Senate Passes PIB into law, Approves Creation of two Firms

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The Senate has broken over 15 years jinx by passing into law the most awaited Petroleum Industry Governance Bill. Senate President, Bukola Saraki while commenting on the bill said “this is a Bill PIGB that has been here for many years, we made a commitment and it’s being fulfilled.” Continuing, Saraki said, “this Bill is not only for Nigerians but for our investors. We are proud of what has been done.” The PIG bill was read the third time at the Senate’s plenary before it was passed. The PIGB was passed after the Senate, in the Committee of the Whole, considered the Report of the Committee on Petroleum Upstream, Petroleum Downstream and Gas presented by Senator Donald Alasoadura. Nigeria’s Petroleum Industry Bill (PIB) has always been identified as a comprehensive instrument for the oil sector development and diversification. The content, in summary, pushes for a more inclusive development away from crude oil to other product lines and by-products and robust engagement between international oil companies (IOCs) and the government in the area of investment and modifications in the Joint Venture Partnerships (JVPs)/cash call obligations. It also advocates the activation and extension of indigenous participation and local content development, just and fair engagement of the oil producing communities and transparency/accountability in the industry. With the passage of first tranche of the Petroleum Industry Bill (PIB), the bill will to take care of the governance aspect of the industry. If assented to by the President, the Act will unbundle the Nigeria National Petroleum Corporation (NNPC) into two companies: Nigeria Petroleum Assets Management Company and the National Petroleum Company. According to the bill, the two companies shall be created and supervised by the Ministry Of Petroleum Incorporated. It provides that “the Minister shall, within six months after the Effective Date, take such steps as are necessary under the Companies and Allied Matters Act to incorporate two entities – the first may be called the Nigeria Petroleum Assets Management Company, or such other name as may be available and the other may be called the National Petroleum Company, or such other name as may be available, as companies limited by shares, which shall be vested with certain assets and liabilities of the Nigerian National Petroleum Corporation (“NNPC”). “Upon incorporation and the transfer of assets pursuant to this Act: the Nigeria Petroleum Assets Management Company (hereinafter called the “Management Company” in this Act) shall be responsible for the management of assets currently held by the Nigeria National Petroleum Corporation (NNPC) under the Production Sharing Contracts and Back-in Right Provisions under the Petroleum Act 1969 as amended; The National Petroleum Company shall be responsible for the management of all other assets held by NNPC except the Production Sharing Contract and Back-in Right assets currently held by the NNPC; At the time of its incorporation, the initial shares of the National Petroleum Assets Management Company shall be held in the ratio of 20% by the Bureau for Public Enterprises, 40% by the Ministry of Finance Incorporated and 40% by the Ministry of Petroleum Incorporated on behalf of the Government. The PIGB was the first tranche of the PIB. Other tranches that would soon be presented before the senate are: Upstream Petroleum Licence and Lease Administration, Downstream Oil and Gas Administration and Petroleum Fiscals. Another tranche to be considered is the Petroleum Revenue Management including Petroleum Host Community Fund. The PIGB would help to create efficient and effective governing institutions with clear and separate roles for the petroleum industry. With the passage of the bill, there will be a slim, focused yet robust framework for effective institutional governance of the petroleum industry. The Nigeria National Petroleum Corporation (NNPC) would be reformed into two liability companies, while all existing regulatory agencies would be absorbed into a new agency called Petroleum Regulatory Commission. The PIGB would help to establish a framework for the creation of commercially oriented and profit driven petroleum entities that ensure value addition and internalisation of the petroleum industry. It will also help to promote transparency and accountability in the administration of the petroleum resources of Nigeria as well as foster a conducive business environment for petroleum industry operation.

 

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