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Implementing the Petroleum Industry Act 2021: One Year After (Warning – Long Post)

by Dr. Adeoye Adefulu & Lateef Bamidele

The apparently unending task of reforming Nigeria’s oil and gas industry which began in 2000 was finally laid to rest a year ago, when the President assented to the Petroleum Industry Act 2021 (“Act” or “PIA”) on August 16, 2021. The industry welcomed the new law with mixed feelings, many believed the Act should have been finalized twenty years earlier to protect the industry from decline.

Despite this mixed reaction, it was clear that the Act had come to stay, and it brought with it sweeping changes and reforms across the institutional, regulatory, environmental, and fiscal frameworks of the Nigerian oil and gas sector. As one would have expected the implementation of these reforms commenced almost immediately, albeit slowly.

On the first anniversary of the PIA, it is useful to take a examine some of the noteworthy events and reforms undertaken and what they mean for the industry.

Continue reading “Implementing the Petroleum Industry Act 2021: One Year After (Warning – Long Post)”
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POSTPONEMENT OF PUBLIC HEARINGS ON THREE PETROLEUM INDUSTRY REFORM BILLS

The House of Representatives today announced that the  public hearings scheduled to take place on the 23rd – 26th of April, 2018 on the Petroleum Industry Fiscal Bill, the Petroleum Host Community Bill and the Petroleum Industry Administration Bill have been postponed to hold between Tuesday, 15 – 17 May, 2018, to allow for greater inclusiveness and stakeholders’ participation in view of the strategic nature of the Bills. Relevant stakeholders are encouraged to submit their memoranda on or before Friday, 11th May 2018.

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NOTICE OF PUBLIC HEARING/ CALL FOR MEMORANDA

The Senate Joint Committee on the Petroleum Industry Governance Bill yesterday published a Public Notice in the Punch Newspaper, inviting industry stakeholders and the general public to a hearing on the Bill scheduled to hold on December 7, 2016 at Conference Room 0.22 of the Senate Building, National Assembly Complex, Abuja for 10.00pm daily. The announcement also invites the submission of Memoranda on the Bill which must be submitted not later than December 2, 2016.

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PIB passes second reading at Senate

News reaching us from the Punch Newspaper confirms that the Petroleum Industry Governance Bill (PIGB), which is an unbundled version of the PIB, described by the Chairman, Senate Committee on Petroleum Resources (Upstream), Senator Tayo Alasoadura, as proposing “a slim, focused yet robust framework” for effective and institutional governance of the Nigerian petroleum industry, passed second reading in the floor of the Senate on Tuesday, November 2, 2016.

This speedy action on the Bill seems to confirm our earlier report of the Senate’s plan to ensure that this version of the PIB is passed before the end of the legislative sitting for 2016.

An interesting development however is the recently launched 7 Big Wins of the Federal Government, which is the government’s Roadmap of short and medium term priorities to grow the Nigerian oil and gas industry. One of the key areas of focus of the Roadmap is oil and gas Policy & Regulation which proposes two industry reform bills – a Petroleum Industry Reform Bill (PIRB) and a Petroleum Fiscal Reform Bill (PFRB). The PIRB is expected to address all governance and operational industry reform issues much like the PIGB and the Roadmap outlines an objective of concluding and passing the PIRB & the PFRB either by the end of December 2016 or by the end of the first quarter of 2017 (a seeming contradiction in the Roadmap).

The question is, is the PIGB and the PIRB one and the same? This is very doubtful. If these two Bills are two different Bills as we suspect, then there is a likelihood of the resuscitation of the supremacy battle between the National Assembly and the Presidency earlier reported on, which we fear may end up stalling the passage of the Bill if not properly managed.

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At Last, Senate Begins Debate on PIB Next Week

It appears the Senate is finally ready to begin deliberations on the PIB as the Vanguard today reports that the PIB will lead other major issues which the Senate will next week pay serious attention to, as part of efforts by senators to reposition the economy.

The PIB is set to be moved for second reading by the chairman of Senate Committee on Petroleum, Upstream, Senator Omotayo Alasoadura, APC, Ondo Central.
According to the report, ahead of debate on the PIB, senators from the Niger Delta areas who had moved for the suspension of the bill some months ago because they believed that the non-inclusion of the community demands in the first phase might aggravate the tension in the oil producing areas, have concluded plans to meet next Monday to brainstorm on the resuscitation of the bill and ensure that the work on its passage moves at a top speed.

The plan is to ensure that the PIB is passed before the end of the legislative sitting for 2016.

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Government to unveil three new PIBs

In our last post, we reported that the passage of the PIB seemed to be nowhere in sight due to internal power play between the National Assembly and the Executive. Well, the Guardian yesterday reported that the Presidency will present three harmonized bills from the PIB to the National Assembly before their resumption from recess.

According to the Minister of State for Petroleum Resources Dr. Ibe Kachikwu, the three Bills are in the final editing stages and will be sent to the Federal Executive Council and other stakeholders for their input. Dr. Kachikwu reiterated the willingness of the Executive and legislature to pass the PIB noting that the three Bills were drafted in consideration of the issues raised by stakeholders.

The National Assembly should resume from recess by 12th of September 2016 and we hope that the Presidency makes good on its promise.

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Supremacy Battle Between Presidency, N’Assembly Stalls Legislation on PIB

There are indications that the passage of the PIB may be nowhere is sight as information gathered from ThisDay suggests that the delay in the passage of the Bill is actually due to internal wrangling between the National Assembly and the Executive, a power play centered around which arm of government is responsible for the passage of the Bill. This is in addition to the unresolved issue of the inclusion or otherwise of the host community fund in the Bill. The report decried this debacle calling it a major embarrassment for Nigeria in view of the landmark passage of a similar Bill by Ghana’s parliament last week.

The paper went on to report that the Group Managing Director (GMD) of NNPC, Dr. Maikanti Baru has promised to continue with the reform initiatives started by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, and further grow the fortunes of NNPC by focusing on a 12-point agenda, which includes security of oil installations, the new business models, joint venture cash calls, production and reserve growth, growth of the Nigerian Petroleum Development Company (NPDC), gas development, oil and gas infrastructure, and refinery upgrade and expansion.

 

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Saraki Orders Suspension of Work On New PIB

It appears progress on the Petroleum Industry Governance Bill, (“PIGB”) is to be stalled as reports reaching us indicate that the Senate President, Bukola Saraki has ordered the indefinite suspension of further consideration of the bill. According to today’s Vanguard, this order came as a result of mounting opposition from southern lawmakers on the removal of the 10 percent royalty proposed for host oil communities tagged the Petroleum Host Community Fund, (“PHCF”) as captured in the original PIB, from the PIGB. Whilst the North is against the inclusion of the PHCF, the oil producing regions in the Niger Delta are favorably disposed to its inclusion stating that its removal is not in the best interest of their region.

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AN ANALYSIS OF THE PETROLEUM INDUSTRY GOVERNANCE BILL 2016 – ESTABLISHMENT OF THE NIGERIA PETROLEUM REGULATORY COMMISSION

The Petroleum Industry Governance Bill 2016 (“the Bill”), by its Section 4, establishes a body to be known as the Nigeria Petroleum Regulatory Commission as the sole regulatory institution for the Nigeria oil and gas industry across the various value chain.

Currently, this role is performed by the Department of Petroleum Resources (“DPR”) with Nigerian National Petroleum Corporation (“NNPC”) influence. This is in addition to a plethora of other agencies regulating certain aspects of the industry. DPR was carved out of the Petroleum Inspectorate Department of NNPC. Some of the issues bedeviling this arrangement has always been the lack of clear and transparent regulatory framework and strong, independent institutions, not to mention interference from NNPC which doubles as a quasi-regulator rather than operating  solely as a commercial entity, as well as overlapping of roles by various agencies.

Continue reading “AN ANALYSIS OF THE PETROLEUM INDUSTRY GOVERNANCE BILL 2016 – ESTABLISHMENT OF THE NIGERIA PETROLEUM REGULATORY COMMISSION”

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AN ANALYSIS OF THE PETROLEUM INDUSTRY GOVERNANCE BILL 2016 – POWERS OF THE MINISTER

A review of the Petroleum Industry Governance Bill 2016 (“the Bill”), which we reported last week passed first reading on the floor of the Senate shows that it largely retains the content of the first version, introduced late last year as the Petroleum Industry Governance and Institutional Framework Bill 2015, with a few amendments. The renewed attention given to the Petroleum Industry Bill (“PIB”) by the National Assembly by sponsoring this Bill is an indication of the lawmakers’ dissatisfaction with the seeming silence of the Executive on the matter.

Part One of this review focuses on the functions and powers of the Minister.

THE MINISTER

The Bill provides for the functions and powers of the Minister in two sections. Under Section 2(1) paragraphs a-i, the Minister is vested with eight functions similar to those provided in Section 6 of the PIB save for three distinct departures. The power to delegate is conferred under Section 2(2) whilst Section 3 addresses the Minister’s right of pre-emption.

  1. The Bill has done away with the Minister’s advisory and approval role stipulated in the PIB before the President can appoint the Board of the various agencies. The President is empowered to appoint the executive and non-executive members of the Board of the Petroleum Regulatory Commission (the “Commission”) (to be established pursuant to the Bill as the industry regulator) subject to confirmation of the Senate. This is a laudable improvement to the old Bill and extant legislation where the Chief executive of the Petroleum Inspectorate is appointed by the Petroleum Minister, (albeit with the approval of the National Council of Ministers) and is also subject to the direction and control of the Minister (and by extension, the Department of Petroleum Resources (“DPR”) and its Director General).
  1. The power to make regulations which is currently vested in the Minister by virtue of Section 9 of the Petroleum Act and maintained by the PIB has been removed and vested instead in the Commission as the regulatory body for the industry by Section 8(1) of the Bill. This provision deals specifically with regulations necessary to give proper effect to the provisions of the Bill and would not affect the provisions of other laws which grant the Minister powers to make regulations such as, the Nigerian Oil and Gas Industry Content Development Act, 2010. It is also worth noting that the Bill empowers the Minister to promote the development of local content in the Nigerian petroleum industry.
  1. Although the Bill maintains the Minister’s rights of pre-emption, a notable change has been made to this provision which is in keeping with current economic realities. Failure to comply with the Minister’s direction issued in respect of a right of pre-emption to petroleum and petroleum products brought on by a state of national emergency or war and obstruction or interference with the exercise of the powers of the Minister in this regard under the Petroleum Act attracted a maximum fine of NGN2,000 and NGN200 or a maximum prison term of six months or both respectively upon conviction. Under the PIB, the maximum fines for the two offences have been increased to NGN2,500,000 and NGN5,000,000 or a maximum prison term of two years or both respectively. The Bill however increases the fine for non-compliance to a maximum of NGN10,000,000 or a maximum prison term of six months or both; and for obstruction, a maximum of NGN5,000,000 or a maximum prison term of six months or both. The Minister is also empowered to make regulation to increase the financial penalties imposed under the Bill.

Under extant legislation, the Petroleum Act grants the Minister exclusive and unfettered power to grant licenses and leases and amend, renew, extend or revoke same pursuant to the provisions of the Act. The Bill, much like the PIB (save for the replacement of the word “advice” with “recommendation”), fetters the discretion of the Minister to issue licenses and leases for petroleum exploration and production activities. The Minister may now only exercise such powers based on the recommendation of the Commission. Currently, the grant of licenses is governed by the Petroleum (Drilling and Production) Regulations and applications are made to the Minister. It appears this would no longer be the case and such applications would now be required to be made to the Commission. Section 25 of the Petroleum Act entrusts the Minister with discretionary powers to revoke a license or lease based on certain criteria. Under the Bill, this power may only be exercised based on recommendations made by the Commission in this regard. Accordingly, Part 6, Section 84(1) of the Bill provides that the provisions of all existing enactments or laws, including the Petroleum Act, Petroleum Profit Tax Act and the Companies and Allied Matters Act, shall be read with such modifications so as to bring them into conformity with the Bill. We expect that regulations would be made which clearly defines new procedures to be adopted.

In our next report, we will continue with an analysis of the proposed sector regulator, the Petroleum Regulatory Commission.