Sufuyan Ojeifo
29 December 2008
Abuja — The much-awaited massive shake-up in Nigeria's oil industry is under way, with President Umaru Musa Yar'Adua poised to implement structural and fiscal changes in the sector - which provides Nigeria over 80 per cent of its revenue and 95 per cent of foreign exchange earnings.
THISDAY was informed last night that the Nigerian National Petroleum Corporation (NNPC) will be overhauled as the President finally moves to implement some of the changes he had announced a few months after assuming office last year.
Yar'Adua had recently re-constituted his cabinet in a bid to energise his government to deliver on the seven-point agenda of the administration.
As part of the critical reforms in 2009 promised by Yar'Adua in his Christmas message to the nation, the Federal Government is now at an advanced stage of introducing a fiscal regime for the petroleum industry.
The fiscal regime, according to the May 2008 Draft Petroleum Industry Bill under fundamental objectives, will maximise the economic rents derivable from the sector and take into account existing national and international obligations of the state.
The Executive, in a bid to carry the National Assembly along in the proposition, consideration and passage of the critical reform bill, has circulated copies to the leadership of the federal legislature for its necessary input.
THISDAY learnt weekend in Abuja that a series of meetings between the executive and the legislature will be held in the second week of January 2009 to fine-tune the proposals, consequent upon which the executive will formally present the bill to the National Assembly for consideration.
The draft bill proposes a wide range of provisions that would significantly alter the composition and operations of the various government agencies and/or corporations that currently administer the oil sector.
The bill, which is being painstakingly looked at by the Oil and Gas Sector Reform Implementation Committee (OGIC), listed the objectives of the fiscal regime to include "the creation of an economic climate that encourages stability, the observance of the rule of law, and he elimination of corruption," and "the gradual elimination of subsidies in all areas of the petroleum industry."
Other objectives include:
The fiscal regime, according to the 216-page draft bill with the long title: "An Act to establish the legal and regulatory framework, institutions and regulatory authorities for the Nigerian Petroleum Industry, to establish guidelines for the operation of the upstream and downstream sectors and for purposes connected with the same", might be reviewed from time to time.
The legislation seeks, among others, to establish the Nigerian Petroleum Directorate (NPD), which shall function in the main as the secretariat of the Ministry and shall take over any functions, which were previously undertaken by the Ministry of Petroleum Resources.
It also seeks to establish the Nigerian Petroleum Inspectorate (NPI), which shall be successor to the assets and liabilities of the Petroleum Inspectorate of the NNPC and the Department of Petroleum Resources (DPR) of the Ministry of Petroleum Resources.
It further proposes the establishment of the National Petroleum Assets Management Agency, which "shall be in charge of monitoring and approving costs of ventures in which Nigeria has investments or participating interests, with the objective of maximising the total revenue accruing to the government from the upstream petroleum industry in Nigeria", and "ensure that all operating contractual arrangements in the upstream, including but not limited to joint operating agreements, production sharing contracts, and service contracts, achieve the objective of realising or achieving optimal financial returns."
Significantly, the bill proposes the incorporation of the National Petroleum National Oil Company, which "shall be the holding company and successor to the assets and liabilities of the Nigerian National Petroleum Company of Nigeria (NNPC)."
The assets and liabilities shall be transferred to the National Oil Company not later than six months after the incorporation of the company.
Section 136 (2) states: "The assets and liabilities of the Corporation shall be deemed to be the assets and liabilities of the National Oil Company and the National Oil Company shall without further assurance be entitled to enforce or defend all obligations for or against the Corporation as if the National Oil Company were the original party to such obligations."
In Section 217 (1) under Part 111 (Upstream Petroleum), the bill proposes in respect of incorporated joint ventures "with effect from the commencement of this Act, the interests held by the NNPC in respect of the joint ventures for the exploration and production of petroleum in Nigerian, shall be vested in the Agency."
Subsection 2 provides that "within twelve months from the commencement of this Act, Limited Liabilities Companies shall be incorporated for each of the joint ventures for the exploration and production of petroleum in Nigeria."
Subsection 3 adds: "Each joint venture company shall be owned by the parties to the existing joint ventures, in proportion to their existing participating interests, with the exception of the participating interests held by the NNPC, which shall henceforth be held by the Agency."
The bill states that the objective of the incorporation of joint ventures is to create an independent entity that is capable of being financially self-sufficient.
A penalty not exceeding N10 million is proposed for the four offences listed under Section 364 of the bill, to wit:
It states that any person convicted for intentionally committing any of these offences shall be liable to pay a penalty not exceeding N10,000,000; and reimburse the licensee for any gas illegally taken and for any damage to the licensee's equipment, provided that:
"(i) Where such person is unable to pay the penalty or to reimburse the licensee, he or she, in the case of a company, every office responsible for the management of the company, shall be liable to imprisonment for a period of not less than two years and not more than five years unless, the officer proves to the strictest standard that he had taken all reasonable precautions and exercised due diligence to prevent the Inspectorate of the offence; and
(ii) The Authority may, as necessary, adjust the amount of the penalty stipulated in subsection (a) of this section by regulations issued pursuant to this Act, in order to reflect current rates of inflation."
The bill also proposes a fine not exceeding N20 million or an imprisonment for a period not exceeding one year or both fine and imprisonment for refusal to furnish return or supply information.
Meanwhile, under the bill's fundamental objectives, it states, "the management and allocation of petroleum resources and their derivatives in Nigeria shall be conducted strictly in accordance with the principles of good governance, transparency and sustainable development."
On the issue of environment and air quality emissions, it states in Section 7(1): "The Federal Government shall, to the extent practicable, honour international environmental obligations and shall promote energy efficiency, the provision of reliable energy, and a taxation policy that encourages fuel efficiency by producers and consumers.
"(2) In accordance with the provisions of subsection (1) of this section, the Federal Government shall introduce and enforce specific air quality emission targets, without regard for fuel type such as gas, liquid or solid, with specific targets for emission of sulphur, lead, aromatics, nitrogenous oxides, particulates and any other pollutants that may be identified in order to ensure compliance with international standards."
On Nigerian content, the bill, among others, in Section 9 (1) states: "The Federal Government shall at all times promote the involvement of indigenous companies and manpower and the use of locally produced goods and services in all areas of the petroleum industry in accordance with existing laws and policies.
"(2) Where any contract for work or services is considered to be within the capabilities of Nigerian companies, in accordance with any law relating to Nigerian content, the tender list shall be restricted to Nigerian companies."
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THANK GOD!! ITS ABOUT TIME. A COUNTRY WITH 140 MILLION CANNOT BE DUMB. YOU HAVE SOME OF THE SMARTEST PEOPLE ON EARTH IN NIGERIA, AND YOU RUN TO THE WEST & EAST FOR HELP?? Mr. PRESIDENT KEEP UP THE GOOD IDEAS AND DROP ALL WHO DO NOT UNDERSTAND THE ABILITIES OF THE PEOPLE OF NIGERIA. A BLACK AMERICAN FRIEND. TONY