PIA: Not the best but a major breakthrough

petroleum industry act PIA

Energyday Editorial Board

President Muhammadu Buhari, on Monday, 16 August 2021, obviously made history when he signed the Petroleum Industry Bill (PIB), 2021 into law. The move which followed the bill hitherto referred to as the oldest was passed by the National Assembly in July 2021.

However, since the bill was assented to by Mr President, stakeholders have expressed divergent views with the focus in most cases being ‘what agitators,’ stand to gain.

In our usual character as a people, the debate for the soul of the bill even at the National Assembly shifted from what the nation stands to benefit to what region gets the upper share of the cake.

Unfortunately, even the signing of the bill into law, Petroleum Industry Act (PIA) 2021, has not stopped the clamour as some critics have threatened to go to court or even take laws into their hands.

But in the face of contention for a greater share, we seem to have forgotten the economic losses and under development the absence of a law predicated on modern realities mean to the oil and gas industry.

Aside, the Nigerian elites who are always championing agitation for their own benefit pretended not to be aware of the corruption enabled by the previous rules governing the industry, hence the sector failed to make meaningful progress for over two decades.

Truth be told, while we’re aware that the PIA is not perfect, of course no law is, we therefore suggest that for the interest of the industry, all stakeholders should embrace the PIA as it is currently and stop the wranglings over percentage share given that successive administrations can review the imperfections.

EnergyDay joins the league of industry experts and stakeholders who have commended the National Assembly and Executive for the passage of the Act after two decades of unsuccessful attempts.

Its important at this point to explain that the PIA provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities and related matters.

But more importantly, it repeals the following outdated Acts
Associated Gas Reinjection Act, 1979 CAP A25 Laws of the Federation (LFN) 2004, and its amendments;
Hydrocarbon Oil Refineries Act No. 17 of 1965, CAP H5 LFN 2004;
Motor Spirits (Returns) Act, CAP M20 LFN 2004;
Nigerian National Petroleum Corporation (Projects) Act No. 94 of 1993, CAP N124 LFN 2004;
Nigerian National Petroleum Corporation Act (NNPC) 1977 No, 33 CAP N123 LFN as amended, when NNPC ceases to exist pursuant to section 54(3) of this Act;
Petroleum Products Pricing Regulatory Agency (Establishment) Act 2003;
Petroleum Equalisation Fund (Management Board etc.) Act No. 9 of 1975, CAP P11 LFN 2004;
Petroleum Equalisation Fund (Management Board, etc.) Act, 1975;
Petroleum Profit Tax Act Cap P13 LFN 2004, (PPTA); and
Deep Offshore and Inland Basin Production Sharing Contract Act (DOIBPSCA), 1993 CAP D3, LFN 2004 and its 2019 amendment.

Good enough, there are transitional and savings provisions in the Act to deal with cases of licensees that may not want to convert. Consequently, the extant laws, such as the PPTA and the DOIBPSA, will continue to apply until such leases have expired and/ or renewed under the Act.

Financial experts have predicted that given the enormous dependence of the nation’s economy on the sector and the consequences of the outbreak of the new COVID-19 variant (the Delta Variant), there are concerns as to when the global and local economic climate will return to normalcy. This development, they stressed further creates uncertainty about the general outlook for the oil and gas sector and the economy.
They submitted that while it is expected that there would be an increase in oil exports as well as domestic demand for crude oil products, Nigeria’s recovery is expected to underperform those of other oil producing countries.

This is why, we at EnergyDay hold the view that time has come to focus on the opportunities and possibilities the PIA has to offer indigenous and global participation in the sector.

In light of the foregoing, EnergyDay sends a strong plea to Nigerians, stakeholders and the Committee charged with the framework for the actualization of the Act to consider all ramifications of how the opportunities in the local content can benefit the host communities and Nigerians at large.

However, the level to which LC policy can achieve this goal will depend on our will to power.

The impact of LC policy on local value creation has generated some interest. We need to assess the impact of LC policy in influencing local value creation with particular reference to indigenous oil firms’ participation, backward linkages and job creation.

EnergyDay findings confirm that LC policy has a positive and significant impact on local value creation. However, we found that local value created in the Nigerian oil industry as a consequence of LC policy is lower than the expected target. This implies that the implementation of the policy needs to be closely monitored to ensure its efficacy towards increasing economic development.

The Nigerian Oil and Gas Industry Content Development (Local Content Act) 2010 was enacted by President Goodluck Jonathan to promote the indigeneous participation in the Nigeria’s oil and gas industry for the purpose of improving the economic and social well being of those engaged in operating in the oil and gas industry

The Act provides for the development of Nigerian content in the Nigerian oil and gas industry, Nigerian content plan, supervision, coordination, monitoring, and implementation of the Nigerian content.
The Act stated the requirement of any company or organization that intends to operate in the Oil and Gas Industry in Section 2 of the Local Content Act, which states that “all regulatory authorities, operators, contractors, subcontractors, alliance partners and other entities involved in any project, operation, activity or transaction in the Nigerian oil and gas industry shall consider Nigerian content as an important element of their overall project development and management philosophy for project execution”.

The Act defines Nigerian content in Section 106 as “the quantum of composite value added to or created in Nigeria through the utilization of Nigerian resources and services in the petroleum industry resulting in the development of indigenous capability without compromising quality, health, safety, and environmental standards”.

The sole purpose of the Local Content is to increase Nigerian participation in the oil and gas industry by prescribing minimum thresholds for the use of local services and materials for the promotion of technology and skill to the Nigerian labour in the oil and gas industry.

EnergyDay findings revealed that hundreds of local companies have benefitted from the local content policy, and in light of the new Act, it will become more robust.

For clarity, the core of the
Act implies that every International and multinational company in Nigeria must show that 50% of the equipment intended to be used to operate or for a project in Nigeria is owned by their Nigerian subsidiaries who will apparently execute the project.

Several international and multinational companies have started to comply with the provisions of the Act, while the Board has continued to play a significant role in ensuring strict compliance with the Local Contact Act by all companies participating in the oil & gas sector.

For us at EnergyDay, the Local Content Act is one of the most successful economic policies of the Federal Government in recent times. It is important to note that the Local Content Act does not try or intend to bar foreigners from taking an interest in the Nigerian oil and gas industry, but subject to the fulfilment of conditions specified by the Act.

Thus, this medium support amplifying interest in the Act as Local Content Act and relevant regulations have made it mandatory for any foreign-owned company seeking to carry out operations in the upstream sector of the economy to do so by involving Nigerians in the composition of the company. The Act has been fundamental to the promotion of the development of indigenous capacity in the Nigeria oil & gas sector