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The passage of the Petroleum Industry Governance Bill (PIGB) by the Nigerian House of Representatives signals a positive change in the governance of Nigeria’s beleaguered oil sector but without passage of the three other bills, Nigeria may yet not fully reap the rewards of an effective oil sector, analysts say.
A comprehensive petroleum industry bill has eluded Africa’s biggest oil producer, a decade after it was first introduced into the national assembly. The Senate passed the bill on May 25, 2017 and the lower legislative body only passed a current version on January 16 retaining the bulk of the provisions made by the joint committee of both houses.
But the other aspects of the bill namely: the fiscal regime bill, upstream and midstream administration bill, and the petroleum revenue bill which includes provision for the host communities are yet to be passed.
“It’s a good development because now we are step closer to getting a law that will set out the governance structure in the oil and gas sector, “ said Adeola Adenikinju, gas policy analyst for the World Bank and professor of Economics at University of Ibadan.
Adenikinju further said, “But if we want to get the best out of the industry, they (lawmakers) must pass all be passed before the end of the year and we can have an oil sector that can contribute efficiently to the growth of the economy.”
Corroborating this view, Chuks Nwani, an energy lawyer and the Vice president of PowerHouse International, an energy consultancy, said it is a good start for the sector as the current national assembly has decided to balkanise the bill to take care of interests that might be affected.
“But passing only the governance aspects does not remove the uncertainty hovering about the oil and gas industry and it still cannot attract patient capital as it does not give investors an overall view of Nigeria’s oil fiscal regime,” said Nwani.
Emmanuel Affimia, another energy lawyer says the passage of the bill is good development for the sector but it is also important that the other aspects be considered to deliver a sector that benefit Nigerians.
The PIGB passed by the national assembly vests approval for allocation of oil blocks in a new regulator: the Nigerian Petroleum Regulatory Commission (NRPC). The commission now has the power to issue, modify, amend, extend, suspend, review, cancel and reissue, revoke and / or terminate upstream licences made in compliance with applicable laws and regulations of the country.
Operators in the petroleum sector complain of too much regulation. They answer to multiple regulators with similar functions paying multiple fees for the same thing. Worse still, it slows down projects because the same approvals are demanded for the same purpose.
This will change with the new PIGB as it establishes one regulator, NRPC which will assume the rights, interests, obligations and liabilities of the Petroleum Inspectorate, the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA) and regulate the upstream, midstream and downstream sub-sectors of the oil and gas industry.
It also vests the Commission with the assets, funds, resources and other movable and immovable properties, which are held by the Inspectorate, DPR and the PPPRA. This will ease regulation, save cost for the government and enhance projects delivery timeline.
Members of the board of the Commission will be appointed by the President but their appointments are subject to the confirmation by the Senate. The minister cannot sit on the Board and only the president can remove a board member.
To make the NNPC operate like a business, the PIGB splits the NNPC into three commercial entities providing for the incorporation of two entities to be known as the Nigerian Petroleum Assets Management Company (NPAMC) and the National Petroleum Company (NPC), which will be vested with certain liabilities and assets of the NNPC. There is also the regulator, the Nigerian Petroleum Regulatory Commission (NRPC).
The NPAMC shall be responsible for the management of the NNPC’s oil and gas investment in assets where government is not obligated to provide any upfront funding (essentially the production sharing contracts), whilst the NPC shall be an integrated oil and gas company operating as a fully commercial entity across the energy value chain.
For many years, NNPC has operated without accountability and cannot produce even a financial statement since 2010. This has made it difficult for the corporation to play the role of national oil companies as Statoil or Saudi Aramco have done.
“One of the issues people have raised before is the overbearing influence of the political leadership in decision making of these organisations and the fact that the regulatory role are combined, now there is going to a separation between regulatory and policy agencies and the NNPC would be allowed to be a commercial entity that will be subject to the rules of the market with public participation in ownership of the company,” said Adenikinju.
ISAAC ANYAOGU & DAVID IBEMERE
