PIGB: Crowded regulatory oil space will deter investors

As lawmakers in the 9th Assembly plow through the Petroleum Industry Governance Bill (PIGB) determined to pass it before the end of June, the desire to muddy an already cluttered regulatory space should be tempered with the understanding of the wilting impact it has on the regulated and the sector

Operators say a crowded regulatory space is one of the most difficult challenges they face.

By law, the Department of Petroleum Regulation is the Technical Regulator of the Nigeria Oil and Gas Industry; responsible for the administration of all laws and regulations as well as implementing policies related to oil and gas activities in Nigeria. DPR has an overriding mandate of full supervision and monitoring of all Petroleum Industry operations carried out under licenses and leases in Nigeria.

But this has not always been the case. Other agencies including the Ministry of Petroleum Resources, the Nigerian Content Development Monitoring Board (NCDMB) and even the NNPC perform regulatory roles. The consequences are regulatory arbitrage, duplication of regulatory functions, weak regulators, slow decision making and undue political interference.

This informed the decision of the previous set of lawmakers to create a single regulator The Nigerian Petroleum Regulatory Commission (NPRC) to replace the DPR and, Petroleum Products Price Regulatory Agency (PPPRA) a the Petroleum Inspectorate and recommended the unbundling of the NNPC.

President Buhari declined assent on the excuse that it increases the revenue of the NPRC at the expenses of the various levers of government and the proposed structure of the Petroleum Equalisation Fund does not align with his government’s policies.

While these were the official excuses, the frosty relationship between the Saraki-led Legislature and the Buhari-controlled executive could have also played a role. Now that Buhari has got the pliant legislature he had always wanted, industry operators are concerned that the myopic lenses of populist fervor upon which they make laws and their fawning, almost worshipful allegiance to an executive arm, the constitution empowered them to hold accountable, may reflect in the new bill.

This set of lawmakers were responsible for amending the Deep offshore and Inland Basin Production Sharing Contract (Amendment) 2019 which requires an adjustment of the revenue due to the Federal Government production sharing contracts whenever the price of oil exceeds $20 per barrel in real terms.

Some have said the reform while it could increase government take but could be be unsuited in an environment where rivals are offering juicy terms to attract investments. The country is yet to record new investments after the passage of the Act.

In considering the new PIGB, experts say Nigeria should be looking at revamping the entire regulatory architecture so that the emphasis should not be solely on the upstream sector. It should include midstream and downstream gas to power, interstate petroleum regulation at state level and upstream regulation and the interstate regulation at Federal level.

Experts say that a smart regulation focuses on policy and process. Policy must be consistent and coherent, clear and certain, fair and non-distortive ad targeted at derisking investment.

The process of implementing regulatory decisions must address a clear need, be transparent and objective, reduce compliance burden, be consultative and subject to regular review and right of appeal.

Therefore, in designing regulation for the sector, lawmakers must temper patriotic fervor with the practical reality of an oil price environment where the scamper for investments is a real challenge.