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Tag: Petroleum Industry Act (PIA)

  • NUPRC opposes establishment of oil, gas decommissioning body

    NUPRC opposes establishment of oil, gas decommissioning body

    The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has opposed the National Commission for Decommissioning of Oil and Gas Installations (NC-DOGI) establishment Bill (2024).

    The position of NUPRC was contained in a memorandum submitted at a public hearing organised by the House Committee on Petroleum Resources (Upstream) in Abuja.

    Earlier, the Chairman, House Committee on Petroleum Resources (Upstream), Rep. Ado Doguwa (APC-Kano), said that over the years, Nigeria’s petroleum industry had continued to face challenges in the decommissioning and abandonment of oil and gas facilities.

    According to him, these challenges have environmental, economic and social impacts, particularly on host communities.

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    “This, therefore, calls for a closer look at whether the existing regulatory frameworks are sufficient or need to be strengthened and whether establishing a dedicated body, such as the proposed commission, would better serve national interests.

    “It is, however, important to note that the Petroleum Industry Act (PIA) already provides for decommissioning and abandonment under Sections 232 and 233, assigning specific responsibilities to the NUPRC and MDPRA and also establishing a fund to ensure these activities are properly planned and financed in line with regulations,” he said.

    The chairman said that the NC-DOGI bill which was sponsored by the leadership of the house is a significant legislative proposal as it sought to address matters that affected human and environmental welfare.

    He said it reflected parliament’s commitment to ensuring the growth of the oil and gas sectors as well as ensuring environmental responsibility and sustainable community development.

    Doguwa explained that the public hearing was part of the legislative process of the National Assembly that ensured transparency, participation and inclusiveness in lawmaking.

    He said that the purpose for engagement was to provide a formal platform for stakeholders to express their views, make observations and offer recommendations that will ensure a fair and informed decision by parliament.

    In the memorandum the NUPRC had opposed the proposed establishment of the commission, saying it is unnecessary, duplicative and contrary to international best practices and is likely to discourage investments in the oil and gas industry.

    The commission maintained that the PIA already empowers NUPRC and Nigerian Midstream and Downstream Petroleum Regulatory Authority (MDPRA) to effectively manage decommissioning in their respective sectors of the oil and gas industry and these responsibilities are currently being discharged competently.

    “Section 232 of the Petroleum Industry Act (PIA 2021) mandates every licensee/lessee to submit a Decommissioning and Abandonment Plan aligned with the approver Feld Development Plan and the Commission already enforces this requirement through an established review workflow.

    “The House Committee on Petroleum Resources (Upstream) is respectfully urged to maintain decommissioning and abandonment oversight within the existing petroleum regulatory framework (NUPRC and NMDPRA).

    “This approach will ensure technical coherence, economic efficiency and alignment with both PlA 2021 and global standards, thereby safeguarding Nigeria’s interests in the oil and gas sector and promoting the Federal Government’s ease of doing business initiatives,” it said.

  • Proposed PIA amendment: a bad workman blaming the tools – Expert

    Proposed PIA amendment: a bad workman blaming the tools – Expert

    Mr Ben Ekori, an industry expert cautions the sponsors of the proposed amendment of the Petroleum Industry Act (PIA), saying the proposal would reintroduce uncertainty, counter production and present grave legal implications for Nigeria.

    Media reports indicate that Nigerians are raising concerns over the alleged ongoing moves to amend the PIA, passed in 2021 after decades of debate.

    Ekori, a public affairs analyst, while reacting to the development said such a move would erode Investors’ confidence and occasion grave unintended consequences to the country and its citizens.

    “That the news of the proposed PIA amendment has been in the public space for a week without denial could only mean that there could be some substance in it.

    “While we await the confirmation of the news and its ultimate metamorphosis into a policy, it is pertinent to x-ray some provisions the proposed amendment appears to have been designed to bring about and their implications for Nigeria and its citizens.

    “The proposed amendment which is alleged to be sponsored by the Ministry of Finance is designed with the objective of addressing the escalating fiscal leakages and revenue loss confronting the Federation.

    “The reports also indicate that areas targeted for amendment include section eight which establishes the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as the body charged with the regulation of upstream operations.

    “The amendment, according to the reports, will see the NUPRC replacing the NNPC Ltd. as the representative of the government in all model contracts attached to licenses and leases provided for in section 85,” he said.

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    He said that section 53 of the PIA was also slated for amendment to make the Ministry of Finance Incorporated (MOFI) the sole owner of the NNPC Ltd.’s shares as against the extant situation where the company’s shares are split 50:50 between MOFI and the Ministry of Petroleum Incorporated.

    The expert, however, warned that the proposed amendment to make the NUPRC the concessionaire in place of the NNPC Ltd. would reintroduce uncertainty into the system, with NUPRC serving as a regulator and an operator at the same time.

    “This would definitely lead to erosion of Investors’ confidence as it would be an over-stretch of the imagination to expect PSC partners to believe that they could get justice if a dispute broke out between them and the concessionaire (NUPRC) which is also the regulator.

    “The sponsors of the amendment need to carefully consider the impact that this proposed provision will have on investors’ confidence and grave legal implications it will present.

    “It will be counter-productive to introduce an amendment into a law that could totally negate what the law is fundamentally designed to achieve.

    “With NNPC Ltd. serving as the concessionaire, the Federation is insulated from legal hazards, and there will be limits to liabilities from legal infractions.”

    He further said the other proposed amendment that could have grave implications for the nation in general, and the national oil company in particular, was the provision that sought to transfer all the shares of the NNPC Ltd. to the MOFI.

    According to him, the PIA provides for the NNPC Ltd. to commence a process of listing on the capital market as part of deepening its commercial focus.

    He said transferring all the shares to one government entity at a time when activities should be in high gear for the company’s Initial Public Offering could create the impression that the government does not want to let the company go.

    “The move has the potential of reversing the modest gain of having the company operate as a true limited liability company without direct government control or interference,” he added.

    He said in trying to analyse the implications of the above proposed amendments to the PIA, it would be nice to understand what the situation was, prior to the passage of the PIA.

    PLEASE READ: National oil assets: are buccaneers coming? [2]

    Ekori recalled that the President Olusegun Obasanjo’s administration set up the Oil and Gas Sector Reform Committee (OGSRC) in 2000 to look at why the industry was consistently not meeting revenue targets and recommend solutions.

    He said amongst numerous observations of the committee were that some of the laws that governed the industry were not only obsolete but created uncertainty which made prospective investors wary of committing capital to further asset development projects.

    The expert further said the work of the OGSRC laid the foundation for the Petroleum Industry Bill which took almost 20 years to pass, due to politics.

    “For the whole of the period that the PIB lagged, Nigeria regressed as a prime investment destination, as most of the IOCs refrained from investments that could boost production because there was no clarity around the fiscal terms which investment decisions could be taken.

    “Another critical area that bred uncertainty, apart from the fiscal terms, was the lack of clear delineation of roles amongst agencies in the sector.

    “Of particular notoriety was the dual role of the then Nigerian National Petroleum Corporation as an operator and regulator, a situation that made the old NNPC to be like a judge in its own court when in dispute with Joint Venture and PSC partners.

    “The enactment of the PIA in 2021 successfully put paid to issues of uncertainty in the system and has gradually begun to restore investors’ confidence.

    “Investors may not have started falling over themselves over opportunities in the Nigerian Oil and gas sector yet, but the reports show that things are not the same as they were in the pre-PIA era,” he said.

  • Host Communities Threaten To Shutdown Oil Production Over 3% PIA Fund

    Oil communities in Bayelsa State at the weekend warned that oil production across the state may be halted if Nigerian Upstream Petroleum Regulatory Commission (NUPRC) fails to refrain from actions that could potentially reduce or create bottlenecks for the three percent host community fund under the Petroleum Industry Act (PIA).

    The warning was contained in a statement jointly signed by a foremost youth leader, Mr Christopher Tuduo, His Royal Highness, Theophilus Moses, chairman Dodo River Rural Development Authority, Francis Amamogiran, Hon. Target Segibo of Oporoma Rural Development Authority and former Chairman of Koluama Clan Oil and Gas Committee, Engr Ebimielayefa Dick- Ogbeyan.

    The communities, in the statement declared their readiness to take decisive action and escalate their efforts to address the concerns of the oil and gas communities if the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) fails to treat the matter as an emergency.

    Emphasizing their proactive engagement in pacifying the youths across various communities since the signing of the Petroleum Industry Act (PIA), the communities stated that the stability of oil operations could be compromised if NUPRC allows the situation to deteriorate further.

    The communities asked NUPRC to recognize the urgency of the matter and take immediate, substantive steps to resolve the concerns at hand.

    They warned that improper handling of host community issues could have negative repercussions on Nigeria’s oil production and economy.

    The communities stated that the NUPRC must reverse any action and regulations adversely affecting the host community to avoid a severe backlash. He noted that host communities are often excluded from the decision-making process, which results in the use of public resources to defend decisions in newspapers.

    They criticized NUPRC’s intention, outlined in a letter dated 9th October, 2023, and signed by Capt. John R. Tonlagha for the Commission Chief Executive, which proposed participation in various activities related to the host community fund, such as BOT nominations, selection and inauguration, Management Committee Advisory Committee nomination and selection, and facilitation of NEEDs assessment. He argued that this would be too much for the three per cent to fund.

    The group maintained that while NUPRC’s oversight function is essential, over-involvement in the activities of the HCDTs is counterproductive and financially burdensome. 

    “They are getting into the operations arena, and this will not augur well for the industry because each participation by the NUPRC will be funded from the HCDT trust.”

    The also criticized the mandate for HCDTs to hire lawyers and accountants with a minimum of 10 years’ experience, stating that it would be impossible to pay such professionals from the five per cent administrative fund, which comes from the three per cent.

    They argued, “In reality, no NGO organizations, including those like Accord or the Nigerian Conservation Foundation, which is one of the most successful NGOs in Nigeria, employ full-time lawyers, let alone one with 10 years experience. The HCDTs are styled as NGO organizations and should be expected to act according to the best practices and standards of that sector,”

    The statement stressed further that by insisting that NUPRC must stop overstepping its boundaries, avoid acting as operators, and cease deducting expenses from the three per cent in cunning ways. 

    The group supports transparency and accountability, but the HostComply portal being developed by NUPRC to manage the administration of the fund should not be funded from the three per cent, as per Sele-Epri. 

    He stated that the regulator should bear the financial burden for the application, which enables it to monitor activities of different players more effectively.

    Additionally, the group accused the regulator of insensitivity to the host communities’ concerns, particularly the allocation in the PIA and the criminalization of oil and gas asset destruction against communities lacking surveillance contracts. 

    They questioned the timing of NUPRC’s review of host community regulations, suggesting that the focus should be on setting up HCDTs and prioritizing benefits to the community.