1.0 INTRODUCTION

The Petroleum Industry Governance Bill 2017 (PIGB 2017) is a bill passed by the National Assembly to provide for the governance and institutional framework for the Petroleum Industry and for other related matters. The main objectives of the Bill are: to create efficient and effective governing institutions with clear and separate roles for the Petroleum Industry; to establish a framework for the creation of a commercially oriented and profit driven petroleum entities that ensure value addition and internalization of the Petroleum industry; to promote transparency and accountability in the administration of Petroleum resources in Nigeria and finally to foster a conducive business environment for petroleum industry operations.

The PIGB 2017 is still awaiting the Presidential assent in line with the requirement of the constitution, thus,this write up is to give an analysis of the Nigerian PIGB 2017.

 house of senate ANALYSIS OF THE PETROLEUM INDUSTRY GOVRNANCE BILL 2017

2.0 FUNCTIONS AND POWERS OF THE MINISTER OF PETROLEUM RESOURCES UNDER THE PIGB 2017.

Part 2 of the PIGB 2017 provides for the functions and powers of the Minister of Petroleum Resources. It states that the Minister shall be responsible for the determination, formulation and monitoring of government policy for the petroleum industry; exercise general supervision over the affairs and operations of the petroleum industry subject to the provisions of the bill (Act); report developments in the petroleum industry to the Federal Executive Council, advice the Government on all matters pertaining to the petroleum industry; promote the development of local content in the Nigerian Petroleum Industry; represent Nigeria at international organizations that are primarily concerned with the Petroleum Industry; negotiate and execute international petroleum treaties and agreements with other countries, international organizations and other similar bodies on behalf of the government. It shall also upon the recommendation of the commission grant, amend, renew, extend or evoke the functions to the commission license or lease required for petroleum to ensure separation of duties pursuant to the provisions of the bill (Act) or any other enactment; do all such other things as are incidental to and necessary for the performance of the functions of the Minister under the Bill (Act).

A clear understanding of the powers of the Minister above will reveal that, the Bill seeks to limit the  enormoous power of the Minister of Petroleum resources under the Petroleum Act; by subjecting his powers to grant, amend, renew, extend and revoke petroleum exploration and production licenses and lease to the recommendation of the Nigerian Petroleum Regulatory Commission which contradicts with the relevant provisions of the Petroleum Act CAP P10 LFN 2004.  This is because, under the Petroleum Act, the Minister of Petroleum resources has an absolute power to grant, amend, revoke and extend OPL’s and OML’s to applicants that satisfy statutorily prescribed conditions.

It must however be emphasized that members of the Nigerian Petroleum regulatory commission would be appointed by the President and not the Minister of Petroleum Resources. This however further limits the powers of the Minister of Petroleum Resources.

Reading further from the Bill, it can be enumerated that there will be a new process for applying for an amendment, renewal, extension or revocation of a license or lease and this will mean that applications would be done through the Nigerian Petroleum Regulatory Commission and not the Minister of Petroleum Resources as opposed to the provision of the Petroleum Act[1]

It is also to be noted that the PIGB 2017 does not provide for the procedure for applying for an amendment, renewal, extension or revocation of a license or a lease.

2.1 THE RIGHT OF PRE- EMPTION

Under section 7 of the Petroleum Act, the Minister of Petroleum Resources as rights of pre-emption. Rights of Pre-emption is to the effect  that, in the event of state of national emergency or war, the Minister has the right to pre-emption of all petroleum and petroleum products obtained, marketed or otherwise dealt with under any licence or lease granted under the Act.  It appears the PIGB 2017 retains the Minister’s power to exercise a right of pre-emption on all petroleum products obtained, marketed or dealt with under any license or lease granted in the event of a state of emergency or war. Although, the Bill modified the provision of the Petroleum Act by specifying what a state of national emergency as specified that the state of emergency shall be in line with the Constitution of Federal Republic of Nigeria, 1999 (as amended). Under the provision of section 305(3) of the constitution, the President shall have power to issue a proclamation for the declaration of state of emergency when:

  • the federation is at war;
  • the federation is in imminent danger of invasion or involvement in a state of war;
  • there is actual breakdown of public order and public safety in the Federation or any part thereof to such extent as to require extra-ordinary measures to restore peace and security
  • there is a clear and present dangr of an actual breakdown of public order and public safety in the Federation or any part thereof requiring extraordinary measures to avert such danger;
  • there is an occurrence or imminent danger, or the occurrence of any disaster or natural calamity constitutes a threat to the existence of the Federation or
  • The President receives a request to do so in accordance with the provisions of subsextion (4) of this section.

The above means that, the power of the Minister to exercise right of pre-emption is subject to the Declaration of State of Emergency by the President. The Bill also stated that the right of pre-emption shall be in respect of licenses under the Bill or any other enactment.  The Petroleum Act CAP P10 LFN 2004 imposes a fine of =N=2000 on any person who without reasonable excuse fails to comply with a requisition made by or on behalf of a direction issued by the Minister of Petroleum resources in exercise of his right of pre-emption.[2]

The PIGB 2017 on its own hand imposes a more stringent penalty, of forfeiture of the petroleum product and facilities subject of the offence and imprisonment term 10 years in order to properly reflect the gravity of the offence as an economic sabotage.[3] Thus, the option of fine is no longer under the Bill as contained under the Petroleum Act.

3.0 INCORPORATION OF TWO ENTITIES

One of the innovative provisions of the Bill is the incorporation of two corporate entities. By virtue of section 37 of the Bill, the Minister of Petroleum Resources is empower to within 6month of coming to effect of the Bill (Act) to approach the Corporate Affairs Commission in line with the provisions of CAMA to incorporate as companies limited by shares, the following names or such other names as may be available. The said entities are;:-

  1. The Nigerian Petroleum Asset Management Company (NPAMC)
  2. The National Petroleum Company (NPC)

These two entities are to be vested with certain liabilities and assets of the Nigerian National Petroleum commission (NNPC).

3.1.ESTABLISHMENT OF THE NIGERIAN PETROLEUM ASSETS MANAGEMENT COMPANY (NPAMC)

The Nigerian Petroleum Asset management company (NPAMC) is responsible for the management of NNPC’s oil & gas investment in assets where the government is not obligated to provide any funding. It shall also be responsible for the management of assets currently held by the Nigeria National Petroleum Corporation (NNPC) under the Production Sharing Contracts and Back-in Right Provisions under the Petroleum Act 1969 as amendedFurther to the above, the Bill under section 38 provides to the effect that,  the initial shares of the National Petroleum Assets Management Company shall be held in the ratio of 20% by the Bureau for Public Enterprises, 40% by the Ministry of Finance Incorporated and 40% by the Ministry of Petroleum Incorporated on behalf of the Government, at the time of its incorporation.

The Bill also provides that within 12months of incorporation, , the Minister shall make an order that the assets, rights, obligations, employees and liabilities of NNPC shall be transferred to NPAMC.[4] It is observed that the Bill by stipulating the period within which this process of transfer of assets, rights, obligations, employees and liabilities should be transferred is for the purpose of preventing an undue delay on the part of the Minister in effecting this transfer. This makes the Minister conscious of the time frame within which the transfer of assets and liabilities among others will be carried out. Also, a transfer order made by the Minister shall be binding on the NNPC, the Management Company and all other persons.

The PIGB 2017 also provides that the company shall be entitled to charge the Federal Government of Nigeria fees for the management of its oil and gas investment/interests and such fees shall be a percentage of the revenue generated by the NPAMC for the Federal Government as determined and appropriated by the National Assembly. The Bill also states that all income of the NPAMC shall be paid into the federation account.

 

3.2.0 ESTABLISHMENT OF THE NATIONAL PETROLEUM COMPANY (NPC)

By virtue of the provisions of the PIGB 2017, the NPC is to be an integrated oil and gas company operating as a fully commercial entity across the energy value chain.

The Bill provides that within 6 years from the date of incorporation of the NPC, it shall divest of not less than 30% of its shares to the public in a transparent manner.

The problem with the Bill is that it is unclear whether the divestment of the NPC’s shares will be limited to Nigerians.

3.2.1 GOVERNANCE AND MANAGEMENT OF THE NPC

The provisions of the PIGB 2017 provides that upon incorporation, the NPC shall be organized and managed on the basis of the provisions of the Companies and Allied Matters Act (CAMA), its memorandum of association and articles of association.

To my understanding of the PIGB 2017on this aspect, the legislature intends ensuring that the NPC operates as a separate commercial entity.

4.0.ESTABLISHMENT OF THE NIGERIAN PETROLEUM REGULATORY COMMISSION

The PIGB 2017 establishes a commission known as the Nigerian Petroleum Regulatory Commission (The Commission). The commission is to assume the rights, interests, obligations and liabilities of the department of petroleum resources, the petroleum inspectorate and the petroleum products pricing regulatory agency. The commission under the PIGB 2017 is also to regulate the upstream, midstream and downstream sector of the Nigerian oil and gas industry.

Objectives of the Nigerian Petroleum Regulatory Commission.

Reading from the PIGB 2017, the objectives of the commission are to promote an efficient, safe, effective and sustainable infrastructural development of the petroleum industry and to promote a healthy, safe and efficient conduct of petroleum operations. It is also empowered to administer and enforce policies, laws and regulations relating to all aspects of petroleum operations.

Functions of the Nigerian Petroleum Regulatory Commission.

Some of the functions of the commission under the PIGB 2017 are as follows:-

  1. To advise the minister on fiscal and other related issues pertaining to the petroleum industry.
  2. To regulate the activities of the downstream petroleum industry in a non-discriminatory and transparent manner.
  3. To make regulations necessary to give proper effect to the provisions of the PIGB 2017.

It is noteworthy that the PIGB 2017 does not require the Minister to sit on the Board of the Commission. From my own point of view, it can be reasonably presumed that the commission is to be independent and shall not be subject to the influence of the minister. To further buttress this fact, the PIGB 2017 states that the members of the commission shall only be removed or suspended by the President.The relevant provision of the PIGB 2017 empowers the minister with the power to issue directions to the commission on matters pertaining to the Petroleum industry and the commission is bound to implement such directions.

This is raises a concern on whether the Commission is independent of Minister of Petroleum Resources The draftsman of the PIGB 2017 should relook at the relevant provisions and this should be re-addressed by the National Assembly to bring about a form of independence of the Commission and prevent the possibility of an abuse of power by the Minister

However, it is important to itemize the relevance of this Bill to the petroleum section and Nigeria as a whole. Thus, the following key benefits have been identified to be derived from the Bill if eventually assented to by the President;

  1. It will create a conducive business environment for petroleum operations
  2. Enhance exploitation and exploration of petroleum resources in Nigeria for the benefit of Nigerians.
  3. Optimize domestic gas supplies, especially for power generation and industrial development
  4. Encourage investment in Nigerian petroleum industry
  5. Optimize government revenue
  6. Establish profit-driven oil entities
  7. Deregulate and liberalize the downstream petroleum sector
  8. Create efficient and effective regulatory agencies
  9. Promote the development of Nigerian content in the oil industry
  10. Protect health, safety and the environment in petroleum operations.
  11. PIB will lead to the establishment of the Nigeria Oil and Gas Investment Pact Scheme will ensure that components of industry equipment can be manufactured locally

5.CONCLUSION

Analyzing this PIGB 2017, the Bill intends to ensure that the Nigerian oil and gas industry is run in an efficient and transparent manner for the benefit of the people and the Country at large.

As the Bill awaits the presidential assent in line with the provision of the constitution, a closer perusal of the Bill as discussed above, it can be conveniently asserted that, the bill seeks to create an avenue for better business opportunities, make the petroleum sector more transparent and ensure better accountability of revenue derived from oil.

Nigeria National Petroleum Corporation (NNPC) would be reformed into two liability companies, while all existing regulatory agencies would be absorbed into a new agency called Petroleum Regulatory Commission. In other words, if the bill scales through assent by the President, it would restructure the Nigeria National Petroleum Cooperation, Department for Petroleum Resources and also create new agencies with more responsibilities[5].

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[1] Section 8, Petroleum Act LFN, 2004.

[2] Section 7(3) Petroleum Act

[3] See section 3(3) of the PIGB 2017.

[4] Section 41 PIGB.

[5] Read more at: http://www.vanguardngr.com/2017/05/pigb-senate-approves-unbundling-nnpc/

BY

F.RANCISCA OLUREMI DAWODU AND M.N ADAM

ASSOCIATES

COUNTRY HILL ATTORNEYS & SOLICITORS

 

chas
Author: chas