Host Communities Trusts: NUPRC Prequalifies 19 Fund Managers, Incorporates 41 Associations

•Says insecurity, low investment constraining Nigeria’s 2.5m bpd allowable target

Emmanuel Addeh in Abuja

Nigeria got closer to its search for lasting peace in Nigeria’s oil-rich Niger Delta yesterday, with the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) disclosing that it has now pre-qualified 19 fund managers who will administer the 3 per cent allocation to Host Communities Development Trusts (HCDT) in the region.

The Petroleum Industry Act (PIA) 2021 introduced the petroleum HCDT under the law which in part is meant to hasten the development of the economic and social infrastructure of communities in the petroleum-producing areas.

The objectives of the associations include fostering sustainable prosperity within host communities, providing direct social and economic benefits from petroleum operations to host communities and enhancing peaceful and harmonious co-existence between licensees or lessees and communities.

In a keynote address during a sensitisation workshop on implementing the development trusts in Abuja, the Chief Executive of NUPRC, Mr Gbenga Komolafe, noted that aside prequalifying the fund managers, 41 communities trusts have now been incorporated with the Corporate Affairs Commission (CAC).

Komolafe, who was represented at the event by the Executive Commissioner, Economic Regulation & Strategic Planning, NUPRC, Dr Kelechi Ofoegbu, noted that the objective of the workshop was to create further awareness on the PIA and provide updates on the commission’s activities towards the implementation of the regulations for Nigeria oil and gas industry.

In addition, Komolafe noted that it was meant to provide a clear roadmap for the implementation of the HCDT to enhance peaceful and harmonious co-existence between oil and gas industry operators and host communities, and ultimately support the development of host communities.

According to him, while the commission is prioritising efforts towards increasing oil and gas production and ensuring maximum federation revenue through the optimisation of oil and gas value chain, the efforts had been constrained by myriad of challenges.

He noted that the problems ranged from insecurity, low investment to the de-prioritisation of funding of hydrocarbon development arising, from the ongoing energy transition.

“ Currently, Nigeria has the technical allowable capacity to produce about 2.5 million barrels of oil per day. However, arising from the highlighted challenges, our current production hovers around 1.5 million barrels of oil and condensate per day,” he added.

To further stem the tide of sabotage and third-party interferences on oil and gas critical infrastructure, the PIA, Komolafe said, has domesticated the protection of Nigeria’s oil and gas infrastructure to the host communities.

He explained that one critical milestone under the PIA is the incorporation of HCDT by the settlor provided for in Section 235 as well as appointment of Board of Trustees (BoT) by the settlor in consultation with the host communities. The settlors are the oil and gas companies operating within host communities.

Komolafe stressed that Section 240 (2) of the PIA stipulates that each settlor, where applicable through the operator, shall make an annual contribution to the applicable host communities development trust fund of an amount equal to 3 per cent of its actual annual operating expenditure of the preceding financial year in the upstream petroleum operations.

Komolafe pointed out that Section 247 of the Act requires the BoT to set up a management committee which shall be responsible for the general administration of the fund.

The management committee, he said, in turn is required to set up an advisory committee, who advises on activities as well as monitors and reports progress of projects being executed in the community.

 He recalled  that the Act requires that the host communities should be represented in the board of trustees, management committee and advisory committee.

Furthermore, he stated that Section 244 of the Act also provides an allocation formula upon which the BoT shall on annual basis allocate sums of money from the HCDT trust fund.

Komolafe stated that while 75 per cent will go to the capital fund to be disbursed for projects in each of the host communities, 20 per cent will be kept as the reserve fund to be invested for the utilisation of the host communities development trust whenever there is a cessation in the contribution payable by the settlor.

In addition, an amount not exceeding 5 per cent, he pointed out, will be utilised solely for the administrative cost of running the trust and special projects.

According to him, it further empowers the commission to make regulations on the administration, guide and safeguard the utilisation of the trust fund and have the oversight responsibility for ensuring that the projects proposed by the board of trustees are implemented.

In exercising the powers, the commission, Komolafe stated, had consulted widely with industry stakeholders in line with Section 216 of the PIA, 2021 and on June 28, 2022 unveiled the regulations as well as the template to give meaning and intent to the spirit of the Act.

“With the regulations and template in place, we have now defined clear navigational path regarding the administration, management, and allocation of funds for development of the host communities as well as clear grievance resolution mechanism for settlement of disputes.

“So far, the commission has successfully approved 75 Host Community Development Trusts out of which 41 have been fully incoorated by the CAC.

“We have also prequalified a total of 19 fund managers and commenced the process of establishing a baseline of ongoing community development projects, in preparation of ensuring the migration of such into the HCDTs,” he stated.

 The NUPRC chief executive further said that the commission has in partnership with an ‘OEM’ developed an industry intelligent, digital automated platform for reporting and monitoring the HCDT for transparent administration of the host communities provisions of the PIA.

Komolafe explained that the portal has been designed to meet specific requirements of HCDT as enshrined in the PIA and will aid all stakeholders to fulfil their obligations to host communities and promote accountability and transparency in the management of the programme as well as enable quick feedbacks from the stakeholders and the public for the commission to carry out its regulatory oversight effectively.

He stressed that the commission shall continue to provide requisite support, and guidance for the full implementation of the law and urged all stakeholders to continue to work together to ensure the successful implementation of the PIA.

The OEM company which gave a rundown of how the portal will work, stated that it will mitigate penalties as well as reduce costs for the settlors as well as allow the regulator real-time monitoring and carry out compliance oversight on the trust fund.