On Monday 16th August, 2021, President Mohammadu Buhari signed the Petroleum Industry Bill (PIB) 2021 into law thereby replacing the Petroleum Industry Bill 2020. The oil and gas industry is a highly important part of the nation’s economy as it contributes about 60% of the total income of the nation. Therefore, it is only pertinent that national matters or anything pertaining to this industry be taken very seriously. What does the assenting of this new law signify? The dawn of a new era in the way oil and gas business is run in Nigeria.
The PIB is a combination of various Nigerian laws on petroleum i.e. the monetization and protection of the nation’s oil and gas resources and it has gone through several changes since its creation in 2008. One of the benefits of a new Petroleum Industry Bill include increased investment opportunities as the industry will be more regulated and thus attractive due to these changes. Another major benefit of the enactment of a new PIB is to ensure that every official and institution in the industry fully understands their responsibilities and are able to fulfill their roles in such a way that the NNPC becomes a highly lucrative commercial endeavor. The creation of a new set of petroleum laws an imperative action that is long overdue because the old laws were no longer environmentally compliant and most of them were not globally competitive.
The move towards enacting this new law is a laudable one even though there is really no provision on transitioning from the current usage of fossil fuel to clean renewable energy as seems to be the global trend.
Below are some of the key changes that have been made to the Petroleum Industry Bill 2021:
- Establishment of a fund for the exploration of unassigned frontier basins across the country such as Chad Basin, Sokoto Basin and Benue Trough. This fund is 30% of Profit from oil and gas sale made by NNPC Limited.
- Creation of the National Petroleum Corporation Limited to be incorporated under the Companies and Allied Matters Act within six months of the bill coming into effect. The institution now has to work like any other organization aimed at making money with the exception that ownership of shares is held by the Ministries of Finance and Petroleum on behalf of the vested owner, the government. NNPC automatically becomes NNPC Limited with all the interests, assets and liabilities transferred to the new company and all its employees consequently becoming its workers too.
- Creation of a Host Communities Development Trust Fund to be registered under the Companies and Allied Matters Act after 12 months of the commencement of the bill.
- Regulation of the Oil and Gas industry by The Nigerian Upstream Regulatory Comission (“The Commission”) and The Nigerian Midstream and Downstream Petroleum Regulatory Authority (“The Authority”).
- Management of Environmental and Gas Flare depending on the size of operation and the risk involved.
- Creation of New Licenses which are the Petroleum Prospecting Licence, Petroleum Mining Lease and Petroleum Exploration Licence.
- Voluntary agreement between buyers and sellers on gas prices even though regulation is still a function of The Authority.
- The Commission and The Authority are both to be run by a Governing Board who will handle general administration and other policy-related matters.
- Permission of companies with refining license as well as international credibility for trading in petroleum products to import any product shortfall that goes unmet by local refineries.
- Limitation of the discretionary powers of the Minister of Petroleum to grant and revoke licenses. This power is now subject to the recommendations of The Commission.
- Creation of other funds such as Environmental Remediation Fund based on size of operations, Decommissioning/Abandonment Fund based on periodic appraisals and Midstream and Downstream Gas Infrastructure Fund which is slated at 0.5% of wholesale price of petroleum and natural gas products sold in Nigeria.
- Calculation of Royalty based on price and production even though Nigerian refineries have preferential royalty rates.
In conclusion, it is obvious that the changes that have been made to the Petroleum Industry Bill are much needed in keeping with the times and current world practices. The provisions contained in the new Bill as drafted by the National Assembly are quite commendable but like all newly enacted laws, we cannot begin to guage how effective the laws will be if we have not implemented or enacted them. Other than that, the motives behind the creation of the bill and the enactment itself promise a very exciting development in the oil and gas industry.
Ajayi Adewale (2021) Petroleum Industry Bill (PIB) 2021 – A Game Changer? KPMG Nigeria. Available at https://www.mondaq.com/nigeria/oil-gas-electricity/1093178/petroleum-industry-bill-pib-2021–a-game-changer-update
Thomas David (2021). What you need to know about Nigeria’s Petroleum Industry Bill. African Business Blog. Available at https://african.business/2021/07/energy -resources/what-you-need-to-know-about-nigerias-petroleum-industry-bill/
Bakare Majeed (2021) What you need to know about proposed law to regulate Nigeria’s oil industry. Premium Times blog. Available at https://www.premiumtimesng.com/news/headlines/472172-pib-what-you-need-to-know-about-proposed-law-to-regulate-nigerias-oil-industry.hyml