Tuesday, 21 May 2013

Petroleum Industry Bill At A Glance

The Petroleum Industry Bill (PIB) has been thrown around recently in political discourse like a hot potato - everybody has something to say about it but no one wants to claim it in its entirety. Newspapers keep churning out numerous articles about the PIB and the variety of impacts it will have once passed into law. Opinions and official statements have also been brandished arguing for or against its passage, each one outlining their justifications and in some cases, referencing bogus facts to support their position. In truth, discussions about “important” issues that carry along far-reaching consequences are good things to bring to the general public discussion table at least for democracy sakes. The first key question is therefore

What is the PIB?

The PIB refers to the Petroleum Industry Bill. It is an omnibus legislation, which seeks to regulate all the activities in the oil and gas industry in Nigeria.  It is the outcome of the Oil and Gas Sector Reform Implementation committee, which was tasked to produce a comprehensive legislation for the present day Nigerian oil and gas industry in 2000. After numerous drafts, and redrafts by the House of Representatives the latest 223 page PIB has undergone the second reading on 7 March 2013. It is now in the hands of the committees who have a six-week timeline to report back to the Senate.

The PIB aims to, improve the upstream activities of exploration and production. Incidentally the petroleum industry has strong links to the power sector because Nigeria is still heavily reliant on oil and gas for electricity generation. This is why the PIB also aims to increase domestic supply of gas to the power sector. The PIB aims to also increase transparency and create a conducive business environment for investors. Furthermore the PIB will deregulate and restructure the downstream sector to allow for commercially oriented activities to flourish. These measures will improve upon the existing fiscal regime- that is the taxes, levies and other payments due to the state in order to boost government revenues. 

How Does the PIB Intend to Achieve These?

If passed into law, the PIB repeals all the existing laws in the industry; mainly the Petroleum Act of 1969 (as amended) which is a forty-year-old document, definitely out of synch with the present day industry. 

How Can You Contribute to the PIB?

Recently, according to an article published in Daily Trust (Wednesday 10 April 2013), public hearings have been scheduled for the 22 and 23 April 2013. The chairman of the committee on PIB relayed that public hearings will be hosted in Lagos, Port-Harcourt, Enugu, Kaduna, Illorin and Gombe according to the six geo-political zones. You can have your say as citizens and stakeholders by participating and contributing to the discussions through the public hearings. As the chairman says “we (house of representatives members) cannot sit in our offices and decide for over 150 million Nigerians”.

Some Nagging Issues

It is true that the bill outlines a number of changes, processes and objectives, however it is still riddled with vagueness.

Some argue that the numerous organizations which shall emerge should the PIB be passed, will become duplications of existing ones. On the other hand, another argument is that the current state is no better because of the very slow bureaucratic environment and numerous hurdles, which results in the inability of the government to keep track of the workings of its national oil company, the NNPC, bog down the sector. Therefore, decongesting and unbundling the NNPC into smaller more manageable units under the control of the Minister will make it easier to keep track of the circus shows. Also, almost every new institution has a special paragraph specifying the power to accept gifts, which candidly spells out a new and improved form of “petronage”-our word for corruption in the petroleum industry.
Take for instance in Part II addressing new governance structure, about creating a Petroleum Technical Bureau (PTB) whose function is to advise the Minister of Petroleum Resources on policies regarding the industry. However, there is room for bias and lack of transparency here as the Minister is still the official who appoints said professionals to the bureau and at the Minister’s discretion. This is one instance where the PIB has been criticized for vesting too much power in the Minister for Petroleum Resources.
In terms of control and oversight of licensing procedures, the Minister awards, revokes and renews licences, he/she can arbitrarily decide who gets what without requiring justification; same with the President. This will result, as some claim, in the undermining of the workings of the sector and leaving it too exposed to political manipulations.
Now consider one of the most contentious parts of the PIB: the 10% PHCF or Host Community Fund, a new fund providing socio-economic and infrastructural development of communities within the petroleum producing areas. It is to be sourced from net profits of every upstream producing company. This actually falls at the doorstep of the international oil companies who are the majority upstream players, in addition to all the other taxes and royalties they currently pay. The PIB does not really go to great lengths to define what exactly constitutes a Host Community? Is a community a “host community” if they have an oil well, or in the Nigerian setting where small settlements and neighbourhoods make up a community-which settlement is then a “host community”? This host community matter may just be creating new conflict zones. Moreover who administers the funds – another agency like the NDDC, the state governments that already get 13% derivation, or the oil companies in the communities?

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