Insight into the details of the new Petroleum Industry Bill (PIB) before the National Assembly has revealed that the Federal Government has split the Nigerian National Petroleum Corporation (NNPC) and offered 30 per cent equity to Nigerians.

The government may also scrap the Department of Petroleum Resources and the Petroleum Products Pricing and Regulatory Agency and replace them with Petroleum Technical Bureau and the Downstream Petroleum Regulatory Agency.

The bill will also see to it that government’s decision to ensure a total deregulation of the downstream product sector is enforced but was silent on when the full deregulation will take off.

Nigerian Tribune gathered that the new agencies that will emerge from the NNPC, shortly after the new bill has been signed into law, include National Oil Company, National Petroleum Assets Management Corporation, and National Gas Company.

Investors, the bill stated, will have the opportunity to buy 30 per cent shares in the National Oil Company and 40 per cent in National Oil Gas Company and equity will be allowed in the two companies any time within six years from the date of its incorporation.

According to Sections 150-152 of the bill: “The minister shall, not later than three months after the effective date, take such steps as are necessary under the Companies and Allied Matters Act to incorporate the National Oil Company as a public company limited by shares, which shall be vested with certain assets and liabilities of the NNPC.

“The National Oil Company shall not be subject to the provisions of the Fiscal Responsibility Act 2007 and the Public Procurement Act 2007.

“At the time of its incorporation, the initial shares of the National Oil Company shall be held by a nominee of the Ministry of Petroleum Resources and Ministry of Finance Incorporated on behalf of the government.

“Notwithstanding the provisions of section 150 of this Act, the government shall at any time within six years from the date of incorporation of the National Oil Company, divest up to thirty per cent of the authorised shares of the National Oil Company to the public in a transparent manner on the Nigerian Stock Exchange.

“Following incorporation of the National Oil Company, the assets and liabilities held by the NNPC on behalf of the Federal Government of Nigeria except the interests in the unincorporated joint ventures and Nigerian Gas Company Limited shall be vested in the National Oil Company within 12 to 24 months from the Effective Date.

“The transfer of liability or obligation under this section releases the NNPC from the liability or obligation with respect to the transferred assets.

“The National Oil Company shall without further assurance be entitled to enforce or defend all obligations for or against NNPC in respect of the portion of interests mentioned above as if the National Oil Company were the original party to such obligations. an event of default or force majeure.”

The bill says, National Petroleum Assets Management Corporation: “The corporation shall be a holding company operating fully on commercial principles.

“The corporation shall have power to- (a) enter into contracts and incur obligations; (b) acquire, hold, mortgage, purchase and deal howsoever with property, whether movable or immovable, real or personal; (c) establish and maintain subsidiaries for the discharge of its functions as the corporation may determine; and (d) do all such things as are necessary for or incidental to the carrying out of its functions and duties under this Act.

“Subject to the provisions of this Act, the functions of the corporation are to - (a) acquire and manage investments of the government in the Nigerian upstream petroleum industry; and (b) undertake such other activities as are necessary or expedient for giving full effect to the performance of its functions under this Act.”

Regarding the National Gas Company, the bill has recommended that the agency shall not be subject to the provisions of the Fiscal Responsibility Act 2007 and the Public Procurement Act 2007.

“At the time of its incorporation, the initial shares of the National Gas Company shall be held by a nominee of the Ministry of Petroleum Resources and Ministry of Finance Incorporated on behalf of the government.

“Divestment of shares of the National Gas Company Plc, notwithstanding the provisions of section 161 of this Act, the government shall at any time within six years from the date of incorporation of the National Gas Company Plc, divest up to 49 per cent of the shares of the National Gas Company to the public in a transparent manner on the Nigerian Stock Exchange.

The bill has made a case for the establishment of the Petroleum Host Community Fund to protect oil producing communities from despoliation It was stated that: “There is an established fund to be known as the Petroleum Host Communities Fund (in this Act referred to as ‘the PHC Fund’).

“The PHC Fund shall be utilised for the development of the economic and social infrastructure of the communities within the petroleum producing area.

“Every upstream petroleum producing company shall remit on a monthly basis 10 per cent of its net profit as follows -. (a) for profit derived from upstream petroleum operations in onshore areas and in the offshore and shallow water areas, all of such remittance shall be made directly into the PHC Fund; and (b) for profit derived from upstream petroleum operations in deepwater areas, all of the remittance directly go into the Fund for the benefit of the petroleum producing littoral States.

“For the purpose of this section ‘net profit’ means the adjusted profit less royalty, allowable deductions and allowances, less Nigerian Hydrocarbon Tax , less Companies Income Tax.

“At the end of each fiscal year, each upstream petroleum company shall reconcile its remittance pursuant to subsection (1) of this section with its actual filed tax return to the service and settle any such difference.”

On the fate of the downstream sector which attracted mass protest in January, the government opted for full-scale deregulation.

The bill added: “The pricing of petroleum products in the downstream product sector is deregulated to ensure – (a) a market related pricing; (b) adequate supply of petroleum product;(c) removal of economic distortions; and (d) the creation of fair market value for petroleum products in the Nigerian economy.

It, however, empowers the Downstream Petroleum Regulatory Agency to oversee tariffs to prevent hijack of the deregulation by shylock marketers .It added: “The agency shall oversee the tariffs for: (a) transportation by pipelines; (b) bulk storage of petroleum products in depots designated by the Agency as regulated open access facilities; and (c) any regulated open access facility.

“ Tariffs for activities referred to in subsection (1) of this section shall be set according to one or more tariff methodologies adopted by the agency for regulating prices and such tariff methodologies shall: (a) allow an operator that operates efficiently to recover the full cost of its business activities including a reasonable return on the capital invested in such business; (b) provide incentives for continued improvement of the technical and economic efficiency of the business; (c) provide incentives for the continued improvement of quality of services; (d) avoid undue discrimination among categories of consumers; and (e) gradually reduce cross-subsidies among different categories of consumers.

“In establishing tariff methodologies, the agency shall take into account the existence of any subsidy given to the operators from which they directly benefit, any favourable financing terms, and any other matter that impacts directly or indirectly on tariff methodologies.

“Notwithstanding the provision of subsection (2) of this section, the agency shall have the power to establish tariff methodologies that reflect the terms and conditions of a contract between operators or between an operator and one or more eligible customer. (5) Prior to approving a tariff methodology the Agency shall give notice in at least two newspapers with nationwide circulation and its website of the proposed establishment of a tariff methodology and such notice shall: (a) indicate a period within which any aggrieved person may raise objections on the proposed methodology; and (b) indicate the date of a public hearing the agency shall conduct for discussion of that methodology.

“Prior to the establishment of the tariff methodology, the agency shall: (a) consider any representations made by applicants, operators, consumers, prospective customers, consumers associations, associations of prospective customers and such other persons reasonably interested; and (b) obtain evidence, information or advice from any person possessing relevant expert knowledge.

“The agency shall fix a date upon which the tariff methodology shall come into effect and it shall cause the notice of that day to be published in at least two national newspapers and its website.

“If it appears to the agency that a tariff methodology should be changed, it shall conduct a public hearing on the proposal to change the methodology and give notice of it in accordance with the terms of subsection (5) of this section, indicating the period within which any person may make representations to the agency in connection with the proposal.

“The agency may confirm the proposed changes to tariff methodology after taking into account any objections or representations received in response to notices issued under subsection (8) of this section and shall comply with the provisions of subsection (7) of this section.”

The bill, however, allows open access to creation or establishment of  facilities by all marketers to ensure a level playing ground for all.

It empowers oil marketing companies to own independent pipelines and depots.

It says: “(1) Any licensed company may be permitted access to the jetties, loading facilities and storage depots or pipelines currently owned by downstream operators, which are designated as ‘regulated open access facilities’ by the agency —(a) in the manner prescribed by this Act, the regulations and other guidelines and directives from the agency; and(b) on commercially viable terms as may be determined by the agency from time to time. (2) Access to any of the regulated open access facilities shall take into consideration the existing capacity in the said open access regulated facilities prior to the access permit being shared amongst licensed petroleum marketing or refining companies in proportion to their needs.

“Nothing in this Act shall preclude any licensed oil marketing company, bulk consumer of petroleum products or independent refineries from constructing and operating independent pipelines, depots or jetties for its exclusive use. (2) The pipelines and depots referred to in subsection (1) of this section shall be subject to the regulation of the agency.

For investors in oil mining, the bill has recommended an initial 20 years for mining lease.

It says: “A petroleum mining lease shall be granted for a maximum term of 20 years, provided , that where a petroleum mining lease is derived from a petroleum prospecting licence where a commercial discovery has been declared pursuant to paragraph (a) of subsection (11) of section 178 of this Act, such license shall be allowed to use up its initial, renewal and appraisal period such that: (a) the overall period shall run for 27 years from the date of the grant of the related petroleum prospecting licence for onshore and shallow water areas; or (b) the overall period shall run for 30 years from the date of the grant of the related petroleum prospecting licence for deep water areas and frontier acreages; and (c) where a petroleum mining lease is to be granted for a petroleum prospecting licence which is yet to expire, the term of the petroleum mining lease shall be the aggregate of the mandatory term of twenty years and the balance of term for the petroleum prospecting licence as contained in paragraph (a) and (b) of this subsection.

“Not less than 12 months before the expiration of a petroleum mining lease, the lessee may apply in writing to the minister for a renewal of the lease either in respect of the whole of the leased area or any part thereof and the renewal may be granted if the lessee has paid all fees, rent and royalties under this Act due in respect of the lease and has performed all its obligations under the lease.

“The terms and conditions that shall apply to such renewal shall be the prevailing conditions for new petroleum mining leases at the time of renewal and the lessee shall pay a renewal bonus of an amount specified in the lease on the date of such renewal. (3) Subject to the advice of the Inspectorate, the minister shall make regulation to provide for terms and conditions for the renewal of leases.”

The bill has also made provision for gas flaring by oil companies.

It reads: “In the course of upstream petroleum operations, no person shall injure or destroy any tree or object which is: (a) of commercial value; (b) the object of veneration to the people resident within the petroleum prospecting licence or petroleum mining lease area, as the case may be. A licensee or lessee who causes damage or injury to a tree or object of commercial value or which is the object of veneration shall pay fair and adequate compensation to the persons or communities directly affected by the damage or injury.

“The lessee shall pay such gas flaring penalties as the minister may determine from time to time. The lessee shall install all such measurement equipment as ordered by the inspectorate to properly measure the amount of gas being flared.”

Comments (3)

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This NNPC-Name change
written by Emeka K Duru, July 20, 2012

There has been a change of name but the functions remain the same with funding the only main change.The question that arises therefore is this,do we still keep NDDC? Give 13% derivation and have the Ministry of NIGER DELTA? There is something fundamentally wrong with our Nigerian-ness because the leadership cannot conceive a national policy.Petronas and Petrobas would not have all these encumbrasses and still survive as viable organisations. There is nothing wrong with the current NNPC structure but the human beings managing the affairs. How can anyone talk about complete deregulation without a holistic understanding of all the factors impacting on service delivery.Why do we hate to think? My overview commentary on this PIB is that it is only fit for the dustbin. At the end it will cause more trouble and enslavement of Nigerians than it tries to sole.Bin It!!

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lets pass the bill now
written by Onyah, July 20, 2012

I SINCERELY HOPE THAT OUR FUNNY HONOURABLE MEMBERS WILL PASS THE PIB TO AVOID MANIPULATION IN THE OIL SECTOR THAT HAVE ALWAYS LED TO STRIKE

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New PIB
written by Love Korfa, July 20, 2012

It is a pity that this bill has taken so long a time to become law in this country. The bill is commendable but the fear is its speedy passage by the lawmakers and full implementation. But I will call on Nigerians particularly those from oil producing areas to really wake up now. They should be harmed with copies of it to enable them take on the government and the oil companies who will be found wanting in its implementation. They should not expect that the bill alone when becomes law will take care of all their agitations. They should be ready for the next phase of the peaceful battle.
May God bless Nigeria

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