THE Petroleum Industry Bill (PIB) was conceived about 20 years ago but the National Assembly (NASS) was definitely not in a hurry to pass the bill. But after 17 years of dilly dallying, the bill was passed separately by the two chambers of the NASS about two weeks ago.
The eventual passing of the bill was seen as a landmark achievement that will enhance and attract local and foreign investment, and in particular, create a unique governance and regulatory structure for the industry. It contains a provision that spells out the mechanism for the development of the host communities and concerns raised earlier by some stakeholders. It has remained a controversial and highly contentious bill from conception to delivery.
In the main, the bill vests property and ownership of petroleum resources within Nigeria, its territorial waters, and continental shelves and exclusive economic zones on the Federal Government. The objective is to create effective governing institutions with clear and separate roles for the petroleum industry; establish a framework for the creation of a commercially oriented and profit-driven national petroleum company; strengthen the accountability and transparency of Nigerian National Petroleum Corporation Limited (NNPCL), as a full-fledged limited liability company; promote transparency, good governance and accountability in the administration of the petroleum resources of Nigeria, among others.
The bill earmarks the use of 30 per cent of oil and gas profits of NNPC Limited, the restructured national petroleum company, to fund oil exploration activities in frontier basins, believing that activities in those basins will, within a short period, boost revenue available to the three tiers of government. The bill is also aimed at promoting the exploration and exploitation of petroleum resources in the country for the benefit of its people; promoting efficient, effective and sustainable development of the petroleum industry; and promoting the liberalisation of the downstream petroleum industry among other objectives.
However, some persons and groups representing the Niger Delta region, the zone largely affected by the stipulations of the legislation, have rejected certain sections of the bill, chief among them the three per cent and five per cent provided by the Senate and House of Representatives respectively, as contribution from the operating expenses of oil companies to the host community development trust fund. Giving host communities 100% of the penalties imposed for gas flaring is also seen as otiose, because operators would not want to be penalised, and so would desist from flaring gas and that will automatically obliterate expected inflows from this “revenue source” for the community.
Again, legislating 30% of NNPCL profits to be allocated to exploration in frontier basins is against corporate governance codes for companies, because a commercialised NNPC is a corporate entity with a Board of Directors, whose responsibility is to make the commercial decision as to whether to commit any funds to exploration (a purely commercial/business decision) based on technical data supplied by her expert geologists/geophysicists in her exploration dept.
Not surprisingly, the Southern Nigerian Governors, at their meeting last week, rejected the 30% allocation. The concerned groups have therefore asked the NASS to address the areas frowned upon and give them the necessary attention before finally sending a harmonised version for assent. They warned against giving assent to the bill without addressing the contentious areas.
Also, the rejection by the Niger Delta groups of the 3% and 5% allocation to host communities in oil and gas projects in their communities is understandable. The percentage must not be seen as a gift. Indeed, it is an equity stake which the community will pay for, even if via carried interest equity arrangement, and share in the profit. Leaders and groups in the region are demanding 10% equity stake, but Southern States governors who rose from a meeting in Lagos recently want at least 5% for oil producing communities.
A contentious annexure to the oil producing communities’ saga is the definition of host communities to include communities in which pipelines are laid for conveyance of crude oil, as opposed to oil bearing communities or communities bearing the direct impact of oil and gas operations. The definition subsumed in the bill is lopsided, unjustifiably wide off the mark, and defeatist of the core definition or host communities of oil producing communities. To say the least, it is highly provocative and it could result in fresh regional hostilities. At best, the aspect involving pipeline communities should be defined as “pipeline bearing communities” with different benefits allocated to them.
The prescription holding a host community responsible for the cost of fixing vandalised pipelines cannot be seen as fair or equitable. Although we are stoutly against vandalism of oil and gas facilities in and by host communities for whatever reasons, there would always arise the issue of who bears the burden of proof as to whether the community is responsible for the damage to the facility.
This provision may have been injected for the sake of protecting pipeline facilities but it might turn out to be a deliberate avenue for future contention with host communities. This clause should be deleted. It is a dangerously counterproductive precedent that should not be set. Cases should be dealt with through existing laws, as they arise.
The current controversies that greeted the PIB as passed by the two chambers of the NASS are expected because, tragically, Nigeria has always put the cart before the horse by instituting legislative reforms ahead of policy reforms. Policy drives legislation and programmes to give effect to the policy targets. In the absence of a broad policy framework for the Niger Delta Region in the form of a National Policy on Niger Delta, outlining agreed stakeholder vision and policy objectives/targets for the region’s development (complete with timelines and outlined roles for all stakeholders, articulation of development programmes and enabling legislation for the region to give effect to the picture objectives), the whole issue of the bill will be less than optimal. Implementation will be problematic and very likely to meet with highly vocal and eventual violent resistance arising from age-long, unaddressed grievances.
As the Senate President has already set up a conference committee to meet with the House of Representatives for the harmonisation of the different versions of the bill, we would suggest a thorough review to address justifiable regional concerns such that the bill which was intended to address contentions issues in the oil and gas industry would not in itself become the harbinger of more controversies. A National Policy on the Niger Delta, ahead of finalising the PIB, would be the way to go, to give effect to the legislation.
If Nigerians and indeed the most affected people have waited for 17 years for the bill to be passed, they could wait some few months more for perfection to address justifiable stakeholder concerns and validation.
