The Petroleum Industry Bill (PIB) on Governance, Its Objective Which is to Foster a Business Environment Conducive for Petroleum Operations...has the Bill Met That Objective?

The Petroleum Industry Bill (PIB) on Governance, Its Objective Which is to Foster a Business Environment Conducive for Petroleum Operations…has the Bill Met That Objective?

Chapter One

PREAMBLE OF THE STUDY

The petroleum industry in Nigeria holds a high stake in the country’s economic decision (Faseemo, 2019). The same goes for countries whose economies lies largely on crude oil and its by-products. Therefore, issues concerning petroleum are handled cautiously in other to carry along all involved parties. The petroleum business, apart from being relevant to countries solely dependent on it, is also a high-profit, high-risk business. This is due to the large expenses usually put into the exploration and development phases which could take 8 to 13 years of development before First Oil. The petroleum business has significant impact on world politics, economic policies, environmental consideration, commercial business participation and regional engagement.

CHAPTER TWO

OVERVIEW OF THE LITERATURE

The PIB was first introduced to the Nigerian National Assembly in 2008 during President Goodluck Ebele Jonathan’s administration. However, there where Petroleum Act of 1969 governing operations in the petroleum industry between the citizens, Government and Oil firms, though the Act has been described as obsolete due to changes, awareness, and technology (Kenneth, 2018). Presently, there have also been an amendment of the Deep Offshore and Inland Basin Production Sharing Contracts (PSC) Bill in 2019, making the deep-water fiscal terms more competitive (Femi, 2020). The contents of the PIB have been debated severally at the Nigerian National Assembly since its introduction making its full passage linger till present.

The PIB was described by KPMG as an Omnibus bill aimed at regulating the entire sphere of the petroleum industry and repealing all existing oil and gas legislation (KPMG, 2017). The PIB has been a work in progress since the Presidential committee set up to look into the oil and gas industry resumed activities in 2007 with the sole aim of improving transparency in the Nigerian National Petroleum Corporation (NNPC) and improve Nigeria’s share of her oil revenue (Wumi, 2008). The bill has experienced lot of objections from the International Oil Companies (IOCs) and subsequently the NNPC during the course of deliberations by the legislative arm (Femi, 2017). The significant point raised by interested parties has led to delays and re-structuring of the PIB causing its setback in the Nigerian’s 7^th Assembly. The then Minister of State for Petroleum Resources, Dr. Ibe Kachukwu suggested an amendment of the bill to ease its speed up. The PIB was subsequently unbundled into four fractions in 2016, namely:

Petroleum Industry Governance Bill (PIGB)
Petroleum Industry Administration Bill (PIAB)
Petroleum Industry Fiscal Bill (PIFB)
Petroleum Host and Impacted Communities Bill (PHICB)

PIGB focuses on the creation of new/existing Government institutions grouped into four categories for the reasons listed below:

Policies and general strategy formulator – The Minister of Petroleum Resources holds this responsibility
Regulator – National Petroleum Regulatory Commission (NPRC)

iii. Commercial institutions – Nigeria Petroleum Assets Management Company (NAPAMC) and Nigerian Petroleum Company (NPC). The NPC effectively replace the NNPC as it is NAPAMC equity are held in a 40-40-20% by the Ministry of Petroleum, Ministry of Finance and Bureau of Public Enterprises.

Others: NAPLMC (temporary) and PEF
Ancillary institutions – Ministry of Petroleum Incorporated (MOPI), Nigerian Petroleum Liability Management Company (NAPLMC) and Petroleum Equalization Fund (PEF).

The PIAB is tasked with the management of the production and exploration operations within the country and in trust for the country, with aims of promoting transparency during operations while making sure involved parties are accorded fair share of the day-to-day operations.

The PIFB is concerned with tax-related issues and terms of contracts in the oil and gas industry. All fiscal terms are required to be up-scaled to best practices and global standards by the PIFB.

The PHICB focuses on the protection of the rights and opportunities of the locals or host communities in terms of compensations or restitutions for both the environmental and social cost of their resources being exploited and extraction activities around such exploitation (Nairametrics, 2020).

Among the fragmented PIB, the PIGB is the only bill that has scaled through the Senate and House of Representatives. It was passed in the Senate on the 25^th of May 2017 and House of representative on January 2018. However, the assent of the President is still expected to make it a law.

EFFECTS OF DELAYED PIB

Contracts in the petroleum industry are mostly long term, therefore the delay in implementation of the PIB leads to contracts been stalled because of lack of clarity and fragility of laws of the land with future changes. As many Oil firms believe that new investments in the Petroleum industry may depend largely on the PIB passage having seen the impact of the PSC Amendment Bill in 2019 where royalty payments increased to between 0% to 10% depending on the present oil price (Femi, 2020).

Developmental benefits (social and environmental) of host communities keeps lingering as the bill delays. However, the bill should clearly state the improvement of the involvement of host communities in the Petroleum Industry.

A Daily Trust Analysis reports that the delay of the PIB and concluded that an estimate of over $120 billion (Over $15 billion yearly) has been lost to diverted or withheld investments. Shell Petroleum Development Company has put to hold two offshore oil and gas projects worth $30 billion till the approval of the PIB, PETAN has also estimated a $10billion loss due to non-PIB (Femi, 2020).

CHAPTER THREE

CONCLUSION

The delay in passage of the PIB into law as can be seen from this study has caused a lot of economic damage to Nigeria as a country, in terms of huge investments lost or withheld, reforms, high quality blueprint; one which could have catapulted the economy into a great pedestal creating job opportunities, restoring peace to the Niger Delta region, improving government revenues, maximizing the oil and gas sector’s value and seeing to the welfare of the Nigerian populace at large.

All stakeholders involved in the passage and implementation of the PIB should put national interest at heart during this discourse owing to its elaborate nature. I for-see the PIB’s success or failure to be a reference point for other Nigeria’s extractive industry discourse in the nearest future.

Since the PIB tends to bridge the gap between three areas of the industry – legal, institutional, and regulatory framework, a better synergy between the legislative and executive arm of government should be reached on the passage of the bill as other matters contributing in lesser capacity to the economy has seen speedy passage and swift government processes. In all, a clear-cut commitment, transparency, and accountability of all stakeholders to seeing the success of this bill should be at the fore burner being portrayed to all the parties involved and most importantly, the Nigerian masses in order to ensure the benefits the passage of this bill will bring.

The PIB should be given timely consent because the global oil events in recent years is putting Nigeria at a slim chance of economic benefits steadily. With energy efficiency realized in the Americas, to the alternative renewable energy in the European market and a massive discovery of oil in other African states amongst other factors, Nigeria’s opportunities for maximum derived benefits is narrowing down by the years.

REFERENCES

DailyTrust (2019). Business: As PIB lingers, multi-billion dollars investments elude Nigeria, Daily Trust https://www.google.com/amp/s/www.dailytrust.com.ng/as-piblingers-multi-billion-dollar-investments-elude-nigeria.html/amp
Faseemo O. (2019). PPD 816: Petroleum Field Development Project, [Powerpoint Slides] Institute of Petroleum Studies, University of Portharcourt, Choba, Nigeria.
Femi A. (2017, October 5). Business: Stakeholders examine opportunities, challenges in PIB, Punch Newspaper, Nigeria https://www.google.com/amp/s/punchng.com/stakeholders-examineopportunities-challenges-in-pib/%3famp=1
Femi A. (2020, June 3). Energy: Nigeria’s Delayed PIB and disappearing opportunities, Guardian Newspapers
https://m.guardian.ng/energy/nigerias-delayed-pib-and-disappearingopportunities/
Kenneth C. E. (2018). The Fall and rise of the Nigerian Petroleum Industry Governance Bill, Oxford Policy Management, Nigeria.
https://www.opml.co.uk/blog/nigerian-petroleum-industrygovernance-bill
KPMG (2017, June). The Petroleum Industry Governance Bill, KPMG Advisory Services, Nigeria, p. 1
Nairametrics (2020, February 9). Columnists: PIB and its unsurmountable obstacles, Nairametrics
https://nairametrics.com/2020/02/09/pib-and-its-unsurmountableobstacles/
OSIWA. Rethinking Nigeria’s Petroleum Industry Bill (PIB) http://www.osiwa.org/publication/rethinking-nigerias-petroleumindustry-bill-pib/
Wumi I. (2008). An Appraisal of Oil and Gas Industry Reform and Institutional Restructuring in Nigeria, International Association for Energy Economics. p. 23-26.

Related Topics:

Other Topics