The ABC of the Petroleum Industry Bill Posted By NEWS WATCH on April 24, 2013

Standard

KEY FACTS

–         The PIB has been thirteen years in the making, it was first introduced at the National Oil and Gas Policy in 2000 by the Oil and Gas Sector Reform Implementation Committee set up by then President Olusegun Obasanjo.

–      The bill was presented to the National Assembly for the first time in 2008 but suffered a still birth for lack of executive cooperation by then President Umaru Musa Yar’Adua. Also, there were too many versions of the bill in circulation.

–         In all, it has 362 sections. Compare this with the current legislation governing the oil and gas industry, the Petroleum Act, which contains just 16 sections.

–         The new PIB will lead to the creation of new agencies, each with a board of paid Chairmen and members. Of these agencies, four of them will be incorporated companies limited by shares and vested with NNPC assets and liabilities. These agencies and companies include:

1. The Nigerian National Oil Company Limited

2. The Nigerian National Gas Company Limited

3. The Nigerian National Petroleum Assets Management Agency

4. The National Technical Bureau in the Office of the Petroleum Minister will undertake policy functions.

5. The National Transport Logistics Company (NTLC) which will own all products, oil and gas pipelines and depots formerly owned by the PPMC and the NGC

6. The NNPC Commercial Limited

7. The Petroleum Products Regulatory Agency which will regulate pricing of all petroleum products, pricing from electricity generated from oil and gas as well as be the commercial regulator of the downstream sector.

8. The Upstream Petroleum Inspectorate and The Downstream Petroleum Regulatory Agency will both have technical regulatory functions in the upstream (prospecting, exploration and mining) and downstream (refining, processing, storage, transportation, supply, distribution and marketing) sectors respectively.

9. The National Petroleum Directorate

10. The National Petroleum Research Centre

11. The Petroleum Training Institute

–         The PIB will lead to the creation of a new fund, the Petroleum Host Community Fund. This is in addition to the NDDC and Petroleum Trust Funds

KEY TAKEAWAYS

Compared to the existing Petroleum Act, the proposed PIB grants wide and overawing powers to the Petroleum Minister. Section 6 provides that “The minister is granted full powers of regulation with or without restraint of any of the PIB Institutions”.  These powers would effectively make the minister the most powerful person in the country after the president – with the power to make or mar oil billionaires.

The minister will by recommending any suitable candidate to any office to the President, control the appointments of all the chief executives of all the PIB Institutions by virtue of Section 8.
While Section 4 of the PIB provides that all the agencies and companies shall be bound by the Nigerian Extractive Industries Transparency Initiative (NIETI), significantly the proposed National Oil Company and the National Petroleum Assets Management Agency will be excluded from being subject to either the Fiscal Responsibility or Public Procurement Acts.

Section 179(3) (d) of the PIB provides that a condition for the approval of a license for prospecting for oil for commercial purposes is an approved Nigerian content plan. Therefore, operators are required subject to our existing laws, to produce a plan for employing Nigerians in every significant aspect of their activities.
Every company currently and potentially involved in oil and gas exploration and production is required to remit into a fund, The Petroleum Host Communities Fund on a monthly basis, 10% of its net profits for the development of the economic and social infrastructure of the communities within a petroleum producing area.
CRITICISMS

THE PETROLEUM HOST COMMUNITY FUND

A considerable section of Northern lawmakers have opposed the proposed Petroleum Host Community Fund. Senator Bukar Abba Ibrahim of Yobe complained that the additional 10 per cent for oil producing states was one revenue stream too many as such states already enjoyed seven other special sources. In his words, “nobody planted or farmed oil, it is God who put it there…” Another lawmaker said that the current 13.5% derivation enjoyed by the oil-producing states was put in place by past northern heads of state thus neutralizing talk of a Northern gang-up against South-South interests. And only on Tuesday, governors from the North-west warned their lawmakers against supporting the bill.

The oil multinationals are opposed to the fund on the grounds that it amounts to double taxation, they are still required to maintain their Corporate Social Responsibility (CSR) programs and it is not the most efficient way to ensure that oil producing communities enjoy the fruits of their soil. They also state that it makes it unprofitable for new investments worth $108billion for the period 2012 to 2025 to go ahead.

Furthermore, economists say that there is no credible evidence to support the idea that increasing the allocation of funds to states or communities reduces the incidence of militancy. They feel that merely establishing another fund overlooks the serious issues of inequality, an inefficient bureaucracy and a governing elite not sensitive to the demands of the ordinary masses. Since the PIB does not specify how the money will be distributed, political interference may be significant as the amount in the fund will depend on the prevailing price of oil.

ENVIRONMENTAL CONCERNS

Public policy advocates, environmental activists and international development agencies have decried the absence of clear and specific timelines with respect to gas flaring (the wasteful burning of gas, a by-product of the oil extraction process). The only mention of anything remotely close to that is Section 275 of the PIB which just says that natural gas shall not be flared or vented after a flare-out date to be prescribed by the minister in a subsequent regulation. The same section makes this subject to certain permits granted under this Act.

MULTIPLE LAYERS OF BUREAUCRACY

The creation of the eight additional agencies each of which will require staffing, an executive board and infrastructural demands (office space, vehicles and other additional needs) has been roundly criticized as an invitation to undesirable funds wastage and unnecessary bureaucracy.

WIDE MINISTERIAL POWERS & GOVERNMENTAL INTERFERENCE

The powers of the Minister of Petroleum Resources as provided in the PIB have been described as ‘omnipotent’, ‘overawing’, ‘excessively wide’ and is seen as preventing the liberalization of the industry and allowing market forces to have a say in the industry which ironically was the intention of the PIB in the first place.

The parts of the PIB which provide for the minister recommending members to the board of all the new companies and agencies, as well as overriding any decisions taken by the regulatory agency at will is seen as potentially scaring away investors and new investment critical to jumpstarting the sector, and the Nigerian economy in general because of the uncertainty of shifts in political thinking which may affect appointment choices. Even more importantly, the Bill says nothing of any mechanisms to check the minister’s powers.

The PIB makes no provision for the National Oil Company or any of its operating units to undergo an annual external audit. It is noteworthy that in its 35 years of existence, the NNPC has never been the subject of an external audit – at least one that has been published.

In view of the fact that Nigeria’s oil reserves have been estimated to run out in approximately 40 years and our gas reserves in about 100 years, the imperativeness of having a law that modernizes our oil exploration and exploitation cannot be overemphasized. We feel it is the responsibility of our lawmakers to resolve their differences and fashion out a petroleum law that recognizes the national interest and takes Nigeria firmly into the 21st Century.

http://www.facebook.com/odedina.taofeek
http://www.twitter.com/oddyta0
http://oddyta0.blogspot.com.
BB  pin:28FAD99E

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s