There is palpable fear among oil and gas stakeholders that the over $200 billion lost by Nigeria to the non-passage of the PIB may ballon in next few years due to President Muhammadu Buhari’s refusal to assent the Petroleum Industry Governance Bill (PIGB).
The harmonised version of the bill was passed by the National Assembly on March 28, 2018 and subsequently transmitted to Aso Rock on Tuesday, July 3.
The PIB for ease of administration was broken down into four parts, including the PIGB, Petroleum Industry Fiscal Bill (PIFB), currently being considered by the lawmakers, Petroleum Industry Administration Bill (PIAB) and the Petroleum Host Community Bill (PHCB).
At a conference of the National Association of Energy Correspondents (NAEC) held recently, oil and gas stakeholders, including policy makers, Managing Directors of International Oil Companies (IOCs) and their indigenous counterparts in oil exploration and production and other service providers in Lagos examined the issues around the PIGB.
Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Maikanti Baru, for instance, sought clarity on the funding structure for the Nigerian Petroleum Assets Management Company (NPAMC) and the Nigeria Petroleum Company when the NNPC is finally unbundled.
He explained that he is worried that the PIGB was silent on the funding structure of the NPC which is to be responsible for all assets currently held by NNPC except the Production Sharing Contracts (PSCs).
NNPC seeks clarity on funding
Baru further sought clarification on the funding structure for the NPAMC in the PIGB, adding that, it was equally important to adequately clarify funding pattern for the proposed NPAMC and the Liability Management Company (NPLMC).
‘‘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,’’ he said.
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 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 is need to emphasize the superiority of the provisions of the Bill over those of the SEC Code, where such conflicts arise.
For his part, Deputy Managing Director, Deep Water District, Total E&P Nigeria Limited, Mr. Ahmadu-Kida Musa, who was also the Conference Chairman explained 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 the rest of the proposed bills have been articulated by our umbrella organisation, the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry.
OPS, marketers demand 2 regulators
Fuel marketers and members of the Organised Private Sector (OPS) equally faulted parts of the bill, saying they fall short of stakeholders’ expectations.
Former Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore, his counterpart from the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Mr. Olufemi Adewole, and the Chairman, Economic Policy of Manufacturers Association of Nigeria (MAN), Mr. Reginald Odiah, representing the OPS, noted that the PIGB, if passed in its current form, would spell doom for the petroleum sector.
Olawore posited that the activities of the upstream and downstream sectors were entirely different and as such, should have two different industry regulators.
He explained that part of the problems confronting the downstream sector remained that of a single regulator overseeing the activities of the upstream and downstream sectors, warning that the inefficiency and lapses currently experienced in a single regulatory regime should not be allowed to continue, hence the call by the stakeholders for separate regulators for the two sectors.
The ex-MOMAN Executive Secretary said one regulator for the industry cannot bring about the desired change that stakeholders have always clamoured for, adding that any attempt to continue with the old order will further compound the challenges of the sector.
“The challenges of the downstream are so cumbersome that adding upstream role for a single regulator to oversee will make it very cumbersome and render such regulator ineffective as we are experiencing at the moment,” he said.
Olawore equally flawed the composition of the boards of government agencies under the current PIGB, saying they are mainly civil servants while members of the private sector have been completely neglected.
He was worried that such board composition was inimical to the growth of the petroleum industry because civil servants are coming to the board with government directives with no counter view of the other sector, warning that such board will not enjoy vibrancy in its operations.
For his part, Adewole regretted that the position of MOMAN and DAPPMAN at the public hearing on the PIGB, against a single regulator for the industry was not taken into consideration in the final harmonisation of the PIGB.
“We marketers were at the PIGB public hearing at the National Assembly and there we made our position known that a single industry regulator would be inimical to the growth of the industry. But to our surprise, our position was not taken into cognisance in the harmonised PIGB,” he noted.
NEITI laments $200bn loss
Meanwhile, Executive Secretary of Nigerian Extractive Industry Transparency Initiative (NEITI), Mr. Waziri Adio, has disclosed that the delay in the passage of the PIB would cost the country over $200 billion.
Adio stated this at a symposium on the Next Steps for PIB convened by NEITI in Abuja recently.
A worried NEITI boss explained that the inability of the country to have a new petroleum sector law in place has led to lack of clarity and inadequate transparency mechanisms leading to the more than $200 billion loss in eight years.
He explained that Nigeria is increasingly in competition for oil and gas investments with many other African countries, not to talk of other oil jurisdictions.
‘‘Now that we are hopefully close to the end of this circuitous journey, it is important for us to focus on the next tasks in a way that will proactively and strategically ensure the intention of the proposed laws are fully realised, to ensure that we have not undertaken the long journey in vain,’’ he said.
The NEITI boss however, commended the 8th National Assembly in getting the Petroleum Industry Governance Bill (PIGB) passed within two years.
But despite the passage of PIGB by the National Assembly, he said there is still much work to be done in the three other bills still pending, adding that at the end of the day, by ensuring effective implementation of the resultant laws in ways that will reposition and transform the oil and gas sector to become a real blessing, and not a curse, for the people is important.
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The NEITI boss noted that despite the fact that oil prices are still not in the threshold of $100+ per barrel and that the best days of hydrocarbons are possibly behind the country, the petroleum sector as at last year still accounted for almost 60 percent of government revenues and more than 80 per cent of export earnings.
He opined that, given the disproportionate impact of government revenues and export earnings on the economy, it will not be wrong to insist that the oil and gas sector remains the backbone of not just the economy but also of national life.
‘‘Our expectation is that this meeting will address many of the questions that have been asked, including those yet to be asked, or at least, set us thinking seriously about these questions. Some of these include: what transitional arrangements are being contemplated?
What is the plan for the fiscal, host community and administrative bills? How do we create optimal equilibrium between revenues for government and returns for investors on one hand and among geo-political zones on the other?”