The making of a New PIB

National Assembly     With the recent proactive measures by President Muhammadu Buhari’s administration to fine-tune the draft of the troubled Petroleum Industry Bill and transmit it to the National Assembly, there is a glimmer of hope that it would soon scale through legislation, writes Olisemeka Obeche

Behold a New PIB

Following President Muhammadu Buhari’s administration’s declaration last October that it will re-present a new version of the Petroleum Industry Bill (PIB) to the National Assembly in the first quarter of 2016, many stakeholders in the oil industry tracking the development of the bill leapt in joy.

The Vice President, Professor Yemi Osinbajo, who broke the news had also hinted that the over 223-paged PIB draft document would be split into smaller laws to make it easier for the bill to scale through the legislative hurdle this time around. “Separating the PIB, breaking it up, obviously is the way I would think that we will proceed,” Osinbajo said.

Barely a fortnight after the vice president gave the hint; the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu also disclosed that the new draft of the PIB will be entitled: “Petroleum Industry Governance & Institutional Framework Bill 2015.” According to him, it would be a 45-page document with 91 sections and three schedules, focusing mainly on governing institutions with clear and separate roles for the petroleum industry.

Kachikwu re-echoed Osinbajo’s proposition on the need to dismember the bulky PIB document: “As long as we continue to want to pass a holistic PIB, it is going to be a major challenge, but once you begin to break it up into critical aspects, you will make a faster run to passing the PIB,” he said.

Apart from seeking to create “commercially” oriented and profit “driven petroleum entities” and plug loopholes that breed corruption, some of the changes reportedly made in the new PIB are principally geared towards curtailment of ministerial powers in the sector and splitting the Nigerian National Petroleum Corporation (NNPC) into two separate entities: the Nigeria Petroleum Assets Management Company (NPAM) and the National Oil Company (NOC).

The NOC, according to the draft bill, will take the identity of an “integrated oil and gas company operating as a fully (private) commercial entity”. NOC will keep its revenues, deduct costs directly and pay dividends to the government, thus putting an end to the era of waiting for federal allocation for funding and always failing to meet cash call obligations.

Under the newly drafted PIB, Kachikwu explained, NPAM will be responsible for the management of the NNPC’s oil and gas investments in assets (a role currently played by NAPIMS). The draft bill also empowers the minister to require the NNPC to transfer employees, assets, liabilities, rights and obligations to the NPAM. Each of the NNPC successor companies will comprise boards with non-executive chairmen, a managing director and executive directors and other members with many years of experience in management positions in oil companies.

The draft bill equally provides for a single regulatory body that merges the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA) into a new Nigeria Petroleum Regulatory Commission. The commission, according to the bill, “shall take up the responsibilities held by the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA).”

The new bill would also create Nigeria Petroleum Regulatory Commission (NPRC) to oversee everything from oil licensing bid to fuel prices. Previously, regulation was split between many bodies with ill-defined roles, leading NNPC to act in part as its own watchdog in a conflict of interest. In addition, a Special Investigation Unit would be set up under the NPRC with the powers to seize items and make arrests without a warrant.

PIB’s tortuous journey

The Petroleum Industry Bill, Nigeria’s most important legislative framework aimed at injecting transparency and probity in the management of the petroleum sector as well as spurring private investment, has spent the last decade on a tortuous journey to legislation. The bill which seeks to reform government institutions in the petroleum sector, change the fiscal framework, and undertake domestic gas reforms, among other objectives, has been stalled for more than 15 years due to a wide range of disputes over its terms and mechanisms.

Despite previous efforts to rejig its controversial content amidst intense lobbying from various stakeholders, successive members of the National Assembly were unable to pass it into law. For instance, former President Goodluck Jonathan used PIB passage as a key lynch-pin for clinching the 2011 presidential poll.

While campaigning for the 2011 presidential election, Jonathan had promised to accord priority to the passage of the bill into law. The then Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke had explained that the Jonathan administration was committed to the passage of the bill into law because it will enable oil producing communities to start receiving over $600 million as annual dividends.

However, Jonathan failed to deliver the PIB before the expiration of his tenure on May 29, 2015, as several moves to push the controversial bill through the legislative hurdle at the National Assembly did not yield the desired result. For instance, in May 2012,   Alison-Madueke revived the dream of a new brand of PIB that would address the grey areas that had stalled the bill.

True to her claim, few months later, a Federal Executive Council meeting presided over by Jonathan approved a new version of the PIB. Alison-Madueke had said that the new draft bill would not only address the vexed provisions in the previous bill but ensure that the interest of host communities are adequately addressed and would be in the best interest of the Niger Delta people who bear the brunt of oil exploration in particular and Nigerians in general.

One significant proposition in the Jonathan administration’s version of the PIB draft was that it sought to unbundle the NNPC into five different companies: the National Oil Company, the National Asset Management Corporation, the National Frontier Exploration Services and the Host Community Fund respectively. Alison-Madueke had explained that “the new bill looks at new areas that were quite critical and, first of all, they are the inspectorate, the regulatory agencies for the oil and gas sector to ensure that they are independent and that they can actually do the regulations.

“As we implement the PIB, we will take over current infrastructure in the oil and gas sector, refineries, depots and certain down-stream entitles as well as production sharing contracts,” she added. According to her, “for the next few years, we will have a continuum in that particular enterprise, which I have always said, is very critical if we are going to continue to diversify our hydrocarbon base in the country.”

Sadly, between the times the new PIB draft was unveiled in 2012 and May 2015 when Jonathan’s tenure lapsed, government failed to get the bill through the legislative hurdle, a development that left most industry stakeholders frustrated. “It was a big disappointment that the Jonathan administration could not deliver on that single promise of getting that single important bill passed into law. Now the country is paying the price,” Barrister Best Ezeani, a petroleum marketer said.

 

Paying the price of non-passage of PIB

Expectedly, the prolonged delay in the passage of the bill has had far-reaching consequences on the sector, with most industry players lamenting loss of investment or divestment from the country’s petroleum sector. A recent statistics issued by the Minister of State for Petroleum Resources, Dr Kachikwu, shows that Nigeria was losing over $15 billion annually. According to him, between February 2009 and February 2014, Nigeria lost $125 billion due to the non-passage of the PIB.

Besides the huge revenue losses, the country has also reportedly lost quantum of investments in the sector, with some major international oil firms such as Shell, Chevron, Total E&P either significantly scaling down their operations in Nigeria or divested following what they considered a harsh operating environment due to non-passage of the bill.

Mr. Austin Avuru, managing director of Seplat, an indigenous oil and gas company, said the delay in the passage of the PIB has contributed to a fall in investments in the sector. According to him, “the fall in investments will have a long term negative impact on Nigeria’s oil and gas industry with a reduction in government revenues, loss of jobs and the damaging effects associated with a failure to replace reserves.”

Oluwaseyi Gambo, former national public relations officer of the Petroleum and Natural Gas Senior Staff Association (PENGASSAN) agrees, stressing that it was already having a ripple effect on the job in the industry. “As we speak, all sectors in the Nigerian oil and gas industry have lost between 18 to 20 percent of their work force. More workers would still be lost if the government and unions do not move fast to nip the current inferno in the bud,” Gambo said.

Similarly, a recent report by Global Risk Insight on the Business Insider UK, noted that while President Buhari is implementing encouraging reforms in the oil sector at a time when the non-oil sectors are gaining ground, investor confidence may plummet further if the government continued to drag its feet. “Tackling the prevalence of oil theft and insecurity in the Niger Delta, as well as the approval of the Petroleum Industry Bill (PIB) will be crucial for the recovery of a sector that is proving to be a strain on the Nigerian economy. For multinational oil corporations (MOCs), the precarious security environment and falling value of the Naira has caused many of them to halt future investments,” it stated.

The report added: “In the absence of the PIB, MOCs will be reticent to bolster their investments while they continue to scale down their operations in an unsafe and uncertain environment.”

The way forward

While most petroleum industry experts and stakeholders have commended the Buhari administration for its efforts so far to transform the troubled sector, there are growing fears that failure to build on the momentum through quick passage of the bill could deal further blows on the country’s chances of salvaging the situation.

“Certainly, a lot depends on how fast and strategic the government addresses the PIB issue and failure to get it passed into law in 2016 could do a lot of damage to Nigeria’s dream of attracting more foreign direct investments into the sector,” said Ezeani.

Dr. Jude Amaefule, vice chairman/CEO, Emerald Energy Resources suggests that rather than delaying the passage of the bill, in view of the dire consequences on the economy, the PIB should be segmented along the lines of fiscal management, host community benefits and general industry operations for easier passage into law.“Let them (legislators) pass the bill in segments since 80 per cent of the provisions are favourable. Even the remaining 20 per cent were opposed because the people did not understand the provisions,” he said.

Amaefule cautioned against further delay, saying: “the industry is high capital expenditure and we are losing money daily because no new investment is coming in and it will get worse if we don’t act fast.”

Dr. Adeoye Adefulu, an energy analyst also stressed the need for the Buhari administration to stick to its timetable of getting the bill passed to avoid the pitfalls of the past administrations. “One of the hallmarks of this process has been the failure of the government to keep its promises regarding the passage of the bill. This failure has kept the industry in limbo, with several companies delaying investment decisions due to the uncertainties surrounding the post-PIB fiscal and regulatory regimes,” he said.

According to him, it should not take the government longer than 12 months to undertake the necessary research and passage of the bill into law. “Whatever time is agreed, it is important that the government achieves its objective within that framework. This will help to bolster its credibility and reduce investment uncertainties”, he added.

Certainly, the PIB is an essential legislation which must be approached with all the seriousness and thoroughness it deserves. Fortunately, the leadership of the current National Assembly appears determined to pass it into law without much ado. Recently, Yakubu Dogara, speaker, House of Representatives urged President Buhari to transmit the new PIB to parliament for consideration as a matter of urgency. He noted that although efforts to pass the bill into law in the past had failed, the 8th National Assembly was poised to speedily pass the PIB into law to reposition the petroleum industry and fix Nigeria’s economy.

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