PIB: Realising objectives of the most debated bill in the history of Nigerian parliament

WITH hallowed anticipation, stakeholders in the oil and gas industry, as well as informed Nigerians, earnestly await the passing of the petroleum industry bill (PIB). After so many years of classical music rendition, the Minister of State for Petroleum, Timipre Sylva, had affirmed that the bill would be passed this month.

More than ever, the bill’s signing into law is essential for a positive outlook in Nigeria’s Petroleum sector and economy in general. While the federal government believes the bill will solve some of the knotty issues that have hindered the development of the oil and gas sector since the 50s, some observers have warned that not much is to be expected from governmental promises.

What exactly is the PIB?

In 1956, oil was discovered by Shell BP at Oloibiri in present day Bayelsa State, after half a century of exploration.

Niger Delta states are oil producing states. They include Delta, Akwa Ibom, Bayelsa, Rivers, Edo, Ondo, Imo and Abia states. However, Lagos has recently been declared an oil producing state also.

Fast forward to 42 years later, the Petroleum Industry Bill was introduced in 2008 by the late President Umaru Musa Yar’Adua. It is a series of laws designed to reform the oil and gas industry and repeal the existing ones. The Federal Government has, however, continued to rely on expired laws that were implemented at a time oil was not the country’s main anchor.  

The PIB seeks to establish a framework for the creation of commercially-oriented and profit-driven petroleum entities in order to ensure that the petroleum industry magnets investors with increased value, through the creation of efficient and effective governing institutions that are effective and efficient with clear and separate roles for the petroleum industry. Its purpose was straight forward and still is. However, 13 years after Yar’Adua’s move, the federal government is yet to find the rhythm of its solo dance with the bill.

According to the Bill, the National Petroleum Regulatory Commission (NPRC), which replaces the current Department of Petroleum Resources (DPR); the Petroleum Inspectorate and the Petroleum Products Pricing Regulatory Agency (PPPRA) shall be responsible for regulating the entire industry. The regulatory functions will cut across the downstream, midstream and upstream sectors.

The PIB seeks to, among others things, ensure an increased level of transparency and accountability in the sector. It was designed to do this by strengthening the governing institutions to attract investment capital through changes to the sector’s governance. Overtime, reports have shown that foreign investors have found it unattractive to invest in the industry despite being Africa’s largest producer of crude oil with about 1.6million b/d.

The Bill was structured to:

• Deregulate the downstream sector
• Increase domestic crude oil production
• Harmonise regulating framework through the establishment of an ethical commission
• Restructure the NNPC into a viable and profitable commercial entity and
• Enhance transparency and accountability in the sector

Apparently, so much has been lost, especially with multinationals finding other oil-producing African countries like Mozambique, Ghana and even Equatorial Guinea more appealing for investment than Nigeria for obvious reasons. Some of the discouraging factors include numerous bottlenecks in the industry, the dearth of a transparent framework and regulatory uncertainty that will enable investors make plans, forecast accordingly and boost their confidence.

The bill passage has indeed continued to suffer hindrance as the 6th, 7th, and 8th Assembly have been unable to pass it owing to several reasons. Some of the major concerns include the discretional powers to be exercised by the Petroleum minister, inefficient institutional framework, conflict of interest between politicians and bureaucrats, mutual distrust among state actors (executive and legislature), ownership and control of natural resources, host community benefits, environmental concerns, and appropriate fiscal regime.

Mutual suspicion among the geo-political zones that make up the country has also been a concern and still is, with assertions that the resources in view belongs to Nigeria as an entity and some selected states. Topics concerning the ownership and self-utilisation of over 20 deposits of minerals including gold, iron, others, would be avoided for now.

To surmount the delay, the bill had to be split into four different parts for easy passage and to deal with the aforementioned concerns effectively. The four parts are:

• * Petroleum Industry Fiscal bill
• * Host Community bill
• * Petroleum Industry fiscal bill and
• * Petroleum Industry administrative bill

Renowned geologist and award-winning writer, Toyin Akinosho, stated in his seasoned piece, ‘The PIB Doesn’t Promise an Efficient NNPC’, that “if the PIB is passed in its current form and properly implemented, NNPC’s role will so shrink that its role in the industry will hardly be noticeable.”

NNPC Limited

The questions to ask are: “Wouldn’t it be more profitable if the NNPC entered into a Joint Venture at 30-70 percent share?”

“Would corporatising the regulator be an even better idea?” How about selling off 70% or 60% to multinationals with full autonomy except the liberty to go public, while the NNPC controls 30-40%?

According to article 53 of the bill, which reads: “The Minister shall within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company Limited (NNPC Limited).

“The Minister shall at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted, which shall form the initial paid-up share capital of NNPC Limited and the Government shall subscribe and pay cash for the shares.”

The Nigerian National Petroleum Company Limited (NNPC Limited) is still under the control of the Nigerian National Petroleum Corporation, under the same Federal Government. Now, more than ever, running a private-public government should fuel our approach.

The question to ask the government especially is: “How would they rate the government’s management of the NNPC over the past two decades?”

Joint Venture of NLNG

The Nigeria LNG has been a proven example of what a joint venture partnership can benefit Nigeria. The NLNG is a joint venture between the Federal Government (the Nigerian National Petroleum Corporation) (49%), and foreign investors (51%). The investors are Shell Gas B.V. (25.6%), Total Gaz Electricite Holdings France (15%), and Eni International N.A. N.V. S.àr.l (10.4%). The NLNG is currently one of the major global suppliers of Liquefied Natural Gas, even if it seems the Federal Government may prefer not to consider that. The progress made and profits garnered overtime can be ascribed to the board made of the multinationals (who have the larger share) and the federal government.

Corporatisation of Saudi Aramco

Nigeria must learn from Saudi Aramco Oil Company, which is the world’s largest producer of crude oil. Saudi Arabia, the Middle-East country, also needed to diversify its economy away from oil, hence it made an announcement to go public.

The then-Deputy Crown Prince, Mohammad bin Salman, announced in January 2016 that he intended to sell 5% of Saudi Aramco – Saudi Arabia’s government-owned oil company – in an international initial public offering (IPO) to fund the country’s ambitious economic reform plans. The rest, they say, is history.

Presently, if not for indices such as the price war between Russia and Saudi Arabia, the plunge in global oil demand in Q1 2020 inter-related with the Covid-19 pandemic, and the periodic attacks on Saudi Arabia’s facilities by rebels, Saudi Aramco’s market cap wouldn’t be $210bn less than tech giant, Apple’s. It stood as the world’s most profitable company until mid-March 2021.

Host Communities

This has been an integral part of the Petroleum Industry Bill due to the outcry of marginalisation and the high rate of underdevelopment harmonising the oil region.  One of the major areas of attention pertaining to the host communities is the equity shareholding percentage ascribed. (Host communities refer to communities with on-going oil and gas operations, and are present in the Niger Delta region)

2.5% Equity Shareholding for HOSTCOM

Article 240 of the Bill clearly states that “the constitution of each host community development trust shall establish a fund comprising of one or more accounts (“host community development trust fund”) to be funded pursuant to this section.”

Identifying the source of funding for petroleum host communities development, it went on to say that, “Each settlor, where applicable through the operator, shall make an annual contribution to the applicable host community development trust fund of an amount equal to 2.5% of its actual operating expenditure in the immediately preceding calendar year in respect of all petroleum operations affecting the host communities for which the applicable host community development trust was established.”

(Equity means the percentage of ownership in a company. The profit and loss is shared based on this percentage. So, a 2.5% equity shareholding means that, for every profit or loss from oil and gas operation within the terrain of the host communities, 2.5% of the value goes to them.)

From 10% to 2.5%

It should be carefully noted that 10% was proposed in the first draft of the bill introduced to the National Assembly in the 6th Assembly. The bill had stated that, “To receive on a monthly basis from the upstream petroleum producing companies sums equaling 10 per cent of their net profits and to utilize the funds for the development of the economic and social infrastructure of communities within the petroleum producing areas.”

The reason for the 7.5% reduction still holds obscurity but the 2.5% equity shareholding in view has however been strongly but reasonably opposed by the Niger Delta region. The host communities have affirmed that an equity less than 10% (where they get 5% each from the Federal Government and operators) would be strongly rejected, and ignite the sleeping flame of militancy in the region.

Does HOSTCOM’s position hold water?

There is no better way to appraise how beneficial the oil industry has been to the host communities than identifying the available reality. They are milked daily to keep protein flowing through Nigeria’s veins, they’ve literally kept the economy off life support, and contributed to its GDP more than any other region among the four geo-political zones.

As the decarbonisation plan of the federal government, alongside its several plans to curb gas flaring and environmental degradation linger, the rate of pollution from oil spillage (which frustrates farming, fishing, thereby promoting poverty, hunger, crime and its siblings) heightens. It blossoms at the detriment of the physical health of men, women and children, who suffer one illness or the other due to contaminated food, water, air; who, of course, mostly do not have enough money to feed themselves properly, cannot afford an education or cover their medical bills. How well does a 2.5% equity shareholding cushion their sustained predicament?

A 2017 poverty assessment showed that the poverty headcount for most of Niger Delta states ranged from 19.2% to 33.1%, with their national average at 53.3%. The proportions of the poor were even higher.

Bearing in mind that, even when compensation and clean-up are made after the recurrence of different forms of environmental pollution, the underlying effects or aftermath lies deep in the community, and some lives may never be the same.

The Niger Delta is Africa’s most important oil-producing region, and one of the most polluted places on earth, according to Amnesty International. Between 2011 and 2017, about 21.7m litres (equivalent to nine Olympic swimming pools) of crude oil was spilled in Niger Delta communities.

Conclusion

The region that literally facilitates the respiration of Nigeria’s economy should not be trivialised, especially with the goals of the Petroleum Industry Bill centred on it to a great extent. It is visible to the blind and audible to the deaf how neglect, corruption and gross mismanagement has kept the region and Nigeria at large in a state of inertia. The emergence of partisanship since the PIB surfaced, religious and ethno-cultural swings, lack of due consideration and the will-power to eschew politics in the process so far, continues to hold back the bill from seeing the light of day.

The different articles of the Bill, the possibilities it holds, if properly passed and well implemented, will revolutionise the oil industry and strengthen efforts at economic diversification. As neighbouring African countries continue to position themselves as attractive to investors, there is the need to restore relevance of the industry without inflicting injuries on any side, especially open sores.

Stating, clearly, the kinds of projects to be executed in the region, and putting modalities in place to stoutly implement, monitor and measure these policies with periodic comparison with the reality in the communities would prevent the embarrassing NDDC-like situation ahead.

Nigeria, especially the Niger Delta region, will enjoy what has been denied it for over 60 years, with surging employment rates and a rapidly growing, diversified economy.

Regardless of the pockets of storm the PIB holds, the federal government has insisted that the bill will resolve the oil sector’s 70-year underdevelopment.