By Fred Ojiegbe
Industry players have projected that further delay in the implementation of the Petroleum Industry Act (PIA) will discourage investment in the sector.
Recalled that in Q3 last year, Nigerian President Muhammadu Buhari signed the Petroleum Industry Act (PIA) 2021, drawing to a close a 20-year effort to reform Nigeria’s oil and gas sector, with the aim of creating an environment more conducive for growth of the sector and addressing legitimate grievances of communities most impacted by extractive industries.
With the signing, the number of indigenous oil and gas firms has grown, but so has the number of oil-producing countries in the region. Militancy in oil-rich communities, while remaining, has diminished.
Concerns over climate change have fueled aggressive efforts to reduce global consumption of fossil fuels — driving divestment from oil by companies, institutions, and countries.
However, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed in January announced that the federal government is setting aside the implementation of the PIA to allow for payment of subsidy for the next 18 months.
Only recently, the National Assembly approved President Muhammadu Buhari’s loan request of N4 trillion to pay fuel subsidy in 2022. The provisions of the PIA provide for complete deregulation of the sector.
The PIA represents an effort by Africa’s leading oil-producing country to respond to this changing environment.
The NBS had stated that in 2019, the oil and gas sector accounted for about 5.8 per cent of Nigeria’s real GDP and was responsible for 95 per cent of Nigeria’s foreign exchange earnings and 80 per cent of its budget revenues.
If implemented, the PIA can present a good standard for natural resource management, with clear and separate roles for institutions of the industry; the existence of a commercially-oriented and profit-driven national petroleum company.
The implementation of the PIA also would have seen an advancement in foreign direct investment into the country, especially in the oil and gas sector.
However, in defence of the delayed implementation, Timipre Sylva, Minister of State for Petroleum Resources, has said the federal government must first aggregate the necessary guidelines that will support the Petroleum Industry Act (PIA) implementation.
Speaking recently while declaring open a stakeholders’ consultation forum on draft regulations under the Petroleum Industry Act (PIA), he admitted that the delay was not in the best interest of the sector but the federal government needed to put everything in place for its safe growth.
President Muhammadu Buhari had approved a nine-member steering committee to ensure the implementation of the PIA — after he signed the bill into law.
PIA Draft Regulations
It is understood that the draft regulations were prepared by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in collaboration with the presidential steering committee on the PIA.
The first consultative forum was aimed at ensuring inputs and considerations of oil and gas stakeholders on the draft regulations for smooth implementation of the PIA.
The regulations include host communities’ development, petroleum royalty, upstream fees and rents, domestic gas delivery obligations, and licensing regulations.
Sylva, chair of the steering committee, said for Nigeria to continue to be relevant at the global level, it must design regulations that could balance the energy base load for Nigeria.
According to him, effective regulations would ensure that Nigeria was not left behind in the energy transition train while still harnessing its rich natural hydrocarbon reserves.
The minister expressed optimism that the input from various stakeholders would further clarify the draft regulations and eventually firm up the final regulations for use.
The Federal Government has a mandate of ensuring sound management of the oil and gas sector, considering the key role the sector plays in revenue generation for the country.
Sylva said it was on this basis that the presidential steering committee played the pivotal role in collaborating with NUPRC in drafting the first set of regulations for review. He commended the effort of the commission in the preparation of those draft regulations to beat the deadline set by the law for the commencement of the implementation of the PIA.
“I am hopeful that the regulations, when fully implemented, will help in no small measure in the smooth take-off of the day-to-day operations of the NUPRC,’’ he added.
The Minister also said that the eventual assent by President Buhari to making PIA a law signalled a new era of opportunities in the oil and gas sector of the economy after almost two decades of unsuccessful efforts to have the law passed in Nigeria.
While decrying challenges posed by huge divestments in hydrocarbon exploration by oil majors in the past due to global energy transition, he called for more innovative ways of fossil fuel exploitation and commercialization, and utilization in Nigeria.
However, stakeholders have argued that 18 months given by the Federal Government to commence implementation of the PIA seems to be too long for investors to wait, owing to the huge potential benefits the PIA will bring to their businesses.