The House of Representatives yesterday passed the Petroleum Industry Governance Bill (PIGB) containing the restructuring and reformation of the nation’s oil and gas industry.
With the passage of the 134-clause bill, the stage is now set for the unbundling of the Nigeria National Petroleum Corporation (NNPC) and merger of its subsidiaries into an entity.
The bill was passed following the adoption of the report and recommendations by the ad hoc committee on Petroleum Industry Bill.
During consideration of the report before the committee of the whole House, the deputy chairman of the ad hoc committee on Petroleum Industry Bill and chairman of the House committee on Petroleum Resources (upstream), Hon. Victor Nwokolo, explained that some subsidiaries of the NNPC had also been merged into an entity to be known as the Nigeria Petroleum Regulatory Commission.
Highlights of the bill include unbundling of the NNPC and other like bodies and the creation of new ones.
The bill also provides for the establishment of a new regulatory agency known as the Nigeria Petroleum Regulatory Commission (NPRC), which would take over the functions of Petroleum Inspectorate (PI), the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA).
The NPRC will administer and enforce policies, laws and regulations relating to all aspects of petroleum operations that are assigned to it under the provisions of the Act.
The proposed legislation also seeks the establishment of two new companies namely Nigeria Petroleum Assets Management Company (NPAMC) and National Petroleum Company (NPC).
The NPAMC will retain certain assets and liabilities of the NNPC, while the NPC would operate as a full independent commercial entity.
The PIGB which stipulates that the ministry of Petroleum Resources would be renamed ‘Ministry of Petroleum Incorporated’ also provides that “upon the recommendations of the new commission, minister of petroleum resources can grant, amend, renew, extend or revoke any licence or lease required for petroleum or production, pursuant to the provisions of the Act or any other enactment”.
In the same vain, the bill also provides that when the commission is created, it shall be vested with all assets, funds, resources and other movable and immovable property, which immediately before the commencement of operation of the new commission, were held by the PI, DPR and PPPRA.
The bill however vested more powers on the commission, as the president or the minister of Petroleum Resources, who hitherto had such powers, would no longer have same.
By implication, the bill seeks to whittle down the powers of the president and the minister of Petroleum Resources in exercising control over the oil and gas sector.
LEADERSHIP recalls that both the House and the Senate passed the PIGB for a second reading in June 2017 after which the leadership of the House set up the ad hoc committee headed by Chief Whip of the House, Hon. Al-hassan Ado Doguwa, to conduct public hearing and fine tune the bill.
Reacting to the PIGB passage while speaking with our correspondent, Sarah Muyonga who is Nigeria’s Manager of Natural Resource Governance Institute (NRGI) said the development will entrench transparency and Boost investors’ confidence in the Industry.
Muyonga observed that unbundling of the NNPC and creating a national oil company with authority to embark on full commercial arrangement will bring about enhanced revenue to government.
“I want to believe that the president will give assent to the Bill and again it is important to see a single regulator putting a check on activities of operators. We have observed cases where the DPR operates as the regulator but then the NNPC takes some measure of regulatory control as well as commercial activities. All of these brings some level of inefficiency and lack of accountability in the whole system”.
LEADERSHIP recalls that the NRGI had in one of its reports released last year alleged lapses in NNPC, observing that despite what seems to be an improvement in the efforts to enhance transparency in Nigeria’s oil and gas industry, the latest report of the NNPC showed that it failed by running its operations in an opaque manner.
The 2017 Resource Governance Index (RGI) noted: “The governance of oil, gas and mining in 81 countries, in policy areas including state-owned enterprises, taxation, licensing, local impact, sovereign wealth funds and sub-national revenue sharing”.
The 2017 RGI said to have assessed how 81 resource-rich countries govern their oil, gas and mineral wealth and the assessment covered the period 2015-2016 noted that despite some progress in transparency of revenue collection over the past five years, tracking payments from oil and gas companies in Nigeria remained challenging.
According to the report, NNPC, which is the largest state-run oil firm in Africa, achieved a poor governance score of 44 of 100.
The report noted that the corporation mainly scored well on indicators that measure elements of transparency required by EITI reporting, such as transfers to government and production volume disclosure.
It acknowledged that the NNPC had recently strengthened some of its reporting practices, particularly for high-level financial data.
The report continued: “However, the company does not disclose detailed annual reports on its finances, despite top officials having made a commitment to do so. Little information is publicly available, particularly concerning some of NNPC’s least efficient and most questionable activities, notably earnings by its subsidiaries, the costs of its operations and its significant spending on non-commercial activities.
“Government agencies and external auditors have disputed NNPC’s interpretation of rules set in the constitution and the NNPC Act governing monetary transfers between NNPC and the government. Officials exercise significant discretion around how NNPC sells the government’s share of oil production for example, when selecting buyers, pricing exports or transferring sales proceeds to the government”.
Nigeria Loses N784bn To Fuel Importation
Meanwhile, the Senate yesterday accused the Nigeria National Petroleum Corporation (NNPC) and Independent marketers of swindling the country of N784.700 billion through inflation of volume of fuel they claimed to have imported in 2017.
The Red Chamber alleged that both NNPC and the Independent Marketers have been unable to account for about 5.9 billion litres in excess of volume of fuel they claimed was consumed in the country in 2017 alone, amounting to N784.700billions at the rate of N145/litre.
Consequently, the Senate directed its committee on Petroleum Resources (downstream) to carry out thorough investigation to identify those who were actually involved on the alleged fraud.
Meanwhile, the upper chamber has threatened to sanction the executive constitutionally on any inappropriate spending made henceforth particularly as regards the illegal subsidy regime of N26 per litre being effected on fuel sales in the country.
The N784 billion fraud, according to revelations made to that effect in the interim report of the Senate committee on Petroleum Resources (downstream) on lingering fuel scarcity in the country, came about through five days surplus importation at 35million litres per day by NNPC on monthly basis, totaling 60 days surplus importation in addition to marketers 109 days surplus supply.
The committee stated: “NNPC said it is importing 30 cargoes of 30,000meric tonnes (minimum) of PMS monthly through the Direct Sale Direct Purchase (DSDP) scheme. This means NNPC is importing 30x 30,000x 1, 341= 1, 206,900, 000 litres of PMS monthly.
“Therefore, at an average consumption of 35million litres /day, NNPC said the country consumes between 27-30 million litres /day from January to September and 30- 40 million litres per day from September to December. From the above figures, NNPC monthly supply is supposed to last the country for about 35 days at 35million litres per day.
“The marketers, on the other hand, received from government about N1.669, 180,182 billion at CBN rate of N305 to a dollar to import PMS from January to August 2017. This means that marketers were supposed to bring into the country about 3.8bn litres of PMS at landing cost of N133.
“In other words, marketers supply were supposed to serve the country for about 109 days at 35m litres daily in 2017.
The implication of the foregoing is that NNPC has 5 days surplus every month, 60 days surplus in a year, added to the marketers 109 days supply, totaling 169 days supply surplus at 35million litres /day or 5.9bn litres which when multiply by N133 subsidised landing cost per litre amounts to N784.700bn”.
The committee through its chairman, Senator Kabiru Marafa (APC Zamfara Central), alleged further that the fraud arose from emergence of subsidy regime in the sector again, similar to the sharp practices carried out in the past through bogus volume of fuel importation.
Though the Senate, based on observations made by Senators that the report did not capture the subsidy fraud going on in the sector, returned it back to the committee for a more thorough job yesterday, Senate President Bukola Saraki praised it for unearthing the 5.9bn litres volume importation fraud.
He said, “The biggest fraud in the oil sector over the years under subsidy regime is not even the subsidy itself but that of volume through bogus claims that will be increasing from year to year.
“It is in the light of this, I will in line with submissions made by many of the Senators here today, say that thorough probe should be carried out by the committee on the 5.9 billon litres surplus supply, while the Senate committee on Public Accounts (SPAC) should investigate the illegal subsidy regime as regards its authorisation and appropriation “.
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