THE oil and gas industry is very crucial to Nigerian economy because it contributes over 95 per cent of its foreign exchange earnings and contributes over 65 per cent of its Gross Domestic Product (GDP).
However, the sector has been challenged with poor regulatory framework over the years. The Petroleum Act is the principal statute that governs petroleum operations, including exploration, production anduse. It vests ownership and control of all petroleum exclusively in the government and the exercise of the powers consequent on this title in the minister of petroleum resources.
The Petroleum Act and its subsidiary legislation, including the Petroleum (Drilling and Production) Regulations, the Petroleum Regulations and the Petroleum Refining Regulations, govern petroleum operations in Nigeria including exploration, development, production, storage, transportation, refining and marketing.
The Oil Pipelines Act and the Oil and Gas Pipelines Regulations provide the legal and regulatory framework for the establishment, operation and maintenance of pipelines that are incidental and supplementary to oil and gas operations in Nigeria.
The Deep Offshore and Inland Basin Production Sharing Contracts Act prescribes fiscal incentives for companies operating in the deep offshore and inland basin areas of Nigeria under production sharing contracts. The Nigerian Oil and Gas Industry Content Development Act aims to enhance the development of indigenous capacity across the Nigerian oil and gas industry. It sets minimum Nigerian content prescriptions for various services and requires that first consideration be provided to companies incorporated in Nigeria, i.e, with 51 per cent of equity owned by Nigerian parties, in the award of oil blocks and licenses. Nigerian companies with the relevant equipment and capacity to execute work on land and swamp-operating areas must be given exclusive consideration to bid for work in such areas.
While most of the stated regulations may have focused more on the upstream sub-sector, the downstream sub-sector seems to be poorly regulated due to either lack of basic and harmonious regulation that will focus strictly on downstream sector.
The DPR, National Environmental Standards and Regulations Enforcement Agency (NESREA), Petroleum Products Pricing Regulatory Agency (PPPRA) and Petroleum Equalization Fund (PEF) seem to be focus on the downstream sector and its immediate environment.
With not less than 15 agencies regulating the oil industry overlap functions and conflict began to set in and there was the need to harmonize regulatory function of the industry.
Emergence of PIGB
The Petroleum Industry Governance Bill (PIGB) was set up with the aim to establish the Nigerian Petroleum Regulatory Commission (NPRC) as a one-stop regulator that will be responsible for licensing, monitoring, supervising petroleum operations, as well as enforcing industry laws, regulations and standards.
Besides, when it was discovered that the petroleum industry needs overhaul, PIB was introduced in 2008 with specific objectives to increase petroleum exploration and production, boost domestic gas supply, establish a viable national oil company, create an efficient regulatory entity, and enhance transparency and accountability in the industry, among other objectives. Lack of political will and corruption killed the PIB.
However, the Buhari-led administration later split the PIB into four namely: the PIGB, the fiscal regime bill, upstream and midstream administration bill, and the petroleum revenue bill.
The PIGB is a bill that aims to establish the Nigerian petroleum regulatory commission as a one-stop regulator that will be responsible for licensing, monitoring, supervising petroleum operations, as well as enforcing industry laws, regulations and standards. This means that the president will no longer have the executive power to allocate oil blocks.
Some of the agencies stated above will continue to exist while some will be merged with others to form new agencies. This is to avoid a clash of responsibilities.
The regulatory functions of the minister of petroleum resources under the Petroleum Act and the Oil Pipelines Act will be transferred to the commission, which will be governed by a nine-man board with a fixed tenure whose composition shall include one representative from each of the ministries of petroleum resources, finance, and environment.
The commission is vested with the power to make regulations, similar to the powers of the minister of petroleum resources under the petroleum act but the PIGB enables the minister to retain certain powers of discretion to “do all such other things as are incidental and necessary” for the performance of his ministerial functions.
The commission is required to establish a fund into which it shall pay a percentage of the monies it generates for the government as may be determined by the national assembly, as well as such fees, penalties, earnings from the sale of data and publications, and grants/loans while the rest will be used for paying salaries and maintenance of its internal affairs.
Stakeholders’ reactions to single regulation for oil industry downstream stakeholders including marketers as well as the Organised Private Sector (OPS) have rejected the single regulator for both the upstream and downstream sectors of the Nigeria’s oil and gas industry as proposed in the PIGB passed by the National Assembly.
In a joint press conference in Lagos recently, the OPS and the marketers under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) and the Depots and Petroleum Products Marketers
Association of Nigeria (DAPPMAN) urged President Muhammadu Buhari to ensure that the PIGB provides for two regulators before signing the bill into law.
Executive Secretary of MOMAN, Mr Femi Olawore, noted that the bill harmonized by the Senate and the House of Representatives provides for only one regulatory, contrary to the position of the marketers, who recommended for two regulators during the public hearing conducted by the National Assembly.
“Our position is that one regulator is inadequate for the entire industry. Historically, from the beginning, we had one regulator but we found out that the regulator was not able to police the industry very well. That was why PPPRA came up to deal with pricing. The upstream deserves one regulator because the activities are very massive.
The downstream deserves one regulator because the activities in the downstream are quite different from the activities in the upstream. Each of them requires different specialists as the regulator. The two have little or nothing in common. One regulator for both will lead to excessive bureaucracy. Having one regulator will be detrimental to the industry and the Nigerian economy,” he explained.
Olawore argued that the board of the two regulators should be autonomous and not subject to removal by the President except with the support of two-third of the members of the National Assembly.
He noted that the board members of the single regulator in the PIGB are mostly civil servants, representing different ministries and government agencies, adding that the private sector is excluded from the board.
He said the board will not enjoy vibrancy as there will be no input from the private sector.
In his remarks, the Chairman of the Economic Policy Group of the Manufacturers Association of Nigeria (MAN), Mr Reginald Odiah, who represented the OPS, said the exclusion of the critical stakeholders in the board of the single regulator is detrimental to OPS.
He added that as Nigerians, the OPS is a critical stakeholder in the oil and gas industry because their machines and equipment use petrol, diesel, gas and other petroleum products.
“As OPS, we are interested in having two regulators for the oil and gas industry. The board of PPPRA has critical stakeholders as members and this gives OPS voice and capacity to make contribution,” Odiah added.
Also speaking, the Executive Secretary of DAPPMAN, Mr Olufemi Adewole disclosed that the marketers had recommended for two regulators at the public hearing conducted by the National Assembly but the lawmakers ignored their recommendation.
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