Business - Business & Economy - News - Oil & Gas - July 1, 2021

Again, NASS passes PIB; cuts provision for host communities development from 5 to 3%

Again, the two Chambers of the National Assembly on Thursday passed the draft Petroleum Industry Bill (PIB) into law, bringing closer  home the birth of a new legal and regulatory framework for the country’s petroleum industry.
The journey that has lasted for over 20 years would finally come to an end when President Muhammadu Buhari gives his assent to the harmonised law that would be transmitted to him to sign into law.
On June 8, 2018, the 8th Senate also passed the Petroleum Industry Governance Bill (PIGB).
But, the harmonised version of the draft Bill transmitted to him for his signature was rejected.
In a curious twist, the President cited some minor errors in the approved Bill which he wanted the lawmakers to fo back rework on
However, the lawmakers were not able to resolve the issues till the tenure of the 8th Assembly expired.
Following the appointment of Timipre Sylva as the Minister of State for Petroleum Resources, and Mele Kyari as the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), the reintroduction and passage of the draft PIB was taken as one of their cardinal agenda.
Deliberations on the draft Bill continued till Thursday when the new law was finally approved after several postponements and delays.
The new law, which is be transmitted again to the President immediately for assent, contians a provision that grant government the power to utilise 30 percent of oil and gas industry profits by the NNPC Limited to finance oil exploration and production activities in country’s frontier basins.
The passage of the draft Bill followed the approval of the report of the Joint Committee of the Senate on Downstream Petroleum Sector; Petroleum Resources (Upstream); and Gas on a “Bill for an Act to provide Legal, Governance, Regulatory and Fiscal Framework for the Nigerian Petroleum Industry, the development of Host Communities and for related matters, 2021.
The lead Chairman of the Committee, Sabo Mohammed Nakudu presented the report.
After due consideration of the report, the Senate approved that host communities would henceforth enjoy 3 percent of annual operating expenditure of oil firms to be contributed into the host community development trust fund.
But Deputy Senate President, Ovie Omo-Agege, insisted the oil communities deserved to be given up to 5 percent in the Bill for the development of their area.
The landmark achievement of the 9th Assembly did not pass without drama at plenary seesion, as lawmakers argued on what percentage of the oil companies’ operating budget approved in the new law should be set aside to finance host communities’ development.
Senate President, Ahmad Lawan described the passage of the PIB as historic, saying it “marks a watershed for the 9th Assembly.”
“The passage of the PIB means the demons have finally been defeated,” Lawan said.
Eaelier, Nakudu said his Committee had recommended the need for the country to urgently and aggressively explore and develop its frontier basins.
He said the development of ths basins would help the country take advantage of the threats to the funding of fossil fuel projects across the world due to speedy shift from fossil fuel-to other alternative energy sources
“Consequently, the Committee recommends funding mechanism of 30 percent of NNPC Limited’s profit oil and profit gas as in the production and profit sharing as well as sole risk /service contracts to fund exploration of frontier basins,” he said.
Highlighting the benefits of effective and efficient administration of the Host Community Trust Fund, Nakudu said this was to be anchored by the settlor (the oil and gas companies operating in the host communities). +
He said the various provisions recommended in the passed Bill would ensure a peaceful operating environment for the oil and gas industry, to enable it have a direct positive impact on the cost of oil and gas production in the country.
In his contribution, Omo-Agege said the rationale for pushing PIB, which has eluded thecountry for so many years, was for the lawmakers to give the country a law that would create an enabling environment for foreign investors coming to invest in the sector before oil goes out of fashion.
Co-Chairman of the Committee, Bassey Albert Akpan, said the 5 percent approved for host communities in the Bill shows the property and equipment of oil companies would be secured by host communities, or part of the trust fund would be used to remedy any damage or theft.
During the clause by clause consideration of the Bill, Ahmad Babba Kaita (Katsina North), proposed an amendment to the provision if the contribution to host communities trust fund was pegged at three percent.
With that he said the government would be saddled with the responsibility of securing oil firms’ facilitites.
However, he said if five percent is approved for the host communities, then the oil communities would be responsible for securing production equipment in their domains.
When it was put to voice vote, the 3 percent won the day.
Nakudu said later the 5 percent provision for the Host Communities Fund was reduced to three to encourage investors.
Meanwhile, civil society groups that havw been in the forefront of the campaign to get the PIB passed have hailed the final passage of the new law by the National Assembly.
The Executive Director, Centre for Transparency Advocacy, Faith Nwadishi, in congratulating the 9th Assembly of the National Assembly and the Buhari administration for the achievement, said it was good news to hear after many years of waiting and back and forth, the National Assembly passed the PIB.
“The Centre for Transparency Advocacy congratulates Nigerians, especially the civil society, media, host communities and donor agencies that gave their supports leading to the achievement of this result which is a positive step towards having a reform petroleum industry.
“Generally, we are happy that Sections, 83, 104 to 108 of the new Bill (the House of Representatives version) makes provisions for contract transparency, disclosure, and outlaws gas flaring, provides 3 percent operational cost for host communities,” she said.
Nwadishi however, expressed disappointment the new law did not recognise gender, while the hosts are still held responsible for any kind of sabotage to oil facilities.
She said Section 83 sub 3-5 on contract transparency provides that (a) the text of any existing contract, licence or lease and any amendment or side letter with NNPC shall – A) not be confidential.  
“Section 104 of the Bill makes gas flaring an offence except in the case of emergency exemption granted by the Commission or for an acceptable safety practice. Offenders are liable to a fine and the fine will be used for investment in midstream gas infrastructure within the host community on which the penalties are levied. 
The Executive Director said the passage of the PIB meant the 1first hurdle has been crossed, asding that Nigerians expect the leadership of the National Assembly to quickly harmonize their versions of the passed Bill and send same to the President for his assent.
She also urged the President to assent to the Bill as soon as it comes to him in fulfilment of his electoral promise to Nigerians and commitment to a better managed petroleum sector.
Calling on Nigerians and the civil society not to rest on their oars until this twenty-year struggle was concluded, by serving as watchdogs and monitors to the implementation of the provisions of the Bill as soon as it is signed into law by the president.  

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