PGIB: Good tidings for oil and gas sector

The Senate on 25 May finally passed the long awaited Petroleum Industry Governance Bill (PIGB) after almost a year of consideration. The PIGB is the first in four bills taken out of the omnibus Petroleum Industry Bill (PIB) that has been stuck in the National Assembly since 2008. Operators in the oil and gas industry claim the country lost as much as US$120 billion in investments that could have been made in the oil and gas sector due to the non-passage of the PIB. Even though there is no clear basis for arriving at this estimate of lost investments, it is generally agreed that the country lost significant amount of investment inflows due to the regulatory uncertainty that has reigned in the oil and gas sector over the lack of a clear legal framework to guide investment decisions in the sector. Currently, there are several projects in the oil and gas sector with total production potential of 825,000 barrels per day awaiting Final Investment Decision (FID) but it is being delayed because of the uncertainty in the sector. The PIGB seeks to clear the regulatory uncertainty and the National Assembly is optimistic that once the bill is concurred to by the House of Representatives and signed into law by the President or Acting President, it could attract total investment inflow of as much as US$30 billion over the next three years.

The PIGB will clear the regulatory uncertainty in the oil and gas sector. The bill seeks to create efficient and effective governing institutions with clear and separate roles for the petroleum industry; establish a framework for the creation of commercially oriented and profit driven petroleum entities that ensure value addition and internationalisation of the industry; promote transparency and accountability in the administration of petroleum resources of Nigeria and foster a conducive business environment for petroleum industry operations. It also seeks to remove powers from different regulatory agencies and scrap the Department of Petroleum Resources (DPR), Petroleum Products Pricing and Regulatory Agency (PPPRA) and Petroleum Equalisation Fund (PEF). PIGB focuses mainly on administration and privatisation of the petroleum industry as it splits the NNPC into three different entities namely: the Nigeria Petroleum Regulatory Commission (NPRC), National Petroleum Assets Management Company (NPAMC) and Nigeria Petroleum Company (NPC). While the NPRC will serve as a regulatory entity for the entire petroleum industry ( upstream, midstream and downstream), the NPAMC will act as the counterpart and administrator of production sharing agreements and such other risk-based agreements, even as it proposes NPC as an integrated oil and gas company. The bill also makes provision for funding the NPRC.

With the PIGB, NNPC is no longer an operator and regulator in the oil and gas industry. The power of the Minister of Petroleum Resources has also been cut down to mainly administrative function while providing political cover and policy direction for the oil and gas industry. The power to issue and revoke licenses now also reside in an independent regulator, the NRPC, which is self-funded, entrenching its capacity to make purely market based decisions concerning operations and operators in the oil and gas industry. It is heartening that the PIGB creates transparency and clarity in the oil and gas sector and has the potential to unleash the earning capacity in the oil and gas industry if adhered to. It also makes provision for the listing on the Nigerian Stock Exchange of the two corporate entities that will emerge from the break-up of the NNPC. T h e PIGB when passed and implemented has the potential to fundamentally change the Nigerian oil and gas industry for the better.

Editorial