The move by the federal government to amend the Petroleum Industry Act (PIA) 2021 continues to generate disquiet in the sector with industry analysts and experts cautioning that such a move has far-reaching implications on the sector.
Besides they said it could destabilise the sector as the PIA is barely five years into its operation.
Daily Trust reports that President Bola Tinubu has approved the amendment aimed at whittling the powers of the Nigerian National Petroleum Company Limited (NNPC).
Also it was learnt that part of the proposed amendment is to vest the power and role of concessionaire of all oil and gas exploration and production assets in the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
The proposed amendment would also make the NUPRC the representative of the Federation in all Joint Venture (JV) agreements with the international oil companies (IOCs) and independent companies.
Also proposed is the removal of the Ministry of Petroleum Incorporated (MOPI) as a shareholder of NNPC, while making the Ministry of Finance Incorporated (MOFI) the sole shareholder of the national oil company.
Daily Trust reports that the federal government has JVs, Production Sharing Contracts (PSCs), Sole Risks and other contractual arrangements with the IOCs. In most cases the NNPC has 60 per cent while the IOC holds 40 per cent.
If the amendment scales through the management of these JV assets would come directly under the NUPRC.
Relevant federal agencies were said to have been notified of the proposed amendment to the PIA 2021. However, the draft of the Bill is not yet in the public domain.
However, the move is generating disquiet in the sector with stakeholders warning that the amendment might destabilize the industry just a few years into the life of the PIA.
Petroleum expert and Technical Director at Template Design Limited, Bala Zaka, expressed concerns with the petroleum industry bill before it even became an Act, saying its inability to provide a win-win situation for investors and the government led to the exodus of international companies from the onshore operations.
‘For somebody like me, those were the kind of laws that needed to be introduced and some modified so that we’re going to enjoy the benefits of activities in the oil and gas industry. That was my thought when the idea of a petroleum industry bill came up,’ he said.
He added that the law ended leading to, first of all, deregulation and a skewed deregulation that encouraged some indirect hostilities that were going to force some of the international oil and gas companies to abandon the conditions and oil fields that they have developed on land and swamp and shallow waters and only concentrate on deep offshore.
He said, ‘But when the Act came up finally, the Act ended up becoming skewed. It was very clear that the Act ended up incorporating so many things that people like me with an objective mind didn’t expect. Because some of the things we discovered are rearing their heads now. First of all, it came up with deregulation.
‘Deregulation without control. Instead of focusing on liberalisation, that will make sure we invite additional investors, but also make sure there is proper organisation so that the Nigerian government, either through NNPC or whichever body, will be able to regulate in the interest of investors and the government. It didn’t do that.’
He lamented that the Act has ended up trying to privatise all the national patrimony of citizens.
‘When you go to other countries, till this moment, you see both local and international oil and gas investors investing or carrying out peaceful activities on land concessions, shallow waters, swamps, and deep offshore.
‘But with this Act now, all of us have seen that all the international oil companies have experienced artificial business climate hostilities that have forced them to leave the concessions they had on land and swamp. Many of them have run deep offshore. And the few of them that are remaining decided to leave Nigeria. That was not the kind of petroleum industry Act that I expected.’
‘A sector can be liberalised and it will do well. In the context of the Nigerian oil and gas industry, I expected to see more of liberalisation. There is a major difference between liberalisation and deregulation. When you liberalise, you allow more players to come in, but you also make sure the powers of regulatory authorities in that country are not diluted. No country will go and allow the powers of regulatory agencies to be diluted. Once you allow their powers to be diluted, then that country or that agency or that country will be like a banana republic.
‘What we should rather do in the context of Nigeria is this. Those you have put in charge of those regulatory agencies, if they are not doing well, continue to change them until you get the right people.’
On his part, Wumi Iledare, Professor Emeritus of Petroleum Economics, said concerns regarding PIA amendments shortly after its enactment may lead to policy instability, discourage long-term investment, and be perceived as benefiting select interests, thereby undermining the act’s original objectives of stability and investor confidence.