An Analysis Of The Petroleum Industry Governance And Institutional Framework Bill 2015 – Part Two

THE MINISTER (CONTD.)

2) The Bill has done away with the Minister’s advisory and approval role stipulated in the PIB before the President can appoint the Board of the various agencies. The President is now empowered to appoint the executive and non-executive members of the Board of the Commission subject to confirmation of the Senate. This is another laudable improvement to the old Bill and extant legislation where the Chief executive of the Petroleum Inspectorate is appointed by the Petroleum Minister, (albeit with the approval of the National Council of Ministers) and is also subject to the direction and control of the Minister (and by extension, the Department of Petroleum Resources (“DPR”) and its Director General).

3) The power to make regulations which is currently vested in the Minister by virtue of Section 9 of the Petroleum Act and maintained by the PIB has been also been removed and vested instead in the Commission as the regulatory body for the industry by Section 8(1) of the Bill. This provision deals specifically with regulations necessary to give proper effect to the provisions of the Bill and would not affect the provisions of other laws which grant the Minister powers to make regulations such as, the Nigerian Oil and Gas Industry Content Development Act, 2010.

4) Although the Bill maintains the Minister’s rights of pre-emption, a notable change has been made to this provision which is in keeping with current economic realities. Failure to comply with the Minister’s direction issued in respect of a right of pre-emption to petroleum and petroleum products brought on by a state of national emergency or war and obstruction or interference with the exercise of the powers of the Minister in this regard under the Petroleum Act attracted a maximum fine of NGN2,000 and NGN200 or a maximum prison term of six months or both respectively upon conviction. Under the PIB, the maximum fines for the two offences have been increased to NGN2,500,000 and NGN5,000,000 or a maximum prison term of two years or both respectively. The Bill however increases the fine for non-compliance to a maximum of NGN10,000,000 or a maximum prison term of six months or both; and for obstruction, a maximum of NGN5,000,000 or a maximum prison term of six months or both.

Under extant legislation, the Petroleum Act grants the Minister exclusive and unfettered power to grant licenses and leases and amend, renew, extend or revoke same pursuant to the provisions of the Act. The Bill, much like the PIB (safe for the replacement of the word “advice” with “recommendation”), fetters the discretion of the Minister to issue licenses and leases for petroleum exploration and production activities. The Minister may now only exercise such powers based on the recommendation of the Commission. Currently, the grant of licenses is governed by the Petroleum (Drilling and Production) Regulations and applications are made to the Minister. It appears this would no longer be the case and such applications would now be required to be made to the Commission. Section 25 of the Petroleum Act entrusts the Minister with discretionary powers to revoke a license or lease based on certain criteria. Under the Bill, this power may only be exercised based on recommendations made by the Commission in this regard.

Accordingly, Part 6, Section 84(1) of the Bill provides that the provisions of all existing enactments or laws, including the Petroleum Act, Petroleum Profit Tax Act and the Companies and Allied Matters Act, shall be read with such modifications so as to bring them into conformity with the Bill. We expect that regulations would be made which clearly defines new procedures to be adopted.

PART THREE – ESTABLISHMENT OF THE NIGERIA PETROLEUM REGULATORY COMMISSION

The Bill, by its Section 4, establishes a body to be known as the Nigeria Petroleum Regulatory Commission as the sole regulatory institution for the Nigerian oil and gas industry across the various value chain.

Currently, this role is performed by the Ministry of Petroleum Resources with Nigerian National Petroleum Corporation (“NNPC”) influence. This is in addition to a plethora of other agencies regulating certain aspects of the industry. The Ministry carries out a majority of its role as the industry commercial and technical regulator (particularly those relating to licensing and operations) through one of its Ministry department, the DPR, which was carved out of the Petroleum Inspectorate Department of NNPC. Some of the issues bedeviling this arrangement have been; the consistent lack of clear and transparent regulatory framework and strong, independent institutions, and interference from NNPC which doubles as a quasi-regulator rather than a solely commercial entity, as well as overlapping of roles by various agencies.

Previous versions of the PIB have sought to deal with these issues through the creation of agencies with mandate to regulate both the technical and commercial aspects of the three petroleum sector value chain: upstream, midstream and downstream.  This was laudable in itself although certain questions were raised in respect of overlapping roles leading to possible multiplicity of administrative oversight along the value chain.

The Bill seeks to go a different route by creating instead, one strong regulatory body which would be responsible for both the technical and commercial aspects of industry regulation. The Commission is expected to assume all the rights, interests, obligations and liabilities of the Petroleum Inspectorate, the DPR, and the Petroleum Products Pricing Regulatory Agency (“PPPRA”), and shall be run by a governing Board drawn from industry experts constituted of a non-executive Chairman, one non-executive Commissioner, an executive Vice Chairman, three executive Commissioners (all to be appointed by the President subject to Senate confirmation); and one representative each who shall not be below the rank of a director from the Ministry of Petroleum Resources, Ministry of Finance and Ministry of Environment. The Minister is not required to chair this Board and indeed has limited control over its operations.

 

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