Senate, Reps pass PIB, Host Community Fund Tops Issues
-By Daniel Adugbo
The long-awaited Petroleum Industry Bill (PIB) was officially passed the on Thursday the 1st of July 2021 by the Nigerian Senate and the House of Representatives, a historic feat which had defied passage in previous assemblies over the last two decades.
The next steps for the bill in the coming weeks is a joint session of the Senate and the House review, before the bill goes to President Muhammadu Buhari for assent. Counting on the current harmony between the Executive and Legislatve arms, there is strong optimism that it will not just be passed but assented before the end of the year.
Apart from ensuring an enabling environment for investors and promoting transparency, the PIB will present significant investment opportunities for both local and international stakeholders especially coming at a time when the global energy sector is competing for foreign capital and also struggling from the impact of COVID-19.
The bill was passed after a clause-by-clause consideration of a report by the Joint Committee on Downstream Petroleum Sector; Petroleum Resources (Upstream); and Gas on the PIB.
The PIB passed by the Senate consists of five distinct chapters: Governance and Institutions; Administration; Host Communities Development; Petroleum Industry Fiscal Framework; and Miscellaneous Provisions comprising 319 clauses and 8 schedules.
Some of the clauses considered and approved during the clause-by-clause consideration of the bill included Clause 4 of the bill which seeks the establishment of the Nigerian Upstream Regulatory Commission to provide technical regulatory functions that would enforce, administer and implement laws, regulations and policies relating to upstream petroleum operations.
The Commission would, among others, ensure compliance with applicable national and international petroleum industry policies, standards and practices for upstream petroleum operations; and establish, monitor, regulate and enforce health, safety and environmental measures and standards relating to upstream petroleum operations.
The upper chamber while adopting the Committee’s recommendation to retain provisions in Clause 29 of the bill, approved the establishment of the Nigerian Midstream and Downstream Petroleum Regulatory Authority. Clause 29(3) empowers the Authority to be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry in Nigeria.
Its function includes implementing government policies for midstream and downstream petroleum operations as directed by the Minister; and to promote, establish and develop a positive environment for international and domestic investment in midstream and downstream petroleum operations.
The upper chamber retained the recommendation of the Joint Committee in Clause 53 which empowers the Minister of Petroleum Resources to incorporate the Nigeria National Petroleum Corporation as a limited liability company to be known as NNPC Limited, six months after the commencement of the Act.
However, an amendment to Clause 240(2) for 3 percent contribution to the host communities, caused disagreements.
This was because the report of the Senate Joint Committee on Petroleum which processed the bill had proposed five per cent for host communities. However, when the Senate carried out the clause-by-clause consideration of the bill, it was reduced to three per cent.
The development led to a stalemate as senators from the Niger Delta region vehemently opposed the decision.
Efforts by the Deputy Senate President, Ovie Omo-Agege (APC, Delta Central), Senators James Manager (PDP, Delta South), George Thompson Sekibo (PDP, Rivers East), and Albert Bassey Akpan (PDP, (PDP, Akwa-Ibom North East) to demand an upward review met a brick wall from lawmakers.
Attempt by the Senator representing Rivers State, George Sekibo, to call for a division was overruled by the Senate President, Ahmad Lawan, who hit the gavel to re-confirm the three per cent host community provision.
The development led to a serious tension.
The Senate President, Ahmad Lawan, in his remarks after the eventual passage of the PIB, congratulated the Ninth Assembly and Joint Committee on Downstream Petroleum Sector; Petroleum Resources (Upstream); and Gas for the “tremendous and historical achievement of passing the long-awaited Petroleum Industry Bill.”
According to him, the passage of the PIB was an indication that the “demon” behind its non-passage in the past had been finally defeated.
Lawan appealed to President Muhammadu Buhari to give expeditious assent to the bill when it is eventually forwarded to him by the National Assembly.
In over decades since the struggle to have the PIB started, business clarity and predictability have been lacking in the oil industry. In the eight years that the PIB was first presented for legislation, experts estimate that over $120 billion (at over $15 billion yearly) has been lost to investment withheld or diverted by investors to other (more predictable) jurisdictions.
NEITI in its 2016 occasional paper series noted that the amounts of funds previously allocated by IOCs for investment in Nigeria almost certainly shrank due to the emergence of several other viable oil and gas projects across Africa including Ghana, Senegal, Mozambique, Kenya, Uganda and Tanzania etc.
Estimates of employment impact on the sector have been computed in hundreds of thousands. Other costs are historical, direct and equally astounding.
