The long-awaited Petroleum Industry Bill 2020 (“PIB”) has been transmitted by President Muhammadu Buhari to the National Assembly. The PIB is an oil reform bill, regarded as critical to the repositioning of Nigeria’s Oil and Gas Industry (the “Industry”), which has suffered various false-starts in the National Assembly for many years.
Although it had been speculated that the PIB would lead to the dissolution of the Nigerian National Petroleum Corporation (NNPC), the Minister of State for Petroleum Resources, Timipre Sylva has clarified that the new PIB seeks to commercialize the NNPC rather than remove it. The PIB proposes the creation of the Nigerian National Petroleum Company Limited that will inherit the assets and liabilities of the NNPC as determined by the Minister of Petroleum and the Minister of Finance. According to Section 53 of the PIB, the Minister shall “within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company (NNPC Limited).”
Many stakeholders in the Industry have expressed the view that excessive government interference has stunted the commercial effectiveness of the NNPC and that there is a need to reorganize the NNPC to ensure that it operates in a more profitable manner and the commercial potential of the nation’s hydrocarbon reserves can be exploited to its fullest extent. It is hoped that through the PIB, NNPC Limited will imbibe a new corporate culture and learn to play on a level playing field with its competitors to cure the indolence and inefficiency that has plagued its predecessor.
The PIB also proposes the establishment of an agency known as the Nigerian Upstream Regulatory Commission which will be responsible for the technical and commercial regulation of upstream petroleum operations while the new Nigerian Midstream and Downstream Petroleum Regulatory Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the Industry. The latest version of the PIB technically annuls the Petroleum Product Pricing Regulatory Agency (PPPRA) and creates new agencies that will carry out the PPPRA’s functions.
In addition to the creation of NNPC Limited to take over the assets and liabilities of the NNPC and the establishment of new regulatory bodies, a section of the PIB proposes an amendment to controversial changes to deep offshore royalties made late last year. This involves reducing the royalty that oil companies pay the Federal Government for offshore fields producing less than 15,000 barrels per day from 10% to 7.5%.
Previous administrations have tried without success to pass the PIB despite its promised reforms for the Nigerian oil and gas sector. However, it would appear that the current administration needs to make concerted efforts, now more than ever, to pass the PIB in view of the adverse effects of the COVID-19 pandemic on the Nigerian economy, especially in the Industry.
We will continue to monitor developments in this regard and bring you updates as further information becomes available.
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