BACKGROUND AND OBJECTIVES OF THE PETROLEUM INDUSTRY BILL.
The House of Representatives at plenary, concluded debate on the general principle on Petroleum Industry Bill and referred same to the Ad-hoc Committee on Petroleum Industry Bill, earlier constituted on Thursday 23rd July, 2020, for further legislative action.
The Bill seeks to provide for Legal, Governance, Regulatory and Fiscal Framework for the Nigerian Petroleum Industry, the Development of Host Communities and for related matters.
It is expedient to note that the Bill has been in the making for about twenty (20) years and involved countless stakeholder consultations and engagements. It was first presented to the National Assembly in December, 2008 during the 6th Assembly and subsequently in the 7th & 8th Assembly, aimed at increasing Nigeria’s share of oil revenue.
However, the Bill became contentious due to objections from international oil companies (IOCs), the Nigeria National Petroleum Corporation (NNPC) and Host Communities. Leaders of Host Communities also raised concerns about the non-inclusion of requests from their communities and pointed out that pre-existent tensions present in the Niger Delta could potentially get worse if the Bill does not provide specific measures to address local issues. Consequently, the passage of the Bill was truncated.
The Bill comprises five (5) Chapters namely: Governance and Institutions, Administration, Host Communities Development, Petroleum Industry Fiscal Framework and Miscellaneous Provisions. It also include Seven Schedules: Right of Pre-Emption, Principles of Negotiating Incorporated Joint Ventures, Domestic Base Price and Pricing Framework, Pricing Formula for Gas Price for the Gas Based Industries, Capital Allowances, Production Allowances and Cost Price Ratio Limit, and Petroleum Fees, Rents and Royalty
CHAPTER ONE (GOVERNANCE AND INSTITUTIONS)
The Chapter vested the Property and Ownership of Petroleum within Nigeria and its territorial waters, Continental Shelf and Exclusive Economic Zone in the Government of the Federation of Nigeria.
The objectives are to:
(a) create efficient and effective governing institutions, with clear and separate roles for the petroleum industry;
(b) establish a framework for the creation of a commercially oriented and profit-driven national petroleum company;
(c) promote transparency, good governance and accountability in the administration of the petroleum resources of Nigeria;
(d) and foster a business environment conducive for petroleum operations.
CHAPTER TWO (ADMINISTRATION).
The Chapter provide for the General administration and management of petroleum resources and their derivatives on the principles of good governance, transparency and sustainable development in Nigeria.
The objectives are to –
(a) promote the exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people;
(b) promote the efficient, effective and sustainable development of the petroleum industry;
(c) promote the safe and efficient operation of the transportation and distribution infrastructure for the petroleum industry;
(d) provide the framework for developing third party access arrangements to petroleum infrastructure;
(e) encourage and facilitate both local and foreign investment in the petroleum industry;
(f) promote transparency and accountability in the administration of petroleum resources in Nigeria;
(g) develop, where appropriate, competitive markets for the sale and distribution of petroleum and petroleum products;
(h) promote safe and affordable access to petroleum and petroleum products in Nigeria;
(i) promote the processing of petroleum within Nigeria and the development of fuel and chemical industry and other related value added products and activities;
(j) create a conducive business environment for operations in the petroleum industry;
(k) promote the liberalisation of the downstream petroleum industry;
(l) establish an orderly, fair and competitive commercial environment within the petroleum industry; and
(m) ensure that petroleum operations are conducted in a manner that protects the health and safety of persons, property and the environment.
CHAPTER THREE (HOST COMMUNITIES DEVELOPMENT)
The Chapter entrust the Host Communities with the burden of developing, managing and supervising the administration of the resources that will accrue to their various Communities
The objectives are to –
(a) foster sustainable prosperity within host communities;
(b) provide direct social and economic benefits from petroleum operations to host communities; (c) enhance peaceful and harmonious co-existence between licensees or lessees and host communities; and
(d) create a framework to support the development of host communities.
CHAPTER FOUR (PETROLEUM INDUSTRY FISCAL FRAMEWORK)
The Chapter provide for fiscal framework for clarity of structures, roles, accountability, transparency, efficiency and overall effectiveness of the Institutions in the Oil Industry
The objectives are to –
(a) establish a progressive fiscal framework that encourages investment in the Nigerian petroleum industry, balancing rewards with risk and enhancing revenues to the Federal Government of Nigeria;
(b) provide a forward-looking fiscal framework that is based on core principles of clarity, dynamism and fiscal rules of general application;
(c) establish a fiscal framework that expands the revenue base of the Federal Government, while ensuring a fair return for investors;
(d) simplify the administration of petroleum tax; and
(e) promote equity and transparency in the petroleum industry fiscal regime.
CHAPTER FIVE (MISCELLANEOUS PROVISION)
The Chapter provide amongst others for legal proceedings, saving provisions and repeals the following enactments and regulations –
(a) Associated Gas Reinjection Act, 1979 CAP A25 Laws of the Federation 2004, and its Amendments;
(b) Hydrocarbon Oil Refineries Act No. 17 of 1965, CAP H5 Laws of the Federation of Nigeria 2004; (c) Motor Spirits (Returns) Act, CAP M20 Laws of the Federation of Nigeria 2004;
(d) Nigerian National Petroleum Corporation (Projects) Act No. 94 of 1993, CAP N124 Laws of the Federation of Nigeria 2004;
(e) Nigerian National Petroleum Corporation Act (NNPC) 1977 No, 33 CAP N123 Laws of the Federation of Nigeria as amended, when NNPC ceases to exist pursuant to section 54(3) of this Act;
(f) Petroleum Products Pricing Regulatory Agency (Establishment) Act 2003;
(g) Petroleum Equalisation Fund (Management Board etc.) Act No. 9 of 1975, CAP P11 Laws of the Federation of Nigeria 2004;
(h) Petroleum Equalisation Fund (Management Board, etc.) Act, 1975;
(i) Petroleum Profit Tax Act Cap P13 LFN 2004, and
(j) Deep Offshore and Inland Basin Production Sharing Contract Act 2019, as amended.
And further cause the Pre-Shipment Inspection of Oil Export Act, 1996 to be amended.