PIB: Many Promises, Failures & Implications on Nigeria’s Oil & Gas Industry
Victoria Ibezim-Ohaeri is a Havard-trained lawyer. She is also the founder and director of research and policy at Spaces for Change. She attended and presented a Memorandum at the House of Representatives on PIB, Thursday. The director has done this several times in the past because of her commitment to the oil and gas industry in Nigeria. She is also interested in ensuring that Stakeholders, including host communities get maximum rights or benefits from oil.
Recently, Victoria Ibezim-Ohaeri was the guest at the virtual engagement organized by The Daily, www.thedaily-ng.com targeted at increasing awareness, mobilizing support and enriching the ongoing discourse as well as bringing about an early passage of the bill that is currently before the National Assembly.
Excerpts:
What is the Petroleum Industry Bill, PIB?
The Petroleum Industry Bill (PIB) 2020, a proposed law seeking to introduce far-reaching industry reforms in the Nigerian oil and gas sector. Among other objectives, the bill aims to establish good governance, best practices, and ease of doing business in the industry by clarifying roles and responsibilities of officials and institutions, enable frontier exploration, mandate improved environmental compliance, and transform NNPC into a commercially viable enterprise.
These are some of the numerous objectives of the bill.
Can you provide the background/picture which called for the introduction of the PIB?
The laws regulating the oil and gas industry date back to pre-independence and pro-democracy rule in Nigeria when laws were made without inclusion and in the light of the peculiarities at that time. With the advancements in technology, the volatility of oil prices, climatic changes influencing the driving forces of the global economy, it has become imperative to review extant laws to bring them in alignment with current realities. Also, the law governing the industry are dispersed in a maze of legal frameworks and byelaws numbering over 16. Some of these laws contradicted each other while regulatory functions also overlapped. This means that the conflicting statutory provisions and overlapping regulatory powers between enforcement agencies offered violators and polluters the advantage of cherry-picking which law and regulator to obey.
What are the major highlights or contents of the bill?
The PIB now aims to harmonize about 16 legislations and cure the conflicts.
There are certain things to note about the bill.
First, the bill proposes two regulatory bodies— Upstream Regulatory Commission and the Midstream and Downstream Regulatory Authority. They will exercise regulatory authority over all aspects of the industry, enforce standards and promote an enabling environment for investment in the Nigerian petroleum industry.
The Upstream Commission will regulate upstream operations while the Downstream Authority will regulate midstream and downstream petroleum operations.
The second development to note is the emergence of Nigerian National Petroleum Company Limited to carry out all crude and petroleum-related businesses commercially such as lifting and selling crude, royalty oil, profit oil, gas, etc. This company will replace and take over the assets and liabilities of the current NNPC.
Thirdly, the incorporation of host communities development trusts provides for the creation of a Host Communities Development Trust. The oil operators, described as settlors, are obligated to incorporate a trust for the benefit of the host communities and shall make an annual contribution to the host Community Development Trust Fund of an amount equal to 2.5% of its actual operating expenditure.
Fourth, the licensing regime will change. The Upstream Commission shall be responsible for granting petroleum exploration licenses. A petroleum exploration license shall be for 3 years and may be renewable for an additional period of 3 years subject to fulfillment of prescribed conditions. PIB 2020 however retains the president’s discretionary power to award licenses to qualified investors identified in an agreement or treaty for strategic purposes and in return for substantive benefits to the nation.
Five, there are other interesting developments such as the Environmental Remediation Fund. As a condition for the grant of a licence or lease and prior to the approval of the environmental management plan, all licensees or oil companies are required to make financial contribution to an Environmental Remediation Fund for the rehabilitation or management of negative environmental impacts with respect to the license or lease. Financial contributions depends on the size of the petroleum operations and the level of environmental risk that may exist. The Commission or Authority will apply the Fund towards the rehabilitation, remediation or management of negative environmental impacts only when the licensed operator lacks the capacity, or is unable to undertake the rehabilitation or management of any negative impact on the environment effectively.
Are the financial contributions made by licensees refundable in the event the operator has the capacity to undertake the rehabilitation?
No. The Commission and the Authority will undertake the rehabilitation
Won’t this have the tendency to make operators carry out activities that have negative impact on the environment with “reckless abandon” since they will not be accountable for costs associated with remediation?
The financial contributions to be made will be commensurate with the size of petroleum operations envisaged. We proposed that the fund should be managed by NOSDRA and HYPREP since they are the agencies responsible for remediation.
Can you recount how previous administrations promised and failed to pass the PIB?
I participated in all the public hearings on the PIB since 2012. I also participated in the public hearing held a few days ago. From my observation, there is no major departure from the official tradition of stakeholder engagement. The same contentious issues that dominated legislative proceedings many years ago remain fresh. For instance, oil companies are still worried about the tax regime, and still asking for a 5-year tax holiday for development projects, and still resisting additional gas obligations on operators. Host communities are still demanding greater environmental protection and insisting on better deals in the form of equitable stakes and opportunities for increased participation in the industry governance and benefits.
NGOs and CSOs still want to have a say in what happens in the sector and the national parliament is not playing the ball. So, it remains to be seen whether the current administration will do anything differently from the previous administrations to pass the PIB.
In your opinion, why has it been difficult to pass it in the past 20 years?
I think it is the lack of political will and vested interests.
That’s the summary.
Kindly comment on the renewed efforts by stakeholders, especially the Executive, Legislators, and oil firms to pass it
Well, the renewed effort I see is the growing acceptance of certain issues that caused tension before. For instance, during the 2012 public hearing, a lot of people esp from oil companies and the north opposed the Host Community Development Trust. But today, the conversation about Host Community Trust Fund has shifted to community representation, the structure of the fund, equity stakes, and what have you. This shift, in my view, represents the willingness of stakeholders to make concessions to see the bill passed.
In your opinion, do you think the April 2021 target for passing the PIB is realistic?
The Speaker of the House of Representatives, Femi Gbajabiamila, announced the bill will be passed in April. He also disclosed that consultations on the bill will transcend the public hearing. There are too many contentious issues in the bill that need to be resolved.
Except the bill is passed without caring about the demands of certain interest groups, I would say the April date is too soon.
How has the disunity of host communities affected them from speaking with one voice at the National Assembly?
The row between host communities witnessed at the last public hearing is not new. So many communities have diverse needs and interests, and are equally impacted differently by oil and gas operations. That’s why it is important for NASS to adopt a consultative process that takes diversity of local needs and perspectives into account.
Will host communities receive compensation for oil spills and environmental damage resulting from vandalism?
This is a great question. See what the bill says:
Where in any year, an act of vandalism, sabotage or other civil unrest occurs that causes damage to petroleum and designated facilities or disrupts production activities within the host community, the community shall forfeit its entitlement to the extent of the cost of repairs of the damage that resulted from the activity with respect to the provisions of this Act within that financial year (Section 257 (2).
What this means is that where there is pipeline damage due to rupture as a result of old age, or where oil operators fail to deliver on their promises to host communities and there are community agitation and eventual disruption of production activities, oil operators may leverage on this and deny host communities their entitlement for that year claiming the act of vandalism, sabotage or unrest from host communities.
At the public hearing, we argued that the entire Section 257 (2) should be expunged from the bill as it will lead to further escalation of community agitation and civil
unrest.
What advice do you have for the host communities and other stakeholders?
We have been engaging host communities since 2012 and encouraged them to come forward and participate in the legislative deliberations. They have done just that. Also, Niger Delta states also came forward to make presentations at the public hearing, making specific demands. What is now needed is consensus-building to articulate and table their issues in a compelling and unified manner. Host communities need to engage the NASS beyond the public hearing. Its now time for the political leaders in the region to take positive steps in this direction.
What major problems abound and how do you think they can be tackled in order to secure the passage of the bill?
The major problems needing utmost attention include the fiscal terms agreeable to both sides (govt and operators); duplicative regulation, weak enforcement of standards, overlapping regulatory powers, hostility between operators and host communities, political interference in NNPC operations and so forth. With the April date for passage, we can only hope lawmakers will do the right thing by addressing these cogent issues.
