Host communities must:
• Fund new portal introduced by NUPRC
• Hire, pay lawyers and chartered
• accountants with at least 10 years’ experience
• As Fresh attempts by NUPRC may frustrate oil companies, worsen hostilities
• Stakeholders raise alarm over infringement by regulators

The dilly-dallying of the Federal Government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the proposed alteration of critical aspects of the host community fragment of the Petroleum Industry Act (PIA), may, in the coming days, create fresh hostility against the government and oil companies in the Niger Delta amidst Nigeria’s troubled oil production.

The concerns of the stakeholders are that funding for a new portal introduced by NUPRC to manage the host community issues impacts the available fund from the three per cent as oil companies and NUPRC are allegedly asking the host community to run it.

While NUPRC is making it compulsory for Host Community Development Trusts (HCDTs) to hire lawyers and chartered accountants with at least 10 years of experience, the HCDTs and the oil companies have kicked against the move, saying that it would be impossible to pay such people from the five per cent administrative fund. The five per cent is from the three per cent host communities fund. By law this is to be administered by the oil companies on behalf of the HCDTs.

Some stakeholders have also insisted that the regulator does not need to get involved in the day-to-day function of the Trust, adding that the cost of such involvement may further impede the projected goals of the host community fund.

The Guardian gathered that the proposed new amendment as well as the demand by the NUPRC to be involved in all operational activities of the settlors that involve the HCDT is aimed at undermining the rights of the settler, and to take over the role of the settlors.

The development follows the proposed draft of amendment of the host community regulation introduced in October.

Earlier this month, the NUPRC had put forward the host community regulation for amendment with series changes, which stakeholders believe may defeat the projected goals of the PIA and fuel hostilities in the oil-producing region.

In a letter with Ref: NUPRC/HQ/HSE.5/03/23/027 dated 9th October 2023, addressed to all Upstream operators and signed for the commission by John Tonlagha, NUPRC, said the Commission is attempting to participate in all BOT nominations, selections, and inaugurations, Management Committee/Advisory Committee nominations and selections, facilitation of NEEDs assessments, among others.

In another letter dated 12th May 2023, with Ref.: NUPRC/HQ/HSE.5/01/23/015 and addressed to all upstream operators, NUPRC had introduced a Host Communities’ Digital Automated Compliance and Data Reporting System (HOSTCOMPLY). The platform has already been launched.

The PIA, signed into law in August 2021, is one of the most audacious attempts to overhaul the petroleum sector. As part of the PIA, oil companies in the country are mandated to remit three percent of their operating expenses to a pool that would enable the government to address the age-long agitation of transferring benefits of the oil industry to communities impacted by oil and gas exploration and production.

While most people in the oil-rich region are yet to accept the three percent in the legislation, fresh attempts by the NUPRC to impose extra financial burdens and alteration of some sections of the host community provision in the PIA have led to new concerns.

There are indications that the commission may be overstepping into the operating space instead of sticking to its regulatory roles, a move seen by some as attempts by some of the officials to help themselves from the proceeds of the three percent.

The multiplier effects of weak oil production are already crippling the nation’s economy and escalating foreign exchange crises as well as inflation amidst ongoing divestment by international oil companies.

The Guardian gathered that most oil companies, the Host Community Development Trust, the settlers, the host communities, and the regulator are already at loggerheads following the changes.

Energy economist and President, Nigerian Economic Society (NES), Prof. Adeola Adenikinju asked NUPRC to be careful in further giving room for crisis and agitation in the oil producing communities. Adenikinju said: “Recent regulations mandating the employment of lawyers and chartered accountants are unnecessary in my view.”

He noted that the implementation of the PIA suffered some delays affecting the development of the Petroleum sector.

“In fact, some of the relatively low production we see in the sector and increased oil theft cannot be isolated from the PIA implementation gulf.

“The oil sector has underperformed in recent years, in terms of its contributions to the GDP, revenue, and foreign reserves. The regulatory agencies in the sector must do all in their power to reduce all barriers to investments and easy operations in the industry,” Adenikinju said.

Executive Director of Environmental Rights Action in Nigeria and the Chair of Friends of the Earth International, Nnimmo Bassey insisted that the “extra arm-twisting costs being proposed by the NUPRC are simply adding salt to injury.”

Bassey said the attempts of the regulator is “insensitive, insulting and utterly objectionable,” adding that the three per cent offered to host communities was nothing to celebrate for a number of reasons.

“First, it is three per cent of the cost of production as declared by the oil companies. The communities have no way of verifying or scrutinizing what is being presented as production or whatever costs by the oil companies.

A source, who pleaded anonymity noted that the NUPRC is bringing back the old culture under the defunct Department of Petroleum Resources where the regulator created bottlenecks for operators.

“The NUPRC should take a lesson from ideal regulators, which are professional and remain in their realm of as regulators, instead of jumping into the arena of the operators. Besides they need to think of the added cost of getting involved in routine operations,” the source said.

Former President of the Chartered Institute of Bankers of Nigeria (CIBN), Prof. Segun Ajibola, said the host community issue needs urgent attention to stem further restiveness in an area that has witnessed cases of pipeline vandalisation, oil theft, environmental degradation, rising poverty, among others over the past years.

He said: “The various deductions and charges by the NUPRC need to be managed in order not to defeat the whole essence of the fund.”

Noting that the modus operandi for disbursing the fund is critical, Ajibola said the template needs to be articulated so that the essence of it would be achieved.

“The Delta region is yearning for serious attention which the oil operators had paid lip service to for decades through discretionary CSOs that remained a drop in the ocean. The Trust Fund and the NDDC are expected to do much better in addressing these known challenges confronting the region,” Ajibola noted.

He lamented that pipeline vandalisation, theft, and hostile environment already pushed Nigeria’s oil production and export down, adding that barely 50 per cent of the country’s OPEC quota was not met at some point.

According to him, Nigeria needs everything it could earn from oil as its dollar income accounts for about 90 per cent of the foreign exchange earnings of the country.

“To achieve this, an agency like NUPRC through its Trust Fund, has a fundamental role to play. It is imperative to put the Trust Fund in its full gear from now onwards. And bureaucratic bottlenecks that are creating brick walls towards effective discharge of its mandate must be dismantled immediately,” he said.