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.

Nigeria’s oil and gas industry is dominated by a number of regulatory institutions, which, under the PIB, would undergo some form of restructure. A new national petroleum directorate is the proposed successor to the Ministry of Petroleum Resources. Currently, the Ministry of Petroleum Resources is charged with regulating Nigeria’s oil and gas industry under the Petroleum Act 1969. The technical and regulatory division of the Ministry, which acts as regulator of the upstream sector of the oil and gas industry, will, it is proposed, be replaced by the Nigerian Petroleum Inspectorate. In a similar vein, the Petroleum Products Pricing and Regulatory Authority, which currently acts as the pricing regulator for downstream products, would be replaced with the Products Regulatory Authority. Likewise, the National Petroleum Investment Management Services, which monitor and approve costs in the upstream sector, would be replaced by the National Petroleum Assets Management Agency.

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!