PIB Bills Latest 31-5-17.compressed

ANALYSIS OF THE PETROLEUM
INDUSTRY GOVERNANCE BILL
INTRODUCTION
25%
of the job is
technically done
Technically, the job is only 25 percent done. The Petroleum Industry

Governance Bill — one of the four bifurcations of the ageless
Petroleum Industry Bill (PIB) — was passed by the Senate last week
(the other three are still pending). Well, half loaf — even a quarter
loaf, in this case — is better than none!
#FixOur il
info@yourbudgit.com BudgITng
1 WHAT IS THE PETROLEUM INDUSTRY GOVERNANCE BILL

? ?
This is not the Petroleum Industry Bill. This is the Petroleum Industry
Governance Bill. It does NOT have details on ﬁscal arrangements (taxes
and royalties) and host communities.
It is sponsored by the Senators led by Senator. Tayo Alasoadura and

co-sponsored by 28 other senators. This is a Private Members’ Bill
The bill will replace Nigeria’s main legislation in the Oil and Gas Industry
written in 1969 and NNPC Decree of 1997.
THE MAIN OBJECTIVES

OF PIGB
3 2 1
To promote transparency To establish framework To create the governing
and accountability for creation of commer- institutions with clear
cially viable petroleum and separate roles
entities
4
To foster a conducive
business environment for
petroleum industry
operations.
THERE WERE SEVEN INSTITUTIONS IN THE PROPOSED BILL BUT

TWO INSTITUTIONS WERE ADDED IN THE FINAL BILL
THE MINISTER THE MINISTRY OF THE NIGERIA PETROLEUM

PETROLEUM REGULATORY
INCORPORATED COMMISSION
THE NIGERIA PETROLEUM THE NATIONAL PETROLEUM

ASSETS MANAGEMENT PETROLEUM EQUALISATION
COMPANY COMPANY FUND
NIGERIA PETROLEUM LIABILITY MANAGEMENT COMPANY
#FixOur il
2 HOW POWERFUL IS THE MINISTER OF PETROLEUM

? ?
The powers of the Minister of Petroleum were reduced in the final bill,
as s/he may NO longer commission, grant, amend, renew, extend or
revoke any licence. This role shall now be handled by the National
Petroleum Regulatory Commission. The Act assigns s/he the
responsibility of determining, monitoring and formulating these
policies.
#FixOur il
3 HOW WIDE ARE THE POWERS OF THE MINISTER

? ?
In case of national emergency, the Minister has the right to all
petroleum and petroleum products obtained. The Minister, in the
interest of the nation, has the first right to buy petroleum products,
specifically products refined locally. If anyone fails to obey the
instruction issued by the Minister on such issues,s/he is liable on
conviction to forfeiture of the petroleum product and facilities that
are the subject of the offence. The number of years in the proposed
bill was raised from six months to 10 years to properly cite this act as
economic sabotage. The passed bill removed the option of fine.
#FixOur il
4 WHO IS THE CURRENT MINISTER OF PETROLEUM

? ?
This position is currently shared between the President who is the
current Minister of Petroleum and the State Minister of Petroleum.
The law does not state if the President may still hold conflicting roles
of being a Minister of Petroleum and also lead the country.
Without this clarity, the position of the Minister held by the President
can lead to abuse of power.
#FixOur il
5 ?
WHAT IS THE NIGERIA PETROLEUM REGULATORY COMMISSION
?
The Commission is the most powerful entity created under the Act. It
takes up the assets, resources, funds properties, liabilities, interests
and obligations of the Department of Petroleum Resources (DPR),
the Petroleum Inspectorate and the Petroleum Products Pricing
Regulatory Agency (PPPRA). It shall be in charge of regulating the
entire industry. It shall keep award and keep register of oil blocks,
monitor them, conduct regular audit of activities and also conduct
bid rounds for oil blocks and administer unalloted crude oil acreages.
#FixOur il
6 WHAT ELSE WILL THE REGULATORY AUTHORITY DO

? ?
In addition to its other advisory, monitoring and regulatory
functions, the Nigeria Petroleum Regulatory Commission also has
the prerogative to release the information provided by a petroleum
operator to the public, if the Governing Board decides that such
action is in the public interest.
#FixOur il
7 HOW SHALL THE BOARD OF REGULATORY AUTHORITY BE

APPOINTED ? ?
The Commission shall be governed by a Governing Board and this
Board shall be made up of eleven persons with representatives from
Ministry of Finance, Ministry of Petroleum and Ministry of
Environment. The Board shall be responsible for steering, providing
direction and supervising the activities of the Commission.
#FixOur il
8 HOW SHALL THE BOARD BE APPOINTED

??
They shall all be appointed by the President, subject to confirmation
by the Senate. Appointment of Chairman and non-executive heads
will be a tenure of four years, renewable only once. The executive
heads shall be appointed for a tenure of five years subject to be
renewable for another term.
#FixOur il
9 DOES THE MINISTER OVERSEE THE COMMISSION’ BOARD

? ?
Yes, the Minister shall oversee the work of the Commission and issue
general policy directions to the Commission as long as they are not in
conflict with the Act. We hope this will not be abused.
#FixOur il
10 HOW DOES THE NIGERIA PETROLEUM REGULATORY

COMMISSION RELATE WITH OTHERS ? ?
In the final bill passed by the legislature, it was stated that the
Commission does not need to consult with Ministry of Environment
on the issue of environmental protection. We wonder why.
#FixOur il
11 IS THE REGULATORY COMMISSION ALLOWED TO MAKE

NEW REGULATIONS BASED ON THE ACT ? ?
The Bill allows the Commission to make new rules subject to public
hearing. Any rule made without public hearing shall not last more
than six months. In cases of conflict, the commission may seek
technical advice or direct anyone affected by its order to seek
judgment from the Federal High Court.
#FixOur il
12 CAN THE PRESIDENT REMOVE A MEMBER OF THE

REGULATORY COMMISSION ? ?
Yes, for numerous reasons and also if the President thinks s/he can no
longer function in the office. Express reply to the President’s query is
allowed and such removal is not subject to ratification by the Senate.
Is this fair for an independent body? No chance!
#FixOur il
13 CAN SOMEONE INVOLVED IN THE OIL INDUSTRY

BECOME MEMBER OF THE BOARD ? ?
Yes. If such person declares their interest and it is satisfactory to the
President that there shall not be a conflict of interest. We believe this
should not be allowed at all. They should be no clauses.
#FixOur il
14 MAY THE REGULATORY COMMISSION ACCEPT GRANTS

?
Yes. It may accept grants/gifts if they are not received from persons or
organisations being regulated by the commission. A board member
may not also accept such gifts for personal use. We think this should
be removed totally.
#FixOur il
15 ?
IS ANYONE ALLOWED TO SUE THE REGULATORY COMMISSION
IN THE COURT OF LAW ?
Yes. However, NO one shall sue the commission within one year after
the bill is passed. The Commission shall have a Special Investigation
Unit for detection of offences and also keep surveillance of oil and
gas installations.
#FixOur il
16 FUNCTION OF THE MINISTRY OF PETROLEUM

?
The Ministry of Petroleum, now to be known as the Ministry of
Petroleum Incorporated, shall hold the shares of government in all
successor companies from government investments, such as NNPC.
#FixOur il
17 THE FATE OF NNPC

?
Upon signing the bill into law, and within six months, the Minister,
through the CAC, shall incorporate two companies known as Nigeria
Petroleum Assets Management Company & National Petroleum
Company. The Nigeria Petroleum Assets Management Company shall
manage the Production Sharing Contracts while National Petroleum
Company shall be responsible for all other assets such as Joint
Ventures.
#FixOur il
18 WHAT HAPPENED TO THE MINISTER’S POWERS

??
The Minister does not have powers to create new entities as stated in
the initial bill presented to the Senate - discretionary powers of the
Minister reduced. However, the Minister shall prepare the clear plan
and timeline for transitioning of new entities.
#FixOur il
19 HOW WILL NNPC SUCCESSOR COMPANIES BE HELD

? ?
The shareholding was amended. The Ministry of Petroleum
Incorporated shall now hold 40%, The Ministry of Finance
Incorporated shall hold 40% and 20% shall be held by Bureau of
Public Enterprises. The Minister shall determine the composition of
the Board of the Management Company and this company shall hold
the shares on behalf of the Nigerian government.
#FixOur il
20 WHO LEADS THE NNPC SUCCESSOR COMPANIES

? ?
The Nigeria Petroleum Assets Management Company and the
National Petroleum Company shall be managed by different boards
of 11 persons each. It was nine persons in the initial bill. The
shareholders of the successor companies shall appoint an
independent committee to choose the Board of Directors.
Appointment of such directors are still subject to the approval of the
President.
#FixOur il
21 EMPLOYEES, ASSETS, RIGHTS, LIABILITIES ETC. ??

The Minister shall, within 12 months of incorporation, issue an order
to transfer some employees, assets, liabilities, rights, financial
arrangements and obligations to the successor companies. With the
Minister leading this all the way, this raises a red flag that requires
one to approach with caution.
#FixOur il
info@yourbudgit.com BudgITng @BudgITng

22 HOW SHALL THE ASSET MANAGEMENT COMPANY

BE FUNDED ? ?
The Minister shall present a budget within six months for
appropriation of funds for initial capitalisation. All costs shall be paid
from the budget and the dividends shall be paid to the government
coffers. The shareholders appointed by the government shall approve
the budget and operational plan.
#FixOur il

23 HOW INDEPENDENT IS ASSET MANAGEMENT

COMPANY ? ?
The Minister still plays a huge role here. S/he may make further
discretionary transfer orders on NNPC transition but her transferred
staff must enjoy no less than the favourable terms they had with
NNPC. The successor companies shall continue with current pension
contributions and no stamp duty or capital gains tax can be charged
on its transactions, except in few cases.
#FixOur il

24 WHAT HAPPENS TO THE SHARES OF THE SUCCESSOR

COMPANY ? ?
After incorporation, within five years, government shall sell 10% of its
shares and shall sell at least another 30% within next five years. After
divestment of 10% in five years, appointment of the Board of the
National Petroleum Company shall NOT be subject to approval of the
President. The initial bill recommends that this should happen after
10 years.
#FixOur il
25 WHAT HAPPENS TO DPR AND PPPRA

??
Within three months of the passage of the bill, all the staff, liabilities,
assets and others shall be transferred to the Nigeria Petroleum
Regulatory Commission. The Minister must submit a detailed
transition plan within 30 days.
#FixOur il
26 WHAT WILL HAPPEN TO THE LIABILITIES OF NNPC AND

OTHER AGENCIES ?
Unlike the initial bill, the new entities will not directly bear the
liabilities of the NNPC. They will only own the assets. A new entity of
Nigeria Petroleum Liability Management Company will assume and
manage the liabilities of NNPC and pensions of DPR.
#FixOur il
27 ?
WHO ARE THE OWNERS OF NIGERIA PETROLEUM LIABILITY
MANAGEMENT COMPANY ?
The Nigeria Petroleum Liability Management Company, formed after
the Effective Date of the Act, shall be owned by the NNPC successors
(National Petroleum Company, National Asset Management
Company) and Nigerian Petroleum Regulatory Commission in ratio of
their debts or liabilities assumed by the new company.
#FixOur il
28 WHEN SHALL THE LIABILITIES END

?
Within 12 months, the Liability Management Company shalldefine a
timeline and clear plan to exit all liabilities and the shareholders
(NNPC successors and regulatory commission) shall develop clear
plan to provide revenues for settlement of their respective liabilities.
#FixOur il
29 WHAT HAPPENS TO PETROLEUM EQUALIZATION FUND

?
This institution was not in the initial bill but was added to the passed
document. There shall be a 5% levy on all petroleum products to
ensure balance in price of petroleum products across the country,
subject to the approval of the Minister. All surplus recoveries shall
also be paid into this Fund.
#FixOur il
30 HOW POWERFUL IS THE INFLUENCE OF THE

MINISTER ON PEF ??
The law allows the fund to be used for infrastructure purposes and
the Minister may also discretionarily approve use of funds for other
vague financial purposes. This needs to be reviewed. The board shall
be constituted by 12 persons.
#FixOur il
31 OUR THOUGHTS
?
The Minister is very powerful. Can any President allow such powers
assigned to the minister be handled by another person but him/her?
Can this entire process be completed in just one
democratic term of four years? It is important for Nigeria to invest
more powers in the institutions rather than in the Minister.
#FixOur il

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ANALYSIS OF THE PETROLEUM

INDUSTRY GOVERNANCE BILL

Technically, the job is only 25 percent done. The Petroleum Industry

1 WHAT IS THE PETROLEUM INDUSTRY GOVERNANCE BILL

It is sponsored by the Senators led by Senator. Tayo Alasoadura and

THE MAIN OBJECTIVES

THERE WERE SEVEN INSTITUTIONS IN THE PROPOSED BILL BUT

THE MINISTER THE MINISTRY OF THE NIGERIA PETROLEUM

THE NIGERIA PETROLEUM THE NATIONAL PETROLEUM

NIGERIA PETROLEUM LIABILITY MANAGEMENT COMPANY

2 HOW POWERFUL IS THE MINISTER OF PETROLEUM

3 HOW WIDE ARE THE POWERS OF THE MINISTER

4 WHO IS THE CURRENT MINISTER OF PETROLEUM

6 WHAT ELSE WILL THE REGULATORY AUTHORITY DO

7 HOW SHALL THE BOARD OF REGULATORY AUTHORITY BE

8 HOW SHALL THE BOARD BE APPOINTED

9 DOES THE MINISTER OVERSEE THE COMMISSION’ BOARD

10 HOW DOES THE NIGERIA PETROLEUM REGULATORY

11 IS THE REGULATORY COMMISSION ALLOWED TO MAKE

12 CAN THE PRESIDENT REMOVE A MEMBER OF THE

13 CAN SOMEONE INVOLVED IN THE OIL INDUSTRY

14 MAY THE REGULATORY COMMISSION ACCEPT GRANTS

16 FUNCTION OF THE MINISTRY OF PETROLEUM

17 THE FATE OF NNPC

18 WHAT HAPPENED TO THE MINISTER’S POWERS

19 HOW WILL NNPC SUCCESSOR COMPANIES BE HELD

20 WHO LEADS THE NNPC SUCCESSOR COMPANIES

21 EMPLOYEES, ASSETS, RIGHTS, LIABILITIES ETC. ??

info@yourbudgit.com BudgITng @BudgITng

22 HOW SHALL THE ASSET MANAGEMENT COMPANY

info@yourbudgit.com BudgITng @BudgITng

23 HOW INDEPENDENT IS ASSET MANAGEMENT

info@yourbudgit.com BudgITng @BudgITng

24 WHAT HAPPENS TO THE SHARES OF THE SUCCESSOR

25 WHAT HAPPENS TO DPR AND PPPRA

26 WHAT WILL HAPPEN TO THE LIABILITIES OF NNPC AND

28 WHEN SHALL THE LIABILITIES END

29 WHAT HAPPENS TO PETROLEUM EQUALIZATION FUND

30 HOW POWERFUL IS THE INFLUENCE OF THE

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