The much hyped Petroleum Industry Governance Bill, which was passed into law mid May 2017, is already generating heated debate amongst stakeholders.Many argue that the law as passed, leaves nothing to cheer about. Ibrahim Apekhade Yusuf in this report, examines the contentious issues surrounding the law
Few issues have generated as much controversy as the Nigeria Petroleum Industry Bill (PIB). Right from the time the idea of the PIB came to the front burner of public discourse some years ago, it was a subject of heated debate considering the differences of opinions by different interest groups.
Although the PIB has been around in one form or the other since 2008 when it was first introduced, however, during the 7th National Assembly, additional efforts were made to pass the 2012 version of the PIB but it unfortunately was unsuccessful, just as similar attempts at prior parliamentary sessions.
But thankfully, Dr. Bukola Saraki-led Senate passed the Bill first time last May and now expects concurrence by the House.
Thumbs up for Saraki-led Assembly
As to be expected, a lot of kudos has gone to 9th Assembly for taking the taking the initiative to pass the bill almost 17 years after the process commenced in April 2000.
Firing the first salvo, the chairman, Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor while lauding the Senate for taking the initiative, said the PIGB provides for the governance and institutional framework for the petroleum industry and for other related matters.
“We need the governance bill to setup the framework for the following as stated in the governance bill document, create efficient and effective governing institutions with clear and separate roles, establish a framework for the creation of commercially oriented and profit driven entities, promote transparency and accountability and finally foster a conducive business environment,” he added.
The Nigeria Extractive Industries Transparency Initiative (NEITI) in a media statement signed by its Director of Communications, Dr. Orji Ogbonnaya Orji noted that the public outcry that greeted the failure of the last National Assembly to pass this important bill perhaps informed the current Senate’s resolve to revive legislative interest on the bill. This resulted in the milestone recorded at the moment.
He said the decision of the Senate to consider the bill as priority resulting in its passage is not only legendary, but historic, given the challenges the bill had passed through in its legislative journey for almost two decades.
Ogbonnaya hoped that with the prospects of a new law coming in to place, the huge revenue losses to the nation as a result of governance lapses will be eliminated
He said NEITI as an agency set up to enthrone transparency and accountability in the management of extractive industries in Nigeria, has legitimate interest in the PIGB in view of its strategic importance to the realisation of its mandate.
Bone of contention
However rather than be a source of excitement the passage of the bill has evoked unpleasant reactions from different quarters as not a few are satisfied with the bill as in its current state.
But what may be responsible for this blatant antagonism of this otherwise laudable initiative? The devil, as they say, is in the details!
It is widely acknowledged that major reforms in the governance and institutional structure for the sector are necessary and urgent but a major drawback of the existing framework is the lack of clarity of roles, self- regulation, conflicts and unnecessary overlaps.
Besides content issues with prior versions, one of the major drawbacks to passage was the bogus packaging of the PIB as a single legal instrument.
Consequently, although the 2015 attempt contains enhanced quality work on content, the bill has been split into logical smaller pieces for submission to the 8th National Assembly, a complete departure from all prior efforts.
Concerns by stakeholders
Stakeholders in Nigeria’s oil and gas sector have criticised the non-passage of the Host Community Bill.
They emphasised the need for the federal government to urgently pass the bill that addresses host community issues to allow for peace and security in the Niger Delta, even as the Bill is yet to scale through the lower house of the National Assembly.
Expectedly, the Ijaw Youths Council (IYC) has rejected in totality the PIGB, describing it as insensitive. However, the Host Community Bill and Petroleum Industry Fiscal Bill are at different stages of scrutiny at the National Assembly.
The Host Community Bill is aimed at addressing issues relating to community participation, security, and the ecological debt incurred by host communities from oil extraction.
Although the oil workers union in the oil and gas sector, including the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), have cautioned were yet to make their position on the PIGB public as at press time, they had both cautioned against inserting anti-labour laws in the PIGB when the proposal was still being drafted.
At a joint statement issued recently after a meeting in Abuja, the unions insisted that no job losses should be recorded in the Nigerian National Petroleum Corporation (NNPC) and all other agencies that would be impacted by the PIGB.
According to the two trade unions, the National Assembly must ensure that workers interests are protected in the bill, currently undergoing legislative scrutiny at the National Assembly.
The unions stressed that labour-related issues must be respected and given due consideration as a panacea for the successful implementation of the bill when enacted.
The unions in the joint statement noted that a major challenge that will confront workers in the organisations and agencies that would be impacted by the PIGB, especially the NNPC is the transitions from a more socially focused organisation to a profit focused one.
They added that the sudden and severe changes that these organisations would bring with the PIGB would impact on the workers like the case of the workers of the defunct Power Holding Company of Nigeria (PHCN) successor companies.
The unions said the PIGB is intended to privatise, as much as is practicable, government’s interest in the petroleum sector, and that if the situation is not carefully and properly handled could lead to serious labour issues thereby jeopardising the overall benefits of the PIGB.
They added that the PIGB also had the additional challenges posed by repeals of existing laws as some of the Acts establishing the government agencies except for Petroleum Equalisation Fund (PEF), Nigerian Nuclear Regulatory Authority (NNRA) and Petroleum Training Institute (PTI) will be repealed by the PIGB.
The unions reiterated that since the Bill plans to change the ownership structure of government establishments in the petroleum sector including asset sales and eventual divestment, workers issues relating to their welfare, benefits, jobs protection and other entitlements should be given due consideration by the National Assembly.
The unions’ leadership said the position of the two industrial unions had been submitted as encapsulated in their memorandum to the National Assembly based on five major policy thrusts. These are Transparency and accountability fiscal terms, institutional framework (such as Minister, Regulator and commercial entities), Refinery and other downstream activities, and labour issues and membership of Institutions Boards and committees.
Intended consequences of the PIGB
A lot is bound to give with the introduction of the Bill. With the passage by the PIGB, the country is set to have five new commercial and governance organisations to replace existing ones, such as the Nigerian National Petroleum Corporation and the Department of Petroleum Resources.
The bill seeks to provide governance and institutional framework for Nigeria’s petroleum industry.
Among other key objectives, the bill promises to repeal the NNPC Act, and replace it with “commercially oriented and profit-driven” petroleum companies to be incorporated by the government.
In effect, the assets and liabilities of the NNPC will be split between two new companies, namely National Petroleum Company, NPC, and the National Petroleum Assets Management Company.
Both companies are to be incorporated by the Minister of Petroleum Resources within six months of presidential assent – that is if it gets that approval.
The management company will run all assets currently held by the NNPC, including OPLs under production sharing contracts, while other assets will be transferred to the NPC.
In both companies, the Bureau of Public Enterprises, Ministry of Finance and the Ministry of Petroleum are to hold shares in ratio of 20:40:40 respectively.
The bill also proposes a third commercial entity, the National Petroleum Liability Company, to be vested with “certain liabilities” of the NNPC and pension liabilities of the DPR in order not to financially encumber the Asset Management Company as well as the NPC.
The bill further seeks to repeal the Acts establishing the Petroleum Inspectorate, Department of Petroleum Resources and the Petroleum Products Pricing Regulatory Agency, and to transfer their functions, assets, funds and all resources to a new body, to be named Nigeria Petroleum Regulatory Commission.
According to the bill, this commission will have responsibility to regulate all aspects of the nation’s petroleum industry, including health, safety, environment, technical standards, infrastructural development, compliance with terms and conditions of contracts and leases, and enabling business environment.
It will also have power to grant licenses for downstream gas, petroleum products, retail outlets and transportation and distribution facilities.
The fifth body proposed by the bill is the Petroleum Equalisation Fund, which is to ensure “efficient distribution of petroleum products through the country” and “enhance development of all regions of the federation by ensuring economic balance in the price of petroleum products”; and “collect and provide funding for infrastructural development throughout the federation.”
Questions over flawed PIGB
To say there have been wide criticisms over the PIGB is simply stating the obvious. Truth is complaints have been from different quarters, especially from stakeholders who feel shortchanged by the system.
In his assessment of the PIGB, Martin Onovo, oil and gas engineering consultant and an energy expert who boasts of over 25 years experience in the sector said the bill as passed by the senate leaves nothing to cheer about.
Speaking in an interview Onovo who was categorical in his criticism said, “I don’t think it’s a laudable move. It has no benefits. It has very heavy unproductive costs. There are many reasons why this bill is wasteful, bureaucratic and inappropriate. In this Petroleum Industry Governance Bill, the Senate simply split the NNPC into an upstream and a downstream establishment and also replaced the DPR with a new industry regulatory authority.”
The original purpose of the PIB, he maintained, “Was to have one comprehensive and updated law that regulates the entire Nigerian petroleum industry both upstream and downstream. This was calculated to make it easier for investors to get a complete view of all laws guiding activities in the petroleum industry so that they can make their investment decisions promptly and thereby increase investments in the industry. Unfortunately, this original primary purpose was defeated by the breaking of the proposed PIB into about five parts and passing only one part, by the Senate. It is a first step towards the misalignment of the laws governing the petroleum industry.”
The PIGB passed by the senate covers only the governance structure of the industry and introduces very wasteful costs of the bureaucratic organisational adjustments they made, he stressed.
He however impressed on the lower chamber the need to make the necessary amendment rather than be railroaded into making the same flaws like the members p the upper legislative chamber.
“The House of Representatives should not accept it as passed by the Senate and if they do, it should not be signed into law. Otherwise, Nigeria will waste very valuable funds and incur increased operational costs.”
On the way out for the industry, he insisted, is very clearly established and published. “In the upstream sector of the industry, we should grow reserves and increase production safely and more efficiently. We should also improve gas utilisation which will reduce flaring and increase revenue. In the downstream sector, we should increase domestic refining capacity.”
The best way to achieve this, he observed, is to identify and prioritise all issues and risks involved with the sector and designed means and ways of managing them efficiently.
“Today, the major issues include: security problems in the Niger Delta, uncertain investment climate that was created by the PIB idea, host community relations, policy changes, political risks, corruption, and mediocrity. We must manage these and other risks and issues most efficiently to achieve our national objectives for the petroleum industry.”
Like Onovo, one group that has raised its voice above the din is the Social Development Integrated Centre (Social Action), a civil society organisation in the forefront of advocacy against socioeconomic injustice.
Speaking at a press conference in Abuja last Wednesday, Dr. Isaac Asume Osuoka, a director at Social Action lamented what he described as “serious ambiguities and flaws in the PIGB as passed by the Senate.”
Osuoka who revealed that his organisation has done a post mortem of the PIGB, said the outcome of the study shows that PIGB, as passed by the Senate, is seriously flawed.
Specifically, he said: “It does not provide for the health, safety, and environment concerns. There is no provision for an end to gas flaring. There is a lack of independence for regulators and a glaring neglect of host communities’ interest in the proposed new institutions. The provisions of the PIGB as passed by the Senate do not demonstrate an understanding of the need to guarantee energy access as a right of citizens.”
Besides, he said the powers and functions of the new institutions like the Petroleum Regulatory Commission created under the Bill do not reflect current global best practices. “Our conclusion is that the version of the PIGB as passed by the Senate is an unconscionable attempt to legalise the appropriation of national oil and gas assets to some powerful private interests.”
The ill-advised separation of a hitherto comprehensive bill into bits (by the Senate), he stressed, “Has created a sufficient setback to a holistic and more effective effort to revamp of the oil sector in Nigeria for the benefit of citizens.”
On the provisions of the bill proper, Osuako said the Senate chose to create new institutions in the industry including the National Oil Company, the Nigeria Petroleum Assets Management Company, the National Petroleum Regulatory Commission, the Ministry of Petroleum Incorporated and the Petroleum Equalization Fund etc., without first creating the enabling environment on which these entities will thrive.
“In its current form, the PIGB cedes virtually all powers on environmental regulation from the Ministry of Environment to the New Petroleum Regulatory Commission. Sadly, the Commission is saddled with functions that are conflicting with each other.”
Expatiating, he said: “The original PIB had made it clear that the Ministry of Environment shall have overriding authority on environmental matters. This neutrality and independence was necessary to appropriately enforce environmental regulations. Worryingly, in the PIGB, all provisions giving the Federal Ministry of Environment powers on environmental issues were struck out. By so doing, the Senate is causing the country to lose out on the opportunity of a new legislation to correct the lapses in our regulation of environmental issues in the petroleum sector. The logical consequence of this line of action is the exacerbation of environmental crisis and conflicts in Nigeria.
He therefore called on the National Assembly to promptly return to the 2015 version of the PIB as regards to the environment as it has clear and effective environmental protection provisions and regulations for the petroleum industry.
With the welter of criticisms against the PIGB still raging, the last may not have been heard of this so-called controversial bill.
