The politics, history of Petroleum Industry Bill

THE much-anticipated bill for an Act to Provide Legal, Governance, Regulatory and Fiscal Framework for the Nigerian Petroleum Industry, the Development of Host Communities and For Related Matters, 2020 (SB. 510) otherwise known as the Petroleum Industry Bill (PIB), was passed last week in the Senate amidst tension and cries of betrayal and marginalisation.

The bill, according to oil industry players, is expected to restore sanity in the management of the oil and gas sectors, both downstream and upstream and inspire investors’ confidence. A sound economic judgement was, however, relegated to the background as it was allegedly sacrificed on the altar of political expediency.

The expected camaraderie that was expected on the floor of the Red Chamber took flight as lawmakers who believed their geopolitical zone was shortchanged during the clause by clause consideration of the report of the Joint Committee on Downstream Petroleum Sector, Petroleum Resources (Upstream) and Gas shouted themselves hoarse over the contribution to the oil-producing communities proposed in the Host Communities Development Trust Fund.

 

History of the bill

The initiative to reform the oil sector was first taken by the Chief Olusegun Obasanjo administration who in April 2000 inaugurated the Oil and Gas Reform Implementation Committee, with a mandate to review and streamline all existing petroleum laws and establish an all-inclusive regulatory framework for the industry.

The first Executive Bill on the PIB was in 2008 sent to the sixth National Assembly by the administration of late President, Umar Yar’Adua.  Checks revealed that passage of the bill suffered setback as a result of disagreement over 10% as dedicated fund for the development of Host Communities and sharing of oil profit among the International Oil Companies.

In July 2012, a revised draft was again presented to the seventh National Assembly by the Goodluck Jonathan administration but it was passed by only the House of Representatives as it was dogged by same controversy over sharing formula.

In the first tenure of President Muhammadu Buhari, the eighth National Assembly broke the jinx, when it passed the Petroleum Industry Governance Bill sent to it by President Muhammadu Buhari. While the Red Chamber under the leadership of Senator Bukola Saraki passed the PIGB in May 2017, the House of Representatives which had Honourable Yakubu Dogara as Speaker, House of Representatives achieved similar feat in January 2018.

To fast track its passage, the ninth NASS split the bill into four parts – the Petroleum Industry Governance Bill, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill.

Speaking after the passage of the bill an elated Saraki in a statement said the feat achieved by the eight NASS was in fulfilment of its pledge to use quality legislation to boost the economy and improve quality of lives of Nigerians. Saraki said: “This bridge that we have just crossed, is a part of the commitment of the National Assembly to remain focused, committed, and determined to meet your expectations. Let me remind our people that this is another promise made and kept by the 8th Assembly. “With this feat, we have demonstrated that we have the will and capacity to deliver on our key promises aimed at rebuilding the national economy and improving the standard of living of our people.”

Checks revealed that President Muhammadu Buhari however declined the Bill presidential assent. Amidst public outcry, his Ita Enang, erstwhile Senior Special Assistant on National Assembly Matters, justified his principal refusal to sign the bill but did not offer any reason for Buhari’s action. But lawmakers in the Joint Committee,which worked on the final draft, however claimed the provision of the PIGB permitting the Petroleum Regulatory Commission to retain as much as 10 per cent of the revenue generated was one of the reasons Buhari declined assent to the bill.

A year after winning election for a second term, President Buhari, in September 2020, dispatched PIB. 2020 to the NASS as an Executive bill. In the fresh document, he sought for the unbundling of the NNPC into a limited liability company. The bill proposed that the duo of Minister of State, Petroleum, Timipre Sylva and his Finance Counterpart, Zainab Ahmed, will be mandated to incorporate the NNPC Limited, with the Finance Minister, determining NNPC’s assets and liabilities that will be inherited by the new firm.

Section 54(1, 2 and 3)) reads in part, “The Minister (of Petroleum) and the Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited; Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection 1 of this section shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government; NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government.”

Section 53 of the bill proposed that the minister shall “within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company (NNPC Limited).“The minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares. Ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.”

The bill also proposed the establishment of an agency known as the Nigerian Upstream Regulatory Commission which will be responsible for the technical and commercial regulation of upstream petroleum operations. Section 4 of the bill states in part, “There is established the Nigerian Upstream Regulatory Commission (the commission) which shall be a body corporate with perpetual succession and a common seal. It read: “The commission shall have the power to acquire, hold and dispose of property, sue and be sued in its own time. The commission shall be responsible for the technical and commercial regulation of upstream petroleum operations.”

The proposed law also recommended the creation of the Nigerian Midstream and Downstream Petroleum Regulatory Authority known as ‘The Authority’.Section 29 of the bill states in part, “There is established the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the Authority) which is a body corporate with perpetual succession and a common seal.he Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.”

 

Contentious issues: How the North won

Submitting the report of the 54-member Senate Joint Committee on Downstream Petroleum Sector, Petroleum Resources (Upstream) and Gas, its chairman, Senator Sabo Mohammed Nakudu, representing Jigawa South West, again restated the objectives of the Bill to include, amongst others, creation of an efficient and effective governing institutions with clear and separate roles for the petroleum industry; establish a framework for the creation of a commercially oriented and profit-driven national petroleum company; and promote transparency, good governance and accountability in the administration of the petroleum resources of Nigeria.”

One of its far reaching recommendations was the establishment of Host Communities Trust Fund with (5%) of the actual annual operating expenditure of the upstream petroleum operators. It read in part:” This chapter highlights the effective and efficient administration of the Host Community Trust Fund which is to be anchored by the settlor, i.e. the oil and gas companies operating in the host communities. The various recommended provisions when passed into law, will ensure a peaceful operating environment that will have a positive direct impact on the cost of oil and gas production which has been the bane of the Nigerian oil and gas industry.

“After extensive engagements with various stakeholders and on-the-spot assessment visits to host communities across the country, the Joint Committee recommended strengthening measures and saddled the host communities with responsibilities with a view to reducing or completely eradicating interferences and tampering in the country’s oil and gas production assets.

“Furthermore, to ensure adequate development of the host communities and reduction in the cost of production, the Joint Committee recommends five percent (5%) of the actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities for funding of the Host Communities Trust Fund.”

Investigation by Nigerian Tribune revealed that the position canvassed by stakeholders from the host Communities during the public hearing organised by the NASS was a return to the 10% for them as proposed by late Umar Yar’Adua to the Sixth NASS in 2008.

Deputy Senate President and senator representing Delta Central, Ovie Omo Agege, while making submission before the Senate last Thursday said 10% was the dominant opinion in the South south region. He pleaded for a upward review of the 5%.

He said: “Today, I speak not as the deputy Senate President but I speak as the senator representing Delta Central Senatorial District. For us in the Niger Delta, there are three areas that are of much interest to us. I’m sure my other colleagues will speak to it.

“On the whole, the major thrust, the rationale for pushing for this Bill which has eluded this country for so many years is for us to get a law in place that will create an enabling environment for foreign investors coming with their money to invest in the sector before as we were told, our oil will go out of fashion. Some of us have this belief that no matter the thinking of the investment community, oil will always be relevant. Some of them have made the case that in the next 10 to 15 years, there will be no use for oil.

“Mr President, this may be acceptable to a lot of people in this country but in my Senatorial District and indeed in most of Niger Delta, they are prepared to let this oil remain on the ground until may be another 40 to 50 years when there may be need for oil again.

“What does that mean? Mr. President, they want a deal but they want a good deal. Sometimes Mr. President, no deal could be better than a bad deal. And Mr. President, this Bill as originally conceived provided only 2.5 per cent contribution by sector companies to the host communities trust fund. This is not the first experiment or first attempt.

“Mr. President, I will still make a case if possible that we go a little more than the five per cent already agreed. I understand we cannot meet the 10 per cent. But that is the clamour at home. I need to plead that if there is a chance we can go a little more than the five per cent, we will be grateful.”

The South-South lawmakers were however taken aback when Senator representing Katsina North, Ahmad Baba Kaita called the attention of his colleagues to the position taken by the GMD, NNPC, Mele Kyari, at the Executive session, where the latter maintained that 3%, not 5% should be ideal contribution to the Host Communities Trust Fund.

While proposing an amendment, which was put to vote and upheld by the Senate, Senator Kaita who incidentally represents President Buhari’s senatorial district, said the contribution to host communities trust fund be pegged at three per cent, since government would ensure security of oil firms’ equipment; in the alternative, if it is five per cent, communities would be responsible for securing production equipment in their domain.

The three percent, however, sailed through after voice vote to the consternation of senators from the Niger Delta region. Checks revealed that the House of Representatives has since maintained the five percent canvassed in the joint committee report.

 

Frontier basins controversy

American political scientist and Communication theorist, Harold Laswell, defined politics as who gets what, when and how. He further posited that political power confers the ability to produce intended effects on other people.

The composition of the 54- member Joint Committee has 34 from the South, with four being co-chairmen and vice chairmen. Senator Albert Basssey Akpan and Senator James Manager, representing from Akwa-Ibom North East and Delta South, respectively served as co -chairmen while Senators Ifeanyi Ubah and Degi Biobarakuma representing Anambra South and Bayelsa …respectively served as vice chairmen. Contrary to the practise in eighth National Assembly, where Chairman, Upstream was made chairman of the Joint Committee, the Senator Nakudu who was Chairman Down Stream emerged as Chairman in the Senator Lawan ninth Assembly Committee on PIB.The composition of the Senate Committee revealed Albert Basssey Akpan and Ifeanyi Ubah as Chairman and Vice Of the Committee on Upstream.

The North got what it wanted to prospect for hydrocarbons in its section of the country, with a proposal to commit the NNPC Limited to dedicate 30% of its profit from oil and gas to search for crude oil in the Frontier Basins.It read in part: “The Joint Committee’s recommendation recognizes the need for the country to urgently and aggressively explore and develop the country’s 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 thirty percent (30%) 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. “A total of 110 amendments were recommended to this Chapter while others were retained. “

Checks revealed that the Buhari administration since it won a fresh term in 2019 had renewed its vigour for oil prospecting in the Chad Basin, the Sokoto Basins, Benue Trough and the Bida Basins—in some of these basins, multinational oil exploration companies have expressed deep reservations about the presence of hydrocarbons in commercial quantities in such areas.

 

Section 9 of the PIB draft alluded to the reservations of the International Oil Companies,(IOC)

It read in part:” Where data acquired and interpreted under a Petroleum Exploration Licence is, in the judgment of the Commission, requires testing and drilling of identifiable prospects and leads, and no commercial entity has publicly expressed an intention of testing or drilling such prospects, the Commission may engage the services of a competent person to drill or test such prospect and leads on a service fee basis”.

Investigation by Nigerian Tribune revealed that before the passage of the PIB, President Buhari had in October 2019, flagged off the exploration of oil in the Kolmani River II Well on the Upper Benue Trough, Gongola Basin, in the North-Eastern part of the country.

With the coming of the Upstream Regulatory Commission, an existing subsidiary, Frontier Exploration Services has now been transformed to Frontier Exploration Fund to carry out crude prospecting in areas where the International Oil Companies,(IOCs) have cleverly abandoned.

Section 9 (5) establishing the Upstream Regulatory Commission read in part:” NNPC Limited shall transfer the 30% of profit of oil and gas pursuant to subsection (4) of this section to the Frontier Exploration Fund Escrow Account dedicated for the development of frontier acreages and utilise the Funds to carry out exploration and development activities in the frontier acreages. This is to ensure funds are strictly utilised for the purpose for which it was established.”

Checks revealed that the renewed vigour for oil prospecting in the North predated the incumbent Group Managing Director NNPC, Mele Kyari, as it gained currency under his immediate predecessor in office, the late Maikanti Baru.

Baru, at a meeting with Benue State governor, Samuel Ortom in Makurdi said preliminary results from the exploration activities in the inland basins so far had shown that there could be commercial quantity of oil and gas finds soon, in the Benue Trough especially.

He said almost 400 square kilometres of 3D seismic data had been acquired in the part of the Benue Trough that was earlier explored by SNEPCO, while similar work would be extended to areas previously explored by Chevron and Total.

“We are targeting these areas because we have seen that some of what they have done have some prospects; it is only that they did not drill deep enough. They also did not target the areas we believe, from the review of the seismic data, would have culminated into a find. So, we are reinvigorating that and soon we are going to start drilling some of the leads that we have seen to ascertain what prospects there are. And as we have pointed out, there is an indication that we could find some hydrocarbon. We believe that in the nearest future, hydrocarbon will be found in commercial quantity, “ Baru reportedly assured Governor Ortom.

 

Why Buhari withheld assent to 2018 PIGB

President Muhammadu Buhari failed to sign into law the harmonised Petroleum Industry Governance Bill (PIGB), 2018, when it was forwarded to him because of constitutional and legal reasons.

The House had passed the bill on January 17, 2018, and almost eight months after, the Senate followed suite on 25 May 25, 2017.

Both the Senate and the House are empowered by the 1999 Constitution to veto a bill passed  into law by a two-thirds majority votes in the National assembly if they deem fit in the event of president withholding his assent.

However, President Buhari withheld his assent to the bill without publicly advancing the reasons for the action at the time.

But speaking on the issue later, the then Senior Special Assistant to the president on National Assembly Matters, Senator Ita Enang, confirmed that Buhari had withheld his assent and communicated the reasons to the legislature.

According to him, Buhari had by presidential communication of July 29, 2018 addressed to the Senate and House, apprised the lawmakers that he had declined his assent to the bill over constitutional and legal reasons stated therein.

Enang explained that the presidential assent could not be discussed publicly because “by convention, it is inappropriate to speak on the content of Executive communication addressed to the Legislature until same has been read on the floor in plenary.”

This followed controversy, which had accompanied the president’s action in failing to sign the bill into law.

Enang blamed what he called the misrepresentation of the president’s communication in the media on a deliberate intent to blackmail the executive, saying then: “None of the reasons for withholding assent by Mr President adduced by the media is true.”

According to experts, even though Nigeria is the biggest producer and has the largest reserves in Africa, it only benefitted just four percent of the $70 billion investments made in the continent’s oil and gas industry between 2015 and 2019.

They quoted reports of the National Bureau of Statistics (NBS) that only $53.5m or 0.55% of total investment of $9.680 billion in Nigeria in 2020 was made in the industry.

The law hopes to replace the obsolete Petroleum Act of 1969 and pave the way for a holistic reform in the nation’s oil industry.

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