The Senate President, Olusola Saraki, and the Senate committee chairman of the Petroleum Industry Governance Bill (PIGB), Tayo Alasoadura, may go down in history as heroes for the successful passage of the Bill on May 25, 2017, by the 8th Upper legislative chamber, after 17 years of stalling during which Nigeria was said to have lost over $235billion investments in the oil/gas sector.Labour leaders who came together in Port Harcourt on Thursday, June 15, 2017, looked at a lead paper by Chika Onuegbu, one of Nigeria’s foremost oil/gas industry financial experts, a chartered accountant and trade union activist, to lead in the dissection for fuller understanding. Onuegbu, a two-time state chairman of the Trade Union Congress (TUC) in Rivers State, national industrial relations officer of TUC and permanent representative of TUC in the PIB panels/negotiations, gave deeper hints on the advances made by the passage of the PIGB.
Reactions to PIGB
Since the passage of the bill by the Senate, however, there have been interesting reactions, positive and negative, he noted. “For instance, many groups and individuals in the Niger Delta have expressed strong reservations over the non-inclusion of the Petroleum Host Community Fund in the PIGB. A former chairman of the Nigerian Extractive Industries Transparency Initiative (NEITI), Assisi Asobie, described the passage as political, citing the timing of the passage; May 25, close to May 29, to give the impression of working hard.”
Also, NEITI has raised concerns that there was no specific provision that the NEITI principles be enshrined in the PIGB governance process.
Also, he said, indications have emerged that the House of Representatives does not intend to follow the strategy adopted by the Senate in the passage of the PIGB as they appear determined to include the Petroleum Host Community and Fiscal Regimes aspects of the Petroleum Industry Bill (PIB). “We understand that the Senate and the House of Representatives have an understanding on concurrence of Bills passed by either Chamber of the National Assembly. However, with the dissenting voices in the House of Representatives, the actions in the coming weeks will enable us understand how the House will approach the PIGB and whether the PIGB will eventually become law.”
The silence of the Ministry of Petroleum Resources has caused anxiety. “This silence of the Ministry is very unusual for a Ministry that is always keen to celebrate achievements in the Petroleum Sector. This may be an indication of the challenges that may arise with obtaining the critical presidential assent needed for PIGB to become law.”
He therefore, advised the leaderships of NUPENG and PENGASSAN to engage the House of Representatives to ensure that their observations were reflected in the final version of the Bill that would be concurrently passed and assented to by the President.
Historic
Despite the contending views, the passage by the 8thSenate of the PIGB, which is essentially the first out of the four parts of the Petroleum Industry Bill (PIB) by midterm, is seen as a milestone achievement. Onuegbu said this was especially so when one considered that the PIGB was not an Executive Bill and the huge consequences over the years due to non-passage.
Obvious drawbacks
The expert observed that the PIGB only deals with the one aspect of the PIB, that is the governance and institutional framework of the Nigerian Petroleum industry, and as such would not deliver the full benefits of the intended reforms except if the other aspects of the PIB such as the Petroleum Host Community Fund and Petroleum Fiscal Regime were also passed into law.
“For instance, we know that one of the major challenges facing the Nigerian petroleum industry is host community and Niger Delta issues. Until the recent peace diplomacy to the oil region by the Acting President, Yemi Osinbajo, the militant attacks in the Niger Delta led to significant amounts of shut-in production at onshore and shallow offshore fields and frequent declaration of force majeure by oil and gas companies in Nigeria.”
This had led to drastic decline in revenue projections and crude oil barrels for 2016 to 2018 from 2.2mbpd-2.5mbpd down to a mere 1.5mbpd in 2016, thereby worsening Nigeria’s economic crisis and pushing the country deeper into recession, exchange rate crisis, and stagflation. “Therefore, it is important that any legislation to address the challenges in the Nigerian oil and gas industry must make provisions on how to effectively address the Petroleum Host community issues.”
Similarly, he said, the non-inclusion of the Petroleum Fiscal Regimes aspect of the Petroleum Industry Bill (PIB) may mean that investors will continue to adopt a wait and see attitude, refraining from making any new major investment decision in Nigeria. “The fact is that it is the Fiscal Regime aspect of the PIB that will guide the final decision of investors on how much to invest in the Nigerian petroleum sector as it has direct impact on the economics of the investments in the Nigerian oil and gas sector vis-a-vis other Petroleum host countries. This aspect is therefore, very critical!”
PIGB’s technical insights
The PIGB as passed by the Senate is not significantly different from the version that was discussed at the Senate Public hearing on December 7th to 9th 2016 except for some few but fundamental changes such as: inclusion of Petroleum Equalisation Fund (PEF); enhanced penalty for violation of the orders of the Minister in the case of emergency under Rights of Pre-emption; and increase in the number of the members of the Governing Boards/Directors of Institutions created by the PIGB.
Others include increase in the experience required for Managing Director of the National Petroleum Company, reduction in the amount of government share that should be divested to the public from 30percent to 10percent vesting full responsibility of environmental matters in the petroleum industry on the Nigeria Petroleum Regulatory Commission; establishment of the Nigerian Petroleum Liabilities Company; requirement of senate approval in the appointment and dismissal of the board members of the Nigeria Petroleum Regulatory Commission; and inclusion of Section 55(a) which makes the Minister of Petroleum the non-executive chairman of the Board of the Nigeria Petroleum Assets Management etc.
The Bill created key institutions in the industry such as the office of the Minister, Nigeria Petroleum Assets Management Company, National Petroleum Company, Nigeria Petroleum Liability Management Company, Petroleum Equalisation Fund, Ministry of Petroleum Incorporated; and Nigeria Petroleum Regulatory Commission.
Minister still powerful
The expert stated that the Minister remained a powerful person in the oil industry contrary to widely-held views. “Please also note that penalties with respect to the Minister’s rights of pre-emption in Section 3 were in the PIGB final version passed by the Senate, increased to treat offenders as economic saboteurs. Penalties were increased to require forfeiture of the petroleum products and facilities subject of the offence. Also, the term of imprisonment was increased to 10 years to properly reflect the gravity of the offence as an economic sabotage. As if the above is not enough, the Minister will also be the chairman of the Nigeria Liability Management Company.”
The comrade pointed out that the PIGB required that the principles of federal character shall be considered in making the appointments into the Board of the Governing Board. The PIGB also provides that the appointment and removal of the Commissioner is subject to Senate approval, unlike before, he noted.
Warning
Onuegbu warned: “Note, the power given to the regulator, the NPRC, to accept grants is worrisome for the industry given the challenges of fighting corruption and promoting transparency in the sector.”
Petroleum Equalisation Fund
He revealed that the inclusion of Petroleum Equalisation Fund (PEF) in the PIGB was one of the cardinal requests of PENGASSAN and NUPENG during the senate public hearing. This was granted. The PIGB repealed the Petroleum Equalisation Fund (Management Board, ETC.) Act, Cap P11 Laws of the Federation of Nigeria, 2004 and established the Petroleum Equalisation Fund (“the Equalisation Fund”) into which shall be paid all monies payable to the Equalisation Fund. It also provides for a 5 per cent fuel levy in respect of all fuel sold and distributed within the Federation which shall be charged subject to the approval of the Minister as part of the funding for the PEF.
There is need for the National Assembly to review the enormous powers of the Minister of Petroleum over the Petroleum Equalisation Fund (PEF) before the concurrent passage by the Federal House of Representatives.
Upcoming commercial entities
The following commercial entities were established by the PIGB: Ministry of Petroleum Incorporated (“MOPI”), which shall hold on behalf of the Government, shares in the successor commercial entities incorporated pursuant to the provisions of the PIGB. Onuegbu warned thus: “We need to restate that the Country does not need the Ministry of Petroleum Incorporated. This is because the organisation will become more like another NNPC holding company. We also expect the Nigerian state governors to show interest on how the establishment of the MOPI will affect their revenue as the MOPI will control 40 percent of the revenue from the oil and gas, and this revenue does not seem to be structured to be paid into the Federation Account. Moreover, control and supervision of the MOPI is essentially that of the Minister of Petroleum Resources.”
There will be the Nigeria Petroleum Assets Management Company, which shall be responsible for the management of assets currently held by the Nigerian National Petroleum Corporation (NNPC). The other is the National Petroleum Company, which shall be responsible for the management of all other assets held by NNPC except the Production Sharing Contract and Back-in Right assets currently held by the NNPC. “This essentially means that much of what is NNPC today including the refineries, NPDC and the Joint Venture assets will be transferred to the National Petroleum Company.”
There is the Nigeria Petroleum Liability Management Company, which shall assume and manage the liabilities of NNPC and the pensions liabilities of the Department of Petroleum Resources in order not to financially encumber the Asset Management Company and National Petroleum Company established pursuant to this Act.
“The Minister is responsible for the incorporation of the Nigeria Petroleum Liability Management Company and will also Chair its Board. There is however need for the representation of NUPENG and PENGASSAN on the board of the Nigeria Petroleum Liability Management Company to ensure that the pension liabilities of the workers are adequately covered.”
Superiority of PIGB
The comrade said: “It is important to note that the relevant provisions of all existing enactments or laws, including but not limited to the Petroleum Act, Oil Pipelines Act, Hydrocarbon Oil Refineries Act and the Companies and Allied Matters Act, to the extent that they deal with matters provided for in the PIGB, shall be read with such modifications as to bring them into conformity with the provisions of this Act. For clarity, PIGB will override any other provision, where they clash.”
Sensitive labour matters
“Several sections deal with transfer of staff. However, it is important to note that there is no difference between the transfer of staff in the PIGB version discussed at the Public hearing and the one passed by the Senate. Although some demands such as inclusion of collective bargaining agreement with the Unions, inclusion of NUPENG and PENGASSAN in the Boards of the Institutions in the PIGB, the minimum Five year stay post transition, etc. were not granted, the PIGB passed by the Senate is not fundamentally different from the position canvassed by NUPENG and PENGASSAN at the Senate Public hearing.”
Conclusion
Onuegbu stated: “The passage of the PIGB whilst commendable will not deliver the full benefits of the intended reforms except if the other aspects of the PIB such as the Petroleum Host Community and Petroleum Fiscal Regimes are also legislated.
“It is important to recall that one of the aims of the reforms in the Nigerian Petroleum Sector was to have one law that coalesces the more than existing 16 laws into one comprehensive, all-encompassing legislation, which captures all the experience of the past 60 years of oil and gas exploration and production in Nigeria as well as international best practices. The approach adopted by the 8th Senate is therefore a fundamental departure from all previous attempts at legislating the reforms recommendations for the Nigerian Petroleum sector. The fact remains that as an instrument intended to bring direction to the hydrocarbon sector, the Petroleum Industry Bill (PIB) represents a great opportunity for Nigeria to ensure a solid legislative foundation on which the future of oil and gas operations in the country will rest.”
He went on: “There is also need for clarity on the structure of the divestment of the shareholdings of the successor commercial entities to ensure their smooth take-off. Host communities, host state government and workers should be given shares as was done in the divestment of the shares of the Federal government in the Eleme Petroleum Chemical Company were the State government has 10 per cent; Host communities 7.5 percent and the workers 2.5 percent.
“Finally, we look forward to the Senate and House adopting a common framework that will eventually lead to the PIGB and other critical aspects of the Petroleum industry Bill (PIB) such as Petroleum Host Community and Fiscal regimes becoming law before the end of 8th National Assembly and this administration. This is more so as political activities will essentially kick-off next year with Political party primaries. PENGASSAN and NUPENG together with their Labour Federations and Civil Society allies should therefore intensify their monitoring and engagement of the National assembly leadership and the Minister of State for Petroleum to ensure that the right thing is done in the best interest of the Nigerian Petroleum Sector.”
Note
The PIGB is a good foot forward but until the host communities and investors get their own packages, the jubilation should be put on hold
