In line with the Petroleum Industry Bill recently passed by the National Assembly, Representatives have been asked to further engage with their constituents in order to enlighten Nigerians on the bill and its components.
Following this, the Spokesperson of the House of Representatives and Member, Representing Bende Federal Constituency, Rep. Benjamin Kalu in an online engagement session with Bende constituents which held on the 4th of July 2021, participated in a question and answer session to address pertinent issues regarding the PIB.
A recap of the questions and answers by the representative:
Question by Constituents (Q): The Petroleum Industry Bill has been in the National Assembly for about a decade, what made the House decide to pass it at this time?
Answers by Rep. Benjamin (A): Exactly nine years after our independence in 1960, on the 27th November 1969 Nigeria saw the need to legislate a legal framework to regulate the oil and gas sector. This gave birth to the Petroleum Act of 1969, which has become obsolete, due to its long non- amendment. Obviously, when a piece of legislation becomes old without the needed amendments as at when due, it fails to meet the needs of the dynamic society for which it was set to serve.
Thirty-nine years later, Nigerians saw the need to introduce far-reaching reforms to bridge these gaps, and a piece of legislation known as the Petroleum Industry Bill was presented to the National Assembly in 2008, to aid the ease of doing business, employ global best practices, introduce more transparency and accountability among the institutions, make the national corporation (NNPC), more commercially viable, while ensuring that the environmental compliance was better strengthened.
For thirteen years, it has been difficult for successive governments to pass this bill due to varieties of interest which invariably has underdeveloped the sector in our country with the reported losses of over $200 billion, diverted or withheld by investors for the benefit of other more predictable climes. In NEITI’s report recently, the lack of a clear governance framework in the sector has led to the loss of $10.4 billion and N378.7 billion through inefficiencies, theft, and under remittances.
To be competitive in the global space, we must refine our legal framework, considering the current realities; the unstable oil prices, new technologies, the impact of climate change, the need of the host communities, and most importantly, the energy transition to clean renewable energy among others. To this effect, the 9th National Assembly in agreement with the executive arm contracted with Nigerians to ensure the passage of the PIB 2020. A contract that has been well kept.
On the 1st of July, 2020, both chambers of the parliament went through the clause-by-clause consideration of the bill in preparation for the third reading, which was a major achievement, although not without a call from the public to explain grey areas appearing discriminatory to the host communities while claiming that a section of the nation is set up to benefit from both the Host community trust fund as well as the Frontier Exploration Fund. The writer considers this a hasty conclusion propelled by the lack of an in-depth analysis of the bill.
Q: What is a Host Community and Who are the Host Communities?
A: Recognized by the bill firstly in chapter 3 under section 234 as “Host Communities Development” with the objectives as described in subsection 1, to foster sustainable prosperity within host communities, provide direct social and economic benefits from petroleum operations to host communities, enhance peaceful and harmonious co-existence between licensees or leases and host communities and create a framework to support the development of host communities.
In Section 318 under the interpretation section, Host Communities were defined as those communities situated in or appurtenant to the area of operation of a settlor, and any other community as a settlor may determine according to chapter three (3) of the Bill.
These communities housing the settlors’ production assets (the IOCs) and are compensated for the loss of surface use of land for exploration after the land survey is carried out.
The IOCs know their hosts at all times. There is zero ambiguity on this, as no settlor will accept funding those who are not hosting them. Surely, the IOCs have a role to play in determining this, especially when one looks at the provisions of the bill with regards to the Host Community Trust Fund and the process of setting up the organizational structure as well as the implementation guidelines as outlined by the Bill. Nigerians are assured that the Trust fund will take care of the host communities to exclude all others.
Pipeline routes are not Host Communities, they are impacted communities under the care of the operators in the course of their operations. It is still not obvious which part of the bill mandated the Host Community Trust fund to cater to the needs of the “impacted communities”. This divisive propagandist theory should be ignored fully.
Q: Tell us about the Host Community Trust Fund.
A: The creation of a Host Communities Development Trust was provided for by the bill in Section 235 “the settlor shall incorporate a trust for the benefit of the Host Communities for which the settlor is responsible to, to be known as the “HOST COMMUNITY DEVELOPMENT TRUST” (Sec.235(5)), and shall make an annual contribution, based on a certain percentage of their yearly operating expenditure. The fund will cover project finance and execution, infrastructural development, economic empowerment opportunities, educational development, health care development, environmental protection, investment of funds, etc as determined by the Board of trustees.
Q: What is the percentage contribution and what is the source?
A: It should be noted that what the executive sponsored bill proposed was an annual contribution of 2.5% of the operating expenditure of the preceding year of the IOCs to fund this as provided for in section 240(2), which the House amended based on technical advice to 5%, although the Host communities asked for 10%.
The reason behind our decision was to ensure that the financial burden is not much on the investors in this era of great competition across the sector. Since the desire of every investor in choosing the destinations for investment is majorly profit. It presupposes that for our bargaining to be attractive, it should create value for the investors to energize their buy-in. The point remains we can’t fund the whole nine yards of exploration and production without foreign direct investments.
Q: What was at stake with further delay of this bill?
A: Considering the amount, we have lost so far like the paltry $3billion we got out of about $80 billion investment that took place within the sector recently in the continent, it will be unwise to drag our feet any further. Aware, that energy transition is real and we have until 2050 before what happened to our coal at Enugu starts happening to the value of our oil and gas, we must speed up all efforts including legislation to enable us to drive the harvest of what is left of the sector. What coal, which was precious to us at one time could not power, oil and gas took over and powered it better, by tomorrow renewable energy will replace oil and gas rendering it almost worthless. The time to act remains now seeing that the life span of oil and gas is less, as the globe goes green.
Q: What Informed the decision to give the Host Communities 5%?
A: The House of Representatives acted in the best interest of the Host communities by doubling the percentage proposal of the Executives from 2.5% to 5%, this should be commended, considering that there are other development interventions for the host communities like the NDDC, Niger Delta Ministry and the derivations. It is better to have the 5% of something of value than 10% of something of less value. Enugu coal in colonial days and Enugu coal post-oil and gas discovery readily comes to mind.
Q: We heard that the Frontier Basin is for the Northern Region alone, why are they being funded?
Based on the definition by the interpretation section of the Bill under Section 318, it means basins defined as a frontier in a regulation issued by the commission with roles as highlighted in Section 9, majorly to carry out exploration of unassigned acreages in Nigeria. This is usually through data acquired and interpreted under a petroleum license, which in the judgment of the commission requires testing and drilling of identifiable prospects and leads, emphasis on “identifiable prospects and leads” for which no commercial entity has shown interest.
It is the commission, not the States where the frontiers are located that will rely on the provisions of Section 64(k) to request the NNPC LTD to handle such services at a fee that will be paid to NNPC LTD, not the frontier States, from the Frontier Exploration Fund established by the Act.
Q: What are the sources of the Frontier exploration fund and What will it be used to achieve?
A: Though many have questioned this, it is trite to state that granted the era of renewable energy is here, we should not concede to abandoning our untapped oil and gas wealth spread across the length and breadth of Nigeria. It will amount to ignorance to claim that oil and gas only reside in the bowels of the Niger Delta region, technology has proven this wrong. There is scientific evidence that oil and gas have been found in commercial quantities in other parts of Nigeria. This is good news not a bad one and should be celebrated.
Since the Drake well of 1859, when oil was discovered, the way oil and gas is discovered has been impacted by evolutionary technology and that so positively. It has been argued that increasing the exploration activities will help Nigeria increase her reserves with a resultant increase in our political influence over important decisions among the comity of oil-producing nations. To do this well, we must adopt the use of the best technologies like digitalization, data analytics, artificial intelligence, big data, etc in the exploration of oil and gas, which takes huge funding. Funding according to the NIGERIAN ASSOCIATION OF PETROLEUM EXPLORATION (NAPE) at their 38th Annual International Conference and Exhibition remains a major impediment to more oil and gas discoveries in Nigeria. This Bill through the Frontier Exploration Fund seeks to cure it.
Q: It’s been said the funds from the basins keep going to the Frontier State Governors, Is this true?
A: Section 9(4), was clear on the sources of funding for this FEF (Frontier Exploration Fund); 10% rent on petroleum prospecting licenses,10% rent on petroleum mining leases, and 30% of NNPC Ltd.’s profit oil profit gas as in the production sharing, profit sharing, and risk service contracts. The application of the fund shall be for all basins and applied simultaneously. Emphasis on “all Basins (found in the south like Anambra and Cross rivers States and I think Lagos State. In the North like in Bauchi, the Benue trough, etc), currently, we have about three in the South and three in the North. Another emphasis is on the simultaneous application of the fund on all basins.
Q: If Nigerians have any concerns or resentment towards the components of this bill, can it be amended further?
A: Many have questioned even the laws divinely legislated by God, picking holes why in their analysis it is either incomplete or lopsided to feed their justification for non-compliance. If the laws of God are questioned by man, it is not surprising that legislations of mere mortals will be dealt a harder blow by fellow men depending on who is analyzing. While divine laws are not amendable, Acts (laws) of men are subject to amendments to reflect the realities of the dynamics of our society, after all, unlike God, the legislators are not omniscient.
Drawing from the above premise and considering the constitutional mandate of the legislature to formulate the wills, the hunger, the desire of the state into law with a legal character, the legislature could transform further legitimate wishes of the people into laws by exercising such power through the amendment of the extant laws. This piece of legislation will not be different. Truly, there is no perfect legislation anywhere in the world, the PIB will embrace series of amendments after the assent of Mr. President, just like any other law. To delay this bill in the bid to completely satisfy all and sundry, when time is of the essence amounts to an exercise in futility and should be discouraged. What has been legislated for the sector remains the best compared to the archaic Petroleum Act of the 27th November 1969.
Q: Any other thing you may want Nigerians to take note of regarding this bill?
A: Don’t buy the propagandist theories that this was designed in a discriminatory manner against the entire South, treat it as the voice of the nay Sayers while remaining proud of the government for pulling this all-important bill out without affection or ill will but in the spirit of nation-building. The partnership of the executives and the legislature must be commended with specific mention of the leadership of the national assembly especially the president of Senate and the Speaker of the House of Representatives, the leadership of the Ad-hoc Committee on the PIB, the members of the committee and the Minister of State for petroleum with the Group Managing Director of NNPC among others for their dedication in walking the talk. Indeed the 9th National Assembly broke the jinx with the passage of this bill.