Last Thursday, the National Assembly finally passed the much-talked-about Petroleum Industry Bill, after a tortuous two decade-long sojourn. Emmanuel Addeh asks if the bill, now awaiting the assent of President Muhammadu Buhari, after harmonisation by the lawmakers, would see the light of the day
From all indications, it appears that the Petroleum Industry Bill (PIB) may finally see the light of day and eventually serve as the framework for operations in the oil and gas industry, having suffered several setbacks for close to 20 years, from the period the entire process first started.
Although, in the past, there had been several attempts to pass the law, such moves, in the end, have always ended in utter failure. Even in some cases when the national assembly succeeded in passing it, the president wouldn’t give his assent.
But this time, it appears that things are different. Since the bill is emanating directly from the executive arm, it is expected that President Muhammadu Buhari, would have no qualms signing it into law this time.
History and Hurdles
Arguably the piece of legislation with the most tortuous journey in the nation’s history, the PIB has faced many impediments in its long walk to fruition as the parties seemingly almost always stuck to their old rigid positions in the process.
For instance, during a two-day public hearing at the National Assembly recently to deliberate on the bill which has been described as pivotal to the long-term overall survival of the oil and gas industry, tempers were so high that blows were physically exchanged between dissenting parties. Such was the tension the bill generated.
Indeed, so complicated was the process that Senate President, Ahmed Lawan, once said that some “demons” were behind its non-passage, promising to put them to shame once and for all. On Thursday, he said the demons had been finally conquered.
Looking back, on September 28, 2020, President Muhammadu Buhari, like some of his predecessors, sent the PIB to the National Assembly for consideration.
But that would not be the first time the must talked about bill would get to the level of the executive and the legislature in the country. Indeed, it had been a long time coming.
An offshoot of the Oil and Gas Sector Reform Implementation Committee (OGIC), which was inaugurated on 24 April 2000 under the chairmanship of Dr. Rilwanu Lukman, the then the Presidential Adviser on Petroleum and Energy, the original body was charged with the task of making recommendations for a far-reaching restructuring of Nigeria’s oil and gas industry.
At the time, the recommendations of OGIC included a proposal to separate the commercial institutions within the industry from the regulatory institutions.
Seven years later, the government introduced the National Oil and Gas Policy and further reconstituted OGIC to make recommendations towards the emergence of a new institutional framework to govern the operations of the oil and gas industry.
That framework was also expected to oversee the emergence of a new national oil company, new regulatory bodies and a new national directorate, for a more effective policy formulation for the industry.
In 2008, the discussions that ensued on ways to strengthen the OGIC produced the Lukman Report which recommended a new regulatory and institutional framework that, when implemented, would guarantee greater transparency and accountability.
Eventually, the report formed the basis of the first PIB that was submitted in 2008 as an Executive Bill under the Late President Umar Yar’Adua. Since then the bill had hit several roadblocks as vested interests attempted to get their full slices.
Having undergone numerous revisions and divisive debates, on the 18th of July 2012, the then President Goodluck Jonathan presented a new version of the PIB to the seventh session of the national assembly for consideration and enactment, further throwing it into the front burner of national discourse.
The PIB has undergone several evolutions, including a split which was done during the 8th national assembly, following the inability of stakeholders to agree on certain clauses.
At a point it was separated into Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and Petroleum Host Community Bill (PHCB).
Although the PIGB was approved by the national assembly at one point, but it couldn’t sail through the presidential assent and was thereafter returned to the legislature for further work.
Sore Points
Key stakeholders mostly rejected its provisions on host communities’ equity share holding and investment prospects. The percentage to be allocated to host communities was largely responsible for the delay in the passage of PIB since 2007.
Late President Umar Musa Yar’Adua proposed 10 per cent, but was rejected by lawmakers predominantly from the north in the 7th National Assembly.
On his part, Jonathan retained the same 10 per cent, but was again rejected by the National Assembly. In the 8th Senate led by Saraki, it was brought down to 5 per cent, but couldn’t be passed into law due to divergence of opinions.
In the latest attempt to discuss the bill before this point, the Host Communities of Nigeria Producing Oil and Gas (HOSTCOM) at a public hearing at the Senate, on the reviewed PIB, made it clear that nothing short of 10 per cent would be acceptable to them.
Aside the argument over 10 per cent, the host communities stressed that after 60 years of what it described as marginalisation and bearing the brunt of the negative impacts of exploration and exploitation, it would be illogical to deprive them the right to equity shareholding in both the establishment of the NNPC Limited, the Commission, the Authority and the Boards which are now parts of the new bill.
Oil Producers Trade Section (OPTS) led by Mike Sanger, had also on its part, made a strong case against the bill for not making serious provisions for investment in the oil and gas sector.
According to OPTS, the lack of competitiveness was caused in part by the high cost of doing business in Nigeria, with overall project costs and operations costs being 69 per cent and 42 per cent higher than the global average respectively.
“A PIB which safeguards existing projects and introduces competitive terms, is required to fully utilise the country’s resources for the benefit of all Nigerians,” it submitted.
In a recent forum, Shell Nigeria Exploration and Production Company (SNEPCo) voiced its opposition to the passage of the proposed legislation, saying it could throw the gas sector into more crisis than currently obtains and further stunt the growth of the sector .
Managing Director of SNEPCo, Mr. Bayo Ojulari, maintained that the PIB was not enabling enough and not fully aligned with the direction that Nigeria has articulated around the “Decade of Gas” as propagated by the current administration.
He maintained that with the condition set for exportation of gas resources by companies operating in the sector, the proposed petroleum governance bill, will stifle competition.
“The terms and prices of gas development, especially for deep non-associated gas need to be more competitive. Today, it is actually looking worse than it is in the current environment and that’s an area that has not enjoyed a level of emphasis.
“Today, the PIB does not do any justice or to help to unlock the huge potential that we have in the non-associated gas environments. With the potential of gas to power our economy, focus should be more on competitive discuss that will stimulate gas.
“Currently, the version of the PIB that we have is not sufficient and will not enable us incentivise investors to unlock the huge non-associated gas that we have,” he argued.
Lost Ground, Renewed Hope
While close observers believe that the law should have been passed several decades ago, there seems to have appeared some light at the end of the tunnel for the Nigerian oil and gas industry. The passage of the bill by the national assembly has rekindled hope that although late in coming, some part of the losses, by one estimate, exceeding $200 billion, may be recouped before big oil goes into extinction.
For instance, the Nigeria Extractive Industries Transparency Initiative (NEITI), while hailing the passage of the bill, stressed that over $200 billion was lost to a clear framework for the sector.
Executive Secretary of NEITI Dr. Ogbonnaya Orji, while commending all stakeholders, argued that the stagnation of investment opportunities in the petroleum industry was as a result of the absence of a new law for the sector.
“This has led to huge revenue losses to the tune of over $200billion. Revenue losses were as a result of investments withheld or diverted by investors to other more predictable jurisdictions,” the initiative stated.
In addition, the executive secretary disclosed that over $10.4 billion and N378.7 billion were lost through under-remittances, inefficiencies, theft or absence of a clear governance framework for the industry.
“The NEITI executive secretary is optimistic that with the new governance law for the industry, these huge revenue losses to the nation as a result of process lapses and outright stealing will be strictly checked if not eliminated,” the organisation stressed.
Earlier, in a forum, the federal government had said that when passed, the PIB will resolve most of the knotty issues that have curtailed the development of the oil and gas sector in the country since the 50s.
Minister of State, Petroleum Resources, Chief Timipre Sylva, argued that Nigeria had been going in the wrong direction since the discovery of oil and gas in the country.
“One thing is very clear, that we went in the wrong direction in the oil and gas business since the 50s and it’s not too late from all that has been said, to as usual try to trade blames, as to who was responsible,” he said.
Sylva posited that the government had bent over backwards on a lot of provisions in its engagement with investors.
In its assessment of the industry, Financial Derivatives Company Limited (FDC) had also indicated that Nigeria’s oil and gas industry was losing as much as $15 billion in investments annually due to the delayed passage of the PIB.
FDC noted that even if passed today, the country has already lost several investment opportunities due to the lack of urgency attached to the passage of the legislation which was first transmitted to the lawmakers over 14 years ago.
“Its delay has sparked a great deal of uncertainty and led to an estimated loss of over $15bn annually in lost investments to Nigeria’s oil and gas industry. With the global shift from fossil fuels to renewable forms of energy picking up pace, the passage of the PIB may just be too little, too late,” an FDC reported indicated.
Controversies
Still, controversies surrounding the bill won’t just disappear. For example, some persons have questioned the rationale behind allocating a paltry 3 per cent to the oil producing communities which bear the brunt, while 30 per cent of all PSCs was allocated for finding oil in the frontier basins, which is literally interpreted as the northern area.
But Chairman of the Joint Committee, Mohammed Sabo, said the senate approved the funding mechanism of 30 per cent because it recognised the need for the country to urgently and aggressively explore and develop its Frontier Basins to take advantage of the foreseeable threats to the funding of fossil fuel projects across the world due to speedy shift from fossil fuel to other alternative energy sources.
“To this end, the committee recommends funding mechanism of 30 per cent of NNPC Limited’s profit oil and profit gas as in the production sharing, profit sharing, and risk service contracts to fund exploration of frontier basins,” he said.
Added to that controversy, a House of Representatives member, Sergius Ogun, had in a shocking revelation, argued that some members did not have copies of the bill during the clause-by-clause consideration of the bill to make informed decisions before the legislation was passed.
He stated: “We didn’t have enough copies. We were told to pick up copies at a particular room yesterday, my aide went there, and they were not available, we went there again this morning, they were not there.
“If whatever we have gone through is different from what was presented, I cannot just go ahead and agree to everything, I just wanted to have a copy and flip through.
“That is why I went to protest to the chairman who was surprised that we all do not have copies and the deputy chairman told us that within five minutes from when we started, we will all have copies but that did not happen.”
But while noting that an imperfect bill would be far better than none, he commended the leadership of the house, the minister of state for petroleum and the NNPC for their commitment to the passage of the bill.
Also, the Pan Niger Delta Forum (PANDEF) expressed reservations over the 3 per cent approval for the development of host communities, with the National Publicity Secretary of the organisation, Ken Robinson, arguing that the government cannot transform the oil industry without transforming the communities in whose backyard the industry is exploited.
Highlights
Among others, the bill has ratified the establishment if the Upstream Regulatory Commission to oversee upstream petroleum operations, including technical, operational and commercial activities and ensure compliance with all applicable laws and regulations governing upstream petroleum operations.
In addition, the commission to be set up, will ensure that wastages are minimised, government revenues are optimised; promotion of healthy, safe, efficient and effective conduct of upstream petroleum operations, among others.
The new bill when assented to by the president will also see the transformation of the Nigerian National Petroleum Corporation (NNPC) into a profit-oriented company devoid of political interferences.
It also sees the expansion of the definition of host communities, which is no longer restricted to the oil-producing areas alone, but now include communities where pipelines pass through.
Clause 29 of the bill also approved the establishment of the Nigerian Midstream and Downstream Petroleum Regulatory Authority which would be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry in Nigeria.
Its function include implementing government’s policies for midstream and downstream petroleum operations as directed by the minister; and to promote, establish and develop a positive environment for international and domestic investment in midstream and downstream petroleum operations.
Others are to ensure strict environmental implementation of policies, laws and regulations for midstream and downstream petroleum operations; and to develop and enforce a framework on tariff and pricing for natural gas and petroleum products.
All monies received from gas flaring, will in the new bill be channelled for the purpose of environmental remediation and relief of the host communities as against the development of infrastructure in midstream gas operations.
The senate also approved the ownership of all shares in NNPC Limited to be vested in the government at incorporation and held by the ministry of finance incorporated on behalf of the government.
The bill which has five chapters, the senate said, deals with creating efficient and effective governing institutions with clear and separate roles for the petroleum industry and promoting transparency and accountability in the administration of the petroleum resources of Nigeria.
The bill also seeks to separate the NNPC into three: Nigerian National Petroleum Authority, Nigerian National Petroleum Commission and NNPC Limited (now to become a limited liability).
Waiting for Buhari
With the expected harmonisation between the copies passed by the senate and the house of assembly, which should be concluded in less than two, the ball now shifts to the court of the president. However, it would be strange if the president declines assent again, with the bill having emanated from the executive and the consultations for the fresh bill being obviously more intense than the previous. Hopefully, Nigeria may just be able to make some hay under the dimming fossil fuel sun.
