A Review of the Nigerian Energy Industry

Right time for Petroleum Industry Bill

10 December 2014, Lagos – “Equally worrisome is that this PIB grants the minister of petroleum the sole powers to reform NNPC and associated entities even when the Privatisation and Commercialisation Act (1999) gives the National Council on Privatisation and its secretariat, the Bureau of Public Enterprises, this responsibility.”- Chika Onuegbu, “The 2012 PIB: Labour Concerns and Challenges”

The above quote articulates one of the various issues its author, Chika Onuegbu, identifies with the Petroleum Industry Bill (PIB). Onuegbu chairs the Rivers State Council of the Trade Union Congress (TUC), and the quote is from his article entitled “The 2012 PIB: Labour Concerns and Challenges,” published in This Day of November 11, 2014.

PIB-600x330The passage of the PIB is meant to transform the way business is done in the Nigerian oil and gas sector. It would create a situation comparable to what obtains in the privatised Nigerian telecom and power sectors. For it would mean liberalizing the oil and gas sector, triggering the influx of private sector investment and with that competitive provision of services in contrast with the present virtual monopoly in the sector view by some as the bane of efficiency.

Currently, as the article points out, “Our four refineries produce at some 20% of their capacity and the country is forced to import about 80% of needed refined products thereby expending scarce foreign currency and perpetrating fraud in the name of subsidy.” So our oil and gas sector is functioning at 20 per cent efficiency relative to the refining of oil for local consumption. It is an understatement to describe this as unsustainable, considering the huge expense of foreign currency on fuel importation, especially in an era of dwindling national earnings due to the fall in oil prices.

Except for strategic reasons, which are not visible in Nigeria’s case, only an unreasonable country would rather buy from others a commodity it can conveniently produce on its own and sell to others. Refined petroleum products are one such commodity in Nigeria’s case, whose importation in the midst of four underutilized refineries continues to wrongly portray Nigeria as an unreasonable country.

Perhaps more intriguing than the preference to import refined petroleum products rather than produce them locally is the fact that some Nigerians have the capacity to build functional private refineries in the country and are believed to have done so in other countries. Undoubtedly, replicating such investments in the country would alleviate the sometimes dire shortage of the commodity locally and wean the country from imported fuel while conserving its foreign reserve. It may also force down the price of the petroleum products locally, amid the competitive service delivery that is likely to ensue from a multiplicity of private investors as we have seen with the liberalisation of the telecom sector.

The article summarily suggests that business in our oil and gas sector would be better served in a new, liberalised era to be ushered in by the passage of the PIB. It therefore calls for the expeditious passage of the bill, urging the National Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association (PENGASSAN), “as the unions in the oil and gas sector,” to ensure its passage by the National Assembly.

But the hallmark of the credibility of the article’s case for the passage of the PIB is the very critical issue it raises about the content of the bill, which “provides for the legal, fiscal and regulatory framework for the oil and gas industry.” Its views are balanced and well-argued, and so deserve respect by anyone interested in the passage of the PIB as a document that caters in the best way to the related national, sectoral, business and other stakeholder interests.

For instance, it notes that the bill makes “no mention of refining or refining operations other than in Section 220 (2)(b) which mentions that regulations may be made for these operations…” This suggests a scenario where even after the passage of the PIB issues of “refining or refining operations” may be subject to the caprice of discretionary treatment whereas they should be subject to clearly defined regulation. It also suggests that the passage of the PIB may not necessarily entail progressing beyond the current 20 per cent efficiency of our refineries and all the attendant problems.

With the additional issues the article flags in respect of the PIB – bordering on transparency, accountability, fiscal matters, institutional framework, ministerial responsibility, the National Oil Company (NOC), the Petroleum Host Community Fund (PHCF), regulation, refinery and other downstream activities, labour issues, and membership of institutions, boards and committee – which require critical attention, it is easy to see why the effort to have the bill passed has so far been unsuccessful, besides the vested interests that may be stalling its passage.

Incidentally, some of the issues need not have arisen where regard is given to the statutorily delineated responsibilities of government agencies and the necessity to carry out such responsibilities on the basis of expertise. This is apparent from the PIB’s ascription of a statutory role of the National Council on Privatisation (NCP) and its secretariat, the Bureau of Public Enterprises (BPE) to a different entity, specifically the Minister of Petroleum, as hinted in the quote that begins this piece. And it is such a critical responsibility as reforming the Nigerian National Petroleum Corporation (NNPC) and associated entities, even though, as the article points out, “the Privatisation and Commercialisation Act (1999) gives the National Council on Privatisation and its secretariat, the Bureau of Public Enterprises, this responsibility.” Does this evoke the incongruity of a bill whose passage in its current state would entail a breach of the law? And should the bill be passed in its current state regardless of the prospects of its precipitating such illegality?

For me, the issue is not about the Minister of Petroleum, whose identity may change even as the office remains. It is about ensuring that due process is followed, beginning with the assignment of responsibilities to individual or corporate entities regarded by the law or convention as deserving of such responsibilities, like the said reform of the NNPC by the NCP and its Secretariat the BPE. That way, we may forestall the inappropriate assignment of such a responsibility as an excuse for the likely failure to discharge it successfully, like asking a hunter to paddle a canoe even in the presence of a specialised canoe paddler. Besides, the NCP and BPE have proved by their recent achievements, including the successful completion of the power sector reform, that they can handle the complex issues of sectoral reform effectively.

Indeed, the resolution of such issues flagged in the article would transform the PIB into the superb reformative document it ought to be and make it more deserving of a prompt passage.


– Tonye Peterside, The Guardian

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