OVERVIEW OF THE PIB BY LANRE OLUYEMI

The Bill codifies all the several legislations applicable to the oil and gas industry in Nigeria into one legislation. It consists of more than 170 pages divided into several parts covering Fundamental Objectives, Institutions, Upstream Petroleum Operations, Downstream Petroleum Operations, Indigenous Companies, Local Content, Health, Safety and the Environment, Fiscal Provisions, Repeals, Transitional Provisions and Interpretation. This article seeks to outline some fundamental provisions of the Bill with particular reference to some institutions and licences in the upstream and downstream sectors of the oil and gas industry. FUNDAMENTAL OBJECTIVES The fundamental objectives of the Bill, include, amongst others, management and allocation of petroleum resources and their derivatives in accordance with the principles of good governance, transparency and the sustainable development of Nigeria (Ss 1-8 of the Bill). INSTITUTIONS While institutions b-h will be established from the effective date of the Act, a summary of their responsibilities as stated in the Bill are outlined hereunder: The Minister: The Minister of Petroleum Resources will be charged with overall supervisory functions of petroleum operations and all the institutions of the industry (Ss 9-11). The National Petroleum Directorate: The Directorate shall, among others, bear responsibility for ensuring that the government derives maximum benefit from all petroleum contracts entered into on its behalf and developing strategies to implement the petroleum policies approved by the Minister (Ss 12-36). The Nigerian Petroleum Inspectorate: The Inspectorate shall, amongst others, ensure the efficient and sustainable infrastructural development of all sectors of the petroleum industry, compliance with the terms and conditions of all licences and leases issued in respect of the exploration and production of petroleum in Nigeria (Ss 37-74). The Petroleum Products Regulatory Authority: This institution shall be responsible for the regulation of commercial aspects of the downstream petroleum industry (Ss 75-112). The National Petroleum Assets Management Agency: It shall monitor and approve costs in the upstream petroleum industry so as to ensure that optimal financial returns are realized (Ss 113-133).

Nigerian National Petroleum Company Limited (The National Oil Company): This company shall from the effective date or within three months of the effective date be incorporated as a private limited liability company to be solely owned by the Federal Government at the time of incorporation but may be converted to a public company after two years. The assets and liabilities of the Nigerian National Petroleum Corporation (NNPC) shall be transferred to the National Oil Company and the Company shall be entitled to act as though it were the original party to such obligations. The Nigerian Petroleum Research Centre: It shall essentially be responsible for carrying out research in all areas pertaining to the petroleum industry, but primarily in the areas of exploration, production and process technology, while focusing on the need to develop new technologies; and design capabilities suitable for the needs of Nigeria (Ss 148-173). The Petroleum Equalisation Fund: The fund shall be used to reimburse petroleum products marketing companies for any loss sustained by them solely as a result of their sale of petroleum products at benchmarked prices throughout Nigeria (Ss 174-197). The Petroleum Technology Development Fund: The fund shall be used, amongst others, to train Nigerians, either in Nigeria or abroad, to qualify as graduates and professionals in the petroleum industry (Ss 198-220). A predetermined portion of fiscalised crude and/or fiscalised natural gas shall be paid by every company engaged in operations in the upstream sector into an account of the Directorate for the use of the Directorate, Inspectorate, Agency and Centre. UPSTREAM PETROLEUM OPERATIONS a) Joint Venture Companies Within twelve months from the effective date, each joint venture agreement shall be incorporated as a limited liability company owned by the parties to the existing joint ventures, in proportion to their existing participating interests. The essence of incorporation of the joint ventures is to have independent entities, capable of being financially self-sufficient (Ss 221-229). b) Vesting of Acreages in the Directorate All licenses and leases previously held by the NNPC, including Oil Prospecting Lease (OPL) and Oil Mining Lease (OML) in respect of which Production Sharing Contracts (PSCs) have been awarded shall be held by the Directorate on behalf of the Federal Government. All acreages, licence or lease areas in respect of the exploration, production and development of

petroleum not previously granted prior to the commencement of the Act, will after the Act, be vested in the Directorate on behalf of the Federal Government of Nigeria (S 230). c) Licences, Leases and Contracts Upon the recommendation of the Directorate, the Minister may grant the following licences or leases to the National Oil Company or any indigenous oil company:Petroleum Prospecting Licence (PPL) to prospect for either crude oil or natural gas; Petroleum Mining Lease (PML) to search for, win, work, carry away and dispose of either crude oil or natural gas. Every PPL or PML shall state that it shall be for either crude oil or natural gas but not for both. In the event that a company possessing either a PPL or a PML intends to engage in operations not covered under its existing licence, it shall apply to the Minister for the relevant licence or lease (S 232).

d) Financial Provision for remediation of environmental damage Every licensee or lessee shall pay a prescribed fee to the Inspectorate for the management or rehabilitation of negative environmental impacts prior to the approval of the environmental management programme by the Minister and this shall be a condition precedent for the grant of a lease or licence. This fee shall be used by the Minister to rehabilitate or manage the negative environmental impact in question in the event that the licensee fails or is unable to do so (S 260). DOWNSTREAM OPERATIONS Licenses in respect of matters relating to design, procurement, construction and operation of all facilities and infrastructure including refineries, process plants, petrochemical plants, which shall include licences to establish, construct and/or maintain a process plant, petroleum transportation pipeline or network, or a petroleum distribution network are regarded as technical licenses under the Bill. The Inspectorate shall bear the responsibility for the grant of technical licences and no one shall carry any of the activities affected without a technical licence issued by the Inspectorate (S 264).

a) Commercial Licensing Any person who desires to undertake downstream activities shall require a commercial licence issued by the Authority and shall not engage in any of the activities without such a licence (S 283). b) National Transport Logistics Company On the date of commencement of the Act or within one month from the date of incorporation of a company to be known as the National Transport Logistics Company, the Minister shall transfer the ownership of the product pipelines and depot systems formerly owned by the Petroleum Products Marketing Company; and the ownership of the gas transportation pipelines formerly owned by the Nigerian Gas Company to the said Transport Logistics Company, which shall be wholly owned by the Nigerian state. c) The National Strategic Stock The Authority shall administer and ensure compliance, distribution and storage of the national strategic stock of petroleum products in accordance with guidelines set by the Minister on the recommendation of the Authority. It shall also designate the strategic points across the country where the national strategic stock shall be distributed and maintained (S 335). d) Nigerian Gas Marketing Company The Authority shall issue a supply licence and a distribution licence to the Nigerian Gas Marketing Company in respect of the pre-existing distribution networks transferred by the Nigerian Gas Company (S 346). CONCLUSION While the Petroleum Industry Bill has been lauded for the reforms which it seeks to achieve in the industry, the real challenge will be the enforcement of the provisions of the Bill upon its passage into law