Do lawyers and oil barons have something in common? It seems they do as they came together to push for new laws to rejuvenate the oil industry. They want the incoming Ninth National Assembly to pass pending bills to boost confidence and investments in the sector. They spoke in Lagos at the third Lawyers in Oil and Gas Conference. JOSEPH JIBUEZE reports.
In the absence of an all-encompassing law to regulate the oil and gas sector, the Federal Government has intervened through policies, which stakeholders have praised.
These include the National Oil Policy, the National Gas Policy, the National Petroleum Fiscal Policy, and the National Gas Flare Commercialisation Regulation, among others.
Legal and energy law experts, however, say policies are not enough. An effective legal framework is needed to drive the sector forward.
According to them, policies do not inspire much confidence in investors as much as laws.
They emphasise that with the economy still heavily reliant on earnings from oil exports, more investment is needed, but only a strong legal framework will guarantee it.
For decades, the economy has depended on the oil and gas industry, which accounts for over 80 per cent of foreign exchange revenue.
But the sector has been challenged by a lack of an up-to-date enabling law that will give bite to the intervening policies.
The government, in a bid to address the problem, inaugurated the Oil and Gas Sector Reform Implementation Committee, whose recommendations led to the Petroleum Industry Bill (PIB).
But, inadequacies and inconsistencies inherent in the PIB and stakeholder/host community politics resulted to its non-passage.
Legal experts believe there is an urgent need to revisit the PIB, review and produce a practicable and sustainable law that provides an inclusive framework for governance, administration, fiscal, legal and regulation of the industry.
They spoke in Lagos at the Third Lawyers in Oil and Gas Conference, organised by the Lawyers in Oil and Gas Network.
Its theme was: Nigerian oil and gas industry: its national policies and regulations, a reflection on the economy.
Speakers included professor of energy law Yinka Omorogbe, Perchstone and Graeys Partner Mr Osaro Eghobamien (SAN) and Aelex Legal Partner Soji Awogbade.
Others were: Mr Bode Olanipekun (SAN), Primera Legal Partner Mr Isreal Aye, Advocaat Principal Partner Mr Ola Alokolaro, Duale, Ovia and Alex-Adedipe Partner Mr Niyi Duale and Mrs Ivie Ehanomo of the George Etomi and Partners.
Industry experts who spoke at the event included Aiteo Exploration and Production Managing Director Mr Victor Okoronkwo, ExxonMobile Vice-Chairman Mr Udom Inoyo, and Baker Hughes Counsel Mr Femi Olaobaju.
Others were Eko Distribution Company Legal Head Wola Joseph, Nigerian Gas Association President Mrs Audrey Joe-Ezigbo and Nigerian Gas Flare Commercialisation Programme (NGFCP) Manager Mr Justice Derefaka.
Among others, they want pending bills such as Petroleum Host and Impacted Community Bill (PHICB), Petroleum Industry Administration Bill (PIAB) and Petroleum Industry Fiscal Bill (PIFB) passed into law.
They also want the Petroleum Industry Governance Bill (PIGB), which has been passed by the National Assembly, to be assented to by the President.
Besides, they called for a state of emergency in the petroleum industry, which includes deadlines for enacting new laws.
Policies good, but not enough’
Bureau of Public Enterprises (BPE) Strategy and Planning Head Dr Terhemen Andzenge, a lawyer, who gave the keynote address on behalf of Prof Omorogbe, noted that policies and regulations lack force of law.
He said only one out of eight bills relating to the oil and gas sector has been passed in recent times, underscoring how difficult law and policy making process is in the Nigerian government due to various interests.He bemoaned the fact that extant laws lack best practices and are opaque, while the legal and regulatory landscape for the oil and gas industry is not in the country’s best interests.
According to him, while policies are good, they derive legitimacy from laws and are not standing alone and self-empowering.
At best, he said policies are useful tools but stop gap measures that cannot replace laws.
He said a policy document merely outlines the goals a government ministry hopes to achieve and the methods and principles it will use to achieve them.
According to Andzenge, policies are merely intentions developed by the executive arm and have legislative input, while laws are set standards, principles, and procedures that must be followed.
“Policies, no matter how good and effective and fair, are not the destination to the sustainable development of the oil and gas industry
“They don’t offer the required legal comfort for foreign direct investment (FDI). They are inherently unfair: developed and implemented by the executive – an front to rule of law ethos,” Andzenge said.
He called for increased advocacy towards passage of the PIGB. “Push for the law,” he said.
Speaking on the sidelines of the event with reporters, Andzenge added: “The oil and gas is the mainstay of the economy. What it means is that we get 80 per cent of our income from oil and gas, so we must reform to make more progress. Policies don’t reform but the law.
“We need investments from outside the country for the oil and gas sector but we can’t have these investments except there are laws to assure the investors that they will be able to recover their money and make profit.
“No investor will come if he is not sure he would get a return of what he invested. They only come when the laws are clear, precise; their properties will not be seized and they would do business and go away with some profit.
“We need to reform the law and ensure the PIB is passed. The law we have here is old; it’s over 50 years, it’s archaic. We need something modern that can move us to the next level.”
‘Why PIB is hanging’
Nigerian Bar Association (NBA) Section on Business Law (SBL) pioneer chairman George Etomi emphasised the need for an effective oil and gas law.
He regretted that the PIB and PIGB have not become law due to lack of political will.
“The ministers always try to protect the powers that they have, which is what is holding back the PIGB.
“The oil and gas policy was recently gazetted, which is a major step. But the inability to get clear thinking and clear legislation is hindering investments. What we need to advance the power industry, for instance, is not in Nigeria.
“It can only come when those with deep pockets who see profits come in, and they will only come when the environment is safe and enabled. One of the issues that currently acts as a deterrent is the legal and regulatory framework.
“When you privatise an industry and you interfere unduly, it does not inspire confidence. If a policy is not enacted or captured in a law, it almost comes to nothing,” he said.
Calling for increased advocacy, Etomi added: “Eighteen years in the making, and suddenly the PIGB is nowhere. For the last 18 years, we’ve held back potentially the hundreds of millions of dollars that could have gone into these related sectors. These are real issues.
“So, we’ll continue with this sort of advocacy through these conferences which add knowledge. We need to engage the right people. Engaging our legislators is very key.”
SAN: policy no substitute for law
For Eghobamien, policy can indicate direction and create some level of certainty, but cannot substitute for law.
“Ultimately a law will have to be passed to reflect the policy. The only reason why policy is promoted and is being used as a replica for a law is because of the challenges it takes to get any law through the National Assembly.
“Therefore, in the absence of the law, there must be a framework to guide those who are in the sector because what we have is obsolete,” the SAN said.
He said policies are necessary to deal with unusual problems and to guide those operating in the absence of a law.
“Undoubtedly, it would be better to have laws to state things in a very clear term. Also, when there is a dispute, you know were rights and oppositions will fall,” Eghobamien said.
In the same vein, Alokolaro believes that Nigeria loses a lot due to lack of effective legal framework.
He said: “The permissive role played by the absence of detailed legal and regulatory framework on gas resource management had cost Nigeria a fortune.
“However, with the increased energy and detailed legal, regulatory and commercial framework set out in the NGP and the components of the Petroleum Industry Bill and subsidiary legislations, there appears to be light at the end of the tunnel after all, for gas to thrive in Nigeria.”
‘Laws will spur private capital’
Nigerian Gas Association President Dr Audrey Joe-Ezigbo believes that a strong legal framework will ensure the optimisation of gas resources for economic growth.
“For us, the advocacy is to say that whatever our history has been as to why we have not fully optimised our gas resources, it is important that all parties – government, private sector and the legal sector which has a huge role to play, all come on board to fast-track the potentials.
“There might be social implosion unless we do something about the youth. How do we achieve this? We want to use gas as a resource for gas-based industrialisation where able-bodied youths can be engaged in a productive manner. We need to take Nigeria away from dependency on oil revenues.
“Gas not only has the potential to serve as revenue generation resource in itself, but as an enabler of generation from several other industries.
“We have operated with a lot of policies. We now see the capital flows go to South Africa and East Africa and other parts of the world. The dynamics of the country itself has changed.
“The government does not have enough money for projects, so the only way to move forward is through private capital.
“We have overtime made some moves that don’t signal to investors that their contracts are cast in stone. This is one of the things we have been speaking about: sanctity of contracts.
“Right now nobody is comfortable with policies because we wake up with interventions at one point of the value chain without considering the roll-back effect on the other sectors.
“We’re in one breath saying things that will make an investor come in and another taking detrimental actions, simply because they are not legislated. Legislation is cast in stone,” she said.
On the way forward, Joe-Ezigbo said: “We need to pass the PIB and the National Petroleum Fiscal Policy so that the National Gas Plan does not remain a document filled with bright ideas and no legal backing.”
Managing Director Aiteo Exploration and Production, Mr Victor Okoronkwo regretted that the PIB has been in the works for several years.
“For as long as PIB has been on the discussion board is as much as we have delayed investment,” he said.
On legislation of prices, he said: “Once you legislate a price, you kill competition. There might be a need to have a benchmark but not a regulated price.”
Exxonmobil Vice Chairman, represented by Company Secretary Mr Charles Ndiomu, noted that government bodies are working at cross-purposes.
In his words: “The Minister of Justice has a different agenda from NNPC and Ministry of Petroleum.”
He said investors will not be encouraged where various arms of government sing discordant tunes over the same sector.
For Olaobaju, the Petroleum Act is an old law but not necessarily a bad one.
“Perhaps what we needed was an amendment of the Act to reform the fiscal regime, while we work on the process of legislating a new one,” he said.
Strengthening gas policies
Derefaka demonstrated how Nigeria has lost billions of dollars to gas flaring in the past years.
“Nigeria is one of the countries where we have gas flare sites where people are living. We have been wasting such a natural resource which is the closest ally to renewables. Only about 12.5 percent of Nigerians have access to electricity,” he said.
The NGFCP, he said, has mandate to reduce gas flaring, adding that it is an impact programme “which ticks all the right boxes (climate, sustainable development, Niger Delta, Co2 reduction, investment and jobs) and could stimulate multiple development impacts.”
Chuba Obi-Okaro, who represented Olanipekun, said the NGFCP will only succeed if there was more involvement of the private sector.
Resolutions
- There is urgent need to pass pending oil and gas bills to create strong legal framework for the sector
- Government agencies must avoid working at cross purposes or singing discordant tunes
- Contracts must be respected
- Government interventions through policies must not be counter-productive
- Infrastructure challenges must be addressed
- Existing enabling law is archaic and should be amended in the interim
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