The Federal Government has broken up the controversial Petroleum Industry Bill, PIB into different versions and is proposing splitting the Nigerian National Petroleum Corporation, NNPC, into two companies – the Nigeria Petroleum Assets Management Company (NPAM) and a National Oil Company (NOC) that would be run on commercial lines and partly privatised.
According to a report obtained from Reuters on Monday, the Federal Government is breaking up the PIB and is replacing it first with a law to overhaul the petroleum sector with the aim of closing loopholes that bred corruption.
Under the draft legislation, the report stated that the NOC will be an “integrated oil and gas company operating as a fully commercial entity and will run like a private company.”
According to the report, the onus would be on the board of the company to make profits and raise its own funding. The NOC would be expected to keep its revenues, deduct costs directly and pay dividends to the government.
To start off, the report stated that the NOC will receive about $5 billion, or at least the five-year average of the amount of money NNPC had to put into joint venture operations, while it would be partially privatised with the Federal Government divesting a minimum of 30 per cent of its shares in the company within six years of its incorporation.
NPAM, on the other hand, is expected to manage assets where the government is not obligated to provide any upfront funding. “These include oil licences run under production-sharing agreements in which independent oil companies cover operating costs and pay tax and royalties on output,” the report noted.
Compared with previous PIB drafts, the report stressed that the law curtails ministerial powers as board appointments are made by the Nigerian president and confirmed by the Senate.
If passed, the report further stated that the law would also create a Nigeria Petroleum Regulatory Commission (NPRC) to oversee everything from oil licence bid rounds to fuel prices, while a Special Investigation Unit would also be set up under the NPRC with the powers to seize items and make arrests without a warrant.
The first new bill, drafted by the Senate and overseen by the oil ministry, according to the report, is entitled “Petroleum Industry Governance and Institutional Framework Bill 2015” and aims to create “commercially oriented and profit driven petroleum entities”.
The Bill is expected to be presented to senators this week.
The report maintained that the Bill repeals the Act that created NNPC that contained legal grey areas that allowed mismanagement to go unchecked and billions of dollars in revenues to go seemingly unaccounted for as operating costs rocketed.
The institutional changes in the new draft have been greatly simplified from the 2012 PIB that created many new regulators and broke up the oil company into separate downstream (refining and retail), upstream oil and gas companies.
Some noticeably problematic amendments are absent from this bill, such as allowing the oil minister to decide what to do with any surplus or allowing the Nigerian president to allocate oil blocks for exploration.
But it remains to be seen whether further add-ons to the bill or later decisions will reconcile the conflict between what the new state oil companies need to run and what they should remit to the treasury.
Commenting on the new Bill, Aaron Sayne, a U.S. lawyer who focuses on the Nigerian energy sector, said, “The bill leaves open lots of questions around what roles the new national oil companies will play in the sector, and how they will receive and manage money.
“But one can sense more strategic thinking behind it than in past drafts, and the bill does a better job than its predecessors of saying who will take key decisions after it becomes law.”
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