Petroleum industry act: Matters arising

A new dawn was ushered into the Nigerian petroleum industry the day President Muhammadu Buhari signed the Petroleum Industry Bill (PIB) into law. Now the Petroleum Industry Act (PIA), mixed feelings have so far greeted the signing of the document into an Act.

Those who welcome the Act are happy because to them, the nation’s energy industry is no longer rudderless. Before this epoch-making incident, which was the signing into law of the PIA, Nigeria’s petroleum industry was governed by the Petroleum Act of 1969 and other obsolete legislations.

Again, this was a document introduced over two decades ago. The uninspiring manner successive leaderships of the National Assembly gave to the document caused Nigeria to lose over $50 billion worth of investments. During the interregnum, the oil and gas industry was inundated with news of divestments by major oil companies who viewed the absence of industry legislation as inimical to their businesses. President Buhari’s assent is expected to assure multinational oil companies of adequate protection for their business interest in Nigeria.

By and large, some new developments have emerged, which ought to be given adequate attention so that the new Act could deliver the expected benefits to all the stakeholders. Topmost on the list is the 3% allocated to the host communities. Based on UN-Energy Security, a host community is an area that falls within 50-km radius of a project site.

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Before the President signed the Bill into law, Niger Delta raised many objections as per the definition of host communities and that the 3% allotted the host community was paltry. The expectation was that the Bill would be revisited to address the concerns raised by stakeholders in the Niger Delta. Unfortunately, that was not to be. President Buhari’s assent to the Act indicated that the concerns raised by Niger Delta were unimportant.

The nation’s oil and gas industry has remained a rent seeking one, in view of the allegations of corruption that dotted the industry from the passage of the bill into law, to importation of petroleum products, and award of oil fields. And now that the industry now has an Act, its success should be based on how much rent seeking the PIA has removed and how much benefits Nigeria gets.

Sub national governments already feel short-changed. They have expressed their reservations to PIA. And what are their salient grievances? The 36-state governors are unequivocally unanimous that the recently assented Act is against the interest of the states in Nigeria. This calls for sober reflection in that, if the National Assembly could ignore the interest of chief executive officers in a federation, then whose interest does the Act protect?

The 36 governors in Nigeria see the 30% allocated to frontier exploration and 3% to host communities as inimical to the progress of the nation. According to them, those provisions have the potential to drain the Federation Account which is a common coffer for all the three tiers of government. Consequently, a committee comprising six finance commissioners drawn from each of the geopolitical zone has been set up to review the Act and pass their recommendations to the implementation committee set up by the federal government.

The Nigerian government is urged to look into the concerns of host communities and the 36 governors in the country. Failure to sincerely accommodate their concerns could flare up tempers. With Nigeria in dire need of funds, the country cannot afford to go through the route of Niger Delta militancy again. This is because for Nigeria to gain from crude oil production, two conditions must be met. First is that the crude oil prices at the international market must be above the budgetary benchmark. Currently, this is favourable to Nigeria as crude oil prices hover around $68/barrel which is above Nigeria’s budget benchmark of $40/barrel for 2021.

Another condition is the quantity of daily oil production, projected in the 2021 budget at 1.86 million per day. This is why all the stakeholders must be carried along. Any disruption to crude oil production could deny the nation of getting the benefits the rising crude oil prices offer producers in the world.

In all, the federal government should adopt inclusive management to manage the fallout of the Petroleum Industry Act (PIA).