Nigeria's Petroleum Sector and Year of Petroleum Industry Act

29 December 2021

The emphasis in the Nigerian oil industry this year has continued to be on the decade of gas with various meetings and stakeholder engagements by the Minister of State for Petroleum, Chief Timipre Sylva.

One remarkable feat in the sector in the early year was the commencement of work to repair the Port Harcourt Refinery after it was given out on a $1.5 billion contract to Tecnimont. In the later part of the year, the contracts for Warri and Kaduna Refineries were also awarded.

After that, the early part of the year moved on quietly like a lame dog until March when the issue of subsidy for petrol resurfaced. The Nigerian Governors Forum committee on subsidy raised the alarm over the continuous payment for subsidy and recommended its removal. The Nigerian National Petroleum Corporation (NNPC) as it was known then, also said it would not be able to remit anything to the coffers of the Federation Accounts Allocation Committee (FAAC) for April due to the increase in the subsidy, which it said was a result of the rising cost of importing petrol also called Premium Motor Spirit (PMS) due to rebound in the price of crude oil.

The petrol subsidy then started from a region of N45 billion in February and reached about N173bn in August. As of November, records show that subsidy payment had reached N1.027 trillion from February to October just to ensure that the product remains within the N162 to N165 price band. The revenue NNPC uses for the subsidy is part of its revenue from crude oil sales, which it should deliver to the FAAC for sharing by the federal government, the 36 states and the 774 local government areas (LGAs).

In the mid-year, the Gas Aggregation Company of Nigeria (GACN) sustained its sensitisation on the use of gas, holding sensitisation in Kano and late in Nasarawa State. The emphasis was that when the Ajaokuta-Kaduna-Kano (AKK) gas pipeline project is completed, the use of gas will be further boosted especially in the North.

Despite this emphasis on the use of gas as even proclaimed by NNPC, Nigerians came under the mercy of high prices of cooking gas, known as Liquefied Petroleum Gas (LPG). From about N3,500 for refilling a 12.5 kilogramme cylinder, the retail price has jumped to about N8,000. The Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGAM) blamed the steep price of rice on various factors ranging from lack of local gas processing facility to the introduction of the 7.5% Value Added Tax (VAT) on gas importation. Oil industry experts have queried this act by the federal government saying it was a turnoff because it at the same time tried to promote domestic gas use while stifling the market conditions.

The Group Managing Director of NNPC, Mr Mele Kyari, in his reaction to the high price of cooking gas said the company was trying to increase domestic gas supply, which he said could help in crashing the price of the product.

The watershed for the oil and gas sector came on 15th July 2021, when the National Assembly passed the long-awaited Petroleum Industry Bill (PIB) with President Muhammadu Buhari signing it into law as the Petroleum Industry Act (PIA) on 15th August 2021. With the new Act, the Department of Petroleum Resources (DPR), Petroleum Products Pricing and Regulatory Authority (PPPRA) and the Petroleum Equalisation Fund (Management) Board (PEF) were scrapped. Two new agencies were created - the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Regulatory Authority (NMDRA). The functions, assets, liabilities, as well as personnel of DPR, PPPRA and PEF, were transferred to these agencies.

But just a month after it was passed, Buhari returned the Act to the National Assembly in September, for possible amendment, which is ongoing. The amendment seeks to expand the number of persons on the board of the two new agencies to cover all the six geopolitical zones in the country.

The president then set up a PIA Implementation Committee headed by Minister Sylva with the secretary being the Executive Secretary, Petroleum Technology Development Fund (PTDF), Dr. Bello Aliyu Gusau.

The Presidency also named a new board and management for the NNPC Limited. They are Senator Ifeanyi Ararume, chairman of the board; Mr Mele Kyari, the Chief Executive Officer (CEO) rather than GMD as he is currently and Mr Umar I. Ajiya is the Chief Financial Officer (CFO). However, the inauguration of the new board and management was suspended in November till further notice.

Following the strength of the PIA, NMDRA just recently rolled out a revised Domestic Base Price (DBP) for gas that saw the price of natural gas to the non-power sector in the domestic market rose by 50 cents.

A critical crisis nearly played out in October when the Petroleum Tanker Drivers (PTD) planned an industrial action. PTD, a branch of the Nigerian Union of Petroleum and Natural Gas Workers (NUPENG) in a communique blamed the federal government over the poor state of highways and other safety issues. The strike was averted with the timely intervention of the ministry or it could have led to product scarcity as loading from NNPC depots to retail outlets nationwide would have been affected.

Towards implementing the agreement, NNPC Ltd said it marked 21 federal roads for rehabilitation at the cost of N621.2 billion across the six geopolitical zones spanning 1,804.6 kilometres. It has gotten approval already from the Federal Executive Council (FEC) under the Federal Government Road Infrastructure Development & Refurbishment Investment Tax Credit Scheme, pursuant to Presidential Executive Order 007 of 2019. More of the recommendations ought to be implemented in the coming year.

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