The prominent law guiding the Nigerian oil and gas industry was enacted in 1969. The political instability that followed stalled the passing of the aged petroleum Act and other petroleum laws. The lack of reform has threatened the growth of the industry; with international investors losing confidence over its stability, the competitive margins elicited by low oil prices, and a global shift towards renewable energy. On September 30, however, the Nigerian senate announced that the Petroleum Industry Bill (PIB) passed its first reading in the Senate. Having been delayed for over a decade, the PIB is designed to reform the oil and gas industry, regulate its operations, and prioritize transparency and accountability within the industry.
The Bill’s Journey
2008: Since its introduction by the then President Umaru Yar’Adua to the National Assembly in December 2008, the PIB has undergone over a decade-long delay in revisions.
2017: the Nigerian senate passed the Petroleum Industry Governance Bill (PIGB). Although the PIGB was never signed into law by president Buhari, the bill was one of the 4 divisions of the PIB which was broken down to enable implementation of sections within the law that were not controversial, thus fast-tracking its passage into law. The other bills include; the Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill, and Petroleum Host Community Bill.
Over the years: the bill has been objected to by the international oil companies (IOCs) and the Nigerian National Petroleum Corporation (NNPC).
One of the major challenges of the industry has been the maintenance of accountability and transparency. The current draft of the PIB prioritizes these factors, and if reviewed and designed appropriately could greatly improve the performance of Nigeria’s oil sector. Transparent and accountable institutions reassure investors, attract investment, improve regulation, dampen illicit behaviour, and improve production and earnings.
Additionally, the environmental effect of gas flaring and oil spillage present a major concern in the country. In 2016, Nigeria lost potential income estimated at $770 million. The bill includes provisions for curbing gas flaring, oil spillage, and Illegal bunkering. The establishment of this bill could reduce the dangers of these problems and have a remarkable influence on the agricultural ecosystem, health of residents, and economic position of the country.The Bill could also enhance the collaboration between the government and oil companies, in reviewing the adherence of these companies to regulations on contracting, compensation, and environmental protection. An improvement in this area will reduce the oil-related conflict in the Niger Delta region of Nigeria.
As Africa’s biggest crude producer, the oil and gas industry accounts for about 90% of Nigeria’s export earnings. The bill, if properly executed, could play a key role in repositioning the sector and building the confidence of foreign investors in the industry.
Highlights of the Bill
The provisions of the Bill are designed to;
- Increase Nigeria’s share of oil revenue.
- Address issues around the fiscal terms
- Prioritize transparency and accountability in the administration of Nigerian petroleum resources.
- Boost investment into Nigeria’s oil and gas industry.
- Lay down a strengthened legal and regulatory framework for the Nigerian oil industry
- Set up structures for the establishment of commercially driven petroleum entities
- Reduce oil and gas royalties
- Improve the developments of natural gas and improved framework for gas delivery and tariffs. Replace the existing petroleum profits tax with a Nigerian Hydrocarbon Tax (NHT)
- Alter the dispute resolution process between companies and the government.
- Incorporate a limited liability company called the Nigerian National Petroleum Company Limited (NNPC Limited) under the Companies and Allied Matters Act.
- Increase funds for environmental clean-up and payments to local communities of oil and gas operations.
- Establish a number of new/existing regulatory, commercial and ancillary institutions. These include of Nigerian Upstream Regulatory Commission and The Nigerian Midstream and Downstream Petroleum Regulatory Authority.