By Margaret Nongo-Okojokwu
When recently President Goodluck Jonathan, while canvassing for public support and goodwill for himself in the forthcoming April presidential election, announced to stakeholders in the oil and gas sector that the long awaited Petroleum Industrial Bill, PIB, would be passed into law before May 2011, many Nigerians received the news with broad smiles and utmost optimism, though foreign investors may not have found it funny.
The benefits of the PIB, which many see as a breath of fresh air for local investors who may want to take advantage of the existing Local Content Act, cannot be overstressed. Primarily, the PIB would encourage the development of small fields with significant low tax incentives having a bottom level of five percent royalty scale based on daily oil production. This provision is a deliberate effort to encourage Nigerian entrepreneurs to partake in the oil and gas sector business.
In addition, the local content provision has been incorporated into the new law which would require all projects and procurements to have Nigerian content elements in them. By this, all purchase of local goods and services in the oil industry would receive a significant boost, given that the PIB makes only 80 percent of foreign costs deductible for Nigerian hydrocarbon tax purposes. The deregulation of the downstream sector coming alongside the reform is also expected to stimulate economic activities in the country as new areas of local entrepreneurship skills would be promoted to enhance the operation and management of the downstream assets under a deregulated regime.
The Bill equally provides adequate incentives to promote domestic gas utilisation in Nigeria. This is consistent with the National Gas Master Plan. Articles 282, 335, 404-410 of the Gas Master Plan highlight the significance of encouraging the use of gas in domestic markets as well as ending gas flaring. As specialised bodies and institutions with distinct roles and responsibilities, duplications of functions are highly unlikely. The separation of the oil and gas value chain into Upstream, Midstream, and Downstream, with clear demarcation of boundaries among the segments ensures that the institutions function properly without any recourse to overlapping responsibilities. The number of institutions being created is linked to the oil and gas value chain. Indeed, most of the institutions are already in existence, namely the Inspectorate, the Authority, the Fund, the Frontier Service, and the Centre. In technical terms, therefore, only two new institutions are being created, the Agency and the Directorate, which have clearly defined roles.
In order to ensure prudent management of resources and accountability, the institutions’ running cost would be tied specifically to the sectors that they regulate and would not unduly put burden on government finances. For example, the Authority would derive their fund from fees and levies on petroleum products and gas sales. The policy and regulatory roles of the NNPC is to be excised and transferred into three regulatory entities for effectiveness and efficiency. Therefore, government would still have strong oversight and control of the oil and gas industry. NNPC would not be privatized but would be fully commercialised. The reform would rather see the present NNPC transit from being a statutory corporation into a Limited Liability Company under the Companies and Allied Matters Act, CAMA. It would function as a purely commercial business entity but wholly owned by government. It would have freedom to enter into commercial ventures within and outside of Nigeria and pay taxes on its profit to the government.
The PIB provides for the current Directorate of Petroleum Resources, DPR, to be transformed into the National Petroleum Inspectorate, NPI, which is an autonomous regulatory body empowered with financial and operational independence to regulate the activities in the upstream petroleum sector. The new laws request each oil and gas producing company in Nigeria to supply a certain proportion of gas for use in the domestic market under the domestic gas supply obligation to be issued by the Minister of Petroleum Resources. All the provisions in the previous downstream gas bill are incorporated in the PIB. The gas sector would be regulated by the three regulators: the Agency, the Inspectorate, and the Authority.
Under the Corporate Social Responsibility section of the Bill, an elaborate presentation on the roles and responsibilities of companies and what constitute their corporate social responsibilities to their host communities recommends stiff penalties for any act of environmental pollution by companies. In addition, it also spelt out provision for effective engagement and participation of host communities in the economic spin-offs arising from oil and gas activities in their vicinity. Companies are required to present a well articulated sustainable community development plan consistent with the PIB guidelines for effective sustainable engagement programme.
The reform process of the oil and gas industry is more or less about creating opportunities for Nigerians. The various institutions to be created would seek to engage Nigerians from all walks of lives to be involved throughout the entire value chain of the oil and gas industry.
Furthermore, analysts are of the opinion that the bill will compel oil and gas companies to include natives in host communities in their employments and contract awards, especially on community-related development projects. The Bill mandates oil and gas companies operating in Nigeria to be guided strictly by the PIB Local Infrastructural Development and Maintenance Guidelines. It also stipulates a mandatory consultation with host communities in the development of infrastructure and all related development initiatives under SCR to be undertaken by company operating in an area. The bill equally mandates all oil and gas companies to ensure support for educational and skill acquisition training programmes for indigenes of the host communities. The sole aim is essentially to create a highly skilled manpower as well as provide the unskilled persons with skills that would provide employment for them, especially in the operational segments of the oil and gas industry.
According to the Minister of Petroleum Resources, Mrs Alison-Madueke, “The PIB is a long and in-depth Bill, a historic, critical and extensive Bill encompassing the 16 hitherto existing laws within the oil and gas industry. One of the major benefits of this Bill is that transparency in the oil and gas industry would be achieved. The oil and gas industry has been characterised by too much opaqueness and extreme level of confidentiality. This Bill would remove opaqueness in a scale that has never been seen. Data would be accessible for all interested individuals.”
Other benefits that would be derived from the passage of the Bill, according to the minister, include that over 300, 000 jobs would be available in the industry in the next 4-5 years, the implementation of corporate social responsibility would no longer be an option but compulsorily, gas flaring would be put to an end, and the commercialisation of the NNPC would be hastened.
But while efforts and pressures were being mounted on the Judiciary to fast-track the passage of the Bill, there came an astonishing report from the National Assembly revealing how the Ministry of Petroleum Resources, which has now become a hot bed of spies for international oil companies, OICs, and some unpatriotic Nigerians have been spending the money meant for the implementation of the bill that has not even been passed.
Nigerian OrientNews findings revealed that in the 2010 budget, the Ministry of Petroleum Resources had budgeted N10 billion for the implementation of the PIB, but the National Assembly slashed it to N7bn. Out of the figure, the Ministry took out N740m for what it called preliminary activities and has so far spent N481m from it. During the probe instituted by the House of Reps, the Minister of Petroleum Resources, who was represented by the Ministry’s Permanent Secretary, Mr Goni Musa, told the lawmakers that the money was spent on some preliminary activities (not specified) that needed to be done before the passage of the Bill. The Permanent Secretary also claimed that the money was spent on existing regulations in the oil and gas industry. He said, “We are carrying out many activities, including the review of the current petroleum regulations in order to align them with international best practices. We are also developing new regulations to cover the downstream sub-sector. The law itself will throw out many regulations. So we don’t want to wait until the law is passed before developing regulations.”
The disclosure rather alarmed members of the House, who described the expenditure as ‘extravagant’. The chairman of the House Committee on petroleum, Mr Clever Isikikpo, said he could not comprehend the essence of the huge expenditure when the bill has not been passed. It would appear, he said, that the Ministry took advantage of the fact that Nigerians were keenly waiting for the passage of the Bill to embark on ‘frivolous expenditure’.
Analysts and experts in the oil and gas sector have criticized the Petroleum Ministry and called on the Federal Government to probe into the alleged spending by the Ministry. A transparency advocacy group, the Africa Network for Environment and Economic Justice, ANEEJ, recently berated the Ministry over the alleged spending of over N481million on the proposed PIB. The group described as commendable the probe initiated by the House of Representatives over the fund, but however maintained that the spending was an indictment on the transparency effort of the present administration in the country. The Executive Director of ANEEJ, Rev. David Ugolor, said though the group recently commended President Goodluck Jonathan for halting the renewal of oil lease until the PIB is passed, the action of the ministry further demonstrated the lack of transparency in Nigeria’s oil and gas industry.
While Nigerians await the passage of the Bill, it is pertinent to look inwards to check these bodies responsible for the facilitation of the said Bill. The revelation clearly explains the desperation with which the Ministry of Petroleum is pressuring the government to get the Bill signed into law. At the same time, it raises the question of whose interests the Minister, the Group Managing Director of NNPC, the Presidential Adviser on Petroleum, and others in the corridors of power are serving. For that matter, one may also ask, whose interest is the presidency serving by subscribing to this attempt to rush a bill through the National Assembly at this eleventh hour?
Nigerian OrientNews learnt that in the last few weeks, some influential Nigerians, including some former leaders, who had been persuaded that Nigeria’s destiny depends on the oil and gas law, had been piling pressure on the President to get the National Assembly to pass the law that the IOCs and their allies have been lobbying to pervert. Consequently, the President, who has realised how critical the Bill is to the prosperity of the country he is bidding to continue to lead till 2015, is reportedly “ready to pull down all the strongholds, all the principalities and powers in the oil sector that have strategically sabotaged the Bill”.
A recent related publication through Wikileaks revealed that the foreign adversaries of the PIB described the content of the oil and gas bill as ‘too nationalistic’. It was also said that the President would soon bring his political campaign to a halt in order to inaugurate a presidential panel to tackle the ancient challenge of passing the PIB that will wrest Nigeria’s sovereignty from the powerful IOCs nurtured by endemic corruption in the oil and gas industry.
After all has been said and some yet to be done, it is important to put these words into action. Already, the President has done much in assuring stakeholders of the passage of the PIB, but it doesn’t end there. Every hand must be on deck to ensure that this Bill works. Also, there is need for proper checks to be put in place, for if such huge amount of money is already being consumed for ‘preliminary activities’, one wonders what will happen when the ‘main activities’ kick off.
