After a 17-year long wait, the Nigerian Senate finally passed the Petroleum Industry Governance Bill (PIGB) into law on Thursday, May 25, 2017. We congratulate the Bukola Saraki-led 8th Senate on the passage of this landmark bill. Here are some important points to note about the new regime:
1. Establishment of New Entities: Petroleum Industry Governance Bill 2017 proposes, inter alia, the establishment of the Nigeria Petroleum Regulatory Commission, the Petroleum Equalisation Fund and the incorporation of three commercial entities including the Nigeria Petroleum Assets Management Company, National Petroleum Company and the Nigeria Petroleum Liability Management Company. The new addition here is the Petroleum Equalisation Fund which was not included in the 2016 draft.
2. Funding the New Entities: The funding of the Commission (NPRC) shall be by appropriation through the National Assembly. The funding of the Equalisation Fund shall be by way of a 5% fuel levy in respect of all fuel sold and distributed within the Federation subject to appropriation by the National Assembly. The funding of the Nigeria Petroleum Assets Management Company shall be by appropriation through the National Assembly for the initial capitalisation and subsequent financing of the company. The funding of the National Petroleum Company shall be for the initial capitalisation only by appropriation through the National Assembly.
3. NNPC will be unbundled: The passed PIGB requires the restructuring of the Nigerian National Petroleum Corporation (NNPC) by splitting the assets and liabilities of the Corporation into two commercial entities, namely the Nigeria Petroleum Assets Management Company and the National Petroleum Company. This restructuring will repeal the NNPC Act, CAP N123, Laws of the Federation of Nigeria, 2004, and the and Nigerian National Petroleum Corporation Amendment Act N123. The passed PIGB also provides for the financial autonomy of the National Petroleum Company. The company shall be entitled to retain its revenue from its operations and shall be entitled to defray from such revenue all its expenses including its cash call obligations in respect of its joint venture assets and its petroleum operations and its obligations to lenders and financiers.
4. No More Regulatory Overlap: The overlapping regulatory functions of the Federal Ministry of Environment (FMOE) and the Nigerian Petroleum Regulatory Commission (NPRC) in matters relating to environmental protection was resolved in favour of the latter (NPRC). Full responsibility for environmental matters in the petroleum industry is now vested in the NPRC. In the previous draft of the PIGB, the NPRC was required to ensure strict implementation of environmental policies, laws and regulations as pertains to oil and gas operations in consultation with the Ministry of Environment. By domiciling environmental matters for the petroleum industry in the NPRC, this requirement for consultation with the Ministry of Environment has been dispensed with.
5. The establishment of the Petroleum Equalization Fund (PEF): The Petroleum Equalization Fund (PEF) will work to ensure economic balance in the price of petroleum products as well as the efficient distribution of petroleum products throughout the federation. The intendment of the Bill is to provide for uniformity of petroleum products prices throughout Nigeria through reimbursement of oil marketing companies for any loss that they incur solely and exclusively as a result of the transportation of petroleum products and for the provision of financing for infrastructural development throughout the federation. The PEF will determine the amount of reimbursement due to any oil marketing company for purposes of equalisation of price of products.
6. Powers of the Petroleum Minister Revised. The review of the Petroleum Minister’s Power is consistent with the proposals outlined in the Memorandum SPACES FOR CHANGE submitted to the Senate Committee in December 2016. In the former draft (2016 version) of the PIGB, the Minister may, in addition to the incorporation of the named successor entities to the NNPC, incorporate other entities, as may be necessary to assume and manage some of the liabilities of the NNPC. Under the 2017 revised version, the Minister shall not have powers to create any further companies suo motu. This also abrogates the Minister’s power to cause the Articles of Association of such other entities to provide for the composition and appointment of their Boards.
7. Increased Representation and Expanded Decision-making Power: The new law provides for increase in number of decision-making executives for effective representation. In this regard, the number of Executive Directors of the Management Company has been increased from 3 to 4. Similarly, the total number of NPRC executive commissioners also increased from from 9 to 11 in order to ensure proper coverage of the industry regulatory functions, while the number of non-executive commissioners increased from 1 to 2 in order to strengthen the Board.
8: DPR + PPPRA = NPRC: Take note that when the PIGB becomes law, the new NPRC will be a merger of Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA). The intendment of the Bill is to rationalise and merge the two existing agencies. This merger translates to the repeal of the Petroleum Products Pricing Regulatory Agency (Establishment) Act, CAP P43, Laws of the Federation of Nigeria, 2004.
9: Increased Shareholder Participation in Company Affairs: The 2016 version of the PIB required the Government to divest 30% of its shares to the public. The revised 2017 version now requires no less than 10% of shareholding to be divested in a transparent manner, within five years from the date of incorporation of the National Petroleum Company. Within ten years from the date of incorporation, no less than an additional 30% of the shares of the National Petroleum Company shall be divested to the public, totalling 40% in all. The increase from 30% to 40% is to ‘ensure a more aggressive divestment and ultimately the transfer not less than 40% to the private sector.’