THE PROPOSED PETROLEUM INDUSTRY BILL IN NIGERIA.
The
new legislation, the Petroleum Industry Bill (PIB), is currently under
legislative consideration and represents the most comprehensive review of the
legal framework for the oil and gas sector in Nigeria since the industry began
commercial operations in the 1960s. It could signal the dawn of a new era; an
era during which restructuring and transformation could address many of the
issues that have dominated the oil and gas industry in Nigeria .
Fundamental
Objectives:
-To
vests Oil & Gas resources in the sovereign State of Nigeria.
-To
separates policy, regulation and commercial activities.
-Any
company shall apply and be granted leases, permits in accordance with the PIB.
-Management
and allocation of petroleum resources in accordance with the principles of good governance, transparency, and to
promote sustainable development and economic value to Nigeria .
-Guarantees
government participation in licenses or leases and in the exploitation of
natural gas.
-To
honors international environmental provisions and obligations.
-To
encourage community relations and the development of Nigerian Content.
Content
of the Bill
Existing
legislation that would be affected by the new Bill includes:
- the
Petroleum Profit Tax Act 1959;
- the
Petroleum Act 1969;
- the
Petroleum Technology Development Act 1973;
- the
Associated Gas Re-injection Act 1979;
- the
Petroleum Equalisation Fund Act 1989;
- the
Oil Pipelines Act 1990;
- the
Nigerian National Petroleum Corporation Act 1997; and
- the
Petroleum Products Pricing Regulatory Agency Act 2003.
The
Bill, which, it is believed, is likely to be enacted by the National Assembly
during 2010, represents the outcome of a report produced by the Oil and Gas
Reform Implementation Committee (OGIC), a committee formed in September 2007
under the current administration. Adeoye Adefulu, a partner at Odujinrin &
Adefulu, Lagos ,
sums up the new PIB under three headings: separation; ‘professionalisation’;
and commercialisation. There will be a ‘clear separation of government roles
and apportioning these responsibilities to newly created organisations’ so that
the government no longer continues to have a part to play across the three
areas of the oil and gas industry: policy, regulatory and commercial. Under the
PIB, responsibility for these functions would be split between different
agencies. The newly created agencies would sit outside the civil service
structure, and would act as professional institutions.
The
Bill also proposes the commercialisation of the national oil company – the
Nigerian National Petroleum Corporation (NNPC). This would mean that the NNPC
would be incorporated as a limited company, operating in accordance with
company law and subject to the same governance as other companies of a similar type.
Under
the proposals, two agencies would be retained in their current form: the
Petroleum Equalisation Fund, into which is placed any surplus revenue recovered
from petroleum products, marketing companies and funds from the federal
government provided for this purpose; and the Petroleum Technology Development
Fund, which was established by the Petroleum Technology Development Fund Act
1973 to manage funds accruing to the government from exploration works and
production activities and channel such funds into training courses for
Nigerians to qualify as professionals within the oil and gas industry.
The
passage of the new legislation would introduce and enforce integrated health,
safety and environmental quality management systems with specific quality,
effluent and emission targets for oil and gas operations in order to ensure
compliance with international standards. But what does this mean in practical
terms? These proposed reforms of the PIB aims to end gas flaring in Nigeria , a
topic of long-standing controversy. The new Bill also seeks to place an obligation
on the IOCs to put in place a domestic gas supply to meet their commitments
with regard to gas exports.
Benefits of the bill.
The
local content aspects of the reforms, for example, would enhance
indigenous involvement in the industry. In addition to the compulsory
participation of Nigerians in both the exploration and the production side of
the petroleum industry, training will be made available to Nigerians, which
will encompass all areas of petroleum industries, thus guaranteeing that the
country as a whole and local communities benefit from such operations by having
access to gainful employment and education opportunities
Companies
that hold petroleum mining leases will be obliged to ensure no less than 95 per
cent of the managerial grades carrying out these functions are occupied by
Nigerians.
Transparency in the oil and gas industry
would be achieved. The oil and gas industry has been characterised by too much
opaqueness, extreme level of confidentiality. This Bill would remove opaqueness
in a scale that has never been seen. Data would be accessible for all
interested individuals.
Up date of the bill.
Mrs. Alison-Maduekwe, who was the guest
speaker at the lecture titled ‘Nigeria's Petroleum Industry, its growth post
PIB', said during the lecture:
"We have to show the commitment
necessary to the passage of the PIB. We are calling on all Nigerians to turn
this aspiration to reality. The PIB has undergone various reviews and it is
currently undergoing the final review by the legislators. It has undergone the
first and second reading by the Senate and the House of Representatives. Right
now, it is undergoing the chapter by chapter reviews by both houses before it
is finally passed into law. When this bill is passed, the gas sector will
become the crux of our economy going forward. We have much more gas reserves
than have in crude."
My personal view on the bill.
The
Nigerian Petroleum Industry Bill (PIB) is an ambitious attempt; theoretically,
it makes a great deal of sense, but in practical terms it is flawed. Flawed
principally because of the scope of its ambitions when set beside the
limitations of our capacity to implement such far-reaching reforms. So, we see,
the debate in many respects has just begun, but what worries me most is if
we have the capacity as a nation to carry out so many reforms at the same time
(the PIB include reforms on the gas section, the downstream creates several new
institutions and indeed new taxes). The Nigerian oil sector does need
significant reforms, but rather than jump on all things with so few hands, we
would have been better advised to have followed the old African proverb that
says slowly slowly catch a monkey!