With the return of discretionary powers to the president and the enormous powers conferred on Minister of Petroleum in the new Petroleum Industry Bill (PIB), Ejiofor Alike writes that the new bill would have to be rigorously reviewed by the National Assembly for the sake of transparency and accountability in the all-important oil and gas sector
The revised Petroleum Industry Bill (PIB), which was recently sent to the National Assembly by the presidency, is no doubt an audacious attempt to modernise Nigeria's petroleum laws and ensure that the country derives maximum benefits from her hydrocarbon resources. The bill seeks to amalgamate all the existing 17 legislations in the oil and gas industry into one law.
Prominent among these legislations are the Petroleum Profit Tax Act of 1959; Petroleum Act of 1969; Nigerian National Oil Corporation (NNOC) Act of 1971; Petroleum Technology Development Act of 1973; Nigerian National Petroleum Corporation (NNPC) Act of 1977 and the Associated Gas Re-injection Act of 1979.
Others include the Petroleum Equalisation Fund Act of 1989; Oil Pipelines Act of 1990; NNPC Act of 1997 and the Petroleum Products Pricing Regulatory Agency, Act of 2003.
Most of these laws are outdated and not in tune with the modern petroleum business and therefore, will require amendments to support a modern petroleum industry.
A major objective of the new PIB is to create a conducive business environment for petroleum operations, and also establish a progressive fiscal framework that encourages further investment in the petroleum industry, while optimising revenues accruing to the government. The reform bill also seeks to establish commercially oriented and profit driven oil and gas entities.
By this objective, the proposed legislation intends to make the NNPC a National Oil Company (NOC), similar to Saudi Arabia's Aramco, Brazil's Petrobras and Malaysia's Petronas that compete for acreages with Shell, Chevron and other multinational oil companies. Another major objective of the bill, which will promote international participation in the oil and gas business, is its desire to promote transparency and openness in the administration of the petroleum resources in Nigeria.
Powers of Minister
However, there is local and international concern that the new bill confers enormous powers to the president and the Minister of Petroleum Resources, potentially setting the stage for the delay of the passage of the bill by the National Assembly.
These discretionary and arbitrary powers if not checked, will no doubt affect transparency, accountability and could compromise due process, which the reform bill seeks to enthrone. This development could engender uncertainty in the operating environment, with its attendant potential to scare investors.
Indeed, one of the hurdles that stalled the passage of the old PIB by the sixth parliament was the powers conferred on the minister. Speaking on the implications of the non-passage of the old bill at a recent oil conference in Lagos, former Chairman of the joint committee of the National Assembly on the PIB, and past chairman of the Senate Committee on Petroleum (Upstream), Senator Lee Maeba, said his committee delayed the submission of the bill to the plenary because the initial draft conferred enormous powers on the minister.
"Starting from Clause 1, we discovered that there was imminent danger when so much power was allocated to a Minister of Petroleum. Some of the powers was the power to revoke oil blocks and re-award it to any company, if in the opinion of the minister, is a good company. We know what the minister will see as a good company. We said something should be done to address this situation. One of the things is that the PIB must create strong institutions that are stronger than anybody running them," he said.
The latest PIB has to a large extent restored the powers of the minister, which were expunged in the oil bill by the sixth National Assembly. Some of the powers conferred on the minister under the new PIB were similar to the arbitrary powers conferred on the minister under the Petroleum Act of, 1969, which vested the entire ownership and control of all petroleum resources in the Federal Government.
The Petroleum Act provides that: "The Minister may revoke any oil-prospecting license or oil-mining lease if in his opinion the licensee or lessee has failed to comply with any provision of this Act or any regulation or direction given there-under or is not fulfilling his obligations under the special conditions of his licence or lease."
It further stipulates that "if he considers it to be in the public interest, the minister may impose on a license or lease special terms and conditions not inconsistent with this Act."
Similarly, Section (6) (g) of the new PIB provides that the minister shall "upon the advice of the Inspectorate, grant, amend, renew, extend or revoke upstream petroleum licences and leases pursuant to the Provisions of this Act."
Section 6 (h) also empowers the minister to grant, amend, renew, extend or revoke downstream petroleum licences for gas transportation pipeline, gas distribution networks, refineries, Liquefied Natural Gas (LNG) and Gas-to-Liquid (GTL) plants, petrochemical plants and gas plants.
However, the most worrisome provision is Subsection (K), which empowers the minister to "do all such other things as incidental and necessary to the performance of the functions of the minister under this Act."
There is concern that with no clear definition, this provision will be subject to manipulation and arbitrariness by overzealous ministers, which have the potential to ignite litigations and stall investment in the oil and gas sector.
Powers of President
A major achievement of the administration of former President Olusegun Obasanjo in the oil and gas sector was the bold attempt in 2000 to abolish discretionary awards of oil blocks, which was abused by the military regimes.
In place of discretionary awards, the Obasanjo's administration introduced open, transparent and competitive oil bid rounds during the life of the administration.
The PIB, which emanated from the report of the Rilwanu Lukman-led Oil and Gas Sector Reform Implementation Committee (OGIC) set up by Obasanjo in 2000, also discouraged discretionary awards of oil blocks.
In addition, Section 190 (1) of the new reform bill provides that licences shall be awarded by open, transparent and competitive bidding process.
Subsection (3) states clearly that "there shall be no grant of discretionary awards," but in a clear endorsement of discretionary awards, Section 191 empowers the president to grant leases and licences in special circumstances, which are not defined by the Act.
According to Section 191, "Notwithstanding the provisions of Subsection (3) of Section 190 or any other provision of this Act, the president shall have the power to grant a licence or lease under this Act."
This provision is no doubt a clear endorsement of discretionary awards of oil blocks to friends, associates and cronies of any sitting president, which will clearly be abused, given the country's past experience in the award of oil blocks.
Expectedly, experts concerned about the arbitrariness certain provision in the new PIB confers on the minister and president have advised that the legislature should be circumspect about passing the controversial provisions, and if need be, expunge them completely from the reform bill.
They argue that experience has shown that most laws in the country are made to suit those in leadership positions at the time of the enactment of the legislations, forgetting that their stay in office is temporary. For instance, any clamour to reduce the powers of the president or governors through a constitutional amendment is always seen as being targeted at the sitting president and governors, even when they have limited time to stay in office.
According to pundits, most Nigerian leaders, including the executive and the legislature have failed to make laws that will serve upcoming generations; simply because such laws will deny them certain privileges within the short time they will hold public positions. As such, they contend that for the proposed reform bill to make a meaningful impact, the executive and the legislature should not allow personal considerations to rob the country of the benefits of a robust legislation that will transform the country's oil industry.