Tag: discretionary powers. minister of petroleum

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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.

 

 

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House of Reps Passes Petroleum Industry Bill

Channels Television reports that the House of Reps’ Ad-Hoc Committee report on the PIB has been considered and that the Bill has been passed by the lower house.

This comes after a flurry of Bills (46 in total) were passed by the Senate yesterday, June 3, after same were transmitted by the House of Reps.

The House of Reps’ passage of the PIB comes to little or no avail as the 7th Assembly wrapped up today. The Bill would have also required passage by the Senate.

Indeed, Senate president, David Mark, in his End-of-Assembly speech, admitted the lawmakers failure to pass the Bill.

The PIB has been before the House of Assembly since July 2012.

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House of Representatives Move to Minimise Executive Discretion under the PIB

ThisDay and Leadership report that the House of Representatives’ Ad-hoc Committee on the PIB has recommended that the President’s discretionary powers to award licenses or leases, as well as the Minister of Petroleum Resources’ control over relevant regulatory agencies, be removed.

The recommendations, which are contained in the executive summary of the Committee’s report on the Bill, also seek to extend the coverage of the Petroleum Host Community Fund to communities where oil and gas installations are located.

The Committee will present its report on the PIB when the House reconvenes on March 31, 2015.

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Splitting up PIB not in Nigeria’s Interest says PENGASSAN

Reacting to the Minister of Petroleum’s suggestion that the Petroleum Industry Bill be split up to ensure prompt passage, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has retorted that such suggestion would not be in the interest of the country. The association maintained that the provisions, as contained in the current Bill, are capable of transforming the industry and in particular, grow the upstream sector.

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David Mark orders Senate Joint Committee on PIB to conclude deliberations

Following a Point of Order raised by the Senator representing the Ekiti-North senatorial zone, Senator Olubunmi A. Adetunbi, the Senate President, David Mark, gave orders that the Senate’s Joint Committee on the Petroleum Industry Bill (“PIB”) conclude work on the Bill and return same to the Senate for prompt passage.

It was reported that Senator Adetunbi’s plea was prompted after he was put on the spot at a function he attended. At the occasion, the Senate was accused of toying with critical issues affecting the economy especially the PIB.

It will be recalled that the PIB was committed to the Senate’s Joint Committee for deliberations on Thursday, March 7, 2013.

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SENATE’S JOINT COMMITTEE ON PIB HOLDS PUBLIC HEARINGS (DAY 1)

The Senate’s Joint Committee on the Petroleum Industry Bill (PIB), yesterday, July 18, 2013, held the first of its two-day public hearing on the Bill.

As reported in ThisDay and the Guardian, stakeholders in the petroleum industry (including the Minister of Petroleum Resources, State Governors and representatives of both government parastatals and oil companies) made their presentations on the Bill before the Senate’s Joint Committee.

International and local oil companies under the auspices of Oil Producers Trade Section (OPTS) opposed the passage of the PIB in its current state. In a presentation made by the Managing Director, Mobil Producing Nigeria, Mr. Mark Ward, the OPTS said the PIB fell short of addressing the challenges in the oil industry.

He observed that the Bill sought to significantly increase royalties and taxes making Nigeria one of the harshest fiscal regimes in the world, a situation that will culminate in the country, as an oil and gas producing region, becoming uncompetitive as projects will now become uneconomical.

Given the enormous expenditure required to develop gas infrastructure, he also opined that an incentive-based approach to domestic gas supply obligations will be required to jump start Nigeria’s much needed gas revolution.

According to him, while OPTS supports the objectives of the Bill and the reforms it seeks, the Bill as drafted will fail in delivering such objectives and will reduce the oil and gas industry contributions to the Nigerian economy.

The Nigeria Extractive Industry Transparency International (NEITI), in its submissions, explained that for effective regulation of the industry, it was necessary to reduce the powers of the Minister and ensure the creation of autonomous institutions that would promote effective governance and control in the management of Nigeria’s petroleum resources.

NEITI also noted that the Bill did little to protect the Nigerian environment. They insisted that the Bill should provide minimum environmental standards in the relationship between Operators in the sector and the environment.

The Revenue Mobilization Allocation and Fiscal Commission (RMAFC), in its presentation, opposed the Bill’s provision mandating a ten per cent (10%)  contribution of Operator profits to the Petroleum Host Community Fund (PHCF). The Commission instead advocated exploring the open-ended opportunity available under the Constitution vis-a-vis the provision stipulating that a minimum of thirteen per cent (13%) of the revenue accruing from the Federation Account be paid to oil producing States. They also recommended that the Bill provide for the remittance of revenue by petroleum regulatory agencies into the Commission’s account.

RMAFC’s position on the PHCF was supported by the Governors of Niger and Kaduna State who described its conception as the most controversial of the entire Bill’s provision.

The Honorable Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in her presentation, said it would take about five years before the provisions of the Bill could be fully implemented. She urged stakeholders not to personalise or politicise the Bill adding that the PIB was put together in the interest of the nation.

She downplayed beliefs that the Bill accorded enormous powers to the Minister, stressing that the current Petroleum Act actually vested more powers in the office.

She further added that “Whilst we take best practices from other developed regions, we should also work within the understanding of our own socio-economic and social-cultural norms, and create entities and policies that will work and are not destined to fail from the word-go.”

The Minister also noted that the PHCF was proposed to mitigate the human and environmental conditions in oil producing regions and to assuage the feelings of the host communities towards oil and gas companies.

Declaring the hearing open, the Senate President, David Mark, promised that the National Assembly would facilitate the passage of the bill, noting that the pursuit of the Bill must be a win-win situation.

He however urged that: “Oil companies should not take undue advantage of Nigeria. What I do not want is when people begin to threaten that if you do not do this, we will park out of Nigeria. That is not the correct thing. We are conscious of the fact that there is frustration in the oil industry”.

 

 

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SENATE SHIFTS PIB HEARING / EXCERPTS FROM HOUSE OF REPS HEARING ON JULY 11, 2013

The Senate’s two-day Petroleum Industry Bill (“PIB”) public hearing session, initially slated for July 16 and July 17, 2013, has been moved to Thursday, July 18 and Friday, July 19, 2013.

The hearings were moved as a result of the Senate’s planned vote on Constitutional amendment and  a valedictory session in honor of the late Senator Pius Ewherido both taking place on the 16th and 17th of July respectively.

The Senate’s hearing will now come up exactly one week after the House of Representatives’ final public hearing on the Bill.

Although hearings failed to hold on Wednesday, July 10 as initial stated, the House of Representatives, on the second day of hearings, played host to a cross-section of stakeholders in the oil and gas industry made up of the National Union of Petroleum and Gas Workers Association (NUPENG), Petroleum and Natural Gas Senior Staff Association (PENGASSAN) and other interested stakeholders as reported.

Both NUPENG and PENGASSAN, in a joint presentation, submitted that the Bill conferred excessive powers on the Minister and as such encroached on the powers of the Regulators. The Unions’ position was also shared by Malam Nasir Ahmed El-Rufai.

Speaking in his capacity as Director of the Centre for Africa’s Progress and Prosperity (“CAPP”), El-Rufai suggested that Joint Ventures be incorporated and quoted on the stock exchange to encourage Nigerian’s participation in the petroleum industry. He also panned the President’s indiscriminate powers to allocate acreages.

The General Manager (Commercial), Shell Exploration and Production Africa, Marc den Hartog, said the company “fully supports the aspirations of government as contained in the PIB.” He however suggested that the PIB clearly define the roles and responsibilities of entities, especially those of the Regulators so as to avoid overlaps and conflicts.

NEITI’s Executive Secretary, Hajiya Zainab Ahmed, suggested that the PIB provide for a public register of corporate entities that bid for, operate or invest in petroleum upstream assets, including the identities of their beneficial owners and their levels of ownership. She also urged for provisions that would allow for cash-call payments for Joint Ventures as a first line charge on the Federation Account. “This means that the federal government’s share of the expenses for JV operation would be paid based on agreed work-plan and budgets directly from the Federation Account, prior to other disbursements from the said account,” she said.

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The Extent of Ministerial Powers under the Petroleum Industry Bill 2012

Feature article

All I want is a warm bed and a kind word and unlimited power.
Ashleigh Brilliant

The phrases, “the Minister may”, “as may be decided or imposed by the Minister” “the Minister shall have the right” are phrases commonly sighted in the Petroleum Act 1969, the principal legislation currently governing the Nigerian petroleum industry as well as subsequent industry legislations. These Ministerial powers cover a multitude of issues ranging from power to grant upstream and downstream petroleum licences, prescribe terms and conditions of licences, control pricing of petroleum products, declare national emergency,[1] order discretionary suspension of petroleum operations and make regulations, to mention a few. These provisions have resulted in the vesting of a huge amount of power in a single office with almost unfettered powers to direct the affairs of this very sensitive industry. The product has been an industry with a record of abuse of power, lack of transparency and accountability and ineffective regulatory oversight, resulting in little or no benefit being derived by the citizenry. Continue reading “The Extent of Ministerial Powers under the Petroleum Industry Bill 2012”

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Assobie on PIB, corruption & ministerial powers

Read the views of Prof. Assisi Assobie, former Chairman of the stakeholders working group of the Nigeria Extractive Industries Transparency Initiative (NEITI) on corruption and the Petroleum Industry Bill as reported in The Guardian newspaper here. The report is quite short but emphasises what has been commented on by others on the extensive powers granted to the Minister in the PIB.