Lax PIA implementation leaves NNPCL, NUPRC, NMDPRA in disarray  | The Guardian Nigeria News – Nigeria and World News – moneyamebo


The Guardian reported that the projected gains expected from Nigeria’s oil and gas sector following the passage of the Petroleum Industry Act (PIA) have remained a mirage as poor implementation leaves principal actors in battle for supremacy and revenue.

The rent-seeking attitude of the Federal Government, bribe demanding officials and bureaucratic process, which is clouded in secrecy, multiple taxation and a crisis rocked regulatory outlook were a few phrases used yesterday by stakeholders to describe the state of the country’s oil and gas industry, a development similar to the pre-PIA era.

With a political board, which is now suspended and the inability to list at the stock market, the commercialization of the Nigerian National Petroleum Company Limited (PIA) and a change of attitude of the workforce of the oil and gas agencies and parastatal according to industry players, who spoke with The Guardian are bottlenecks that must be urgently addressed if the country would progress in harnessing the benefits of the much-trumpeted legislation.

Most stakeholders appeared to also be voting in the direction of a single regulator as they canvassed for merger following the loopholes and battle for supremacy being witnessed between Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA).

This comes as the Nigerian Extractive Industry Transparency Initiative (NEITI) insisted that the provision in section 64 (m) of the Petroleum Industry Act (PIA) that makes NNPC the supplier of last resort and that all associated costs to be borne by the Federation is capable of being misinterpreted as it was in the old practice of deducting from revenue source.

The agency noted further that section 64 (C) and 9 (4) of the PIA that provides for 30 per cent deduction from profit oil and profit gas by NNPCL for frontier exploration fund and NNPCL management fee, does not provide clarification as to what percentage goes for frontier exploration fund and NNPCL management fee.

“The federal government should consider reviewing the deductions from oil profit to ensure they are clearly delineated. If the intention is to have one 30 per cent retention that covers both the management fee and the FEF, the wording should be rephrased to reflect this clearly. Alternatively, if separate 30 per cent retention is required, the language should be revised accordingly,” NEITI said.

Despite the criticism that greeted the allocation of three per cent of oil companies’ operating expense to host communities in the oil and gas producing region, stakeholders, while expressing concerns on the fiscals of the deep water assets, said the inability of NUPRC to implement the host community fragment is a serious case for concern and a snag for investment.

While President Bola Tinubu had recently dissolved the boards of government agencies including that of NNPCL, the industry players insisted that the political board would not deliver the needed reform at the state oil firm, adding that until NNPCL is listed on the stock market and the board appointed by shareholders instead of government, the national oil company would still remain like a corporation.

In August 2021, former President Muhammadu Buhari signed into law the PIA, which had been in the making for over two decades.

Although the implementation committee includes, Executive Secretary, Petroleum Technology Development Fund-Secretary as head of the Coordinating Secretariat and the Implementation Working Group, Buhari became the first hindrance to the legal framework as he delayed ‘removal of fuel subsidy for his party to win election.’

This is coming at a time that fossil fuel, Nigeria’s key economic mainstay, is in a race against time despite the country’s economy challenged by rising poverty, inflation and foreign exchange crisis fueled by the fall of the oil and gas sector.

Energy Scholar at the University of Ibadan, Prof. Adeola Adenikinju said implementation of key components of the PIA has been slow, and timelines have not been adhered to as contained in the Act.

“Much of the expectations of stakeholders are yet to be met. There are still regulatory overlaps between the two industry regulators. The process of getting approval is still slow, deliberately hindered and costly.

“I will support the merger of the two regulators. That will reduce the current battle for supremacy between the two regulators and help operators to cut down on moving between the two regulators,” Adeola said.

According to him, the government must do a lot more to ensure that the vision of a virile petroleum sector is realized.

The scholar said unless the NNPCL is listed on the stock exchange and its board appointed by shareholders instead of the government, the commercialization of the oil firm would not bring needed gains and transparency.

Adenikinju decried the delay in the removal of subsidy by the previous administration, stating that the move sent a negative message towards the implementation of the PIA.

“PIA was suspended for almost two years. The host community fragment has been delayed for over two years. The investors would be worried,” he said.

In the face of mounting inefficiency in the industry, a chain of recent events, among which are oil bunkering and theft, game of wits among the key offshoots of the PIA, especially NUPRC, NMDPRA and NNPCL have seen the nation’s crude oil production and investment portfolio heading towards its record worst.

Consequently, revenue from the sector keeps plummeting and is no longer enough to cater to the nation’s multifarious expenditure, amidst rising borrowing and debt stock.

An operator, who pleaded not to be quoted, told The Guardian that officials at both regulatory agencies and other agencies still demand bribes to attend to licenses and approvals, adding that the delay in the process and bureaucratic obstacles did not change.

Former Secretary of the NNPC and President, Nigerian Association for Energy Economics (NAEE), Prof. Yinka Omorogbe said the implementation is the key problem of the PIA.

Omorogbe, who noted that the PIA remained a critical instrument for the overhauling of the oil and gas sector said the law has led to creation of new institutions.

The Senior Advocate of Nigeria however decried that the needed reform in the sector is yet to take, adding that the workforce and prevailing situation cannot deliver the projection of the PIA.

Omorogbe noted that the idea of having two regulators in the PIA is not much of a problem compared to addressing the issues that bedeviled the functionality of the regulators.

“Implementation could be much better,” Energy Expert Henry Adigun said, adding that gaps persisted in the reform.

Noting that there have however been significant achievements, Adigun said, “NNPCL still imagines itself as the policy organ of the oil industry.

He said unless such a significant issue is properly addressed alongside other loopholes, the gains of the PIA must remain elusive.

Speaking on the regulatory framework, Adigun said: “I think a lot of clarity is still required as there is significant overlap in some cases.” He believes that the dual regulatory system would work with time.

Adigun expressed concerns over an alleged plan by the current government to merge the gas aspect of the oil sector with the ministry of power, stressing that “gas investments will stagnate if that is done.”

A scholar and renowned energy expert, Prof. Wunmi Iledare, said the implementation of PIA has been so slow and short-circuited, adding that the committee implementing the law was sidetracked in resource mapping, especially for the PIA institutions.

“The suboptimality of PIA is majorly because the new institutions were indirectly handed over the task of human resources mapping to the defunct institutions; the old Petroleum Products Pricing Regulatory Agency (PPPRA) became the driver of the Authority and the defunct Department of Petroleum Resources (DPR) indirectly drives the Commission,” he said.

Iledare noted that the selection process of the board members of NNPCL became driven by political expediency with blatant disregard for the guidelines stipulated in the PIA.

According to him, the PIA final fiscal framework also, because of transactional mindedness, blatantly violated the fiscal rules of general applications.

Iledare said: “The royalty scheme was truncated and the dual taxation was skewed generously in favour of deep offshore Production sharing Contracts (PSC) assets, perhaps, because of profit petroleum split.”

Iledare said the fact that the deepwater assets were exempted from the PIA hydrocarbon tax, violates the dual intention, noting that there was a need to correct the error in the fiscal framework provision.

The professor said even if it had to be suspended for a period as a severance tax holiday, the fiscal framework is highly favourable and particularly very generous for deepwater investment.
Iledare supports the merger of the regulators, adding that he aligns with the discomfort expressed by investors.

“The original intent was a single regulator with multidimensional commissioners manning each segment of the petroleum valuation chain as per the petroleum policy document. The regulatory institutions in the PIA is a complete departure from the 2017 policy with two regulators.  It is, however, interesting to note that a good policy or bill that does not become an act is nothing but an academic exercise. Time will tell if the error is correctable without an unpalatable cost, judging from the marginal propensity for institutional capture of economic rent by NASS when it comes to anything petroleum,” Iledare said.

He believes the regulators are more concerned with revenue enhancement as the basis for enacting regulations, then there is a problem, stressing that the vogue to invoke revenue to fund regulators is bound to increase the cost per barrel in the country.

Energy Scholar, Garuba Dauda, who noted that it might be too early to conclude on PIA, said: “The only thing we possibly need to be mindful of is the ongoing development of the energy transition. It will happen as it has been with earlier transitions before fossil fuels, except that we need to exercise caution and balance our responses. It is gratifying that Nigeria is cautious about this already, and has launched an energy transition plan to respond to it. We can have a conversation and (dis)agree about the details of the plan.”

Former Chairman, Society of Petroleum Engineers, Joseph Nwakwue insisted that the implementation has so far been slow and inconsistent.

“One would have wished for a more focused and speedier implementation given the state of play and the prize at stake,” Nwakwue said.

According to him, a review and amendment of the Act may need to be done to minimise overlaps and gaps in the law.

Nwakwue disclosed that there is significant over-regulation, which would undermine a key objective of the PIA, especially the attempts to minimize cost of production.

Legal practitioner and former management staff at Shell Nigeria, Madaki Ameh said while PIA was promoted with pomp and pageantry as a one silver bullet to cure all ills in the Petroleum Industry, indications have shown that “all the euphoria was misplaced.”

According to him, apart from the confusion in the regulatory agencies, where there is uncertainty as to which body to deal with in respect of some of the approvals required to carry out certain activities, there is the issue of weak regulation and lack of experience by the regulators.
Ameh said: “The much-anticipated upsurge in investments in the Upstream and Downstream Sectors of the Petroleum Industry has not crystallized because of the dislocation in other sectors of the economy which has generally resulted in slow foreign investment inflows. There is an urgent need to review the Petroleum Industry Act in order to bring it in tandem with current realities of the Industry.”

Source: Guardian


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