Nigeria: The Petroleum Industry Bill Debate Continues

The Petroleum Industry Bill (PIB), outlines the three sectors of downtream, midstream and upstream. It also outlines specific operations to be undertaken in each sector. The Bill, which vests Oil and Gas resources in the sovereign state of Nigeria, also separates policy, regulation and commercial activities.

It ensures that licences, leases and permits are granted only through guided procedures established by the Act. According to its provisions, any company shall apply and be granted leases, permits in accordance with the PIB, while the management and allocation of petroleum resources are in accordance with the principles of good governance and transparency.  The aim is to promote sustainable development and economic value to Nigeria.

The Bill also guarantees government participation in licenses or leases, and in the exploitation of natural gas. It insists that institutions of the National Oil Company (NOC) that will emerge - after its passage into law - are to be guided by the provisions of the NEITI Act of 2007, even as it honours international environmental provisions and obligations.

The bill, for which public hearings were held in Abuja at both the Senate and House of Representatives recently, has strict provisions for transparency, accountability and good governance in the conduct and operations of Nigeria’s Oil and Gas Industry. The PIB Consultative Forum has been drumming up support for the bill.  The forum had stressed equity, fairness, openness, greater access and a level playing ground for the multinational oil companies, embassies and missions as well as major oil-consuming nations. The Midstream Sector has responsibilities for oil transportation and gas transmission; gas processing; liquefied natural gas (LNG)/condensed natural gas (CNG)/gas-to-liquid (GTL); derivative processing/production; and oil refining.

Under the Petroleum Downstream sector, activities of fuel distribution & retail; petroleum product distribution and storage; and petroleum product retail are to be carried out.  Okon says that fundamental objectives of the Bill are to achieve functions and institutional arrangements that are guided by the NEITI Act 2007, thus creating an open framework that eliminates confidentiality.

The veil, he explains, is to be removed from all texts of licences, leases, contracts and amendments; amounts of revenue payments to the government by individual companies; all geological, geophysical, technical and well data; approved budgets of joint ventures and production sharing contracts; and production, lifting/quantities and value lifted. “Further accountability and transparency provisions are a clear distinction between upstream, midstream and downstream.  Establishing an open and competitive bid process; creating a uniform but flexible royalty and tax terms that apply to all. Establishing equal conditions to regulated institutions through open access rules; Clear guidelines for the revocation of licences and leases; and All decisions of the Minister and on petroleum administration shall be based on equal rules applicable to all,’’ says Okon.

Lukman said that the bill, which contains 16 different Nigerian Petroleum Laws in a single transparent and coherent document, set out a new legal framework for the organisation and operation of the entire oil and gas industry.  Insisting that confidentiality encourages corruption, Lukman said the best way to fight corruption is to remove confidentiality for all procedures, contracts and payments. “All texts of all licenses, leases and contracts and any of the changes to such documents will no longer be confidential. Payments to the government of Nigeria will be public information,” Lukman said.

Dr Emmanuel Egboga, the Presidential Adviser on Petroleum Matters, said the reform was a fall out of the parlous state of the industry.  “The oil and gas sector, though it has been the mainstay of Nigeria’s economy, has not fully met the aspirations of its key stakeholders.  In addition, the operating landscape, business and competitive environments, both locally in Nigeria and international, have continued to change rapidly in the last few years and can no longer operate in a sustainable manner,” Egboga said. According to him, the existing structure of the industry and enabling legislation were no longer consistent with global standards.

As expected, majority of the key stakeholders have already endorse the petroleum industry bill going by the massive approval it received at the forum and at the public hearings.

Mr Andrew Fawthrop, the Chief Executive of Chevron, who spoke for the international oil companies (IOCs), said the multinationals ``support the reform in the industry”.  He said that the reform, which included the restructuring and unbundling of the NNPC, was a welcome development as it would refocus and reposition the company for greater performance.

“NNPC has all it takes to achieve its corporate goals. As joint venture companies (JVCs), we need to produce more, increase our capital investments and provide enough money to run our operations and new projects.

Chief Sylvernus Okoli, President of Depots and Petroleum Products Marketers Association (DAPPMA), said ``we are pleased to support the PIB, particularly on the emphasis on deregulation of the petroleum downstream.  “The inclusion of open access in the bill has allayed our fears. We once thought the NNPC was being unbundled, but it is being strengthened”.

The forum also received similar endorsements from other groups including IPMAN, NARTO, MOMAN and NUPENG/PENGASSAN. But, those endorsements did not come without  reservations, including the IOCs and their shareholders, whose major concern was the cash call obligations and respect for existing JVC and PSC Agreements and contracts. They also want to know how next the business could best be conducted in the next dispensation with the passage of the PIB, the mode of funding operations, especially with the credit crunch resulting from the global financial and economic meltdown.

While the international upstream trade media have been critical of the PIB, PetrolWorld would suggest that the PIB is not just a step in the right direction but will place pressure on all parties to find compromise and result in a better petroleum sector. The dowsntream sector is crying out for positive change and the PIB may provide a framework for some of this change.

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