By Teddy Nwanunobi
For two decades, the Nigerian oil and gas industry has dreamed night and day to have a legislation that will reform the way the industry operates so as to boost the sector and make it attractive for investment. Over the last 20 years, a bill had struggled to make it through the National Assembly. But it was either one issue or the other that would kick it back to the National Assembly.
The Petroleum Industry Bill (PIB) 2020 is a law in the making, which seeks to introduce far-reaching improvements in the Nigerian oil and gas industry. The Bill aims at establishing good governance, best practices, and ease of doing business in the industry, by clarifying roles and responsibilities of officials and institutions, enabling frontier exploration, mandating improved environmental compliance, and transforming the Nigerian National Petroleum Corporation (NNPC) into a commercially viable enterprise.
For decades, almost all the petroleum-related laws, including the Petroleum Act of 1969, had been belated. In other words, they are no more relevant and competitive globally. With the advancement in technology, the volatility of oil prices, and climatic changes influencing the global economy, it has become imperative to review extant laws to bring them in alignment with current realities.
The present Bill could be traced to the Oil and Gas Reforms Committee (OGRC) that was constituted by former President Olusegun Obasanjo’s administration. The report of the committee formed parts of the Bill that was, first, introduced to the National Assembly by former President Umar Musa Yar’Adua’s administration in 2008.
Yar’Adua had constituted a committee on the implementation of the OGRC report. A subcommittee chaired by Yinka Omorogbe drafted the Bill, but that particular bill was marred by controversy.
It was, again, reintroduced in 2012 by former President Goodluck Jonathan’s administration and passed by the House, just a few days to the end of that administration, but the Senate failed to pass the bill.
In the 8th National Assembly, the lawmakers decided to introduce the PIB in parts. The Bill was broken down into the Petroleum Industry Governance Bill (PIGB), Petroleum Industry Fiscal Bill, Host Communities Entitlement and Protection Bill, and the Petroleum Industry Administration Bill.
Several lawmakers introduced different versions of the bills, but the PIGB, which was sponsored by Tayo Alasoadura and Pally Iriase, was the version passed by both chambers and harmonised. The Bill was transmitted to President Muhammadu Buhari, but he failed to assent to it.
Although the two chambers reconsidered, and passed the Bill again, it was still not assented to by Buhari, until that House adjourned sine die.
Unlike in the 8th Assembly, the current bill is an Executive Bill. The Bill was sent to the National Assembly in September 2020.
So, when, on Thursday, July 1, 2021, the two chambers of the National Assembly (Senate and House of Representatives) passed the long-awaited Bill, it was a welcome development to a good number of the oil and gas industry’s stakeholders. But, of course, like the issues that trailed the former Bills, there were yet concerns about this particular one that has been passed by the National Assembly.
One of such concerns is the proposal to create two regulatory agencies instead of a one-stop-shop regulator to oversee Nigeria’s oil and gas sector. Expectedly, the Bill has also stirred up controversies across the country, with the representatives of the host communities and the southern governors voicing their opposition to various clauses in the Bill. The many dissents, so far, generated by the Bill has called into question the aim and objective of the Bill.
What the PIB sets out to do, in regulating the oil and gas industry, is terminating a regime of a single-regulator model. The idea of merging some Federal Government agencies, such as the Petroleum Equalisation Fund (Management) Board (PEF(M)B), Department of Petroleum Resources (DPR), and the Petroleum Products Pricing and Regulatory Agency (PPPRA) in the PIB, if one critically looks at it, is very worrisome.
The Bill had proposed that the three agencies be merged under an entity to be known as ‘The Authority’. This new organ is to be saddled with tackling the onerous responsibilities of the three agencies and it is expected to run efficiently and effectively.
The DPR has been chiefly in charge of the compliance of oil and gas companies to petroleum laws, regulations and guidelines set aside by the Federal Government. It has also been responsible for monitoring operations at drilling sites, production platforms and flow stations, crude oil export terminals, refineries, storage depots, pump stations, retail outlets, among others. Another of its function is overseeing the safety and other regulations that relate to exportation and importation.
The activities of the DPR, for instance, cut across the upstream, midstream and downstream segments. But the new Bill sets out to redistribute the regulatory roles to two entities to be created to succeed DPR. These are the Nigerian Upstream Regulatory Commission (NURC) and the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA).
The NURC simply refers to as ‘the Commission’, and it is to take over the oversight of the upstream segment of the industry. The NMDPRA, however, simply refers to as ‘the Authority’, and it is to take over the oversights of the midstream and the aspects of DPR’s powers in the downstream.
Some proponents of this reform have already provided some defense for it. According to them, it is to ease the processes of regulating the industry.
However, what is not being considered here is how the two-regulator solution may likely create unnecessary bureaucratic bottlenecks for the oil and gas companies, especially those that are operating in all the segments of the industry. The foreseen challenges would be much worse than that.
Aside from the perceived overlapping roles of the proposed regulators, the cost of regulating the industry may skyrocket, and it is going to tell heavily on any objective cost-benefit analysis that maybe be adopted by the Federal Government. Having two regulators is not only going to be an expensive system for a nation that is perpetually searching for ways to cut down the cost of governance, but it may likely be characterised by lack of coordination, cooperation, and the consequent lack of harmonised data, as we have witnessed in other Nigerian agencies with duplicate functions.
The reason for the above is not farfetched. According to the Bill, the old employees of DPR, and other sister agencies, including those of the PEF(M)B and PPPRA are going to be reassigned to the two new regulators.
Reassigning the old employees would not be the real danger here. The real danger is that the former employees of the old regulatory agency are not going to be any more encouraged to work.
At this point, it is important to point out that most of the agencies that are still functioning in the oil and gas industry were once departments at the DPR. They could have been left so, and allowed to evolve, grow, and function under the institutional framework of the DPR.
But most of the agencies have become loudly redundant, after being expunged from the DPR. Perhaps this is the same mistake Nigeria is about to make again – a cogent lack of commitment to investing in building strong institutions.
The PEF is one agency that has a direct impact on the day-to-day life of the ordinary person. Today, the fact that petrol is being sold at a uniform price all over Nigeria is due to the ‘equalisation’ activities of the PEF. The system of price uniformity, put in place since the inception of this agency in 1975, has been hugely modernised, and it is working perfectly. Incidences of losses and phoney claims by marketers have been largely plugged through immense investments in Information Technology and Truck Tracking (ITTT).
The PPPRA is a body that determines the prices of petrol products within the polity. It is the vision of running a smooth and resilient downstream sub-sector of the petroleum industry, with the ultimate goal of engendering self-financing and sustenance, should not be muddled by a merger.
All said and done, merging the three agencies of the Federal Government under ‘The Commission’ and ‘The Authority’ is bound to worsen the already straining socio-economic fabric of the nation. Nigerians are very familiar with the problems the nation had been experiencing over the years with government bureaucracy. Needless to say, everything that will threaten the prevailing tranquility of petrol supply all over the nation, should be nipped in the bud from the beginning.
At the moment, Nigerians are very much aware of the galloping prices of food items all over the country. Families are scrambling on how to work out their food budgets to last the long haul for them. Many cannot even afford to feed themselves anymore. The situation in the country is that dire.
In his remarks, the Senate President, Senator Ahmad Lawan, had stated that, with the Bill passage, “…PIB demons have been defeated…”
The “demons” may, however, have been weakened, but they are certainly, not down and out. Whatever Nigeria sets out to achieve through a two-model regulator can be done through a single regulator.