How PIB repeals Overlapped Petroleum Acts and Regulations In Nigeria – By Hon Abdullahi Mahmud Gaya

July 22, 2021
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Hon Abdullahi Mahmud Gaya

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Nigeria’s oil and gas industries is being governed by laws enacted more than 50 years ago which are extremely not conversant with current oil and gas reality. Eben thought oil and gas industry contributes less than 10% to the country’s Gross Domestic Product, but it contributes about 90% of the foreign exchange earnings and 60% of total income.

The passed PIB will clear the concerns raised by investors and have greater clarity on the direction of the industry, especially with respect to the new fiscal rules and Nigeria’s oil and gas industry and Nigeria’s economy to witness an exponential growth soon. It is a fact that Nigeria hosts Africa’s second largest petroleum reserve with proven oil reserves of about 36.97 billion barrels of crude oil. As of 2020, Nigeria had the most concentrated the natural gas reserves in Africa. The country had more than 200.4 trillion Standard Cubic Feet (TSCF). But in spite of the abundant oil and gas reserves, country only received four per cent ($3 billion) of $75 billion invested in the continent in 2019 making Nigeria to be overthrown by its smaller neighbour, Ghana, according to the National Bureau of Statistics, NBS

My piece will focus on the significance of the Petroleum Industry Bill (PIB) on Repeals Overlapped Petroleum Acts And Regulations In Nigeria passage to the country’s economy. About two weeks ago both chambers of National Assembly passed the long awaited Petroleum Industry Bill after 13 years the bill has gone through three presidents and four legislative tenures without resulting in an overarching petroleum industry law. In 2018, the House of Representatives passed a harmonised version of the PIGB almost a year After the Senate passed the bill. However, the Petroleum Industry Bill was rejected by President Buhari for “Legal and Constitutional reasons.

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Non passage of the Bill remained a major drag on the petroleum industry, significantly limiting the country’s potential to attract both local and foreign capital at a time when many other countries in Africa are scrambling to exploit their oil and gas resources. In spite global market is changing rapidly, exacerbating old threats and creating new ones. The world’s largest consumers have become top producers and top importers have begun to export. Future trends for the oil industry do not look too good because a number of developed countries have set ambitious targets for reduced green house emissions.

Therefore the passed the bill arrived at right time considering future usefulness of petroleum resources in near decades had increased level of uncertainty on oil demand calls for great concern. With great anticipation Petroleum Industry Bill would overhaul the sector to operate optimally in line with Global Standards.

For all these years the sector has many Petroleum Acts and Regulations which overlapped each other in functions and responsibilities without comprehensive law for the administration of the oil and gas sector. But When PIB assented by Mr President will repeals about 10 laws including the Associated Gas Reinjection Act; Hydrocarbon Oil Refineries Act; Motor Spirit Act; NNPC (Projects) Act; NNPC Act (when NNPC ceases to exist); PPPRA Act; Petroleum Equalisation Fund Act; PPTA; and Deep Offshore and Inland Basin PSC Act. It also amends the Pre-Shipment Inspection of Oil Exports Act while the provisions of certain laws are saved until termination or expiration of the relevant oil prospecting licenses and mining leases including the Petroleum Act, PPTA, Oil Pipelines Act, Deep Offshore and Inland Basin PSC Act. Under- Fiscal framework the objective is to establish a progressive fiscal framework that encourages investment in the Nigerian petroleum industry, provides clarity, enhances revenues for the government while ensuring a fair return for investors.

Within 6 months from commencement of the new law, NNPC Limited under Companies and Allied Matters Act (CAMA) will change NNPC operation to commercially oriented, which would bring much-needed dividends to Nigerians. NNPC will metamorphose into a limited liability company. Incorporation of a commercial and profit focused NNPC Limited under CAMA with ownership vested in the Ministry of Finance Incorporated (and Ministry of Petroleum Incorporated) on behalf of the Federation to take over assets, interests and liabilities of NNPC. This structure is expected to pave the way for eventually sale of shares to Nigerians.

The initial shareholders are going to be the Ministry of Finance Incorporated and Ministry of Petroleum Incorporated. But subsequently, it will be open for the general public to invest. Then with regards to the fiscal regime, the laws will bring it in tandem with international best practices, to make the oil and gas industry in Nigeria much more competitive and attract the much-needed investments into the country.”

The passed bill create of the Nigerian Upstream Regulatory Commission responsible for the technical and commercial regulation of the upstream petroleum operations; and the Nigerian Midstream and Downstream Petroleum Regulatory Authority responsible for the technical and commercial regulation of the midstream and downstream operations in Nigeria.

The PIB seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and It contains 5 Chapters, 319 Sections and, 8 Schedules. Petroleum Industry Bill (PIB) key objective is to ensure good governance and accountability, creation of a commercially oriented national petroleum company, and fostering a conducive business environment for petroleum operations.

The quest for oil explorations in the North and other parts of the country have received a huge boost. Based on Section 9 of the PIB, at least 30% of the profit generated by the proposed Nigerian National Petroleum Company Limited will go to the exploration of oil in ‘frontier basins’. Although the proposed law doesn’t identify the frontier basins, a statement by the president in 2019 identified the frontier basins as Chad Basin, Gongola Basin, Anambra Basin, Sokoto Basin, Dahomey Basin, Bida Basin and Benue Trough.

30 per cent for Frontier Exploration Fund as specified in (section) 9(4) of this Act”. It will also have the power to “be a supplier of last resort for security reasons. All associated costs shall be for the account of the federation. The main objective of 30% frontier exploration activities is to promote the exploration of petroleum resources in Nigeria for the benefit of the Nigerian people and promote sustainable development of the industry, ensure safe, efficient transportation and distribution of infrastructure, and transparency and accountability in the administration of petroleum resources in Nigeria. The proposed law stipulates that the 30% profits from oil operations will be held in Escrow Account that process completing of transaction. Money, securities, funds, and other assets can all be held in escrow. In a situation where it is not being used, it would be returned to the treasury.

the House of Representatives made efforts to return to the Senate to discuss the possibility of renegotiation to 5% but the Senate had already passed the report thereby foreclosing any review. Therefore, members of the conference committee of tbe House had to return and pass it. That is what House rules say. As we don’t want PIB to suffer the same fate that it had suffered in the past. Therefore, the House of Representatives adopted Conference Report on the Petroleum Industry Bill approving 3% as the financial provision for the Host Communities Fund to align with the position of the senate on the same matter.

The three per cent should be pay annually as contribution to the Host Community Development Fund Operating Expenditure of Oil Companies (OPEX). Another good aspect for communities component in the bill provides that each settlor must set up a development trust fund and appoint a Board of Trustee which must apply to the Corporate Affairs Commission (CAC) to register the trust as a Host Communities Development Trust.

Clause 236 of the bill gives the time frame for the registration of a trust fund for oil asset. For existing leases and existing designated facilities, the period for setting up the fund is within 12 months of the bill coming into effect. Existing prospective licences must set up the Fund before application for the field development plan. And failure to comply with setting up of the trust fund in line with the Act, a holder risks revocation of the applicable licence.

The passed PIB proposed that Host Communities Be Held Responsible Pipeline Vandalization in their domains. According to the Bill, “wherein any year, an act of vandalism, sabotage or other civil unrest occurs that causes damage to petroleum and designated facilities or disrupts production activities within the host community, the community shall forfeit its entitlement to the extent of the costs of repairs of the damage that resulted from the activity with respect to the provisions of this Act within that financial year. Provided the interruption is not caused by technical or natural cause.

PIB will Liberalise downstream sector and help to attract Foreign Direct Investment into Nigeria thereby expanding the contribution of this sector to the country’s economy, In addition, with more FDI inflows to help in external reserves accretion thereby supporting the exchange rate. PIB will make multinational oil companies refine 50 percent of their crude supply in the country. Stakeholders are optimistic outlook on the industry, driven by the full implementation of the bill. The bill also promotes the competitive and liberalised downstream sector of the petroleum industry as well as the development of fuel and chemical industries.

Hon Gaya,Writes in From the House of Representatives Abuja

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