26 November 2013, Lagos – As the clamour to expedite passage of the Petroleum Industry Bill (PIB) intensifies, oil workers under the umbrella of National Union of Petroleum and Natural Gas Workers (NUPENG) and Petroleum and Natural Gas Senior Staff Association (PENGASSAN) have listed key areas the National Assembly should tinker with to ensure it reproduces a bill that will be mutually beneficial to all Nigerians. Chika Amanze-Nwachuku reports
Penultimate week, the joint senate committee on petroleum upstream, downstream, gas, judiciary and legal matters concluded its public hearing on the PIB, an amalgamation of 16 laws that will reshape the future of Nigeria’s oil and gas sector.
The bill was first presented to the National Assembly for consideration in 2008 and the then senate joint committee headed by Senator Lee Maeba, conducted the first public hearing on it in 2009, with the aim of passing it into law that same year. However, hopes of its expeditious passage had been thwarted owing to stiff resistance by some stakeholders, particularly, the international oil companies (IOCs), who picked holes on some of the provisions, especially the fiscal provisions.
Also, the existence of different versions of the bill in the national assembly, political intrigues and wrangling within the National Assembly and executive were major impediments to the passage of the bill during the sixth national assembly.
Following the inability of the sixth assembly to pass the bill, the federal government in 2012, drafted a team that reproduced a new draft bill, which was presented to the seventh National Assembly for consideration around July 2012.
The PIB has become synonymous with missed deadlines. Government had pledged that the bill would be signed into law in 2012, but that again was not met. Also, frantic efforts to pass the bill by December this year have been hampered due to stiff resistance by some stakeholders.
Oppositions to the passage of the newly draft PIB first emerged in December last year, when some northern senators, who were against the host community fund, as provided in the draft oil industry reform bill, openly opposed its consideration by the senate. Also, various interest groups and stakeholders have continued to come up with their demands and suggestions on some of the provisions of the bill.
Oil workers’ position
The two unions in the Nigerian oil and gas industry, NUPENG and PENGASSAN have noted that the objectives of the PIB and Nigeria’s national interest are best secured under six broad themes: transparency and accountability; fiscal terms; institutional framework and regulator; refinery and other downstream activities; labour issues and membership of institutions, boards and committees and health, safety and environment.
Transparency and Accountability
At the just-concluded senate joint committee’s public hearing, Chairman NUPENG and PENGASSAN Joint Committee on PIB, Mr. Chika Onuegbu, said the PIB must in concrete terms, provide for total transparency with regards to award of all contracts and Licenses, and other accompanying processes. This, he said, included but not limited to basis for the award, contract costs and itemisation of activities.
These activities, according to the oil workers, should closely follow the guidelines of both the Extractive Industries Transparency Initiative (EITI) and the Nigeria Extractive Industries Transparency Initiative (NEITI).
The oil unions also argued that another way to ensure transparency was to ensure mandatory publication of all licenses, tenders and contracts. According to the unions, the publications must be easily accessible to all stakeholders, by the creation of database systems to be accessed online as is the case with the database system managed by the National Petroleum Agency, ANP of Brazil.
They also sought provisions that will void all confidentiality clauses for oil revenue and payment information as these are key barriers to transparency efforts; provisions for publication, at a minimum on a quarterly basis, statistical figures of oil operations that include but not limited to production, export and import figures; provisions for publication of annual reports and audits of operations of commercial and associated institutions created under the PIB, such as the National Oil Company; National Petroleum Asset Management Corporation/Company; Host Community Fund etc.
The oil workers also demanded that the provision in the PIB granting the President powers for discretionary award of petroleum licenses and leases be expunged as it is a recipe for cronyism and corruption.
Furthermore, they urged that the Fiscal Responsibility Act (FRA) and Public Procurement Act (PPA) should apply to the NNPC successor companies namely, the Nigerian Petroleum Assets Management Company Limited (NPAMC), the National Oil Company, the National Gas Company (NGC) to further entrench transparency and accountability in the organisations.
One of the proposals in the PIB that has attracted the most strident comments from industry players is that which deals with a new fiscal regime for the industry, particularly the upstream players.
In this area, NUPENG and PENGASSAN posited that the PIB should allow for the optimisation of returns to Nigeria from its oil and gas resources without stifling investments and growth of the industry. The oil unions therefore urged the government to strike a balance between taking a significantly higher stake from industry operations and ensuring the sustainable growth of the industry.
To this end, the oil workers called on the National Assembly to arrange a meeting between the NNPC and the Oil Producers Trade Section (OPTS) to reconcile the disagreements on the fiscal regimes.
For the meeting to be transparent and successful, they also advised that independent fiscal experts be engaged to review the fiscal regimes and come up with facts about the current fiscal regimes, proposed fiscal regimes under the PIB, and the competiveness of Nigeria’s proposed fiscal regimes when compared with similar countries of the world.
The two groups also noted that the PIB did not contain any royalty rates, or amounts for fees and rents leaving it to ministerial regulations. They therefore enjoined the national assembly to urgently address the issue as it does not only give the Minister wide discretionary powers to prescribe rent, royalty and fee rates and amend same, pointing out that royalty rate was one of the key basis on which investors base their investment decisions.
The oil unions observed that the institutional reforms proposed in the PIB are global best practices, align with the Nigerian oil and gas policy and are capable of delivering the long-sought efficiency required for industry operations, thereby placing it on a firm footing for the future. To this end, they recommended that rather than just having a technical team in the minister’s office, styled Petroleum Technical Bureau (PTB), the entire ministry should be a technical one (except for the administrative cadre) with various departments responsible for various aspects of the ministry’s policy formulation role. Also, they suggested a special salary structure and condition of service can be provided for the ministry to attract and retain experts.
Powers of the Minister
The oil workers declared that the PIB 2012 creates a very powerful minister, even more than under the Petroleum Act 1969 or the Petroleum Act of the United Kingdom. They observed that under the PIB, the minister is responsible for the co-ordination of the activities of the petroleum industry in Nigeria and exercise general supervisory powers over the operations and all institutions in the industry. Even typical regulatory functions of the agencies, they also noted, were stipulated to be subject to the minister’s approval. In addition, such routine administrative duties as determining and creating departments are subject to ministerial approval. Also, the minister will have wide discretionary powers to prescribe rent, royalty and fee rates and to amend same.
The unions reasoned that aside some of the wide powers granted the minister under the PIB, it is observed that the minister is to chair many of the agencies created under the PIB, which includes the PEF, PTDF, PHCF and NPAMC in addition to recommending the appointment of virtually all board members of institutions under the PIB.
The therefore held that the powers of the minister under the current PIB are too broad and should be curtailed as the concentration of such powers in one individual will create not only unnecessary bureaucratic bottlenecks but can also lead to abuse.
“In line with global best practice, the minister and the ministry of petroleum should be concerned with broad policy framework and not with the day-to-day running of the industry while the regulator is allowed to carry out its regulatory functions with little or no interference. On this score, we can draw enviable parallels to copy from the powers of other ministers vis-a-vis the Nigeria Communications Commission (NCC) and Nigerian Electricity Regulatory Commission (NERC).
Furthermore, there is no need for the minister to chair any of the institutions/agencies under the PIB. The position of chairmen of the boards should be held by respected and experienced technocrats who have worked previously in the industry in order to give credibility to these institutions. Also, appointments and removal of board members of the institutions should be subject to Senate confirmation”, the groups added.
Unbundling the NNPC
The unions also suggested the PIB needs to reduce government’s stake in the NOC, if it is to be run as a profitable commercial entity. According to them, the Brazilian government for example, holds less than 50 per cent of Petrobras shares although it owns a majority of the voting shares in order to retain control of the company.
They advised that the board, chief executive and top management of the NOC and should also be granted a fixed term in office akin to what obtains in the Central Bank of Nigeria (CBN). They said, this way, the company can function with minimal interference with the board setting targets for the management to meet.
The present PIB also proposes a NPAMC to manage the NNPC’s present Joint Venture (JV) assets. This company is to be owned 100 per cent by government and it is proposed that the company will be capitalised with a 2-year seed loan from the federal government and thereafter stand on its own.
The JV assets provide the bulk of government’s revenue from the oil industry. The JV has however been bedevilled by inadequate funding, as government has often not been able to meet its cash call obligations.
The workers posited that the proposal under the PIB for the JV assets to be under a wholly government-owned corporation did not seem to solve this cash call problem even with the proposed seed capital. According to them, what will therefore be more practical is for government to divest some of its holdings in the NPAMC while members of the public hold the rest. This way, the JV will be better funded.
Host Community Fund
The Petroleum Host Community Fund (PHCF) proposes that oil-producing companies pay 10 per cent of their profits into a PHCF to provide socio-economic infrastructure in the host communities but from which they cannot draw if there is sabotage of petroleum facilities in their domain. The unions also observed that the PIB makes no detailed provisions for the PHCF and leaves it to regulations to be made by the minister.
They also noted that the structure and mode of disbursement of the fund is not provided for and there are no detailed functions and objectives, and reasoned that fund is too fundamental to be left to conjecture and latter day regulations. For these reasons, they suggested there must be clear provisions on the administration of the fund including such provisions allowing the communities to decide for and by themselves the value-adding projects required by the respective communities.
Furthermore, they observed there was ambiguity on whether contributions by companies to the fund will constitute an immediate credit to total fiscal rent obligations, adding that this needs to be clarified.
The workers noted that labour is the most critical factor in the production process. They therefore canvassed that the PIB must make provisions that recognise and uphold the interest and welfare of workers. Specifically, they demanded that the following minimum requirements with regards to labour issues should be met before NUPENG and PENGASSAN can give their support to the PIB:
• Mandatory recognition of the rights to freedom of association and effective collective bargaining by all companies operating or doing business in the Nigeria oil and gas industry irrespective of where they are located;
• Ensure that all companies operating in the Nigerian oil and gas industry comply with all international labour conventions that have been ratified by Nigeria; the collective agreements with the labour unions and the extant labour laws as a minimum in all their dealings with the Nigerian workers and their representatives;
• Ensure all workers in the NNPC and all other government agencies to be impacted by the PIB shall transit to the new companies/agencies on terms and conditions no less favourable than their present conditions. This, they said, was crucial to the successful take-off of these agencies, the NOC and PIB itself;
• Ensure proper arrangements be made that the liabilities of the NNPC and other agencies to their staff such as pensions to retired and existing employees are adequately provided for prior to the effective commencement date of the PIB;
• Ensure that companies operating in the oil and gas industry do not use the PIB as a ploy to disengage Nigerians. To this end, the PIB should give the regulatory agencies the power to protect the jobs of Nigerians working in the oil and gas industry such that no Nigerian will be relieved of his/her job without the approval in writing of the regulator;
• Ensure all workers in the oil industry to be impacted by the PIB shall not be asked to leave service until a minimum of five years after transition. In addition after five years, the Union must be involved in re-organisation/ right-sizing cum negotiation of exiting staff;
• Ensure strengthening of the Nigerian Content Act and policies, especially as relates to labour, training and manpower development;
• Establish the Petroleum Industry Labour Advisory Council to advise on and resolve all labour and industrial relations issues in the critical oil and gas industry.
On Health, Safety, Security and Environment (HSSE) the workers suggested the PIB should ensure that there is no overlap of regulatory duties, responsibilities and oversight functions on the critical HSSE. But in case of conflict between the regulators and the Ministry of Environment and other parastatals, they recommended that the PIB should give ultimate primacy to the industry regulators.
They also recommended that companies must ensure that all those working in their facilities whether they are staff of other companies or contractors observe the same HSE standards and that HSE must be given critical importance in the award criteria and performance assessment of all project and activities in the oil and gas industry.
The workers also demanded a provision that will encourage IOCs to enter into an arrangement with the Petroleum Training Institute (PTI) and PTDF for the training of the lower and middle level manpower for the industries should also be articulated in the PIB. This, they said will enable them create Centres of Excellence in Nigeria.
Furthermore, they said with respect to the membership of boards created under the PIB, provision must be made for representation of one person each of PENGASSAN and NUPENG in all the boards and committees set up in the PIB. This, they said, was predicated on the fact that workers and their unions were strategic partners and stakeholders whose participation, initiatives, drive and inputs are important for the successful operations of the oil and gas industry.
The two oil unions also stated that strong and independent regulators for regulatory function are critical success factors in oil industry operations. They suggested boards of the regulators should also have a fixed term and the appointment and removal of the board members must be approved by the Senate.
Furthermore, they recommended that funding regime for the regulators should be structured to ensure its independence with budgetary appropriations subjected to legislative oversight and not attached to ministerial budgetary provisions. Similarly, the suggested that there should also be no provisions for grants from governments and/or stakeholders they will be regulating. The role of Government, its agencies and officials, they advised, should be limited to issuing only broad/general policy guidelines to the regulator as opposed to specific directives which amounts to day-to-day interference with the powers of the regulators.
Also, the oil industry workers urged the National Assembly to disregard what they described as new gamble with the Idea of Incorporated Joint Venture(IJV), insisting that the PIB as currently proposed has enormous challenges and divergent opinions that need to be resolved in the best interest of the country and the long-term development of the Nigeria oil and gas industry. For them, raising new contentious ideas like IJV will further compound the challenges and call into question government’s sincerity with the reforms in the Nigeria oil and gas industry.
– Chika Amanze-Nwachuku