Nigerian Senate Plenary of 1st July , 2021: Passes Petroleum Industry Bill, 2021
Last Updated on July 31, 2021 by Memorila
After weathering a storm that threatened to tear it apart, Nigerian Senate Plenary of 1st July, 2021 passed the Petroleum Industry Bill, 2021
After over twenty years of trying to regulate and innovate the petroleum sector through the Petroleum Industry Bill, the 9th Nigerian Senate on Thursday July 1, 2021 finally read for the third time and passed the bill. The Senate President, Ahmad Lawan, remarked in a statement afterwards that the “demon” behind the non-passage has finally been defeated and buried.
Before the Senate moved into a Committee of Whole to deliberate on the report of the Joint Committee on Petroleum (Downstream), Petroleum (Upstream) and Gas Resources, the Senate Leader, Abdullahi Yahaya (Kebbi North, APC) moved a motion to admit the Minister of State Petroleum Resources, Timipre Sylvia, and the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari into the chamber. The motion was seconded by the Minority Leader, Enyinnaya Abaribe (Abia South, PDP).
There was also a petition by Senator George Sekibo (Rivers East, PDP) from a corporate constituent over alleged land grab, which was referred to the Committee on Ethics, Privileges and Public Petitions. The committee is expected to report back within four weeks.
On the votes and proceedings of the previous day, Wednesday, 30th June, 2021, Senator Degi Biobarakuma (Bayelsa East, APC) moved for their adoptions and was seconded by Senator Binus Daoda Yaroe.
What is Petroleum Industry Bill?
The oil and gas industry has a significant impact on the Nigeria’s economy. According to KPMG, “Though the industry contributes less than 10% to the country’s gross domestic product, it contributes about 90% of the foreign exchange earnings and 60% of total income.”
According to the report by KPMG, for the past 20 years, there have been various attempts at reforming the industry. However, none of these efforts has yielded any tangible result until the re-introduction of the Petroleum Industry Bill (PIB) in 2020.
The report further stated that prior to now, there were various iterations of the PIB. The PIB started as an omnibus bill and was later divided into 4 separate bills before emerging in 2020 as a consolidated bill.
It also stated that previous attempts at passing the PIB in 2009, 2012 and 2018 failed because of factors such as lack of ownership, misalignment of interests between the National Assembly and the Executive, perceived erosion of ministerial powers, stiff opposition by the petroleum host communities and push back by investors on the perceived uncompetitive provisions in those versions of the bill.
Reporting from the National Assembly complex, QueenEsther Iroanusi of PremiumTimes, wrote that the senators passed the Petroleum Industry Bill, 2021 after weathering a storm.
According to her, the Senate approved a funding mechanism of 30 per cent of NNPC’s profit from oil and gas for frontier basins, which will be for oil exploration in the frontier states.
But she added that, “in the report seen by PREMIUM TIMES the states referred to as ‘frontier basins’ were not clearly stated”.
In a press release, the special assistant (press) to the Senate President, Ezrel Tabiowo, stated that the chairman of the Joint Committee, Senator Sabo Muhammed Nakudu (Jigawa South West, APC), delivered a presentation on the Committee’s report moments before the upper chamber held a closed session to receive briefing by the Petroleum Ministerand the GMD of the NNPC. The close session lasted for about 1 hour, 30 minutes.
Senator Nakudu noted further that the Petroleum Industry Bill consists of five distinct chapters which include Governance and Institutions; Administration; Host Communities Development; Petroleum Industry Fiscal Framework; and Miscellaneous Provisions comprising 319 clauses and 8 schedules.
According to the Senator, the bill’s passage and eventual assent into law would strengthen accountability and transparency of NNPC limited as a full-fledged company under statutory/regulatory oversight with better returns to its shareholders – the Nigerian people.
Exploration of frontier basins, creation of regulatory agencies
The Senator added that the Joint Committee’s recommendation on Frontier Basins recognized the need for Nigeria to explore and develop the country’s frontier basins to take advantage of the foreseeable threats to the funding of fossil fuel projects across the world due to speedy shift to alternative energy sources.
According to Tabiowo’s statement, during a clause-by-clause consideration of the bill, the upper chamber approved the funding mechanism of thirty percent of NNPC limited’s oil and gas profit in the production sharing, profit sharing, and risk service contracts to fund exploration of frontier basins.
The Nigerian Senate also approved Clause 4 of the bill which seeks the establishment of the Nigerian Upstream Regulatory Commission to provide technical regulatory functions that would enforce, administer and implement laws, regulations and policies relating to upstream petroleum operations.
The Commission would, among others, ensure compliance with applicable national and international petroleum industry policies, standards and practices for upstream petroleum operations; and establish, monitor, regulate and enforce health, safety and environmental measures and standards relating to upstream petroleum operations.
In addition, the 9th Senate, while adopting the Committee’s recommendation to retain provisions in Clause 29 of the bill, approved the establishment of the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
Clause 29(3) empowers the Authority to be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry in Nigeria.
Its function include implementing Government policies for midstream and downstream petroleum operations as directed by the Minister; and to promote, establish and develop a positive environment for international and domestic investment in midstream and downstream petroleum operations.
Others are to ensure strict environmental implementation of policies, laws and regulations for midstream and downstream petroleum operations; and to develop and enforce a framework on tariff and pricing for natural gas and petroleum products.
Incorporation of NNPC Limited
The recommendation of the Joint Committee was amended in Clause 52(7d) to ensure that all monies received from gas flaring be channeled for the purpose of environmental remediation and relief of the host communities as against the development of infrastructure in midstream gas operations.
The upper chamber, however, retained the recommendation of the Joint Committee in Clause 53 which empowers the Minister of Petroleum Resources to incorporate the Nigeria National Petroleum Corporation as a limited liability company to be known as NNPC Limited, six months after the commencement of the Act.
Accordingly, the adopted Clause 53 mandates the Minister of Petroleum Resources at the incorporation of NNPC Limited, to consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted, which would form the initial paid-up share capital of NNPC Limited.
Consequently, the Senate approved ownership of all shares in NNPC Limited to be vested in the Government at incorporation and held by the Ministry of Finance Incorporated on behalf of the Government.
Bone of contention
However, the members of the upper chamber had a rowdy session a motion was moved to review downward the Joint Committee’s recommendation that 5 percent be paid as contribution to the host community development fund.
According to Tabiowo, Senators in the majority voted for 3 percent contribution to the host communities, following an amendment to Clause 240(2) by Senator Ahmad Babba Kaita (Katsina North, APC), which was seconded by Ibrahim Gobir (Sokoto East, APC).
The approval of 3 percent for host communities represents an upward review of 0.5 percent from the previous 2.5 percent contribution to the host community development fund.
Efforts by the Deputy Senate President, Ovie Omo-Agege (Delta Central, APC), Senators James Manager (Delta South, PDP), George Thompson Sekibo (Rivers East, PDP), and Albert Bassey Akpan (Akwa-Ibom North East, PDP) to demand an upward review met a brick wall from lawmakers.
In his plea, Senator Omo-Agege had remarked, “Mr. President, for us in the Niger Delta, there are three key areas that are of much interest to us… On the whole, the major trust for pushing for this Bill is for us to get a law in place that will create the enabling environment for foreign investors to come with their money to invest. This Bill as originally conceived provided 2.5% from the company to the host community trust fund. But because of your Leadership, they have been able to move this up by 5% – contribution by set up companies. I understand we cannot get the 10% but I will plead if there is a chance we can go above 5%, I will be grateful.”
On his part, Senator Sani Musa added that “the oil industry all over the world is in turmoil. I believe this Committee has done a very beautiful job and what they have recommended is something that will bring unity to this country.” He thereafter appealed to his colleagues to pass the Bill without rancor.
But in his move to sustain his agitation for an increase in contributions to host communities, Senator Sekibo relied on Order 73 of the Senate Rule and called for a division.
The Senate Leader, Yahaya Abdullahi (Kebbi North, APC), however, prevailed on Sekibo to withdraw his call for division, and reminded him of the commitment of Senators of the 9th Assembly in fostering unity while keeping in mind their obligation at all times to protect the national interest.
The Senate Leader’s plea was accompanied by a subtle reaction from the Senate President, Ahmad Lawan, who reminded Sekibo of the overwhelming support demonstrated by lawmakers who had earlier approved that host communities receive remediation and relief from monies accruing from gas flaring in the PIB.
Sekibo at this point withdrew his earlier call for division.
Passage of the Petroleum Industry Bill, 2021
The Senate President, Ahmad Lawan, in his remarks after the eventual passage of the PIB, congratulated the 9th Assembly and Joint Committee on Downstream Petroleum Sector, Petroleum Resources (Upstream), and Gas for the “tremendous and historical achievement of passing the long awaited Petroleum Industry Bill.”
According to him, the passage of the PIB was an indication that the “demon” behind its non-passage in the past had been finally defeated.
He added, “I must commend the leadership of the House of Representatives, too, for providing leadership to ensure that our Joint Committees in the Senate and the House work together to produce the report that we have just passed.
“Let me say that the Ninth Senate and, indeed, the Ninth National Assembly has achieved one of its fundamental items on the legislative agenda.
“We promised Nigerians that we will do our best to pass the PIB that has defied passage or defied assent. At least, the demons are being defeated in this chamber.”
Lawan appealed to President Muhammadu Buhari to give expeditious assent to the bill when it is eventually forwarded to him by the National Assembly.
The plenary of July 1, 2021 was afterward adjourned till Tuesday, 6th July 2021.