An oil and gas expert in commercial integration and business venture unit, Taaj Shobanjo, has boldly made it clear that the recently passed Petroleum Industry Bill (PIB) did not alter the definition of host community as he said is bandied in the press and social media.
The nation only gained about five per cent of the over $100Bn investment that headed to Africa oil/gas sector in the past 10 years due to absence of a law while the Bill tarried. Also, the pipelines in the oil region are over 24,000, compared with about 10,000 that can be traced outside the oil region which incidentally is Trunk A pipelines that only carries crude to Kaduna. It has also been made clear that the Bill cannot be changed to accommodate agitation but can only undergo amendment when it is signed into law.
Answering questions on a radio stations dedicated to Niger Delta affairs, Canvas, Shobanjo read out directly from the Bill as it concerns Host Communities status and said the PIB defines Host Community as a community that is host to a sedlog (sedimentary log).
He explained thus: “A sedlog is defined as the holder of a lease. If you go by that definition, the bill does not aim to make people along pipeline right of way host communities, going by the text of the law. Not my interpretation but what is written in the bill.”
On how it would be interpreted, he said the Bill is providing legal backing to what is going on today. “I will not expect for example a lot of difference in the host community’s configuration; different from what it is today. No. So, if today people along Pipeline Right of Way today are not there, the PIB won’t put them there.”
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He also said the Bill says the Host Community Fund will be implemented by setting up a Trust. “Trust is set up; this then employs management committee. They will effectively run the host community fund; then community advisory body. The community will have a lot of say and it will run like a company because it would be registered with Corporate Affairs Commission (CAC) with a lot of control in there. Regulator also can go in. There is fixed time limit too, and several safeguards to ensure that it is not mismanaged.”
Responding to questions from callers, he said it is a win-win and it is good to give it a chance; “And if we don’t like it, we can amend it as we go on. Communities need to keep the discussions going, hold the people in affairs accountable so that they know what we – communities – want.”
Shobanjo described the PIB as a bill aimed at encouraging investments. “Oil and gas investments are typically multi-year projects. Therefore, the ultimate benefit of this Bill will not really be felt until about four to five years down the line.
“The agitations that are related to the differences on the versions of the bill passed in the two houses can be accommodated. But those agitations that don’t relate to the differences will have to be treated through amendments to the Act. Like any law, it can be passed today and amended tomorrow. There is nothing cast in stone in any law.
The economist, finance and commercial professional who has worked in key oil and gas centres of Nigeria (Niger Delta, Abuja and Lagos – and on international assignments) reminded Nigerians that the Bill had waited for 20 years. He made it clear that the Bill is not perfect, not for the host communities, not for investors, and not for the government. “Let everybody keep working on a good win-win solution for everyone. It provides legal framework for what does not exist today, like the NNPC becomes a company – accountability, profit-seeking, regulators more strengthened; the industry would have a certainty of law as a minimum to know on the basis that they are investing.”
He also said the implementation would be guided by additional regulations and guidelines issued by the minister and the new regulator over time; Some immediately, others will be made later on.
He explained why investors shunned Nigeria all this while, saying no investor would put his money in an environment that is yet to get a law because the law may change midway. He said a major gain is that what an oil company would now do in a host community is backed by law and the amount is specific.
He said: “The Bill then prescribed a needs assessment what the communities really need; and it is what these communities need that the money would be spent on. The Bill provided that about 75 per cent of the fund should be spent on Capital Expenditure; things that would serve the communities for a long time. On this, 20 per cent is to be reserved; and 5 per cent is on their routine and Opex (operating expenses) activities. Essentially, the Bill provides structure around what currently exists outside of the law. To that extent, I think that it is good.”
On the vexed issue of percentage good for host communities, Shobanjo explained thus: “Much has been said about two and half, three, five and five per cent. The percentages are good; the higher, the better, but is it percentage of what? That is the key question which I think is not well spelt out in discussions in the public domain.
“If it is of profit, as was in previous versions of the Bill, your profit goes up and down depending on what the market conditions are. But for this Bill, the percentages passed by the Assembly is based on OPEX – the money that you must spend. So, if you are getting a share of my OPEX, you are going to get money all the time.
“Whether I make profit or not is secondary. You must get something because of the basis. So, I think there should be a bit of more discussion on this basis of the percentage. I think that it is important because that is the fund available to them, in addition to what may get to them from government, etc.”
Shobanjo said PIB touched two critical areas to the benefit of host communities; setting aside a fund for environmental remediation should an oil company not do what the law said; and a fund to handle abandonment when an oil well is no longer yielding.
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