Time to Take Back Our Oil

BEHIND THE FIGURES

BY IJEOMA NWOGWUGWU 

Exactly a year ago, a news story published in quite a few papers failed to gain traction. Senator Omotayo Alasoadura who chairs the Senate Committee for Petroleum Resources (Upstream) was reported to have revealed how he resisted pressure from unnamed “high places” to kill the Petroleum Industry Governance Bill (PIGB). According to Alasoadura, he rejected huge sums of money offered as bribe in order to frustrate the passage of what has essentially become an offshoot legislation of the omnibus Petroleum Industry Bill (PIB), first presented by the Umaru Yar’Adua administration 10 years ago to the National Assembly. The senator representing Ondo Central Senatorial District spoke of the political landmines that he had to sidestep and how he had to lobby his colleagues who were resistant to the PIGB to get it passed by the Senate.

For those of us who had followed the lack of progression of the original PIB, Alasoadura had not said anything new. That the PIB and its revised version, presented by former petroleum minister, Mrs. Diezani Alison-Madueke, never got passed by the sixth and seventh National Assemblies arose from the fact that the legislators succumbed to alleged bribes and the pressure brought to bear by the same people in “high places” and operators in the oil and gas sector. Often enough, the lobby to quash the PIB, and later the PIGB, did not just come from compromised legislators but from officials of government-run parastatals, the petroleum ministry inclusive, whose preference was to maintain the status quo. They were beneficiaries of the inefficiencies, rot and corruption in the system, after all. So why would anyone in the Ministry of Petroleum Resources, Nigerian National Petroleum Corporation (NNPC), Petroleum Inspectorate, Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA), Petroleum Equalisation Fund (PEF), the international oil companies, et al, who had been living fat off the food of the land support the passage of a legislation that would reform and plug the loopholes in the system?

Unsurprisingly, our current so-called petroleum minister, President Muhammadu Buhari, has towed the well-trodden path of others before him. The reason he proffered to the legislature for vetoing the PIGB was abundantly evident. Buhari reportedly withheld his assent to the legislation because it would whittle down the powers of the petroleum minister and transfer same to the technocrats who will be appointed to run the National Petroleum Regulatory Commission (NPRC) – the industry regulator envisaged by the bill. Throwing more light on the president’s ill-advised decision, his National Assembly liaison, Senator Ita Enang, clarified a day after the news of Buhari’s veto sent shockwaves through the system, that the NPRC would have been allowed to retain 10 per cent of the funds it generates to the detriment of the three tiers of government and the Federal Capital Territory. Citing constitutional and legal breaches, Enang went on to say that the PIGB also seeks to expand the scope of the Petroleum Equalisation Fund (PEF) in a manner that is “antithetical to the policy of his (Buhari’s) administration and consequently stipulates provisions that are in conflict with an independent PEF”. The third reason was that the PIGB consists of some legislative drafting concerns, which he said had the capacity to create ambiguity and conflicting interpretation.

While the third concern raised by the executive could be rectified by the legislature by revisiting the PIGB and expunging and consolidating potential areas of ambiguity and conflicting representation, the other reasons given by the presidency were absolute bunkum. The PIGB came into being with the input of all stakeholders in the industry, including the petroleum ministry that Buhari supposedly superintends, in an effort to unbundle what was deemed an unwieldy PIB that had been pushed back and forth between the executive and the parliament for years. With the latter’s decoupling into smaller more manageable legislations comprising the PIGB, the Administration Bill, Host Community Bill and the Fiscal Bill, the architects behind the unbundling were of the view that badly need oil and gas sector reforms would be easier to implement and manage through guided legislations for specific aspects of the industry.

Hence, the PIGB, the first of the four bills, was passed in March 2018 by the National Assembly to provide the legal framework for the creation of commercially oriented and profit-driven petroleum entities, to ensure value addition and elevate the petroleum industry to international standards, through the creation of efficient and effective governing institutions with distinct and separate roles.  

In summary, the bill envisages that the Ministry of Petroleum shall be responsible for setting the overall policy and strategy for the oil and gas sector. It also grants the minister preemptive rights over all petroleum products in the country in the event of a national emergency. However, the powers to grant, renew, amend, extend or revoke licences for oil and gas acreages were taken away from the minister. The bill also provides for the establishment of the NPRC, which shall replace the DPR, Petroleum Inspectorate and PPPRA. It shall be wholly independent, and shall among other functions, be responsible for regulating the entire gamut of the oil and gas sector as well as the conduct of bid rounds and or processes for the award of any licence or lease required for oil and gas exploration and production.

Commercial institutions contemplated by the PIGB include the Nigerian Petroleum Corporation (the successor company of NNPC) and the National Petroleum Assets Management Company (NAPAMC), which shall take over and manage all the assets currently held by the NNPC under the Production Sharing Contracts (PSCs) and back-in-right provisions of the Petroleum Act of 1969. Ancillary institutions include the PEF; Ministry of Petroleum Incorporated (MOPI), to hold on behalf of government, shares in the successor commercial institutions that shall be incorporated pursuant to the provisions of the PIGB; and the National Petroleum Liability Management Company (NAPLMC), which shall take over the stranded assets and liabilities of NNPC and DPR.

From the condensed outline of the PIGB above, it is apparent why a Buhari would not support the passage of the bill. For him, he sees the petroleum ministry as his personal fiefdom whose powers must be retained so that his office can continue to dispense favours and patronage in the oil industry. It must be added here that from the outset of his administration, Buhari, in his capacity as petroleum minister, has never uttered a word about the PIB, or its unbundled elements. This could be blamed on a number of factors: The first is the absence of mental wherewithal to understand the need for oil and gas sector reforms. The second is his inordinate old school belief in the concentration of political and economic controls in the state. The third is the need to keep government institutions in the oil sector as bastions of sleaze and slush funds.

Even the attempt by the administration to hide under constitutional and legal breaches does not hold water. That the NPRC shall be allowed to retain a certain percentage of the revenue it generates is not strange to the laws of the Federal Republic of Nigeria. Indeed, quite a number of regulatory agencies in the country are statutorily allowed to retain a certain percentage of the funds that they make as provided for in their establishment Acts. These include the Federal Inland Revenue Service, Nigerian Customs Service, Nigerian Communications Commission, National Pension Commission, Central Bank of Nigeria, etc. The framers of these Acts included such clauses in order to grant them the autonomy that they needed to operate efficiently and effectively. That the PPPRA has not been able to function with the same independence and has operated without a governing board for years can primarily be traced to regulatory capture. The agency was subsumed hook, line and sinker by the petroleum ministry from the days of Alison-Madueke and has not been able to wriggle out of the stranglehold ever since.  

This aside, it will be misconceived for the executive arm to insist that the NPRC should be dependent on budgetary allocations that are often dispensed at the pleasure and discretion of the finance ministry. A completely independent NPRC with a strong governing board is desirable for the oil and gas sector for so many reasons, chief of which is that it will gradually bring to an end the discretionary award and revocation of oil industry leases, licences, permits and authorisations.

One notable snag, however, with the NPRC and by extension the PIGB is that the proposed industry regulator shall still be responsible for establishing the framework for determining the fair market value of petroleum products and tariffs for gas processing and transportation. This in itself suggests that the legislature is aiding the executive arm in its price fixing regime – one of the major impediments to growth and investment in the down- and midstream oil and gas subsectors. It need not be over-stressed that the price fixing of petrol is one of the primary reasons for the bottomless black hole in the books of NNPC, it is the same reason the country keeps wasting billions of dollars on subsiding petrol, and is the main reason for the revenue shortfalls accruable to the three tiers of government. This same provision in the PIGB further raises the issue of ambiguity over the pricing of diesel and aviation fuel – two petroleum products that have long been deregulated by past administrations. That is what the executive arm of government needs to focus on, not the 10 per cent of total revenue that shall be retained by the NPRC.    

However, all hope is not lost for the PIGB. The legislators should take Buhari’s veto of the legislation as a challenge to salvage the oil industry from the decay that has enveloped it for decades. At the very least, they should heed the cries of their state governors who have been doing battle with the NNPC for several years over lack of transparency and under-remittances to the Federation Account. They should seize on the president’s lack of foresight and knowhow by cleaning up the bill and amending any areas of ambiguity and conflicting representation, including fortifying and shielding the position of the chief executive of the NPRC with the inclusion of a provision requiring the approval of two-thirds of the Senate before the person can be removed from office by the president.

The long and short, Buhari’s veto should be considered irrelevant and of no consequence whatsoever to a bill whose time has come. In any case, he never had any interest in it in the first instance. Enough of the pussyfooting with oil sector reforms. It’s time we send the right signals to serious investors who have kept investment decisions on new projects in abeyance or departed for other climes due to the uncertain climate fostered by successive administrations on the sector. With the powers vested in them by the constitution, the National Assembly must as a matter of urgency override President’s Buhari’s veto of the PIGB!