The passage and signing of the highly anticipated Petroleum Industry Act is a watershed moment in the oil and gas sector and stakeholders, albeit in the private or public sector, will be affected by its wide provisions. This paper seeks to analyse the salient innovations and provisions of the recently passed Petroleum Industry Act. The Act provides legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry and the development of host communities and contains 5 Chapters, 319 Sections and 8 Schedules. We shall, in this piece, provide major insights into the legal, governance, regulatory and fiscal requirements for stakeholders in the upstream, middle stream and downstream oil sectors.
2. Background to the Petroleum Industry Act, 2021
For over a decade, the Nigerian government has made various attempts at developing new legal, regulatory and institutional frameworks for the Nigerian petroleum industry. These attempts began with the inauguration of an Oil and Gas Sector Reform Implementation Committee (OGIC) by the Federal Government in 2000 with a mandate to propose reforms for the industry. In 2004, OGIC submitted to the Federal Government, a draft National Oil and Gas Policy (NOGP), which was eventually approved by the Federal Executive Council in 2007.
In a bid to implement the approved NOGP, the Federal Government procured the drafting and submission to the sixth National Assembly of an executive bill called the Petroleum Industry Bill (PIB) 2008. Although several iterations of this Bill were circulated, the Bill was never passed into law by the houses of the sixth National Assembly.
In 2011, discussions resurfaced on the enactment of the PIB which led to another executive bill that was submitted to the National Assembly in July 2012. The long-drawn legislative procedure eventually crystalised into the Petroleum Industry Bill, 2021. This Petroleum Industry Bill was the signed into law by the President of the Federal Republic of Nigeria on August 16, 2021.
3. CHAPTER ONE – GOVERNANCE AND INSTITUTIONS
This chapter reiterates the fact that the ownership of petroleum within Nigeria is vested in the Federal Government of Nigeria. The Petroleum Industry is headed by the Petroleum Minister who has powers to formulate, monitor and administer policy in the Petroleum Industry and shall generally exercise supervision over operations of the industry1.
"In a bid to implement the approved NOGP, the Federal Government procured the drafting and submission to the sixth National Assembly of an executive bill called th Petroleum Industry Bill (PIB) 2008."
3.1. Nigerian Upstream Petroleum Regulatory Commission2
The Act establishes the Nigerian Upstream Petroleum Regulatory Commission (The Commission) whose objects and functions are within the confines of the upstream petroleum operations. Upstream operations are limited to exploration and production (E&P) and include exploring, drilling and extracting petroleum products. In the oil and 3 gas supply chain, the upstream sector is the farthest away from the consumers.3
The Act explicitly itemizes the functions of the Commission which include inter alia; to enforce, administer and implement laws, regulations and policies relating to upstream petroleum operations and ensure compliance with applicable national and international petroleum industry policies, standards, and practices for upstream petroleum operations.
3.2. Nigerian Midstream and Downstream Petroleum Regulatory Authority
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (alternatively referred to as the Authority) is another major innovation of the Act.4 The Authority is a body corporate with perpetual succession and a common seal which shall have the power to acquire, hold and dispose of property. The Authority is also vested with the power to sue, and be sued in its own name.5
As its name suggests, the Authority is responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry. Its objectives include inter alia, the environmental obligation of ensuring efficient, safe, effective and sustainable infrastructural development of midstream and downstream petroleum operations, and promoting a healthy, safe, efficient and effective conduct of midstream and downstream petroleum operations in an environmentally acceptable and sustainable manner.
The Authority is empowered to make regulations concerning the processing, refining, transmission, distribution, supply, sale and storage of petroleum and petroleum products as well as other midstream and downstream petroleum operations inter alia. The Authority is also responsible for regulating the prerequisites for obtaining licenses and permits for the midstream and downstream petroleum operations.6
In the same light, the Authority is also empowered to make regulations relating to the retail sale and distribution of petroleum products, competition in the petroleum industry and anti-competitive behavior. Furthermore, as disputes are always bound to occur, the Authority is empowered to make regulations concerning dispute resolution and consumer protection. The Authority is also to regulate pricing regimes for midstream and downstream petroleum operations.
The Act also establishes the Midstream and Downstream Gas infrastructure Fund subject to the appropriation of the National Industry, which shall be a body corporate with perpetual succession and a common seal. One of the major sources of this fund is levy of 0.5 % of the wholesale price of petroleum products and natural gas sold in Nigeria, which shall be collected from wholesale customers and levy imposed as a source of the Authority fund.7
"Furthermore, as disputes are always bound to occur, the Authority is empowered to make regulations concerning dispute resolution and consumer protection. The Authority is also to regulate pricing regimes for midstream and downstream petroleum operations."
3.3. The Nigerian National Petroleum Company Limited
Among the key innovations of the Act is the establishment of the Nigerian National Petroleum Company Limited (NNPC Limited), which shall be incorporated under the Companies and Allied Matters Act (CAMA), as a limited liability company within 6 months from the commencement of the Act8
1 Section 3(1), Petroleum Industry Act, 2021
2 Part III, Chapter 1, Petroleum Industry Act
3 Adam Haynes, Upstream available at https://www.investopedia.com/terms/u/upstream.asp accessed on August
6 Ibid, Section 33
7 Ibid, Section 52
8 Ibid, Section 57
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