NNPC Commercialised As Senate Passes PIB

The Senate Thursday passed the Petroleum Industry Bill (PIB) after two decades of failed attempts.

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 Red Chamber approved the commercialisation of Nigerian National Petroleum Corporation (NNPC) and the scrapping of the Petroleum Equalisation Fund (PEF) and Petroleum Products Pricing Regulatory Agency (PPPRA).

It also okayed 30 per cent of profits accruing from oil and gas operations by the NNPC Limited for the exploration of oil in the frontier basins and set aside three per cent of the operating expenditure of oil companies for the development of host communities.

The Chairman of the Joint Committee, Sabo Muhammed Nakudu, said the bill’s passage and eventual assent into law would strengthen accountability and transparency of NNPC limited as a full-fledged company.

He said the Joint Committee’s recommendation on Frontier Basins recognised the need for Nigeria to explore and develop the country’s frontier basins to take advantage of the foreseeable threats to the funding of fossil fuel projects across the world due to speedy shift to alternative energy sources.

PIB was first introduced in the Senate in 2008 and since then, it had suffered series of setbacks.

It came closer to passage in the 8th Assembly but suffered the same fate as its passage was jettisoned in the twilight of the life of the 8th Assembly.

Senate President Ahmad Lawan said the 9th Assembly had achieved one of its fundamental legislative agenda.

“The demons (of PIB) have been defeated in this Chamber. We have passed the bill,” he said.

Major highlights of PIB

The Petroleum Industry Bill consists of five distinct chapters, which include Governance and Institutions; Administration; Host Communities Development; Petroleum Industry Fiscal Framework; and Miscellaneous Provisions comprising 319 clauses and 8 schedules.

The Red Chamber approved Clause 53 of the bill, 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.

Clause 53 mandates the minister of petroleum resources at the incorporation of NNPC Limited, to consult with the minister of finance to determine the number and nominal value of the shares to be allotted, which would form the initial paid-up share capital of NNPC Limited.

The Senate approved ownership of all shares in NNPC Limited to be vested in the government at incorporation and held by the ministry of finance incorporated on behalf of the government.

The Red Chamber approved the funding mechanism of thirty per cent of NNPC Limited’s oil and gas profit in the production sharing, profit sharing, and risk service contracts to fund the exploration of frontier basins.

Also, the Senate approved that 3 per cent of operating expenditure of oil companies (OPEX), estimated at $500 million annually be paid as contribution to the host community development fund.

The upper chamber also approved 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.

It approved the establishment of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, which shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry in Nigeria.

The recommendation of the Joint Committee was amended in Clause 52(7d) to ensure that all monies received from gas flaring be channeled for the purpose of environmental remediation and relief of the host communities as against the development of infrastructure in midstream gas operations.

Uproar over 3 per cent equity for host communities

Before the bill was passed, senators were divided on the right per cent of oil profits to be accrued to the Host Communities Trust.

The Presidency had, in the executive bill forwarded to both chambers of the National Assembly last year, proposed 2.5 per cent operational cost-share for the host communities.

Though the proposal was opposed during the public hearings in February by leaders of the oil-producing communities, the Senate joint committee that worked on the bill recommended 5%.

This, the committee said, was to ensure adequate development of the host communities and reduction in the cost of production.

However, the Red Chamber became tensed when the Senate passed an amendment to Section 240 of the bill on the sources of funding for the Fund, slashing the percentage to 3 per cent.

The development did not go down well with the senators from the Niger Delta, who quickly rose against the amendment.

Senator James Manager (PDP, Delta), proposed an amendment to retain the provision of five per cent in the report.

“This particular thing that is before us is something that is very bitter for us to swallow, a very bitter pill for us to swallow,” Manager said.  His appeal was rejected.

After the Senate President ruled on the 3 per cent, Senator George Sekibo (PDP, Rivers) called for a division to challenge the ruling of Lawan.

At this point, Senate Leader, Yahaya Abdullahi, appealed to Sekibo to withdraw his motion, saying the Senate would be heading to the state of Armageddon if it allowed that division to happen.

Lawan said though calling for division is the right of every lawmaker, he pleaded with Sekibo to allow the Senate progress with the bill.

Sekibo, apparently overwhelmed, agreed but appealed that the percentage should be increased.

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