In our last post, we reported that the passage of the PIB seemed to be nowhere in sight due to internal power play between the National Assembly and the Executive. Well, the Guardian yesterday reported that the Presidency will present three harmonized bills from the PIB to the National Assembly before their resumption from recess.
According to the Minister of State for Petroleum Resources Dr. Ibe Kachikwu, the three Bills are in the final editing stages and will be sent to the Federal Executive Council and other stakeholders for their input. Dr. Kachikwu reiterated the willingness of the Executive and legislature to pass the PIB noting that the three Bills were drafted in consideration of the issues raised by stakeholders.
The National Assembly should resume from recess by 12th of September 2016 and we hope that the Presidency makes good on its promise.
There are indications that the passage of the PIB may be nowhere is sight as information gathered from ThisDay suggests that the delay in the passage of the Bill is actually due to internal wrangling between the National Assembly and the Executive, a power play centered around which arm of government is responsible for the passage of the Bill. This is in addition to the unresolved issue of the inclusion or otherwise of the host community fund in the Bill. The report decried this debacle calling it a major embarrassment for Nigeria in view of the landmark passage of a similar Bill by Ghana’s parliament last week.
The paper went on to report that the Group Managing Director (GMD) of NNPC, Dr. Maikanti Baru has promised to continue with the reform initiatives started by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, and further grow the fortunes of NNPC by focusing on a 12-point agenda, which includes security of oil installations, the new business models, joint venture cash calls, production and reserve growth, growth of the Nigerian Petroleum Development Company (NPDC), gas development, oil and gas infrastructure, and refinery upgrade and expansion.
It appears progress on the Petroleum Industry Governance Bill, (“PIGB”) is to be stalled as reports reaching us indicate that the Senate President, Bukola Saraki has ordered the indefinite suspension of further consideration of the bill. According to today’s Vanguard, this order came as a result of mounting opposition from southern lawmakers on the removal of the 10 percent royalty proposed for host oil communities tagged the Petroleum Host Community Fund, (“PHCF”) as captured in the original PIB, from the PIGB. Whilst the North is against the inclusion of the PHCF, the oil producing regions in the Niger Delta are favorably disposed to its inclusion stating that its removal is not in the best interest of their region.
The Petroleum Industry Governance Bill 2016 (“the Bill”), by its Section 4, establishes a body to be known as the Nigeria Petroleum Regulatory Commission as the sole regulatory institution for the Nigeria oil and gas industry across the various value chain.
Currently, this role is performed by the Department of Petroleum Resources (“DPR”) with Nigerian National Petroleum Corporation (“NNPC”) influence. This is in addition to a plethora of other agencies regulating certain aspects of the industry. DPR was carved out of the Petroleum Inspectorate Department of NNPC. Some of the issues bedeviling this arrangement has always been the lack of clear and transparent regulatory framework and strong, independent institutions, not to mention interference from NNPC which doubles as a quasi-regulator rather than operating solely as a commercial entity, as well as overlapping of roles by various agencies.
A review of the Petroleum Industry Governance Bill 2016 (“the Bill”), which we reported last week passed first reading on the floor of the Senate shows that it largely retains the content of the first version, introduced late last year as the Petroleum Industry Governance and Institutional Framework Bill 2015, with a few amendments. The renewed attention given to the Petroleum Industry Bill (“PIB”) by the National Assembly by sponsoring this Bill is an indication of the lawmakers’ dissatisfaction with the seeming silence of the Executive on the matter.
Part One of this review focuses on the functions and powers of the Minister.
The Bill provides for the functions and powers of the Minister in two sections. Under Section 2(1) paragraphs a-i, the Minister is vested with eight functions similar to those provided in Section 6 of the PIB save for three distinct departures. The power to delegate is conferred under Section 2(2) whilst Section 3 addresses the Minister’s right of pre-emption.
- The Bill has done away with the Minister’s advisory and approval role stipulated in the PIB before the President can appoint the Board of the various agencies. The President is empowered to appoint the executive and non-executive members of the Board of the Petroleum Regulatory Commission (the “Commission”) (to be established pursuant to the Bill as the industry regulator) subject to confirmation of the Senate. This is a laudable improvement to the old Bill and extant legislation where the Chief executive of the Petroleum Inspectorate is appointed by the Petroleum Minister, (albeit with the approval of the National Council of Ministers) and is also subject to the direction and control of the Minister (and by extension, the Department of Petroleum Resources (“DPR”) and its Director General).
- The power to make regulations which is currently vested in the Minister by virtue of Section 9 of the Petroleum Act and maintained by the PIB has been removed and vested instead in the Commission as the regulatory body for the industry by Section 8(1) of the Bill. This provision deals specifically with regulations necessary to give proper effect to the provisions of the Bill and would not affect the provisions of other laws which grant the Minister powers to make regulations such as, the Nigerian Oil and Gas Industry Content Development Act, 2010. It is also worth noting that the Bill empowers the Minister to promote the development of local content in the Nigerian petroleum industry.
- Although the Bill maintains the Minister’s rights of pre-emption, a notable change has been made to this provision which is in keeping with current economic realities. Failure to comply with the Minister’s direction issued in respect of a right of pre-emption to petroleum and petroleum products brought on by a state of national emergency or war and obstruction or interference with the exercise of the powers of the Minister in this regard under the Petroleum Act attracted a maximum fine of NGN2,000 and NGN200 or a maximum prison term of six months or both respectively upon conviction. Under the PIB, the maximum fines for the two offences have been increased to NGN2,500,000 and NGN5,000,000 or a maximum prison term of two years or both respectively. The Bill however increases the fine for non-compliance to a maximum of NGN10,000,000 or a maximum prison term of six months or both; and for obstruction, a maximum of NGN5,000,000 or a maximum prison term of six months or both. The Minister is also empowered to make regulation to increase the financial penalties imposed under the Bill.
Under extant legislation, the Petroleum Act grants the Minister exclusive and unfettered power to grant licenses and leases and amend, renew, extend or revoke same pursuant to the provisions of the Act. The Bill, much like the PIB (save for the replacement of the word “advice” with “recommendation”), fetters the discretion of the Minister to issue licenses and leases for petroleum exploration and production activities. The Minister may now only exercise such powers based on the recommendation of the Commission. Currently, the grant of licenses is governed by the Petroleum (Drilling and Production) Regulations and applications are made to the Minister. It appears this would no longer be the case and such applications would now be required to be made to the Commission. Section 25 of the Petroleum Act entrusts the Minister with discretionary powers to revoke a license or lease based on certain criteria. Under the Bill, this power may only be exercised based on recommendations made by the Commission in this regard. Accordingly, Part 6, Section 84(1) of the Bill provides that the provisions of all existing enactments or laws, including the Petroleum Act, Petroleum Profit Tax Act and the Companies and Allied Matters Act, shall be read with such modifications so as to bring them into conformity with the Bill. We expect that regulations would be made which clearly defines new procedures to be adopted.
In our next report, we will continue with an analysis of the proposed sector regulator, the Petroleum Regulatory Commission.
It was reported that the Petroleum Industry Governance Bill 2016 passed first reading on the floor of the Senate yesterday, April 13, 2016 as the upper chamber deliberated on this version of the PIB amongst other oil and gas sector issues.
As we had earlier reported, this version of the PIB is not a one stop shop version for all issues relating to petroleum regulation like the previous versions, but rather tackles specifically, the institutional and governance structure of the petroleum industry.
The Senate President , Olubukola Saraki announced on twitter earlier this week, that both Houses of the National Assembly will start considering the “Petroleum Industry Governance Bill” next week. Based on publicly available information and exposure drafts, this paper briefly highlights five things to expect from the long-awaited bill.
The Minister of State for Petroleum, Dr. Ibe Kachikwu recently announced the ”unbundling” of the Nigerian National Petroleum Corporation (“NNPC”). Various newspapers report the number of new NNPC entities as between 21 to 30. This paper seeks to answer some questions arising from the restructuring.
1. What does the restructuring look like?
NNPC has been restructured into seven coordinating units: an upstream unit, a downstream unit, a refinery unit, a gas & power unit and one which is responsible for other ventures. There will also be one unit responsible for corporate services across the group, as well as a finance and services company. Each of the new units will be responsible for existing NNPC subsidiaries and activities and will be led by a chief executive officer.
Amidst speculations that the government is splitting the Petroleum Industry Bill into manageable segments starting with a new Bill titled “Petroleum Industry Governance and Institutional Framework Bill 2015”, This Day Live reported that the Speaker of the House of Representatives Hon. Yakubu Dogara on Monday announced the National Assembly’s unwillingness to continue to maintain the status quo.
According to Dogara, the National Assembly is set to work on its own version of the bill to expedite the reforms needed in the oil and gas sector and will no longer stand on the sidelines while the Executive continue to delay in transmitting the Bill to the legislature for passage into law.
Dogara further stated that work on their own version has reached advanced stage and may soon be introduced in both chambers of the National Assembly.
Could he be alluding to the Institutional Framework Bill? We are not certain at the point. However, in our earlier report where we intimated that according to Reuters, a new Bill was in the works, the report had stated that the bill was “drafted by the Senate and overseen by the oil ministry”.
It was recently reported by Reuters Africa that the government is breaking up the Petroleum Industry Bill and replacing it first with a law to overhaul the state sector. This new Bill, entitled “Petroleum Industry Governance and Institutional Framework Bill 2015” aims to create “commercially oriented and profit driven petroleum entities” and close loopholes that bred corruption.
Some of the changes reportedly made to the new Bill include amongst others, curtailment of Ministerial powers, the splitting of NNPC into two separate entities: the Nigeria Petroleum Assets Management Co (NPAM) and a National Oil Company (NOC). The NOC will be an “integrated oil and gas company operating as a fully commercial entity” and will run like a private company. It will keep its revenues, deduct costs directly and pay dividends to the government thus putting an end to the era of waiting for Federal allocation for funding and always failing to meet cash call obligations.
You will recall that in the recent past we had reported that the former Minister of Petroleum Resources, Diezani Alison-Madueke, suggested that the PIB be split up to ensure speedy passage into law. This sentiment is one that is shared by many industry stakeholders although there are others who believe that splitting the Bill is not in Nigeria’s best interest.
This is an interesting development and one we intend to watch closely to see how the pendulum swings. Should this Petroleum Industry Governance and Institutional Framework Bill 2015 be passed as reported, we do hope it addresses not just a few, but all the lacunae and institutional issues which the previous PIB was not able to effectively tackle. We are at least certain of one fact, it will be a welcomed development for NNPC JV partners.