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Buhari’s Proposal To Scrap The NNPC, PPPRA & What You Need To Know About The Petroleum Industry Bill

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In a recently transmitted Petroleum Industry Bill 2020 to the National Assembly, President Muhammadu Buhari proposed the scrapping of the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Product Pricing Regulatory Agency (PPPRA). The President proposed the establishment of the NNPC Limited that will be overseen by the Ministers of Petroleum and Finance. The new arrangement will see the NNPC transfer all its assets and liabilities to the NNPC Limited. There also will be the establishment of the Nigerian Upstream Regulatory Commission and The Nigerian Midstream and Downstream Petroleum Regulatory Authority. The new bill proposes that the petroleum minister shall within 6 months from the commencement of the Act, incorporate a limited liability company called the Nigerian National Petroleum Company Limited (NNPC Limited) under the Companies and Allied Matters Act (CAMA). Some sections of the bill says “The Minister (of Petroleum) and the Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited.

“Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection 1 of this section shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government.’’ “NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government.”

“The minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares.’’

A section of the bill also states that: “ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.” By this, NNPC will cease to exist while it transfers full control to the ministers. The upstream and downstream sectors will also have a commission for their operations. Nigerian Upstream Regulatory Commission will be responsible for the technical and commercial regulation of upstream petroleum operations with the new Nigerian Midstream and Downstream Petroleum Regulatory Authority shall be liable for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.

The new bill will technically scrap the PPPRA with the establishment of the new agencies that will now carry out the PPPRA’s functions. Recall that the NASS had split the bill into four different parts to ensure easy passage during the 8th Assembly. The four parts were namely: the Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill.

However, after the passage of the PIGB by the National Assembly, the president refused to sign the bill because of the retention of 10% of the revenue generated by the Petroleum Regulatory Commission which the NASS deemed too high and the reduction in the powers given to the Minister of Petroleum.

About The Petroleum Industry Bill

The Petroleum Industry Bill (PIB) has been in existence for more than 20 years starting from the administration of PResident Olusegun Obasanjo to Umaru Musa Yar’Adua and successive governments. The bill has however not seen the light of the day ever since, with challenges seen in its passage at the national assembly. This can be linked to the intricacies of the bill in the areas of taxes, exploration, payments to local communities, commissions and revenues sharing formula.

The transmission of the modified bill has spent a very long time with the executive insisting this happened because there was a need to fine-tune the rough areas it presented.

"It (the PIB) has not been watered down. I don't know who has seen the bill. It's still in draft. It has gone through several modifications. That's the whole idea. You can't change the laws very easily. "It tells you that when we are able to pass the bill, it won't change for a long time, because it has taken us about 20 years to get to where we are. It's now ready to go to the National Assembly. But it has not been watered down.

"Everything has been done in the national interest and in the interest of Nigeria and we are hoping that in the next two weeks, we will be ready to go to the National Assembly, and then people can talk. "Before seeing the bill, you can't say it has een watered down. It's a bill at the foundation of the main industry. There are lots of parts to it - community, government, industry - everybody's interest has to be accommodated.

"We have been able to take a lot of interests on board. Not everybody will be on the same page. There's no way the government and private sector will be on the same page 100 percent, but what we have tried to do is to narrow the gap as much as possible. Right now, we are ready to go to the National Assembly, so we can get this bill passed,’ said Minister of State for Petroleum, Timiprey Silva. The PIB was first sent to the NASS by the administration of former President, Yar’Adua in 2008 after a committee had suggested the proposition of a new bill to correct the anomalies in the oil and gas industry in Nigeria.

Why The PIB Is Important 

The Petroleum industry is one of Nigeria’s biggest corruption blocks with billions of dollars going to proceeds of graft and wastages on a yearly basis. Just recently, Mele Kyari, Group Managing Director of the NNPC revealed that Nigeria has lost N10trn to fuel subsidy removals.

The PIB is expected to block leakages as the ones already being experienced by Nigeria. On the societal and communal level, host communities of the oil wells and rights have been crying endlessly at the spillages they suffer. Their farmlands are bad, and uncultivable, leading to hunger and more. Worse still, the communities earn little to nothing in terms of revenues and direct development. As at today, Nigeria earns 75% of its total revenues from the sale of crude oil, taxes, and royalties. Not less than 90% of the country’s foreign exchange is gotten from the sale of oil and gas. Nigeria has a 30-year reserve of crude oil, amounting to 37bn barrels, standing at the 10th largest in the world and all these, like previous years will mean nothing if bad eggs still have a field day stealing from the nation’s coffers.

The PIB will not just be affecting the petroleum industry as the gas is where Nigeria is blessed the more with 82trn Cubic feet of gas in reserves, according to BudgIT. Should we maintain the current production schedule, this can last the country 80 years. Armed with some of the biggest deposits of oil and gas in the world, Nigeria needs stronger legislation to make better decisions and block the corruption chain in the country. The major laws guiding the oil and gas industry were enacted in 1969, over half a century, hence the very urgent need for new laws. The PIB amongst many other functions is expected to:

  • Enhance benefits to the broader economy of the country
  • Rejig the oil and gas sector
  • Improve fiscal terms
  • Improve policy making and enhance more transparent discourse on the oil and gas sector and its regulations
  • And very importantly, it is expected to improve the crude oil capacity of the country

 

The new bill puts the Minister of Petroleum as the most powerful person in the petroleum industry. Section. 6. of the bill detailing the functions and Powers of the Minister says

“The Minister shall have; g. Upon advice of the Inspectorate, grant, amend, renew, extend or revoke upstream petroleum licenses and leases pursuant to the provisions of this Act; Section. 191 of the Act highlighting the President as having the overall authority said “Powers of the President to grant licenses and leases in special circumstances Notwithstanding the provisions of subsection (3) of section 190 or any other provision of this Act, the President shall possess the power to grant license or lease under this Act. Also in the bill, there is a reward for Host Communities as they are liable for the proceeds of the oil and gas exploration. The Bill provides for a 10% Host Community Fund for inhabitants of communities playing hosts to oil and gas resources. This is believed to help in the development of the communities, majority of whom are in the Niger Delta and also a means to correct the many ills plaguing oil and gas exploration communities. The Bill only makes provisions for allocation of funds. It does not: (a) Define “host communities”, (b) Provide details of how the funding would be sought ( c ) Provide details on the auditing of the funds (d) Provide details delineating the process of disbursements for these funds. Some faults observed in the bill gives the Minister the power to make regulations on entitlement, governance and management structure with respect to the PHC Fund. This may make corrupt practises easy as it also provides an opportunity for the politicization of this fund, which may lead to inter-tribal and communal clashes, thereby defeating its original purpose.

How The PIB Affects The Ordinary Nigerian

Other than its security of oil revenues, the bill also seeks to provide better and more stringent measures to aid the protection of consumers against gas supply. Section 183 of the bill says “Domestic gas supply obligations (1) The Inspectorate shall determine in accordance with section 269 of this Act, the needs of the domestic gas market in accordance with the Domestic Gas Demand requirement and shall on such basis impose Domestic Gas Supply Obligation (“DGSO”) and ensure that all lessees comply with such Domestic Gas Supply Obligations. The federal government who are the originators of the bill have also protected the local market from oil and gas shortage through its legislation. With an abundance of gas in the country, Nigeria has looked strongly at the option of using gas to fuel its power sector. The International Oil Companies ( IOCs) however argue that a critical pricing system has to be maintained to correct the infrastructure deficit and power the power sector. Nigerians may enjoy better electricity if the government keys into the potentials of the gas industry.

Gas flaring criminalisation and fines, hydrocarbon taxes are some of the other things listed in the bill to protect the average Nigerian. Also listed as benefits to the most common Nigerian is the green initiative, which will see to the planting Some of the questions against the bill which has passed first reading at the Senate is its approval of the receipt of gifts of money and property. This bill will compromise the integrity and objectivity of the agencies, and further lower some of the qualities of the Bill.

Delays in the passage of the PIB has led to the distrust shown by IOCs willing to invest in Nigeria, but with a passage looking to happen soon, if the Senate is anything to go by, Nigerians can ask questions as this is very key to our development as a nation.