Nigeria’s Slippery Road to PIA Implementation
In August, President Muhammadu Buhari approved a steering committee which would oversee the implementation of the Petroleum Industry Act (PIA). But as if in a hurry to see the process considered as early as possible, he has since then taken other steps to fully ensure that the law that will unlock the enormous potential in the oil and gas industry is put into operation. Emmanuel Addeh writes that while some of the decisions have been greeted with some applause, others have attracted mixed feelings
RMuhammaduoughlysixweeksago,President Buhari signed intolawthePetroleumIndustry Bill (PIB), a piece of legislation thatwillserveastheframework for operations in the oil and gas industry. Having suͿered several setbacks for close to 20 years, starting from the period the entire process wasÀrstinitiated,thebill,nowanAct,underwent arguably the most tortuous journey in the history of law-making in the country.
InhisÀrstmajormove,Buharipickedmembers of the PIAsteering committee which is headed by theMinisterofState,PetroleumResources,Timipre Sylva, while the Executive Secretary, Petroleum Technology Development Fund (PTDF) serves as head of the coordinating secretariat and the implementation working group.
However, the process was fully triggered last week when Buhari in his capacity as Nigeria’s Minister of Petroleum Resources, under Section 53(1) of the new Act, directed the incorporation of the NNPC Limited.
The president also approved the formation of a new board, which would be overseen by Senator Ifeanyi Ararume as well as replacing the board member representing the South-south, Senator Magnus Abe, with Constance Harry-Marshal, a lawyer.
HealsodroppedDr.StephenDike,whoseposition will be ocially Àlled by Senator Margaret ChubaOkadigbo,formerSenatePresident,Chuba Okadigbo’s widow.
BuhariretainedtheservicesoftheGMD,NNPC, Mallam Mele Kyari as Chief Executive Ocer and Mr Umar Ajiya as Chief Financial Ocer of the corporation on the new board.
A Political NNPC Incorporated?
The appointment of a board for the proposed NNPC Limited has generated the most controversies of all the steps so far taken to begin the process of implementing the new law.
The view by many critics is that for a company thatistransitioningtoafullycommercialisedentity and looking to do away with the perception that it is perpetually tied to the apron strings of the federal government, it was an own goal to have selectednon-industryactorstomanthosepositions.
Although a number of the appointees to the board have considerable experience in the oil and gas industry, yet their exposure to politics, many believe would detract from the verve and focus requiredofabehemothliketheNNPCintransition.
“Whateverthecase,thisboardwon’tdeliverthe levelofgovernancethattheNationalOilCompany (NOC) needs for an Initial Public OͿer (IPO). Nigeria, they say, never misses an opportunity to miss an opportunity!
“This decision has serious implications for the new NOC, particularly its governance and funding going forward. By law, the NOC may not have recourse to funding from public funds. That road is now permanently blocked.
“So, it has to seek alternative sources of funding for the several projects that need to be undertaken throughthetransition.Theindustrialisednations, theinternationaldevelopmentbanksandthemajor Ànancialinstitutionsarealignedonclimatechange and will minimise spend on upstream crude oil projects as we rundown to 2030.
“After that period, expect zilch for oil projects. This leaves natural gas projects as the only hydrocarbon that will be supported by the global
Ànancialcommunityandthatwillnotbeautomatic anyway,” a top industry source who preferred to remain anonymous told THISDAY.
HeaddedthatNNPC’spartnersarealsounder immensepressuretominimisespendingonfossil fuelprojects,hencetherewillbemoredivestments from lower quality assets and provinces.
Accordingly, save for deepwater oͿshore and gas-prone Nigerian assets, he noted that Nigerians should not expect NNPC’s IOC partners that would ordinarily support the funding of upstream projects to come to the table.
He added: “The next possible option would have been an IPO, but the PIA says shares can only be sold by competitive bidding and does not explicitly provide for an IPO route. Without doubt, this option must have been on the table for inclusion in the PIB but inexplicably not taken aboard.
“Politics and discipline however hardly walk together in Nigeria. One of the drivers for the PIB over the long season was that Nigeria needed to insulate its NOC from the political system. The appointment of this board kills a great story for an IPO. To be blunt, this is a poison pill – you can’t take a political board to global investors more so given the history of the predecessor corporation,” the top industry henchman noted.
AsideArarumeandOkadigbo,othermembers of the board are: Dr. Tajudeen Umar (North-east), Mrs. Lami Ahmed (North-central), Mallam Mohammed Lawal (North-west), Constance Harry Marshal (South-south) and Chief Pius Akinyelure (South-west).
The appointments further appeared to have gone against the letters of the new PIA which recommendsthatappointeesintotheboardmust have experience in the oil and gas or related areas.
For instance, described as a career politician, Ararume from Imo State was the pioneer state chairman of the defunct All Peoples Party (APP) and later theAll Nigeria Peoples Party (ANPP) in Imo State between 1998 and 1999 and was elected to the Senate to represent Imo North (Okigwe) constituency.
In his comments, Ghana National Petroleum Corporation, Petroleum Commerce Research
Chair,UniversityofCapeCoastOil&GasStudies, Prof Wunmi Iledare, noted that the new board looked more like “business as usual” despite the planned commercialisation of the national oil company.
Iledare opined that the likelihood of investors having conÀdence in the board is “very low,” adding that it appears government has made up its mind to continue to fund NNPC Limited, which is not even incorporated
The Upstream, Midstream Downstream Boards
ButthedampeningeͿectoftheannouncement of the NNPC Ltd. board seemed to have been quickly erased by the list of persons to head the upstream as well as the midstream and downstream agencies sent to the national assembly by the president.
For the upstream, the president nominated Isa Ibrahim Modibbo as Chairman, while the Chief ExecutiveOcerwaslistedasMr.GbengaKomolafe.InadditionHassanGambowasmentionedas Executive Commissioner, Finance andAccounts while Ms. Rose Ndong is the Executive Commissioner, Exploration and Acreage Management.
ThepresidentfurtherretainedMr.SarkiAuwalu whocurrentlyheadstheDepartmentofPetroleum Resources (DPR) as the Chief Executive Ocer of the proposed midstream and downstream authority.
HelistedtheChairmanoftheauthorityasIdaere GogoOgan,AbiodunAdenijiasExecutiveDirector, Finance and Accounts, and Ogbugo Ukoha as ExecutiveDirector,DistributionsSystems,Storage and Retail Infrastructure.
But Komolafe’s appointment has generated a lot of excitement within the industry, given his antecedents and his many years of experience in the industry.
A core oil and gas man, Komolafe has held leadershippositionsatvariouslevelsoftheindustry as well as the possession of three degrees in three diͿerent Àelds of academic research.
President Seeks Fresh Alterations to New Law In his letter to the lawmakers, President Buhari also requested amendments to the new PIAand expansion of the membership of the boards of the upstream regulatory commission as well as the midstream and downstream petroleum regulatory authority.
The president hinged his desire to alter the new law on the need to ensure national balance in appointments into the boards in a request which was contained in a letter dated September 16, 2021, and read during plenary on Tuesday by the Senate President, Ahmad Lawan.
Furthermore, Buhari requested amendment to Sections 11(2)(b) and 34(2)(b) which provides for the administrative structure of the PIA 2021, to increasethenumberofthenon-executivemembers from two to six on the upstream as well as the midstream and downstream boards.
Inaddition,thepresidentproposedthedeletion of sections 11(2)(f), 11(2)(g), 34(2)(f) and 34(2)(g) from the Act, which would see the removal of the ministries of petroleum resources and that of Ànance from both boards.
“The proposed amendments will increase the membershipoftheboardfromnineto13members, that is, representing 44 per cent expansion of the board size. This composition would strengthen theinstitutionsandguaranteenationalspreadand also achieve the expected policy contributions,” Buhari noted.
However, the belief is that the president could have simply made it a south, north appointments if indeed it was necessary, rather than overpopulating the boards with a nominee from each geopolitical zone.
On the removal of the two ministries from the boards of the agencies, the president explained that they already have clear-cut roles and could carryoutthoseresponsibilitieswithoutnecessarily being on the boards.
“The two ministries already have constitutional responsibilities of either supervision or inter-governmental relations. They can continue to perform such roles without being on the board.
“It is also important to note that administratively, the representatives of the ministries in the board will be directors – being same rank with directors in the institutions. This may bring some complications in some decision making especially on issues of staͿ related matters,” he maintained.
Will It Prompt a Floodgate of Amendments?
But with the proposed amendments sent to the national assembly by the president, the fear is that there could be a Áoodgate of calls for new alterations to the contentious areas of the law.
Although, the lawmakers are yet to openly begin deliberation on the new portions of the law, where the president is seeking amendments, there are already calls from some quarters asking constituents to pressure their representatives to use the opportunity of the president’s request to make other necessary alterations.
Forinstance,thestategovernorshaveexpressed concern over the 30 per cent allocation for frontier exploration in the PIA, saying if implemented, it will deplete the Federation Account from which they draw from monthly.
The governors are also against the vesting of ownership of the NNPC Limited in the Federal MinistryofFinanceIncorporatedandtheMinistry of Petroleum Resources, without mentioning the statesandthelocalgovernmentswhoaresupposed to be co-owners.