Why stakeholders express concerns over PIGB
In March 2018 when the Senate passed the Petroleum Industry Governance Bill (PIGB), the whole nation was excited, especially the stakeholders who had witnessed the lack of political will by past administrations to pass the bill and repeal the outdated Petroleum Act 1969. In this report, OLATUNDE DODONDAWA examines why stakeholders still express fear as the bill awaits the assent of President Muhammadu Buhari.
Stakeholders in the Nigerian oil and gas sector have expressed fear over the position of the Petroleum Industry Governance Bill (PIGB), noting that the bill which has since been passed and harmonised by both the Senate and House of Representatives is yet to reach the presidency for assent.
PIGB is the first part of the Petroleum Industry Bill (PIB). Others are Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community and Impacted Bill.
PIB was first introduced in 2008 with specific objectives to increase petroleum exploration and production, boost domestic gas supply, establish a viable national oil company, create an efficient regulatory entity, and enhance transparency and accountability in the industry, among other objectives.
In 2015, Minister of State for Petroleum Resources, Dr Emmanuel Ibe Kachikwu, said the country lost about N3 trillion worth of investment annually due to the non-enactment of the PIB and in reaction, the Buhari-led administration split the PIB into four.
The PIGB is a bill that aims to establish the Nigerian Petroleum Regulatory Commission as a one-stop regulator that will be responsible for licensing, monitoring, supervising petroleum operations, as well as enforcing industry laws, regulations and standards. This means that the President and the minister will no longer have the executive power to allocate oil blocks.
The regulatory functions of the Minister of Petroleum Resources under the Petroleum Act and the Oil Pipelines Act will be transferred to the commission, which will be governed by a nine-man board with a fixed tenure whose composition shall include one representative from each of the ministries of petroleum resources, finance, and environment.
The commission is vested with the power to make regulations, similar to the powers of the Minister of Petroleum Resources under the Petroleum Act but the PIGB enables the minister to retain certain powers of discretion to “do all such other things as are incidental and necessary” for the performance of his ministerial functions.
Apart from job creation and improved domestic gas supplies for power generation, the PIGB requires government to privatise up to 40 per cent of the Nigeria Petroleum Company (NPC)’s shareholding within 10 years of the commission’s incorporation. The government must give up at least 10 per cent of its shares within the first five years, and an additional 30 per cent over a period of another five years.
The divestment is required to be conducted in a transparent manner and may include the sale/transfer of the divested shares to institutional or strategic investors. This means that citizens can own a stake in the national oil company subject to any terms put forward for the privatisation exercise.
What are the issues and concerns?
President, The Petroleum Club Nigeria, Dr Godswill Ihetu, disclosed at a panel session during the Annual Conference by Association of Energy Correspondents of Nigeria (NAEC) in Lagos that contrary to information in the public domain that the bill is awaiting presidential assent, in the actual sense, the PIGB was yet to leave the National Assembly.
He said the information with regard to whereabouts of the bill was disclosed at the Senate public hearing on June 3 this year. The hearing was to consider the Petroleum Industry Fiscal Bill, the Petroleum Industry Administration Bill and the Petroleum Industry Host and Impacted Communities Bill.
Ihetu said that it was the Senate President that let out the information that the National Assembly was yet to transmit the PIGB to the President, and that the document was still with the lawyers who were tidying up the legal aspects of the bill.
“It is therefore unclear whether or not this document has arrived at the Presidency,” he feared.
He expressed concern that despite several billions of dollars of potential revenue and investment loss due to delayed passage of the bill, it will be unfortunate if one more year is added to the process before implementation, especially as the bill recognises the urgency in completing the remaining three bills.
Ihetu therefore urged stakeholders to mount pressure on government to speed up the process of passing the bill into an Act so as to commence proper implementation.
Another cause for concern raised by Ihetu is the retention of the Petroleum Equalisation Fund (PEF) in the PIGB. He argued that rather than outright abolition, it has been allowed to exist for another indefinite transition period than to be phased at a non-specific date.
On the fear that the bill will affect existing permits and licenses, Dr Adeoye Adefulu, one of the panelists at NAEC conference, stated the bill provides that licenses, leases, certificates, authority or permits issued by the Department of Petroleum Resources (DPR) will remain valid and have effect for the remainder of the period for which they were granted. However, he stressed that the government can put a caveat in place which may state that the bill (when it becomes law) will come into effect after two or three years of its passage to allow for stakeholders to decide if they wish to continue operating under the law or not.
On his part, the Deputy Managing Director, Deep Water District of Total Exploration and Production, Ahmadu-Kida Musa, stated that “As it is usually the case with new legislation, especially one as fundamental as this, there are bound to be some initial concerns. But we believe that these concerns can be easily addressed through dialogue and legislative public hearings. Our thoughts and concerns on the PIGB and rest of the proposed bills have been articulated by our umbrella organisation, the Oil Producers Trade Sections (OPTS) of Lagos Chamber of Commerce and Industry.”
The Group Managing Director (GMD), Nigerian National Petroleum Corporation (NNPC), Dr Maikanti Baru, expressed his concerns over clarification on funding structure for the proposed Nigerian Petroleum Asset Management Company (NPAMC) in the PIGB.
Baru said though the bill is focused on the key governing institutions in Nigeria’s oil and gas industry and aims to separate the regulatory, policy and commercial roles of public sector agencies and allocate respective roles to agency properly positioned to perform them, it is important to adequately clarify funding pattern for the proposed NPAMC and the Liability Management Company (NPLMC).
The GMD, who was represented by Roland Ewubare, Group General Manager, Nigerian Petroleum Investment Management Services (NAPIMS), suggested that the NPAMC should be structured in the form of an agency, rather than a company, in consideration of its limited role in the administration of Production Sharing Contract (PSC) assets, as similar institutions across the world are structured as agencies like Petoro in Norway.
Furthermore, he noted that the national oil company has historically experienced frequent board and management leadership changes which has impacted on the Corporations performance.
He said though the bill defined tenure for non-executive directors, there are currently no provisions that help to ensure stable tenure for the executive directors and insulate them from changing dynamics of the political context as far as possible.
“The issuance of well-defined contract terms to the executive directors may address this issue. The newly established commercial entities are expected to be governed in line with the provisions of the Code of Corporate Governance issued by the Securities and Exchange Commission.
“However, the Bill does not include recommendations to address possible conflicts that may arise between its provisions and those of the SEC Code,” he observed.
To prevent this possible ambiguity, Baru said there was need to emphasize the superiority of the provisions of the Bill over those of the SEC code, where such conflicts arise.
Baru also said splitting the corporation into two may cause tension. Two companies, Nigerian Petroleum Assets Management Company and the Nigeria Petroleum Company, will be floated from the NNPC and its subsidiaries.
Shares of the NPC will initially be held by the ministry of petroleum (40 per cent), finance (40 per cent) and the Bureau of Public Enterprises (20 per cent).
“Engagement with staff and consultation with individuals and establishment with an institutional memory of how the issue of staff movement was handled when the DPR was expunged from the NNPC is necessary,” Baru said.
“However, 10 per cent and an additional 30 per cent of the shares of the company shall be floated on the Nigerian Stock Exchange within five years and 10 years from incorporation, respectively.
“On the issue of divestment of 40 per cent of the NPC shares to the Nigerian Stock Exchange, there is a need for clarity on the process of the divestment and the steps should be clearly provided in the law.
“There is a need for clarity regarding the nature of the NNPC liability to be transferred to the Nigeria Petroleum Liability Management Company, asides from outstanding pension obligations of the DPR. There is a need to provide adequate clarity on the type and nature of liability to be inherited and the process for the settlement of such liability,” he said.
The GMD added, “However, 10 per cent and an additional 30 per cent of the shares of the company shall be floated on the Nigerian Stock Exchange within five years and 10 years from incorporation, respectively.
“On the issue of divestment of 40 per cent of the NNPC shares to the Nigerian Stock Exchange, there is a need for clarity on the process of the divestment and the steps should be clearly provided in the law.
“There is a need for clarity regarding the nature of the NNPC liability to be transferred to the Nigeria Petroleum Liability Management Company, asides from outstanding pension obligations of the DPR. There is a need to provide adequate clarity on the type and nature of liability to be inherited and the process for the settlement of such liability.”
Dr Adefulu assured that PIGB is currently in the presidency and he also assured stakeholders that the remaining three arms of PIB will be considered for passage by the National Assembly simultaneously.