The Next Incarnation of the Petroleum Industry Bill

Recently, the Minister of State for Petroleum, Mr. Timipre Silver announced that the Federal Government was sending a new draft of the Petroleum Industry Bill to the National Assembly for deliberation and passage. In a series to be published here over several weeks, Ikechi Ibeji examines the contentious history of the PIB and some of the issues and challenges that have kept the reform law mired in the National Assembly for nearly 20 years.

The Obasanjo presidency of 1999 to 2007 achieved the most in fundamental reforms and restructuring in the energy industries in Nigeria. However, after the milestone passage of the Nigerian Electric Power Reform Act 2004, a game changer for the power sector, the Obasanjo government could not push its reforms in the oil and gas sector fast enough, handing the batten to his successor. But as a first step in the oil sector reforms, Obasanjo inaugurated the Oil and Gas Sector Reform Implementation Committee (OGIC) in April 2000.

Unfortunately, successive federal governments since the Obasanjo regime have not pursued energy sector reforms with the same focus and drive. At best they have been slow (save for President Jonathan’s acceleration and conclusion of the power sector deregulation). They have also been unable to navigate the political minefields on the path of the reforms. To Obasanjo’s credit, the OGIC he set up proposed the first comprehensive National Oil and Gas Policy, which focused on separating the commercial institutions in the oil and gas sector from the regulatory and policy making institutions. But he left the proposed institutional restructuring for his successors. Such restructuring has been held up by the politics of patronage and entrenched interests to date.

In September 2007, President Umaru Musa Yar’Adua reconstituted the OGIC with a mandate to translate provisions of the National Oil and Gas Policy into functional institutional structures for the effective management of the oil and gas sector in Nigeria. And in particular, to restructure the petroleum industry so as to facilitate expansion in the non-oil sectors to achieve GDP growth levels that will put Nigeria among the top 20 largest economies in the world by 2020.

The reconstituted OGIC, chaired by the late Dr. Rilwanu Lukman, had the late Dr. Emmanuel Egbogah, who was Special Adviser to the President on Petroleum Matters, as its main driver. The committee submitted a report in July 2008, which culminated in the first draft of the Petroleum Industry Bill.

The OGIC report, which gave rise to the first draft of the Petroleum Industry Bill sought to:

1. Replace outdated regulatory and institutional arrangements governing the Nigerian petroleum industry.

2. Introduce a new national petroleum policy framework, to address the myriad problems affecting the oil and gas industry in Nigeria.

3. Develop strategies and required action to make the national oil company competitive on a global platform.

4. Use pragmatic fiscal arrangements to address the main problems hampering growth and sustained expansion in the Nigerian oil and gas business. They included community issues; funding and sustainability of E&P operations; viable structures for emergent commercial entities from the NOC; transition from the prevalent unincorporated joint ventures to incorporation of joint venture operations as autonomous commercial entities; introducing progressive policy instruments for existing and new PSCs and other concessionary fiscal arrangements.

The PIB, which resulted from the work of President Yar’ ardua’s OGIC, failed to pass in the third National Assembly because it got caught up in controversies. One of the contentious issues was the provision for the Communities Equity Fund, which wanted to address the question of inclusiveness for oil bearing communities, borrowing from the Alaska Fund template in the United States. Legislators from especially the northern part of the country felt that paying 10 per cent of oil revenues or any percentage whatsoever, was an overkill given the 13 percent derivation and the setting up of the Niger Delta Development Commission.

A new Bill was proposed by Senator Lee Maeba, who was then Chairman of the Senate Committee on Petroleum, to among other things, resolve the controversies relating to the form the Community Equity Fund would eventually take, and how it would be administered; complaints against the Government’s actual share in revenues through royalties and PPT (now hydrocarbon Tax) charged, et cetera. Maeba’s new bill was later merged with submissions from an Inter-agency Committee set up by the Federal Executive Council to address and resolve areas of controversy. The last ditch effort to pass the Bill in the third session of the National Assembly failed.

Enter the “Dieziani Bill” of 2012, which tried to incorporate some of the settled issues for accelerated passage. Unfortunately, the new Bill under President Jonathan started its own controversies. The biggest contention in the Dieziani Bill was the enormous powers handed the Minister of Petroleum, which many experts complained went against principles of checks and balances. However, several amendments to that Bill still failed to pass, before it was resolved that another approach should be taken – break up the issues and have separate Bills addressing different aspects of the reform – one Bill addressing fiscal issues; another Bill addressing governance issues and a third Bill addressing community issues. This almost succeeded in the last session of the National Assembly.

To be continued…

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