PIB and Nigeria’s continued wait for necessary petroleum industry reforms

When the House of Representatives recently passed for second reading, the new Petroleum Industry Bill (PIB), after prolonged debates on the general principles of its proposed legislation, many stakeholders heaved a short sigh of relief. This is because the process for reforms for the country’s petroleum industry has dragged for over 17 years without much result. ROTIMI IGE, in this report, X-rays some key components of the bill and how it could change the fortunes of the nation’s economy, stakeholders and host communities of crude oil installations.

The Petroleum Industry Bill (PIB) was first presented before the National Assembly in 2008 to bridge the inadequacies identified in the earlier oil and gas acts, precisely the 1969 Petroleum Act and the 1959 Petroleum Profit Tax (PPT) Act to initiate reform in the governance, administrative, regulatory and fiscal framework of the oil and gas industry in Nigeria. Now, over 12 years later, the PIB has still not been implemented. However, it would be recalled that President Muhammadu Buhari presented the bill to the National Assembly again on 28th September, 2020 and recently passed its second reading.

Clearly stated, the major goal that the bill seeks to achieve is efficient and effective governing institutions with distinct roles within the petroleum industry. Moreover, according to stakeholders, it will address the need for an established framework to create profit-driven petroleum entities to encourage value addition and globalisation of the petroleum industry. In the same way, it promises to promote transparency and accountability in the administration of petroleum resources of Nigeria and foster a more conducive business environment for petroleum industry operations.

Similar to other bills presented before the lawmakers, the PIB is not exempt benefits. One of its many advantages is increased oil revenue and improved fiscal terms, which will ultimately bring about increased royalties. Eventually, the industry will experience increased crude oil capacity and gas production targets while establishing sustainable growth and development in host and impacted communities. Furthermore, the bill makes provisions for environmental protection and sustainability, hence making Nigeria more eco-friendly in the face of harsh climate changes. Inevitably, the expansion of the Nigerian petroleum industry will create more job opportunities, especially in sensitive hotspots like the South-South part of the country.

A key component of the PIB, the Petroleum Industry Governance Bill (PIGB), was passed by the House of Representatives on 15 January 2018, seven months after its passage by the Senate in May 2017. The passage by the National Assembly was a huge step forward considering the last 17 years which had been characterised by failed attempts at policy reforms in the petroleum sector.

Since then, the PIB has undergone numerous revisions and debates and met with a complex set of obstacles. According to reports, in July 2012, the then President Goodluck Jonathan’s administration presented a new version of the PIB to the National Assembly for consideration and enactment. There was some success in 2015, with the passage of the bill in the House of Representatives in the 7th Assembly but progress stalled when the bill did not go through the Senate before the dissolution of the 7th Assembly following the change of government in May 2015.

In 2015, the present administration proposed passing the PIB in various segments, forming four separate bills. The Petroleum Industry Governance Bill (PIGB), Fiscal Regime Bill (FRB), Upstream and Midstream Administration Bill (UMAB) and Petroleum Host Communities Bill (PHCB). They prioritised the PIGB, as it addresses reforms to the governance of the sector through the establishment of an independent regulatory commission , the Nigerian Petroleum Regulatory Commission, which incorporates the current Department of Petroleum Resources (DPR) and the Petroleum Product Pricing Regulatory Agency (PPPRA); the unbundling of the Nigerian National Petroleum Corporation (NNPC) into two limited liability companies, with one holding joint venture assets in the upstream sector and the other holding the production sharing contract assets; and governance and accountability arrangements with respect to the new institutions created.

The PIGB was finally passed at the Senate in May 2017, and progress has been made through the passage to second Reading of the other three segments of the bill.

Now, back to present day. Although the benefits of the PIB look massively favourable to the development of our economy, there are a few roadblocks obstructing its assent. Primarily, the conflict of interest, especially in the aspects of the bill concerning transparency and sustainability, has hindered the bill at the legislative level. In the same way, research indicates that there are vital parts of the bill that have still not been presented to the National Assembly by the executive arm.

Also, there is a tug of war involving the host communities and international oil companies. Local communities have representatives who have been involved in endless discussions with decision makers to ensure the communities remain protected, irrespective of any government agenda. On the other side, the global oil companies have also been following the journey of the bill very closely to ensure their interests are still very much secure.

Consequentially, the aforementioned obstacles of the PIB have resulted in detrimental effects which have caused a decline across the bar. For instance, some financial reports from various agencies have stated that an approximated sum of $15 billion is being lost yearly due to diverted and withheld investments. For perspective, the stated amount, when calculated, could fund a whopping 52 per cent of the 2021 budget. Secondly, the developmental benefits that host communities seek to enjoy remain wishful thinking as the bill continues to delay. More importantly, the stagnation of the enactment of the PIB has succeeded in stalling countless contracts and causing loss of income for companies and the government, as a result of ambiguity and the fragile nature of laws.

In the face of these mounting issues, the threat to national security is undoubtedly one of the most pressing of all. Specifically in host communities, criminal activities including political violence, pipeline vandalism and oil theft are the order of the day. An estimated value of 205 million barrels of crude oil has been lost to oil theft between 2015 and 2019. This translates to a colossal loss of ₦4 trillion during that period – an amount that could have been invested in other developmental projects. Sadly, high security costs also set the communities back, as they continue to face poor socio-economic development. Their agricultural land and water have endured constant pollution from oil products, thus leading to the degradation of the environment, which is especially not helpful at a point where countries are clamouring for environmental preservation. All these factors have led to a monumental decline in the general health and well-being of the residents and contributed to the mortality rate in these host communities.

In 2018, the Host Communities Development Bill (HCDB) was created to remediate the gruesome impact that these communities have been persevered overtime. This bill is particularly fundamental to the protection of host communities because there is a need for an independent conflict settlement and grievance management system and the minimisation of government involvement and control in funding the development of these communities. This transfers autonomy to the host communities themselves by increasing community participation in the assessment of their needs and formulation of development plans to meet these demands. Equally, it encourages the centralisation of monetary proceeds if a secure funding model is created.

When all of these are put in place, it prepares residents and stakeholders to advocate for the accelerated treatment of the PIB because they naturally would want to protect their communities and the framework which obviously must have taken a lot of effort to build. It is important that these communities engage in positive action to draw the attention of legislators to accelerate the assent of the Petroleum Industry Bill or they will silently continue to be one of the most affected groups at the centre of the chaos, as is the case with some other major government laws and policies.

Stakeholders are, however, still hoping that accelerated attention is given to the passage of the bill, especially as advanced nations of the world are already looking for alternatives to fossil fuel. Last week, Vice-President Yemi Osinbajo met with stakeholders from the oil and gas sector over the PIB. Meeting virtually under the auspices of the Oil Producers Trade Section (OPTS) in Nigeria, and Independent Petroleum Producers Group (IPPG) on Wednesday, Osinbajo advocated agreement on terms that will give the nation a more competitive environment. The meeting followed ongoing consultations ahead of the passage of the PIB.

The vice president noted that in line with the focus of the present administration, there is need for stakeholders in the sector to agree on terms to create a more competitive environment while maximising opportunities in the oil and gas industry.

He said, “The other point is that of gas. To sound the question of reconciling and maintaining our domestic gas obligation, and at the same time improving the gas environment in such a way that we are able to benefit maximally from it as a business and government.

Speaking further on the benefits of harmonising interests in the PIB, Osinbajo observed that the passage of the PIB should be seen as an opportunity to transform the industry by addressing lingering issues that have impeded development across the different sectors that make up the industry.

He said, “Businesses would like to invest and invest more in this environment. So, that is the point of convergence. We want more investments and obviously state governments like more investments, and you (private companies) would like to invest so that you can make more money. No question about that; what we should seek to do is to see to what extent we can come to that convergence.”

Earlier in his remarks, the Minister of State for Petroleum Resources, Mr Timipre Sylva, had said the interaction with the stakeholders in the petroleum industry is indicative of their commitment to the transformation of the industry through the PIB.

He assured that working with other stakeholders, including the National Assembly, the PIB as conceived by the Buhari administration would be passed into law.

President of Nigeria’s Senate, Ahmed Lawan, has also restated the ninth National Assembly’s commitment to the early passage of the PIB, giving the first quarter of the New Year as a timeline for passage of the bill which he noted has suffered a long delay.

“When we resume, we will start work on PIB. That is one piece of legislation that not only Nigeria but the entire world is waiting for because that will change our economy. The money will start flowing. Passing the PIB is going to be the strength of our patriotism as lawmakers.

He said there had been oppositions to the amendment of the act but the leadership of the ninth Senate pressed on to get it passed. With his promises, stakeholders in the oil and gas industry continue to wait, hoping that a silver lining that is the PIB’s passage, will birth the beginning of a new, prosperous economy for all.

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