Public Hearing on the Petroleum Industry Governance Bill

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img-20161208-wa005The Senate Joint Committee on Gas, Downstream Petroleum and Upstream conducted a public hearing on the Petroleum Industry Governance Bill (PIGB) on December 7, 2016. The PIGB is an independent bill extracted from the provisions of the 2012 Petroleum Industry Bill (PIB) relating to institutional reorganization and governance of the Nigerian petroleum industry.  The Senate Joint Committee comprises of Senators Bassey Akpan (Chairman), Abubakar M. (Vice-Chairman), and other members such as Senators Hope Uzodinma, Francis Alimikhena, Joshua C. Dariye, Matthew Urhoghide, Danjuma La’ah, Barnabas Germane, Rilwan Adesoji Akanbi, Emmanuel Paulker, Rose Oko, Ibrahim Kurfi, Foster Ogola, and Samuel Anyanwu.

 

In his opening remarks, the Senate President, Distinguished Senator Bukola Saraki stated that the key objectives of the Petroleum Industry (Governance & Institutional Reforms) Bill is to reform this segment of the industry by introducing international best practices that have led other countries to success in the development of their various oil and gas sectors. In doing this the bill will enable us;

 

a) Create efficient and effective governing institutions with clear and separate roles for the petroleum industry;

 

b) establish a framework for the creation of commercially oriented and profit driven petroleum entities that ensures value addition and internationalization of the petroleum industry;

 

c) promote transparency in the administration of the petroleum resources of Nigeria;

 

d) create a conducive business environment  for petroleum industry operations.

 

Senator Saraki reiterated that the public hearing is another avenue to further hear from the operators, regulators, experts and other stakeholders in the industry regarding how best to achieve these objectives and move the industry forward in a manner that is efficient, effective and corrective. He also disclosed the Senate’s intention to begin informal discussions around the next bill to be considered after the PIGB: the Fiscal Framework and Host Community Bill. It is expected that the bill on Fiscal Framework and Host Communities will be a shift from the previous approach where the government will force its opinion on all parties.

 

The public hearing was preceded by a call for public commentaries (memorandums) from stakeholders in the Nigerian oil and gas sector regarding the provisions of the bill. SPACES FOR CHANGE submitted a 7-paged memorandum, advocating five key issues for parliamentary review and reconsideration. The five-point agenda are as follows:

5 Key Points for Review in the PIGB S4C Recommendations
Women’s under-representation in energy sector decision-making a) Affirmative action in energy policies is an empowering strategy that can be used to expand women’s access to boardroom spaces where energy decisions are made, enabling them to overcome the constraints to their participation in decision-making in big businesses and energy-based enterprises.b) Minimum of 35% board membership/or executive leadership of oil and gas-focused governance institutions should be women
Petroleum Host Communities Fund and environmental protection a. Include the PHC Fund into the current petroleum governance legislation.(b) Environmental protection is integral to industry governance. Strengthen legal protection against exploitation and environmental damage(c) Integrate the environmental protection provisions in the PIB into the PIGB.
The powers of the petroleum minister A clear legislative prohibition requiring that the president should no longer have the power to become the petroleum minister under any circumstance.
Independence of regulatory agencies and new entities It will be ideal for the president to appoint members of the board with input from the minister. The board should then be responsible for recommending (to the President) an executive head of the regulator, and the Senate to approve.
Public participation in oil sector governance Promote transparency and accountability through the adoption of appropriate provisions in the Articles or Corporate Bylaws, specifying the procedures for shareholder/stakeholder participation in the election of directors, voting, financial disclosures, executive compensation, etc.

 

 

SPACES FOR CHANGE’s executive director, Victoria Ohaeri, presented the memorandum to the Senate Committee, highlighting proposals for reform. Other agencies of government also made presentations at the hearing, proffering a wide range of recommendations for improving industry governance.  The Bureau of Public Enterprises (BPE) advocated for the strengthening of regulatory independence in the bill, especially that of the proposed Nigeria Petroleum Regulatory Commission, (NPRC). The agency recommended that NPRC’s independence could be strengthened by guaranteeing the security of tenure of its commissioners or through the review of their terms of recruitment, appointment and removal. They further advocated for a clearer delineation of upstream and downstream functions in the PIGB. In addition, the PIGB should maintain the current momentum in the frontier exploration service in the proposed National Petroleum Company (NPC).

 

Related to BPE’s calls for the PIGB to be reworked to strengthen the independence of the NPRC, the Directorate of Petroleum Resources (DPR) called for a streamlining of the regulatory commission’s role. In the current draft of the bill, the environmental regulatory functions of different agencies and parastatals overlap.  The overlap can create regulatory confusion if it not better clarified by statute.  In addition, the proposed regulatory agency should reflect the career progression of currently in place for commissioners. This is to avoid a situation where heads of agencies are always brought from the outside, which is often demotivating to the workforce. Secure funding streams for the regulatory body should also be established by law, to forestall regulatory lapses that may result from depending on oil revenues, currently characterised by economic uncertainties and dramatic shifts in oil prices. Finally, DPR wants the bill to create a policy making body for the industry.

 

Dr Maikanti Baru, the Managing Director of the Nigerian National Petroleum Corporation (NNPC) presented the national oil company position on the new bill. The NNPC declared support for the creation of the three entities as proposed in the PIGB namely: the Nigeria Petroleum Regulatory Commission (NPRC), as a regulatory entity for the entire petroleum industry (upstream, midstream and downstream), the Nigeria Petroleum Assets Management Company (NPAMC) as a counterpart and administrator of production sharing agreements, and such other risk-based agreements as the government may decide preferable to being a company. He shared the NNPC’s consideration that the proposed Nigeria Petroleum Company (NPC) be a vertically integrated oil and gas company operating as a fully commercial entity across the value chain (including the current Joint Venture Operations, Nigerian Petroleum Development Company, NPDC operations, Frontier Exploration and other upstream/service activities, refinery, Petrochemicals, downstream activities as well as sale and disposal of crude oil and products).

 

NNPC advocated that more emphasis be placed on transparent and efficient administration, creating lower overhead cost for petroleum companies; as well as clear delineation of functions among the entities including the enactment of transition provisions for effective management of assets. It requested that the NPC be mandated to publish a detailed annual report on all petroleum revenue payments (including include all royalties, rentals, fees, Petroleum Profit tax, corporate income tax, other taxes, bonuses, profit oil/gas shares from each of the licenses, leases and contracts) made to government.

 

Noting the need for institutional linkages with government decisions related to renewable resources, power generation, climate change policies and other policies affecting the petroleum industry through the roles of the Minister and the proposed NPRC, the NNPC called for better definition and even more distinguishing of the roles of the Ministers of Environment; and Petroleum.  The NNPC highlighted the importance of increased institutional attention to natural gas development and distribution. It also called for clarity in Joint Ventures and Production sharing contracts (PSC), and PSC ownership of assets including the handling and sale and disposal of available production. Dr Maikanti Baru also expressed deep concern that investments diagrams currently suffer setbacks and huge financial losses due to the delay in passage of the PIGB.

 

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) reiterated that its position on the petroleum sector reforms remains the same whether the PIB is a single document as was the case in the 2009 and 2012 PIBs or broken into parts as is currently done.  In line with global best practice, the Minister and the Ministry of Petroleum should be concerned with broad policy framework and not with the day-to- day running of the industry while the regulator is allowed to carry out its regulatory functions with little or no interference. On this score, PENGASSAN draws enviable parallels from the powers of other Ministers vis-a- vis the Nigeria Communications Commission (NCC) and Nigerian Electricity Regulatory Commission.(NERC).

 

PENGASSAN also argues that ignoring the concerns of the Nigerian workers will be counterproductive, if not catastrophic. Provisions should be included to ensure that ALL companies and organisations operating in the Nigerian oil and gas industry comply with all international labour conventions; the collective agreements with the labour unions and the extant labour laws as a minimum in all their dealings with the Nigerian workers and their representatives.

 

Dr. Obong Victor Attah of the Pan Niger Delta Forum (PNDF) suggested that the term, ‘host communities’ is derogatory and should be replaced with ‘oil producing communities’. He disclosed that 4 out of 5 oil fields recently discovered in Lagos state are owned by the states whereas oil-producing states in the Niger Delta region do not enjoy this same advantage. He requested that the PIGB should include a provision allowing this benefit for all the oil producing communities, and as is being done in the extractive industry.

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