The momentous passage of the Petroleum Industry Governance Bill on May 25, 2017 by the Nigerian Senate was heralded by many as a revolutionary step at creating a legal framework to address some of the perennial challenges that has plagued the oil and gas industry over the years. With this development, it is expected that the Bill will go through a few other legislative procedures and eventually assented by President of the Federal Republic of Nigeria. We give a short overview of the provision of the passed Bill in this article

The Bill seeks to establish efficient and effective governing institutions with clear and separate roles for the petroleum industry. It is also noted that the Bill proposes to establish a framework for the creation of commercially oriented and profit driven petroleum entities that ensure value addition and internationalization of the petroleum industry as well as promote transparency and accountability in the administration of petroleum resources of Nigeria. Furthermore, it is the expectation of oil industry players that the Bill will foster a conducive business environment for petroleum industry operations.

The Bill provides three-pronged solutions to the bureaucratic bottlenecks and regulatory inefficiency in the oil and gas industry; harsh business environment for investment in the industry; and default in meeting the financial obligations of the government on its investment in the industry. The unique approach offered by the Bill is the establishment of three institutions to pilot the change in the general operations of the oil and gas industry: Nigeria Petroleum Regulatory Commission (NPRC); National Petroleum Asset Management Company (NPAMC), and National Petroleum Company (NPC).

The Bill establishes the Nigerian Petroleum Regulatory Commission (NPRC) which, upon the final passage of the Bill, will assume the full upstream, midstream, and downstream regulatory functions of the Department of Petroleum Resources (DPR) and the Petroleum Products Pricing Regulatory Agency (PPPRA). It is expected that the harmonization of the functions of the regulators of the industry will address issues of redtapism in the industry and reduce frictions characteristic of the oversight functions of the DPR and the PPPRA.

The National Petroleum Asset Management Company (NPAMC), modelled after the Malaysian PETRONAS, is to be incorporated as a company to manage the assets where government has no upfront funding obligations. When the company is incorporated, it is expected that NNPC shall transfer its employees, assets, rights and obligations to the NPAMC.

The National Petroleum Company (NPC) would take over assets with existing cash call obligations. It is expected that at any time within 6 years of the operation of the Bill, 30% of the shares of the NPC will be divested to the members of the public. The opportunity for the private sector investment in the company will undoubtedly increase the operational efficiency of the company.

The above considered, it is our recommendation that the liabilities of the NNPC should be severed and transferred to a company to be named Oil & Gas Liability Management Company (OLMC). The aim of this is to ensure a seamless transfer of the assets of NNPC to the companies that will take over, without burdening them with the liabilities. It is expected that the liabilities will be efficiently managed by the OLMC, in the same manner the National Electricity Management Company (NELCO) was saddled with the liabilities of the defunct Power Holding Company of Nigeria in the power sector.

It is also our view that the passage of the Petroleum Industry Governance Bill by the Senate is a commendable step. We therefore urge the House of Representatives to expedite all legislative procedures for the passage of the Bill so that the anticipated wind of change can blow on the oil industry sooner.

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