Corporate governance, gas administration, transparency, top stakeholders’ concerns

Stakeholders in the oil and gas sector have called on the House of Representatives to review critical issues, including corporate governance for the National Petroleum Company (NPC), management of the shares of the company, and gas administration, in their consideration of  the Petroleum Industry Governance Bill (PIGB).

On May 25, the Senate passed the PIGB, wresting the power to award oil blocs from the petroleum minister and vesting it on a new regulator, the Nigerian Petroleum Regulatory Commission (NPRC). It also split the Nigerian National Petroleum Corporation (NNPC) into two limited liability companies – the National Petroleum Company and the Nigeria Petroleum Assets Management Company – to ensure efficient and effective commercial performance.

“The PIGB does not make any reference to what happens to gas administration and we think that is an issue that we require clarity about,” said Akinyemi Akingbade, Senior Manager, PwC, Nigeria, in his presentation at the company’s Oil and Gas Executive Breakfast Session, which analysed critical issues in the newly passed PIGB held in Lagos, yesterday

While there was a general consensus that the passage of the PIGB 17 years after the idea was first mooted, was a significant development, stakeholders say there are still fundamental issues that could derail the goals of the bill if they are not addressed.

“The issues around governance, for us, have always been around the discretionary powers of the minister before now. Also, the joint ventures (JVs), cash calls, how the NPC manages revenue from the extractive sector, their ability to retain certain volume before remitting the rest to the federation, the liabilities of the joint venture, these have always been major issues we have had,” said Asma’u Dahiru-Maibe, senior officer, Oil & Gas, Nigerian Extractive Industry Transparency Initiative (NEITI).

Maibe further said, “Unfortunately while the structure is seemingly okay, the issues around the JVs still remain unclear. What happens to the liabilities of the JVs? What we had hoped for, was that the JVs would actually be incorporated in an Incorporated Joint Venture (IJV) structure, so that they would operate the way the Nigerian Liquefied Natural Gas Company (NLNG) does, for instance, but that is not the case.”

On transparency, Maibe expressed another concern, “while the PIGB mandated operators to make disclosures, it also, in another section contradicted itself, by saying that every operator could determine what they want to disclose.

“What we proposed at the time, was that though not all portions of contracts should be disclosed, there should be transparency around government’s take and payments in the sector,” said Maibe.

Yemisi Awonuga, partner, energy projects, Templars, a law firm, said that while it is laudable that the NPC does not have to comply with the Fiscal responsibility Act and Public Procurement Act, removing concerns of bureaucracy, “ the other side is that if you do away with accountability and transparency, what now happens? What do you fill the void with?”

The new PIGB provides for a regulator, the NRPC, hence Yemi said, “Why not enable the commission to develop codes of governance for the sector, now that we are moving away from the old system? I’m very concerned about the asset management company. There is no divestment plan, it is going to be made a government-owned entity, 20 -40-40 shareholding structure, so for me, nothing really has changed, so we need more governance.”

Thomas Mamora, from the Major Oil Marketers Association of Nigeria, (MOMAN), who stood in on the panel for Adedapo Abidoun, chairman of  the Depot and Petroleum Products Marketers Association (DAPPMA),  said that the concern for downstream operators in the PIGB, is the provision of a single regulator for the sector.

“For me, having one regulator for the industry is wrong from the beginning. In the past, we had one regulator, known as the Inspectorate of Petroleum, if they were doing very well, the PPPRA would not have come into existence. We all know the problems of having only one regulator; it makes it too powerful and unwieldy.”

Another critical issue in the downstream segment raised by Pedro Omontuemhen, partner at PwC Nigeria, is the operation of the NPC after the NNPC has been dissolved. “Currently, it is only the NNPC that is bringing in refined products, the rest cannot bring in refined products, because the landing price of petroleum products is higher than the pump price. Really, somebody is bearing the ‘subsidy’ even if we don’t like using that word in Nigeria.

 

“That is my worry with this new arrangement, is the NPC, going to be doing all these subsidy warehousing that NNPC is now doing and still be able to run commercially? That is a big question. Will the same principle of equalising still apply with the NPC?”

Adedapo Abidoun, chairman of the Depot and Petroleum Products Marketers Association (DAPPMA) in his submission later, called for a full deregulation of the downstream sector saying that the current structure would impede the successful implementation of the PIGB.

 

ISAAC ANYAOGU