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Reasons Behind Reps’ Call for PIA Amendment

By Yange Ikyaa

Nigeria is the largest market in Africa with a young and vibrant population still evolving. This population is projected to grow by an average of 2.6% per annum, according to World Bank figures released in 2020, with the growth expected to fuel greater energy demand.

The oil and gas industry remains Nigeria’s most important in revenue generation and foreign exchange earnings. To manage this sector, both for meeting energy demand and attracting wealth for the country, a number of policy measures have been considered for implementation by the West African country. 

Despite being a major source of revenue, the oil and gas sector lags behind other sectors in GDP contribution to the economy. It has been argued by experts that if well implemented, the PIA is capable of catalyzing economic development in Nigeria, by attracting and creating investment opportunities for local and international investors.

The country’s Petroleum Industry Act (PIA), enacted and signed into law in 2021 is described as one of the most audacious attempts to overhaul the petroleum sector. The law seeks to provide legal, governance, regulatory and fiscal framework for the industry.

There are also a number of challenges that the PIA faces. Voices have been raised within some quarters against parts of its provisions. Recently, the House of Representatives affirmed this in a declaration on its intention to review the PIA and smoothen its perceived rough ages.

Through its Committee on Host Communities, the House of Representatives said it will propose the review of the PIA before the nation’s National Assembly, with a view to amending what it called “the grey areas” in the law, which it believes will make it difficult for the seamless implementation of the law.

The House Committee is saddled with the duty to handle the yearnings and aspirations of host communities. Making reference to its plan to review the PIA, the Committee said it will protect the interest of all stakeholders by engaging the oil and gas industry regulators, the oil producers, as well as members of host communities, among other stakeholders, in order to ensure the smooth implementation of the PIA to increase Nigeria’s oil output and boost the nation’s revenue.

Chairman of the House of Representatives Committee on Host Communities, Hon. Dumnamene Dekor, stated that the Committee will look at the grey areas in section 257(2) of the PIA, which leaves the responsibility of securing oil and gas installations in what he called “the hands of unarmed host communities.”

According to him, the duty being handed to host communities is the task that should be exclusively left for the military, Operation Delta Safe, Civil Defence, Police and pipeline surveillance contractors. He also said that these military and security formations have failed in the area where host communities are being mandated to act.

His words: “One of the major aims of this meeting is to look at the grey areas in the PIA. You will agree with me that there are shortcomings in virtually all laws, and there is room to tinker with the laws from time to time; and when we find these gaps, we have to look for legislative intervention to handle them. It is our duty as House Committee on Host Community to handle the cries of the oil and gas host communities in the Niger Delta, so we must ensure those areas of the law are amended and also work with the regulatory agencies to provide regulations.

“I assure you that, we will propose amendment to some parts of that law that have been identified as not going to serve their purpose. We will go back and do this amendment to reflect more roles for the settlor, the regulators and the host communities. We’ll go deeply into how the three per cent OPEX is determined; we’ll engage NUPRC on that. The host communities also have a huge role to play; we will engage all the HCDTs. We will urge the regulators, the operators and the communities to cooperate with us in ensuring that we have a law that will be seamless in terms of delivery.”

Dekor also disclosed that the House of Representatives has constituted a Special Committee to investigate the issue of oil theft in the country.

According to him, “the issue of low oil production has to do with many variables. The average Nigerian does not have the funds to run a 29-kilometer pipeline from an oil installation to the sea. The major oil is stolen in the sea, not in the backwaters. We can bring airplanes to carry out air strikes, but we can’t stop the attachment of these pipelines in the sea, so it’s a food for thought.

“The issue of oil theft is commonplace to everybody. As we speak, there is legislative intervention on that. There is a Special Committee of the House of Representatives with a mandate to do proper investigation into the issues of oil theft. I won’t preempt the outcome of the investigation, of which I am a co-Chair, but I assure you that once we are done with the investigations, we will make it public.”

But these are not the only issues with the PIA that the National Assembly has voiced its concern about. In October 2023, the Nigerian Senate urged its Committees on Petroleum Downstream and Gas to conduct a holistic investigation on the implementation of the Petroleum Industry Act (PIA).

The call for this investigation followed the adoption of a motion sponsored by Senator Etim Aniekan on the “Urgent Need for Enquiry into Implementation of the Petroleum Industry Act (PIA) 2021 with Regards to Potential Exit of International Oil Companies (IOCs) from Nigeria: Case of ExxonMobil in Akwa Ibom.”

Senator Aniekan, in presenting his motion, said that the discovery of oil and gas in commercial quantity in Nigeria saw the arrival of International Oil Companies (IOCs) such as Shell PB, Mobil Producing Nigeria Unlimited, later merged into ExxonMobil, as well as the Nigerian Agip Oil Company (NAOC) among others; he however lamented that the PIA had not made clear implementation plans for situations such as the emerging trend of exit of the IOCs.

The Senator further argued that the PIA had not holistically resolved issues bothering on the protection of the interests of the Federal Government of Nigeria, the producing states and host communities or provided future assurances in the handling of situations, such as the issue now under review.

The lawmaker expressed concern about the potential adverse effects of the exit of ExxonMobil from Akwa Ibom, including high loss of jobs, exit of professionals and service companies, loss of revenue and abandonment of certain yet to be satisfied obligations. He further expressed worry that the new company taking over the assets and liabilities of ExxonMobil may not have sufficient capacity to successfully step into the company’s footprints and retain its industry successes.

International oil companies or IOCs usually operate in Nigeria by going into Joint Venture (JV) contracts with the Federal Government through the Nigerian National Petroleum Company (NNPC) Limited. In the case of the JV between NNPC and ExxonMobil, NNPC has 60 per cent stakes, while ExxonMobil holds 40 per cent shares in the JV. Also, the responsibilities for injection of capital expenditure into the JV and the proceeds of same are shared in corresponding proportions between the two entities.

But curiously, when ExxonMobil offered to sell its entire onshore and shallow water facilities and business in Akwa Ibom State, NNPC rather notified ExxonMobil of its intention to exercise that Right of Pre-emption on ExxonMobil’s planned sale of assets. This is considering the fact that NNPC holds the Right of First Refusal (RFR) in such scenarios and also looking at the situation where ExxonMobil had established fields and high-quality operations with highly skilled local operational teams.

Furthermore, the IOC has a track record of safe operations, high production rate, as well as a very extensive footprint in the Niger Delta region of Nigeria. It has however made a strategic decision to exit its onshore and shallow water operations in Akwa Ibom State and to focus on deepwater production.

 However, with NNPC opting for exemption from acquiring ExxonMobil’s assets, the company has sealed a deal with Seplat Energy for the asset transfer programme.