New Petroleum Industry Bill: Matters arising

The passage of the nation’s Petroleum Industry Bill (PIB) appears to have been jinxed for over 20 years now, going by the range of disputes hovering over the proposed law. Yet, its concept, objectives and long-term goals remain impeccable as to warrant not just its passage but its full implementation. It is crucial for all stakeholders as well as all arms of government to embrace the common desire to make the law, and its intended brief of sanitising the oil industry a reality.

Tagged “A 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 (HB. 1061)” the newly presented bill, has generated much controversy and public show of shame at a public hearing held at both arms of the National Assembly. This indeed caught the attention of the entire country, amid the numerous economic and security challenges the populace has been grappling. The melodrama marks the high stakes involved as they affect host communities, oil producing states, oil companies, labour unions and the Federal Government, among others. The whole issue boils down to “who gets what” in terms of resources, the governance structure and the operating environment in the industry.

These contentious issues have been the bane of the passage of the bill by successive federal administrations since the law was first muted about 20 years ago. At the heart of all these is the lack of a functional fiscal federalism arrangement acceptable to all the components of the country.

Firstly, the bill, as newly presented, fails to clear what it meant by “host community” thus creating room for speculation by the stakeholders present at the public hearing. Does “host community” mean the “town” or “local government area” or “senatorial zone” or the “state” where the oil and/or gas is being drilled and produced? Does it also include communities outside the Niger Delta and other oil producing zones or is it expansive as to include areas where oil is not produced but is being processed through downstream and marketing activities? This has to be decided and clearly so in such a manner that the communities that suffer from oil pollution and other environmental degradation are not short-changed.

Another core issue in the reworked bill is what goes to the host communities. The bill deviated substantially from the original proposal of 10% of profits of the oil companies going to the host communities; to 5% considered under the 8th National Assembly; to a mere 2.5% in the present bill –thus attracting the vehemence of representatives from the Niger Delta region. This clamour has not subsided and understandably so, despite the effort of Timipre Sylva, the Minister of State for Petroleum Resources to explain that what is on offer to the host communities is 2.5% of the prior year’s operating expenditure (OPEX) and not of profit, given that the oil companies may decide not to declare profit in any given year; that they must thus commit to the communities whether they make profit or not. There is room for some horse-trading here. The goal should be to ensure that host communities get adequately compensated given the negative externalities they suffer by virtue of the oil production activities in their environment. This is more so since the country is yet to embrace full fiscal federalism, a current clamour by most groups across the country.

When it was first muted by the Olusegun Obasanjo administration, the PIB was meant to regulate the entire sphere of the industry and repeal all current existing oil and gas legislations. It was also meant to overhaul the petroleum industry, entrench efficiency and transparency in both upstream and downstream sectors and bring operations in line with international standards. The passage of the bill is expected to pave way for massive investment into the country’s oil and gas sector and increase government revenue from oil as well as lay down a strengthened legal and regulatory framework for the Nigerian oil industry.

The 8th National Assembly, under the headship of Senator Bukola Saraki, in the quest to make the passage easier and less contentious, broke it down into four different components, namely the Petroleum Industry Governance Bill (PIGB), the Petroleum Industry Administration Bill (PIAB), the Petroleum Industry Fiscal Bill (PIFB) and the Petroleum Host and Impacted Communities Bill (PHICB). Only the PIGB was passed by the Nigerian Senate in May 2017 and House of Representatives in January 2018, but subsequently rejected by the President.

The PIGB originally was meant to make the oil and gas sector more transparent and commercially viable as well as combine the functions of revenue generation and environmental protection in a single agency. However, all these have been jettisoned by the Buhari administration resulting in the reworking of the bill to take a total departure from the work of the 8th National Assembly.

Mr. Timipre Sylva had earlier stated that the bid rounds for oil blocks stand suspended until the PIB is passed with serious concerns expressed by many stakeholders in the sector, given that the marginal oil fields are a substantial component of the country’s oil production and will add to the tempo of activity as well as job creation in the sector. If this suspension is to be sustained, then it behoves on the National Assembly to enhance the quick passage of the PIB, as one of the major achievements of the administration.

It is important for both the President of the Senate and Speaker of the House of Representatives to keep to their promise to pass the bill by April 2021. The country cannot prevaricate on its passage. Changes in the global energy market are dynamic, and the country should make the best of the gains from the oil and gas industry before fossil fuels become obsolete in the global energy consumption matrix.