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PIB Addresses Concerns of Host Communities

-By Gideon Osaka

There seems to be a ray of hope for oil host communities as provisions of the Petroleum Industry Bill are set to address majority of their concerns and agitations.

Before now, there had been public outcry on how International Oil Companies (IOCs) explore oil at the expense of host communities, resulting in contamination of water and destroying aquatic creatures which are a major source of livelihood in the region.

However, the story will no longer be the same if eventually the Petroleum Industry Bill is given a presidential assent
A close look at the composition of the bill indicates that oil companies operating in Nigeria are expected to incorporate a host community trust for social and economic benefit from petroleum operations in the host communities.

Presideny Muhammadu Buhari

The rationale for the trust is to foster sustainable prosperity within the host community.

It will be recalled that militants over the years had disrupted the exploration of oil in Nigeria over the inability of oil companies to develop the region.

Experts are of the opinion that a good legislation would help to ensure that both the oil companies and host communities work together to achieve required development in the oil host communities.
The new PIB said ”Settlors (oil companies) shall incorporate a trust for the benefit of host communities for which the settlor is responsible.

”Where there is collective of settlors operating under a joint operation agreement with respect to upstream Petroleum operations, the operator appointed under the agreement shall be responsible for compliance with the chatter on behalf of the settlors.

”For settlors operating in shallow water and deep offshore, the littoral communities and any other community determined by the settlor shall be host communities for the purposes of this act.”

It added that the settlor would appoint and authorise a board of trustee that would be registered by the Corporate Affairs Commission as a corporate body under the Companies and Allied Commission Act.
It noted that the name of the corporate body to be registered would be “Host Community Development Trust”

The new bill noted that settlor would determine the members of the board of trustees and criteria for their appointment.
”The membership of the board of Trustees of the host communities development trust shall be subject to the approval of the commission or the regualtory body, ‘the Authority’.

“The settlor shall in determination of membership of the board of Trustees, include persons of high integrity and professional standing who may not neccessarily come from any of the host communities,” it said.

It added that the members of the board would serve a term of four years in first instance, and may be reappointed for another term of four years and no more.
It said that the board would also have as Secretary one that would be appointed by the settlor to keep the books of the board.
The new PIB revealed that the board of trustees would be responsible for the management of the host communities development trust, determine the criteria, process and proportion of host communities development trust fund to be alloted to specific development programmes.

It added that the board would approve projects for which the host communities development trust fund would be utilised adding that it would provide oversight of the projects for which the funds would be utilised.

“It will approve the appointment of fund managers for purposes of managing the reserve fund, and set up the management committee of the host communities development trust and appoint its members,” it said

It noted that allocation of funds to host communities would be based on the matrix provided by the oil companies.

”The board of trustees shall in each year, and in pursuant of section 240 of this bill allocate from the host communities development trust fund , a sum equivalent to 75 per cent of the capital fund.

”The board shall make disbursements for projects in each of the host community as may be determined by the management committee in furtherance of the objectives set out in section 234 of this bill.

“20 per cent to the reserve fund, which sums shall be invested for the utilisation of host community development trust whenever there is a cessation in the contribution payable by the settlor,” it said.

On consequences for defaulting oil companies, the PIB which is currently before the National Assembly, is proposing the revocation of licences for oil and gas firms that fail to meet up with their obligations to their host communities.

The power to revoke the licence of the defaulting firms was given to the Minister of Petroleum, upon the recommendation of the Nigerian Upstream Regulatory Commission, among other powers.

The bill defines host community as “any community situated in or appurtenant to the Area of Operation of a Settlor, and any other community as a Settlor may determine.”

According to the bill, any oil and gas company that fails to incorporate the Host Communities Development Trust shall have its license revoked.

It stated that on its constitution, the Host Communities Development Trust would be empowered to manage and supervise the administration of the annual contribution of the settlor (the oil company) contemplated under the Act and any other sources of funding.

The bill explained that the objectives of the host community development trust shall include to finance and execute projects for the benefit and sustainable development of the host communities; undertake infrastructural development of the host communities within the scope of funds available to the Board of Trustees for such purposes; and facilitate economic empowerment opportunities in the host communities, among others.

Other powers granted the Minister of Petroleum in the new bill, include the revocation and assignment of interests in the petroleum industry; approve the fees for services rendered by the upstream, midstream and downstream regulatory authorities; and order a cutback of the levels of crude oil or condensate production in the context of international oil pricing agreements supported by Nigeria.

The minister is also empowered to, upon the recommendation of the Nigerian Upstream Regulatory Commission, or the Nigerian Midstream and Downstream Petroleum Regulatory Authority, direct in writing the suspension of petroleum operations in any area.

The suspension, the bill stated would persist until arrangements to prevent danger to life or property have been made to his satisfaction, or where in his opinion, a contravention of the Act or any regulation made under the Act has occurred or is likely to occur.

The bill also mandates the Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority to keep proper accounts of its income and expenditure for each financial year and cause it to be audited within six months after the end of each financial year by auditors appointed by the Commission from a list and in accordance with guidelines, supplied by the Auditor-General of the Federation.

For the Nigerian Upstream Regulatory Commission, the Bill said: “The Commission shall submit to the Minister – a mid-year report of its operations and finances not later than the 31st of August of each year; an annual report of its operations and performance; and an audited financial account for the year, not later than 31st of March of the following year.

“The Commission shall, not later than the 31st of March of each year – submit to the Minister a summary of its annual report and audited financial accounts; and publish the annual report and audited financial accounts on its website.”

The bill is also proposing the setting up of a Midstream Gas Infrastructure Fund, which it said, shall be a “body corporate with perpetual succession and a common seal; and reside in the Authority as prescribed in accordance with this Act.

“The Midstream Gas Infrastructure Fund shall have the power to acquire, hold and dispose of property, sue and be sued in its corporate name.”

What are the new changes under the under PIB?
The new PIB bill could offer a radical departure from past norms. The bill plans for the selling of shares in a reformed NNPC, the replacement of regulatory bodies, and the reduction and streamlining of royalties.
The legislation suggests the NNPC should become “a commercially oriented and profit-driven national petroleum company” independent of government and audited annually, although no dates are yet given for a share sale. The PIB could also boost the amount of money companies pay to local communities and for environmental cleanups, introduce new dispute-resolution mechanisms between government and oil companies, and set up a midstream government infrastructure fund.

“It would play a vital role in addressing the inefficiencies plaguing the NNPC, from slow approval for oil projects to budget shortfalls that hinder its ability to pursue public-private partnerships. What’s more, the bill would create a supportive environment for both IOCs and indigenous petroleum companies, help protect the environment and the interests of host communities, support economic diversification in Nigeria, and critically important, promote transparency in Nigeria’s administration of petroleum resources,” according to NJ Ayuk, an energy expert as well as executive chairman of the African Energy Chamber.
The PIGB have been introduced for the last 20 years but is yet to see the light of the day. However, President of the Senate, Ahmed Lawan recently stated that it will be given priority to ensure it is passed as soon as possible