency’s 2013 audit of the oil and gas sector revealed that what the absence of the law cost the nation in 2013 alone was N1.74 trillion as a result of underremittances, inefficiencies, theft or absence of a clear governance framework for the sector.
It is now anticipated that with the prospects of the new law coming into place, this huge revenue losses to the nation will be eliminated.
The passage of PIGB, stakeholders agree, will help to create efficient and effective governing institutions with clear and separate roles for the petroleum industry.
Deep dive into the PIGB
If the PIGB is eventually passed into law, all existing regulatory agencies like the Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) would be merged into a new agency called the Nigerian Petroleum Regulatory Commission (NPRC). The NPRC would be an independent, one-stop-shop regulatory agency unlike what is obtainable at present. The NPRC will be charged with the responsibility of administering and enforcing policies, laws and regulations relating to all aspects of petroleum operations. It will also conduct bid rounds or other processes for the award of any licence or lease required for petroleum exploration or production.
The bill, would within six months unbundle the Nigeria National Petroleum Corporation (NNPC) into two companies: the Nigeria Petroleum Assets Management Company (NPAMC) and the National Petroleum Company (NPC). The two companies shall be created and supervised by the Ministry Of Petroleum. There is also provision in the Bill for a third company that will temporarily manage the liabilities of the NNPC and the DPR.
While the NPAMC will be responsible for the management of assets currently held by the NNPC under the Production Sharing Contracts (PSC), NPC shall be responsible for the management of all other assets held by NNPC.
For the NPAMC, Section 41 (1) of the bill requires that the minister shall, within 12 months of incorporation of the NPAMC, require the NNPC to transfer some employees, assets, liabilities, rights and obligations of the NNPC to the NPAMC. NPAMC administration will be composed of a non-executive Chairman; the Managing Director, four other Executive Directors, four non-executive Directors and a representative of the Ministry of Petroleum.
For the National Petroleum Company (NPC), Section 61 notes that at the time of its incorporation, the initial shares of the NPC shall be held in the ratio of 20 per cent by the Bureau for Public Enterprises (BPE), 40 per cent by the Ministry of Finance Incorporated and 40 per cent by the Ministry of Petroleum Incorporated on behalf of the government.
Section 63 of the bill further stipulates that initial funding for the NPC must be provided not later than six months from the date of incorporation by the minister, after consultation with the ministers responsible for finance and budget, through a request for the appropriation of funds for the initial capitalisation of the NPC.
As against the current practice, the new NPC going by Section 65, will be entitled to retain its revenue from its operations and “shall be entitled to defray from such revenue all its expenses, including its cash call obligations in respect of its joint venture assets and its petroleum operations and its obligations to lenders and financiers.”
There is also a provision in the bill that, “All dividends accruable in respect of the shares held on behalf of the Government shall be paid into the Federation Account,” while the new NPC will divest shares in form of the sale or transfer to institutional or strategic investors.
In terms of composition of the NPC board there will be a non-executive Chairman, the Managing Director, four other executive and nonexecutive directors, as well as a representative of the Ministry of Petroleum.
The new Nigeria Petroleum Liability Management Company (NPLMC) which will be incorporated within six months that the bill becomes law shall be responsible for the management of the liabilities of the NNPC and the pensions liabilities of the DPR transferred to it and also ascertain outstanding liabilities of the NNPC and layout a clear plan and timeline for the settlement of such liabilities.
“The minister shall undertake the winding up of the Liability Management Company upon confirmation that the Liability Management Company has concluded the settlement of all outstanding liabilities,” Section 86(10) states.
Hurdles before PIGB
Stakeholders in the oil and gas industry comprising local and foreign oil companies, labour unions, extractive industry transparency bodies and civil society organizations have hailed the passage of the PIGB describing it as a positive development considering the tortuous path the bill has treaded.
The Extractive Industries Transparency Initiative (NEITI) welcomed with excitement, the bold step by the Senate to pass the PIGB.
NEITI said that the decision of the Senate to consider the bill as priority resulting in its Nigeria passage was not only legendary, but historic given the challenges the bill has passed through in its legislative journey for almost two decades.
NEITI called on the House of Representatives to find similar courage to give the bill an accelerated consideration on its merit in overriding public interest.
NEITI said that while it looks forward to carefully studying the contents of the PIGB, it hopes to convey a multi-stakeholders dialogue on the provisions of the bill as passed by the Senate to set the stage for informed stakeholders’ engagements on how this Bill will positively influence the ongoing reforms in the oil and gas industry.
The two major unions in the oil industry; the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Senior Staff Workers (NUPENG) have also described the PIGB passage as good for the oil and gas industry.
However, the PIGB still has another major hurdle to overcome as the House of Representatives is reportedly said to have a different version before it.
The House had said it did not yet have a specific timeline for the passage of the bill, but that it was still carefully considering inputs made by local and international stakeholders during a seminar on the bill last year.
On the other hand the two key unions in the sector the PENGASSAN and NUPENG are much concerned about the serious labour issues that may arise from the scrapping of the DPR, PPPRA and other organiations.
The National PRO of PENGASSAN, Comrade Emmanuel Ojugbana, who said the unions would take time to look at what had been passed, added that the unions hoped all the concerns they raised had been captured in the PIGB that was passed.
The unions had in a memorandum submitted to the Joint Senate Committee on the PIGB asked for inclusion of interests of the workers.
“The position of the PENGASSAN and NUPENG is that staff of the NNPC and all other agencies that will be impacted by the PIGB must NOT lose their jobs or be allowed to be transferred on terms and condition of service that is less favourable than what they currently have under any guise.” Their position read in part.