Bottlenecks as National Assembly debates Petroleum Industry Bill
Nigeria’s oil and gas sector, which is the mainstay of the economy, is still largely governed by the Petroleum Act and the Petroleum Profit Tax Act enacted since 1969. But since the enactment of these laws, the global oil and gas industry has changed significantly.
Although certain obsolete aspects of the aforementioned acts have been amended, many inadequacies still abound, which now necessitate the development of the PIB, which was first presented to the National Assembly in 2008. More than 10 years after, the bill is yet to see the light of the day, leading to increased uncertainty hindering the flow of desired investment to the oil and gas sector.
On September 28, 2020, President Muhammadu Buhari sponsored another version of the Petroleum Industry Bill (PIB) to the National Assembly for consideration. The bill seeks to introduce pertinent changes to the governance, administrative, a regulatory and fiscal framework to the Nigerian oil and gas industry to ensure transparency, strengthen governance institutions and attract investment capital, among other objectives.
However, there is a sharp division among stakeholders over some of its provisions. The issue of percentage for host communities from oil companies is one of the main contentions, as the National Assembly prepares for the passage of the much-awaited bill.
It would be recalled that the Umar Musa Yar’Adua administration proposed 10%, but lawmakers from the north in the 7th Assembly rejected it. The same 10% was retained by the Goodluck Jonathan administration but it was equally rejected. In the 8th Senate, led by Bukola Saraki, it was brought down to 5%, yet it could not sail through.
The 2.5% proposal in the current bill is the source of agitation among host communities, who insist on 10%, which Yar’Adua presented, saying anything less than 10% will be an effort in futility. The Senate is stuck at determining what percentage to be given to host communities, which is the major point of disagreement that has stalled passage of the PIB since 2007.
Also, the host communities find some provisions in the bill unacceptable, beginning with the introductory part in chapter one, which says that the Federal Government owns oil and gas. They have kicked against that clause, asserting that oil and gas are owned by host communities, which the Federal Government can only hold in trust. They said also that there are no good roads, hospitals and other amenities in oil and gas host communities.
“For well over 60 years that oil and gas activities have been going on in host communities, there is little or nothing to show for it,” a stakeholder stated. “But with the 10% equity shares, the communities would be in the position to address some of the challenges, which are man-made that have been bedeviling us for over 60 years.”
As the argument on the agreeable percentage remains unresolved, stakeholders are calling for compromise to facilitate the passage of the bill in view of the teething problems that caused the delay in the past 10 years. At the recent public hearing place by the Senate Committee on Petroleum, stakeholders called for action, saying the time for action was now.
The Minister of State for Petroleum, Timipre Sylva, had said the 10 per cent Host Communities of Nigeria Producing Oil and Gas (HOSTCOM) is demanding would create room for oil companies to shortchange host communities, adding that the 2.5% proposal is the best option that government could give, as it would be based on operational cost. He said with the 2.5% operational cost, there was no way oil firms would play games with host communities.
He indicated that with 10 per cent for host communities, when a company makes N100m if they want they can say it is N10m and in that case host communities would find it difficult to determine their exact percentage is. But host communities faulted Sylva’s argument, saying if they could not determine what 10 per cent because oil firms would under-declare, what’s the guarantee that they would not under-declare with 2.5%?
While rejecting the 2.5% provided in the current PIB, HOSTCOM at the public hearing at the Senate made it clear that nothing short of 10 per cent would be acceptable to them.
In a presentation by its National President, Mr. Benjamin Style Tams, HOSTCOM declared: “As it concerns the Host Communities of Nigeria Producing Oil and Gas in Chapter 3, the host communities stand on 10% equity shareholding after 60 years of marginalization and bearing the brunt of the negative impacts of exploration and exploitation.
“Today, some states have started discovering and enjoying their natural resources but the oil-producing states and HOSTCOM are not envious of them. Therefore, our position is sacrosanct.”
The host communities argued that it would be absurd and economically illogical to deprive HOSTCOM of the right to equity shareholding in both the establishment of the NNPC Limited and any other agency relating to oil and gas business.
The host communities further made it clear, “this quest to take over complete control of all our national assets by a very unpatriotic few has to stop. In the case of the Gas Flare Penalty Funds, the host communities, which are the direct recipient of the negative effects, are the ones to receive the gas flare penalty.
“Regarding the environmental management and sustainable development of the host communities, it’s imperative that all laws and policies precedent to the commencement of any action plan must conform with existing international standards inherent in our submission.”
IN their own presentation, the Oil Producers Trade Section (OPTS), led by Mr. Mike Sanger, made a case against the Bill for not making serious provisions for investment in the oil and gas sector.
OPTS stated, “if the PIB is passed in its current form, it will not meet the government’s objectives of making Nigeria the leading destination for oil and gas investment and the recent scarcity of investment – only $3bout of $70b in Africa – will continue.
“Nigeria faces ever-increasing competition for investment and, despite having the largest reserves, only $3 billion out of the $70 billion committed in Africa for projects sanctioned between 2015 – 2019 were attributed to Nigeria, representing a meagre 4%.
“This lack of competitiveness is caused in part by the high cost of doing business in Nigeria, with overall project and operations costs being 69% and 42% higher than the global average respectively.
“A PIB, which safeguards existing projects and introduces competitive terms, is required to fully utilise the country’s resources for the benefit of all Nigerians.”
Also, Women In Energy Network (WIEN) has raised concerns over the proposal in the Petroleum Industry Bill which stated that “each settlor, where applicable through the operator, should contribute an amount equal to 2.5% of actual operating expenditure in respect of all petroleum operations.”
According to Egbema and Gbaramatu Communities Development Foundation (EGCDF), the provisions of the Petroleum Industry Bill 2020 in relation to host communities’ development, as contained under chapter three from sections 234 to 257, would generate instability, agitations and eventually massive conflict between oil companies and their host communities if the concerns raised were not addressed before the bill is passed into law.
Chairman of Egbema and Gbaramatu Communities Development Foundation (EGCDF), Amb. Jude Ebitimi, said the overriding constitutional function of the National Assembly in the 1999 Constitution (as amended) is to make laws for the peace, order and good governance of the Federal Republic of Nigeria.
“Then section 234 of the PIB seeks to foster prosperity within host communities, social and economic benefits from petroleum operations, enhance the peaceful and harmonious relationship between companies and communities and support development of host communities,” he said. “However, the Petroleum Industry Bill 2020 in its present form in relation to host communities’ development does not promote or enhance any of the aforementioned objectives.
“It would neither promote peace and order nor good governance in the oil-producing communities. In short, if the bill is passed into law in its present form, it would lead to great instability, the consistent conflict between communities and companies and violent agitations in the oil-producing communities.”
He recommended a governance model that does not provide a uniform governance structure for all the host and impacted communities.
According to him; “The different oil-producing communities have their peculiarities. Therefore, the governance and management structure should be left for the different communities to decide. The governance and management structure of the EGCDF has proven to be effective and acceptable to all parties concerned, and we are comfortable with it.”
He said the present structure, totally driven by communities with slight oversight by the state governments, with a regular briefing by the oil companies of activities is sufficient, adding; “There is no basis at all for persons from outside oil-producing communities to be involved in the management of host and impacted communities’ funds.”
On funding, he said the contribution of oil companies to the funding of oil-producing communities’ development fund should be tied to the quantity or amount of production from first oil or commencement of production or before production at the point of exploration.
According to him, it should be operating cost, which in all cases should be 10 per cent of the revenue from production or operating cost.
“The unnecessary administrative structures under sections 235, 247, 249 and 251 of the PIB should be eliminated. They would not in any way aid the development of the oil-producing communities. Instead, they would lead to unnecessary bureaucracy at the expense of the development and orderly management of the affairs of oil-producing communities,” Ebitimi said.
MEANWHILE, President of Senate, Ahmad Lawan, said the National Assembly in its consideration of the piece of legislation, would ensure that the bill when passed into law, guarantees improved revenue earnings for the country.
Lawan said, “let me say this: we (National Assembly) will pass this bill not without ensuring that it is a bill that satisfies certain conditions.
Lawan lamented; “Nigeria is blessed with these resources; we want Nigeria to benefit optimally from them. In fact, we are in a hurry because we have lost so many years of benefits that we could have had.”
On the stance of HOSTCOM on percentage shareholding, Lawan said;
“The 10% demanded by host communities and the side of the government offering 2.5% operational cost is a clear indication that they want to shortchange host communities. Host communities are not beggars; they are not asking for grants. They are not asking for favour, but rather host communities are asking for equity participation as shareholders.
“States also were given 13% but these things are not trickling down to the communities that bear the brunt. For us to be a partaker as stakeholder, let there be 10% set aside for host communities. 10% equity would guarantee the operating companies their safety the assets and personnel, and also will minimise or remove totally pipeline bunkering, vandalization, crude oil theft, and many more because host communities now know that 10% equity is coming to them.
“For example, if one particular well is producing 10,000 barrels of crude per day and 100 barrels are meant for the community, if they sabotage it the community would lose, but if they are sure of the 10%, nobody will go to sabotage oil facilities again, because they will consider it as their own business. Since they are partakers, they will treat it as their own.”
In his contribution, Chief George Bucknor, said; “When you talk of giving somebody something, on what basis? We are not asking for a grant. We are not asking for a loan or asking them to throw some peanuts at us. What we are saying in law is the Citizens Development Mechanism and the Nigerian Environmental Act. They have all talked about stakeholders’ consultation.
“The CDM, which is global international law allows the inputs of the stakeholders to protect their interests; that is the essence of the stakeholder’s consultation.”
He wondered who government consulted before arriving at 2.5%, adding; “The truth is, the communities provide land in the contract and they are the ones living where they are getting the oil and gas, with all the attendant negative consequences.
“The truth remains that somebody is where you are doing your business and you are poisoning the person. He is only saying you cannot take care of him because the negative effect of your activity is irreparable, meaning that when my lung is affected by your gas flare, my soil is poisoned with benzine, nitrogen oxide, carbon dioxide, criogene and I go to the hospital, there is no cure for me. I am a living corpse. The women, because of gas flaring, are suffering from high mortality rate, because of the same poisoned air and poisoned soil and it impacts on our economy; the quality of our soil is gone.
“Our creeks are polluted; we cannot plant cassava and get cassava as it should be. We said we don’t want to quarrel with you. You have facilities; let us follow the rule the way it is. After all, it is there in our laws; it is not like we are propounding it on our own. It is legislators that put the laws together.
“We are saying a 10% equity share for the host communities. Thank God, oil is being discovered in Taraba, Kogi and the far North, good; so, oil-producing states are growing. Look at Zamfara; what they discovered was gold. Gold is a natural resource and then they allowed them to do their thing by themselves as the state that produces it, along with their communities and even sell it.
“The President and the CBN gave them a contract of N5b to supply Gold which they delivered and received their money.
“We are magnanimous enough to say since our own was the first to be discovered and it serves the entire country, we are not saying since Zamfara has gotten their own we would destroy everything, nobody should come to Niger Delta, no, we are not saying so, but we are saying let us have a fair share of the deal.
No comments yet