By ADEBAYO OBAJEMU
The passage into law of the 20-year old controversial Petroleum Industry Bill, PIB, has been done in the wake of controversy and now in the trail of another controversy and anger; as the Senate handed out only three percent equity holding to Host Communities Trust Fund which is the direct benefit the host communities, as against the 10 percent people of the oil-producing areas are demanding. The House of Representatives, on its part, last week also passed the PIB, granting host communities’ five per cent equity stake.
Meanwhile, National President, Host Communities of Nigeria Producing Oil and Gas, HOST ON, Chief Benjamin Tamanarebi said it was an unwarranted insult for the Senate and House of Representatives to cede only three and five per cent equity shareholding respectively to the oil and gas producing communities in the PIB, passed, yesterday.
He made this known last Thursday in a briefing with newsmen.
Though the proposal was opposed during the public hearings in February by leaders of the oil-producing communities, the Minister of State for Petroleum Resources, Timipre Sylva, argued that the 2.5 per cent operational cost was better than 10 per cent equity.
This comes as Presidency celebrated the passage, saying the administration has broken the jinx of non-passage of the bill after 20 years of dilly-dally by several National Assemblies.
At the Senate, there was heated debate over the actual the percentage for the host communities. However, the lawmakers approved three percent of the actual annual operating expenses of the preceding financial year in the upstream petroleum operations affecting the host communities for funding of the Host Communities Trust Fund.
The original bill brought to the Senate by the Executive was 2.5 percent for funding of the Host Communities Trust Fund, but the Senate committee moved it to five percent, which the Senate changed it to only three percent.
Indications also emerged that although the two chambers of the NASS will go into a conference committee to harmonise their differences such as the percentage for the host communities, it was gather that the senate position will like be adopted given the fact that it had executive backing.
It was learnt that there was a meeting between the senate president Ahmed Lawan, Minister of state for petroleum, Sylva and GMD of NNPC, Mele Kyari, to agree on the percentage. The executive had earlier suggested 2.5 percent.
In an Aljazeera program: Counting the Cost, monitored by BusinessHallmark last week, Ifuoma Oghoyone, an UK- energy analyst, who has spent over 20 years in oil and gas industry in Nigeria said the PIB bill has been overtaken by time and events, and no longer relevant in light of current development in global oil industry.
On the planned withdrawal of Shell Petroleum Development Company from its onshore activities Oghoyone said the development will have a devastating impact on the country’s oil and gas industry.
Answering questions from Aljazeera on energy issues in Nigeria on the programme; Oghoyone stated that Shell has decided to sell off its onshore assets, adding that the local companies do not have the expertise and experience to fill the vacuum that will result from the oil giant’s pullout from its onshore activities.
He said it was regrettable that the country has made so much money from my oil and there has no impact on the streets, as Nigerians including Niger Deltans still wallow in poverty, while the few pocket the proceeds from the oil and gas money.
He further stated that a few power brokers from the North controls the oil and gas, wondering how many Niger Delta indigenes are involved?
He stated that the world is moving away from fossil fuel, adding that the West are looking for alternative.
“There will come a time when we have to drink our oil, as the world is moving away from fossil fuels”, he stated.”Local companies and other multinational cannot fill the shoes of Shell,” he added.
Dr. Olufemi Omoyele, a public affairs analyst said the passage of the bill in its present form is a victory for the north, adding that the host communities have lost out.
“Everybody is saying that at long last, the Senate and House of Representatives have separately passed the much-awaited Petroleum Industry Bill (PIB). But they should know that in the bill about 30 per cent of profits accruing from Oil and Gas operations by the Nigeria National Petroleum Corporation (NNPC) now to be set aside for exploration of oil in the frontier basins. Where are the frontier basins? The North! Only three percent goes to the communities.”
However, the Senate reached these decisions amid uproar due to disagreements on the right percentage of oil revenue for host communities.
Many analysts who spoke with BusinessesHallmark said the extant law guiding the oil and gas industry before the PIB was old , and efforts by the Nigerian government to actually improve the regulation in the oil industry had met resistance from players of the downstream and upstream.
It was learnt that only recently was a synergy between the Nigerian government and parliamentarian, unlike before when parliamentarians would pass the law, and then when the law would get to the executive, it would not be assented to.
Many who spoke said this time around, there’s a very huge possibility, because of the way the executive contributed to this bill, that there will be an assent to it. But the controversial aspect to this bill is the host communities.
The current situation where by the House of Representatives approved five percent equity holding, while the Senate approved only three, is widely condemned by host communities, which feel cheated and see it as victory for the power brokers and oil moguls from the north.
Initially, when the executive sent this bill to the parliament, it was at 2.5% for the host communities, but the host communities wanted to directly benefit from the oil resources coming out of their areas.
There’s a 13% derivative from that which goes to the state, but the communities say they don’t feel the impact, so much.
A source in the Department of Petroleum Resources, which is not authorized to speak told BusinessHallmark on conditions of anonymity that there are other channels of benefit to the oil communities.
“You know there is the Ministry of Niger Delta for the entire region. There’s also the Niger Delta Development Commission, but in spite of all this, the host communities say they have not been feeling the impact, so much. So, this 3% approved by the Senate, based on what they have said, is about $502m.
So, there’s going to be a harmonization committee that will seat up between both. Normally, what they do is that they will add 5% to 3%, which is 8%. Since it’s a bicameral legislature, what they will have to do is divide the 8 by 2. So, they may likely arrive at a consensus of 4%. And if they do that, what the Senate is saying is that the 4% is going to be between $500m to $600m, which they feel is enough for the host communities”.
The Petroleum Industry Bill, PIB, 2020 is a law in the making, which seeks to introduce far-reaching reforms in the Nigerian oil and gas industry. It was first sent to the National Assembly in 2008.
The bill seeks to establish good governance, best practices, and ease of doing business in the industry by clarifying roles and responsibilities of officials and institutions, enable frontier exploration, mandate improved environmental compliance, and transform NNPC into a commercially viable enterprise.
Experts, analysts and stakeholders believe PIB is necessary because almost all petroleum-related laws, including the Petroleum Act of 1969, had been belated for decades. In other words, they are no more relevant and competitive globally.
With the advancement in technology, the volatility of oil prices, climatic changes influencing the driving forces of the global economy, it has become imperative to review extant laws to bring them in alignment with current realities.
The bill proposes the Upstream Regulatory Commission for upstream operations, including the granting of petroleum exploration licenses. A petroleum exploration license shall be for three years and may be renewable for an additional period of three years subject to the fulfillment of prescribed conditions.
The PIB also provides for the establishment of the Midstream and Downstream Regulatory Authority for midstream and downstream operations. But the president has been advised to go for only one Commission with many departments, using the example of the Nigerian Communications Commission, NCC, as an example.
The PIB further provides for the creation of a Host Communities Development Trust. The oil operators, described as settlors, are obliged to incorporate a trust for the benefit of the host communities and shall make an annual contribution, based on a certain percentage of their yearly operating expenditure.
As a condition for the grant of a license or lease and prior to the approval of the environmental management plan, all licensees or oil companies are required to make financial contribution to an Environmental Remediation Fund for the rehabilitation or management of negative environmental impact with respect to the license or lease. Financial contributions depend on the size of the petroleum operations and the level of environmental risk that may exist.
The regulator will apply the Fund towards the rehabilitation, remediation or management of negative environmental impact only when the licensed operator lacks the capacity, or is unable to undertake the rehabilitation or management of any negative impact on the environment effectively.