Live blogging the Public Hearing at the House of Representatives Day 1

The PIB public hearing at the House of Representatives will commence shortly. The public hearing will be streamed live on Zoom and will also be shown on NTA.

Public hearing commences at 10:30 am with a speech by the Speaker of the House of Representatives, who focused on the urgency of reforms and the need to diversify Nigeria’s economy. PIB should provide solutions uniquely suited to our needs. The House of Representatives intends to pass this bill by April.

HMSPR, Timipre Sylva thanks the members of the House of Representatives for their work on the Bill so far. “The effort to pass the PIB must be sustained and finalised. The world has changed significantly since the efforts for reform started.” The Minister emphasised the challenges of energy transition and the urgency of passing the PIB. “I am available to assist in any way that I can.”

NNPC GMD, Mele Kyari – “oil will still be relevant in another 30 years. The uses will change but oil and gas will still be relevant.” Only countries that can harness the resources in an efficient way will prosper. The time is now. We have not seen any significant investment in the oil and gas industry since 2000 as there has been no fiscal stability. Our current fiscal environment is uncompetitive. We have made significant improvements in the PIB and there is still room for improvement.

Chairman of OPTS – Mike Sangster:

  1. only US$ 3bn out of US$ 70 bn invested in Africa was invested in Nigeria;
  2. operating costs in the country is over 40% higher than competitor countries;
  3. Deepwater developments – PIB does not provide a favourable environment for future investments;
  4. PIB should grant full royalty relief for the first 5 years for deepwater;
  5. Gas – PIB does not address the key issues facing gas development. Inadequate infrastructure, low gas pricing.
  6. PIB must honour existing contractual obligations. Operators should be allowed to retain their existing license areas.
  7. Segregation of upstream and midstream assets under the PIB should not apply to past investments;
  8. PIB needs to include a robust dispute resolution process;
  9. The dual tax system introduces a complexity;
  10. The deductions should be based on WREN test;
  11. Royalties should not be included in calculating the cost price ratio;
  12. PIB does not broadly support the growth of indigenous oil companies.

Chairman FIRS, Muhammad Nami:

  1. Tax administration will change significantly and will increase fiscal administration. FIRS is able to rise up to the challenge;
  2. There will be a reduction in tax revenue in the short term, which will be compensated in the mid to long term by increased investments;
  3. OPTS concerns on capital allowance has been raised with the executive committee and has been addressed;

Representative of Total, Victor Bandele:

  1. The Bill increases administrative complexity
  2. Total proposes a 5 year royalty relief and the removal of hydrocarbon tax for deep water;
  3. cost price ratio should be deleted;
  4. the deductibility provisions under hydrocarbon tax and the companies income tax act are misaligned;
  5. Sole risk contracts should have the option to preserve the fiscal terms.

Nigerian Labour Congress:

  1. No provisions for labour in the bill;
  2. the provisions on the levy needs to be clarified.

Delta State, Chief Economic Adviser:

  1. Incorporation of the host communities should be done within 3 months;
  2. Failure to incorporate should be penalised;
  3. Host community fund should be 5% of revenues;
  4. 20% of the license fee should be allocated to the trust fund;
  5. Members of the board of trustees should be selected by a panel including the settlor and communities;
  6. Chairman of the trustees should be appointed on a rotational basis;
  7. Surveillance contracts should be given to the host communities;

Joint Presentation by NUPENG & PENGASSAN:

  1. We must not pass a PIB like the Deep Offshore Inland Basin Amendment Act 2019, which was a disincentive for investment;
  2. PIB must protect Nigerian workers and stamp out casualisation in the oil and gas industry;
  3. We should have a single regulator in the oil and gas industry;
  4. Labour unions should be represented in the Commission;
  5. NNPC limited should include an independent director nominated by the regulator;
  6. a portion of oil company training budget should be set aside for PTI;

Women in Energy Network President Mrs. Funmi Ogbue

  1. Ensure gender neutrality in the PIB
  2. PIB should ensure 35% of representatives of the organisations created in it are reserved for women;

Always Ibom State representative

  1. Host communities and state governments should be involved in appointing the trustees for host communities development trust;
  2. PIB should recognise the concurrent jurisdiction of the States on environmental matters;
  3. oil producing states should have shareholding in NNPC Limited.

Federal University of Petroleum Resources:

  1. FUPRE should be recognised in the PIB;

Live Blogging the Senate Public Hearing

Good morning. Day 2 of the public hearing starts with the representative of the Rivers State Government. Points made include:

  1. Petroleum should be vested in the Federal Government and the petroleum producing states;
  2. Petroleum producing states should nominate members to the Upstream Petroleum Regulatory Commission;
  3. The Upstream Regulatory Commission should not be responsible for frontier exploration;
  4. Midstream Gas Infrastructure Fund should be expunged;
  5. Petroleum data should belong to both the federal government and the government of the petroleum producing states;
  6. NNPC’s shares should not be sold and any decision regarding the disposal of assets should be made with the approval of the petroleum producing states.

The second set of presentations is being given by the Host Community Association:

  1. Host communities as a critical stakeholder should be granted a 10% equity position in all licenses – 5% from the government and 5% from investors;
  2. Gas flaring fees and penalties should be transferred to the host communities.
  3. The Bill should ensure that there is host community participation in environmental issues;
  4. Ensure that the principles of sustainable development is enshrined in the Bill;
  5. Establish a national body called Oil and Gas Producing Development Commission, which should be replicated at the States and Local Government levels;
  6. 25% of Royalties from Upstream production should go to the Host Communities;

The representatives of DAPPMAN:

  1. Expunge the levy imposed on the wholesale price of petroleum products;
  2. Regulatory decisions should be made on a level playing field;
  3. Board of the Authority should include senior industry representatives;
  4. All provisions in relation to the regulation petroleum product pricing should be deleted and prices should be determined by the market;
  5. Tariff regulation also not necessary because there is sufficient competition in the petroleum products market;
  6. PIB should include minimum license terms for the downstream sector;
  7. Competition regulation should be exercised by the Federal Competition regulator;
  8. Third party access provisions should only relate to uncontracted capacity;
  9. Storage depots should not be required to contribute to the host community funds as they are low margin businesses.

National Oil Spill Detection and Response Agency:

  1. Concerned about the powers granted to the Commission and the Authority in relation to environmental matters;
  2. Environmental functions should remain in the hands of the Ministry of Environment;
  3. Environmental management plan provisions conflict with the general environmental impact assessment provisions.

Petroleum Technology Association of Nigeria:

  1. This bill does not promote local content;
  2. The Commission and the Authority should be merged;
  3. The power to revoke and assign licenses should not be delegable;
  4. NCDMB and PETAN should be included in the board of the Commission and the PETAN should be included on the board of the Authority.

AELEX:

  1. The Bill should follow the existing government policy and adopt the single regulator model;

KPMG presentation

Very important for Nigeria to pass a bill that is realistic.

KPMG believes that the provisions on cost price ratio will harm investment.

NDDC no longer relevant and host community funds should be deducted from the contribution to NDDC funds.

Environmental remediation fund is not necessary.

Voluntary conversion from current licenses to the new licenses created under the PIB is not truly voluntary given the time within which it must be done.

The PIB should not mandate the formation of new companies to takeover existing midstream operations of licensees.

PIB 2020 passes 2nd reading at the Nigerian House of Representatives

The Petroleum Industry Bill 2020 passed the second reading at the Nigerian House of Representatives and has now been referred to the House’s Ad Hoc Committee on the Petroleum Industry Bill. This comes a few weeks after the Senate passed the same bill through second reading. Given that the year is winding down, it is likely that any public hearing on the Bill will hold in January 2021.

Watch PIB Education Series Episode 3

On Thursday, November 19 2020, I spoke with Ms Stella Duru, Partner, Banwo & Ighodalo; Dr Nuhu Habib, Special Assistant to the President on Natural Resources; and Dr Dayo Ayoade, Senior Lecturer of the University of Lagos, on Upstream Regulation in the PIB 2020. We discussed the new acreage management system, ministerial discretion in the award of licenses, the option to convert existing licences to the new licenses and the requirement for both the Environmental Remediation Fund and the Decommissioning & Abandonment Fund. You may watch the video below.

PIB Education Series – Session 3: 4PM WAT 19/11/20

At the 3rd session of the PIB Education Series, I will be joined by guest speakers – Ms Stella Duru, Partner, Banwo & Ighodalo, Dr Nuhu Habib, Senior Special Assistant to the President on Natural Resources and Dr Dayo Ayoade, Senior Lecturer at the University of Lagos. We will be speaking about Upstream Regulation in the PIB including the new licensing system, ministerial discretion, voluntary conversion from existing licences to the new licenses, gas flaring and the Environmental Remediation Fund amongst others. Please join us by clicking here.

Watch PIB Education Series Session 2 Video

On Thursday, 12th of November, 2020, I spoke with Charlotte Essiet of AOS Orwell and Israel Aye of Primera Africa Legal on the Institutional Framework of the Petroleum Industry Bill 2020.

Key points from the discussion include:

  1. Need to give careful consideration on the interface between the proposed regulatory agencies to ensure that there is no unhealthy competition, which may be harmful to the industry;
  2. The proposed governance structures for the regulatory authorities and the new National Oil Company, should be revised to include all executive directors/commissioners on the relevant boards.
  3. The PIB should be explicit about the privatisation of NNPC.

Watch a video of the session below.