THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National...

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THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer

Transcript of THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National...

Page 1: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW

Chika Onuegbu JP,FCAPENGASSAN National Industrial Relations Officer

Page 2: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

The Nigeria Petroleum Industry Reforms started long time ago

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-12

Inauguration of OGIC

24th Apr

5th Sept, 2007

Approval of National Oil & Gas Policy

Re-Inauguration of OGIC

7th Sept

May 2008

OGIC Report completed

2004

Draft National Oil & Gas Policy

PIB

Phase-1

PolicyPhase-2

Legislation

Page 3: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Unfortunately the PIB was not passed during the 6th National Assembly

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… and so the Fed Govt was advised to re-start the whole process over

Public Hearings

Senate Committee Recommendations

House Committee Recommendations

PIBFEC Submission

2008 Jul 2009 Dec 2010 Mar 2011

NASS Passage

NASSHarmonisation

Presidential Assent

Memoranda; IATSB 236 IAT HB 159 (+170 clauses)

Page 4: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

…Journey to the 2012 Petroleum Industry Bill(PIB)

Special PIB Task Force led by Senator Udo Udoma was set in January 2012 to work with relevant government bodies to produce a new version of the PIB for presentation to the National Assembly. The PIB Technical Committee was headed by the Director of DPR Osten Oloronsola.

The Task Force was directed to consult with key stakeholders and to liaise with the National Assembly to ensure the quick passage of the 2012 PIB

The Special Task Force on PIB submitted its report in June 2012 to the Presidency

Federal Executive Council of Nigeria approved the PIB on 11 July 2012

The Presidency upon the approval of the Federal Executive Council (FEC)forwarded the 2012 PIB to the National Assembly on 18th July 2012

The bill is now before the National Assembly

Any moment from now the National Assembly will call for public hearing.

… So how ready is PENGASSAN for the public hearing?

Page 5: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

…Journey to the 2012 Petroleum Industry Bill (PIB) cont’d

PENGASSAN National Secretariat set up a PIB Committee made up as follows:1. Comrade Chika Onuegbu Chairman2. Comrade Zaid Kolawole Member3. Comrade M. B. Saidu Member4. Comrade (Rev.) S. F. Oginni Member5. Comrade Chinedu Ajabor Member6. Comrade Tony Nwoha Member7. Comrade Seyi Gambo Member8. Comrade Azubuike M. Azubuike Member9. Comrade Emmanuel Onuorah Member10. Comrade Bayo Olowoshile Co-opted Member11. Comrade Babatunde Oke Secretary

The PENGASSAN PIB Committee had an interactive session with the Senator Udo Udoma Federal Govt Task Force on PIB and the Osten Oloronsola Technical Committee on PIB on April 11, 2012 in FCT Abuja.

The PENGASSAN PIB Committee obtained and circulated the PIB submitted by the Presidency to the Senate to all our branches and members for their review and inputs.

However the response was not encouraging as many branches did not respond. For instance among the PF family only Total E&P submitted a position to the PENGASSAN PIB Committee.

Page 6: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Overview of the 2012 PIB

The 2012 PIB: Is a 223 page document ;comprises 363 sections divided into 9 parts with 5 schedules. Provides for

the legal, fiscal and regulatory framework for the oil and gas industry. Note that some sections of the PIB were not correctly numbered. E.g. no section 119

Create two regulatory entities. The Upstream Petroleum Inspectorate and the Downstream Petroleum Regulatory Agency Provides for Host Community Fund ; Upholds in its entirety the Nigerian Oil and Gas Industry Content Development Act 2010

Split the NNPC into three entities; two incorporated, one not. Subjects the Petroleum industry to heavy political manipulations &interference, which could lay

foundation for unrivalled corruption .e.g. Presidential power to grant licenses and leases without competitive process or any other process; Excessive powers of the Minister of Petroleum including the power to determine rentals and royalties by regulation; recommend all persons to the boards; chairman most of the boards ;make regulations without public hearing etc.; power to receive gifts by the agencies; non application of fiscal responsibility and public procurement acts for many agencies

Introduces new fiscal framework for the oil and gas industry; NHC, CIT and Royalties No mention of refining or refining operations other than in Section 220 (2)(b) which mentions that

regulations may be made for these operations. Meanwhile there is a refinery Bill in the senate. Its outcome will determine the future of the Nigerian oil and gas industry , as well as the Nigerian

workers. Most influential and important legislation after the Nigerian constitution

Page 7: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Overview of the 2012 PIB cont’d

The 9 parts of the PIB are:

Part I. Objectives (Sections 1 to 4)

Part II. Institutions (Sections 5 to 169)

Part III.Upstream Petroleum (Sections 170 to 205)

Part IV.Downstream Licensing (Sections 206 to 220)

Part V. Downstream Petroleum (Sections 221 to 283)

Part VI.Indigenous Petroleum Companies (Sections 284 to 288)

Part VII. Health Safety and Environment (Sections 289 to 298)

Part VIII Provisions on Taxation in the Petroleum Industry (299 to 353)

Part IX Repeals, Transitional and Savings Provisions (Sections 354 to 363)

Page 8: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Overview of the 2012 PIB cont’d

The 5 Schedules of the PIB are:

First Schedule. Rights of Pre-emption

Second Schedule. Supplementary Provision Relating to the Proceedings of the Boards of institutions under this Act:

Third Schedule. Powers and Duties of the services under the Act:

Fourth Schedule. Capital Allowances

Fifth Schedule. Production Allowances

Page 9: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

OBJECTIVES OF THE 2012 PIB (s.1)

Create a conducive business environment for petroleum operations;

Enhance exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people

Optimize domestic gas supplies, particularly for power generation and industrial development

Establish a progressive fiscal framework that encourages further investment in the petroleum industry while optimizing revenues accruing to the Government

Establish commercially oriented and profit driven oil and gas entities;

Deregulate and liberalize the downstream petroleum sector;

Create efficient and effective regulatory agencies;

Promote transparency and openness in the administration of the petroleum resources of Nigeria

Promote the development of Nigerian content in the petroleum industry

Protect health, safety and the environment in the course of petroleum operations; and

Attain such other objectives to promote a viable and sustainable petroleum industry in Nigeria

Page 10: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

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2012 PIB:BROAD POLICY THRUST FOR PENGASSAN

Page 11: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB – Broad Policy Thrust for PENGASSAN

Transparency and Accountability : Competitive, non-discretionary licensing and tender processes

for all contracts and licenses. Specific provisions for Voiding ALL confidentiality clauses for oil

revenue and payment information The reduction to the barest minimun of all discretionary powers

and political interference in the running of the agencies set up by the PIB

Sincere and genuine pursuit of transparency and accountability as key enabler of business growth in the nation’s petroleum industry and sustained economic development of Nigeria

Specific provisions for Publication at least on a quarterly basis the comprehensive production, export and import figures

Specific provisions for Publication of NNPC/ NOC/ National Petroleum Asset Management Corporation/Host Community Funds annual reports and audits online as the case with the multinationals

Page 12: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB – Broad Policy Thrust for PENGASSAN cont’d

Balance b/w Government Take & Industry Growth:

PENGASSAN believes that there should be a good balance between government take (royalties, Tax etc) and industry growth.

The PIB should optimise the returns to Nigeria from its oil and gas resources without stifling investments and growth of the industry.

Our position is informed by the lessons presented in Economic theory by Laffer curve.

The PIB should provide a fiscal regime that is competitive and that will encourage investments in critical areas of the Nigerian oil and gas sector.

This position is furthered strengthened by the discovery of oil and gas in the Gulf of guinea , Dahomey regions and similarly close regions; and the urgent need for the development of gas and power, local refining capacity etc.

Page 13: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB – Broad Policy Thrust for PENGASSAN Cont’d

Labour Issues : PENGASSAN supports the PIB in principle, provided the following are fully met :

There is mandatory recognition of the right to freedom of association and effective collective bargaining by all companies operating or doing business in the Nigeria oil and gas industry irrespective of where they are located .

The PIB ensures that all companies operating in the Nigerian oil and Gas industry comply with all international labour conventions that have been ratified by Nigeria; the collective agreements with the labour unions and the extant labour laws as a minimum in all their dealings with the Nigerian workers and their representatives.

All Workers in the NNPC and ALL other government agencies to be impacted by the PIB shall transit to the new companies/agencies on same terms and conditions. This is crucial to the successful take-off of these agencies, the NOC and the PIB itself.

Page 14: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB – Main Policy Thrust for PENGASSAN cont’d

Labour Issues Contd :

Proper arrangements should be made in the PIB to ensure that the liabilities of the NNPC and other agencies to their staff such as pensions to retired and existing employees are adequately provided for prior to the effective commence date of the PIB.

Ensure that companies operating in the oil and gas industry do not use the PIB as a ploy to disengage Nigerians. To this end, the PIB should give the Upstream Petroleum Inspectorate (UPI) the power to protect the jobs of Nigerians working in the oil and gas industry such that no Nigerian will be relieved of his/her job in the Nigerian oil and gas industry without the approval in writing of the Upstream Petroleum Inspectorate (UPI). This will ensure the reduction of anti-labour practices and engender industrial peace and harmony

Strengthen the Nigerian Content Act and policies especially as relates to labour, training and manpower development

Page 15: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB – Broad Policy Thrust for PENGASSAN cont’d

Membership of All Boards in the PIB :

Workers and their unions are strategic partners and

stakeholders whose participation, initiatives, drive

and inputs are important for the successful

operations of the oil and gas industry.

Consequently we demand for one representative

EACH of PENGASSAN and NUPENG, in ALL the boards

and committees set up in the PIB as strategic

partners with cognate industry knowledge

Page 16: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

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2012 PIB:INSTITUTIONS

Page 17: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Structure of Institutions under the PIB

Ministry of Petroleum Resources

NATIONAL GAS COMPANY

NGC Assets

NATIONAL OIL COMPANY

NPDC Assets

REFINERIES

PSCs, PPMC, NLNG, ETC

National Petroleum

Assets Management Corporation- NPAMC

NPAMC

6 JVs

PARASTATALS

PTDF, PEF, PTI,

NCDMB, PHCF

Downstream Petroleum Regulatory

Agency

Upstream Petroleum

Inspectorate

Petroleum Technical Bureau

Page 18: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutions

1.The Minister - Supervision + Policy

2. Petroleum Technical Bureau – PTB; Special Unit of the Office of the

Minister

3. Upstream Petroleum Inspectorate – UPI; Independent? Regulator,

Upstream

4. Downstream Petroleum Regulatory Agency – DPRA; Independent?

Regulator, Downstream

5. Petroleum Technology Development Fund - PTDF; Capacity

development

Page 19: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

6. Petroleum Equalisation Fund - PEF;…..Collects net surplus revenue

from petroleum products marketing companies . Will manage

subsidy fund post PIB

7. Petroleum Host Community Fund – PHCF; FTO issues, security of

facilities

8. National Petroleum Assets Management Corporation- NPAMC;

………JV Operations

9. National Oil Company – NOC; Commercial

10. National Gas Company Plc.; Commercial

PIB Institutions Cont’d

Page 20: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment

1. Minister of PetroleumPolicy Regulation Operations

Minister UPI NOC

PTB DPRA NGC plc.

PHCF PTB? NPAMC

International / Indigenous OCs

Page 21: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2. The Petroleum Technical Bureau (PTB)

PIB Institutional Alignment Cont’d

A special Unit of the Office of the Minister

Provide technical and professional support to the Minister

Assist the minister in formulation strategies to implement government

policies in the Petroleum Industry(PI)

Assist the minister in monitoring the implementation of government

policy in the PI

In addition to its other duties carry out the functions of the former Frontier

Exploration Services (FES) of the NNPC

***No information on staffing structure

Page 22: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

3. Upstream Petroleum Inspectorate (UPI)

PIB Institutional Alignment Cont’d

Upstream Regulator

With the approval of the Minister, allocate petroleum production quotas

Execute government policies assigned to it by the Minister

Regulate all technical aspects of the upstream sector

Regulate commercial activities within the upstream sector

Determine and ensure implementation and maintenance of technical

standards and specifications

Administer and enforce policies, laws and regulations relating to upstream

operations

Page 23: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

4. Upstream Petroleum Inspectorate (UPI)

PIB Institutional Alignment Cont’d

Members to be appointed by the President on recommendation of the

Minister

Structuring the Inspectorate into such number of departments as is deemed

fit for the effective discharge of its functions will be subject to the approval

of the Minister

The Board shall appoint a Secretary for the Inspectorate

Page 24: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

***UPI Board

Chairman *

Director General

2 Directors of the Inspectorate

2 persons (min. Directors) of the Ministry of Petroleum Resources

1 person (min. Director) from the Federal Ministry of Finance

1 representative from NUPENG *

1 representative from PENGASSAN *

3 others **

***4-yr terms renewable for no more than additional 4 years

*Part-time

 

Page 25: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

5. Downstream Petroleum Regulatory Agency (DPRA)

Downstream Regulator

With the approval of the Minister, allocate petroleum production quotas

Facilitate the supply of gas to the strategic sectors

Execute government policies assigned to it by the Minister

Regulate all technical aspects of the downstream sector

Regulate commercial activities within the downstream sector

Determine and ensure implementation and maintenance of technical

standards and specifications

Administer and enforce policies, laws and regulations relating to

downstream operations

Page 26: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

6. DPRA Board

Members to be appointed by the President on recommendation

of the Minister

Structuring into such number of departments as is deemed fit

for the effective discharge of its functions will be subject to the

approval of the Minister

Page 27: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

Chairman ***

Director General**

2 Directors of the Inspectorate

2 persons (min. Directors) of the Ministry of Petroleum Resources

1 person (min. Director) from the Federal Ministry of Finance

1 representative from NUPENG*

1 representative from PENGASSAN*

3 others ***

**4-yr terms renewable for no more than additional 4 years

*Part-time

DPRA Board

Page 28: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

7. Petroleum Technology Development Fund (PTDF)

Develop local human capacity for the oil and gas sector through

but not limited to:

Provision of scholarships and bursaries, wholly or partially in

universities, institutions and in petroleum undertakings in Nigeria

or abroad

Making suitable endowments to faculties in Nigeria universities,

college, or institutions

Liaising with research centres in Nigeria and abroad on the

adaptation of technology and innovations appropriate to the

needs of the Nigerian petroleum industry

Enhancement and development of infrastructure in tertiary

institutions that provide courses of study relevant to the

petroleum industry

Page 29: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

PTDF Board

The Board shall appoint a Secretary for the Inspectorate Minister as Chairman 1 person (min. Director) from the Federal Ministry of Finance 1 person (min. Director) from the UPI 1 representative from the Nigerian Content Development and

Monitoring Board (NCDMB) The Executive Secretary of the PTDF The Principal, PTI A representative of the Society of Petroleum Engineers A representative of the Society of Engineers6 persons from the 6 geopolitical zones to be appointed by the

President on recommendation of the Minister* Part-time 4-year terms and renewable for another 4 years.

Page 30: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

8. Petroleum Equalization Fund (PEF)

Shall continue to be the PEF into which shall be paid:

Any net surplus revenue recovered from petroleum products

marketing companies pursuant to this Act

Such sums as may be provided for purpose of the Equalization

Fund by the Federal Government

Manage the Subsidy fund post PIB

Exist only as long as there is subsidy on petroleum products

PIB Institutional Alignment Cont’d

Page 31: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

PEF Board

The Board shall appoint a Secretary for the Fund Minister as Chairman The Executive Secretary of the PEF 1 person from the Federal Ministry of Finance 1 person from the Ministry of Petroleum Resources 1 person from the PEF 1 person from the National Association of Road Transport Workers 1 representative of the Major Marketers Association of Nigeria 1 representative of the Independent Petroleum Marketers

Association of Nigeria 1 representative each of the NLC and the TUC of Nigerian 3 persons to be appointed by the President on recommendation of

the Minister

* Part-time 4-year terms and renewable for another 4 years.

Page 32: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

9. Petroleum Host Communities Fund (PHCF)

Utilized for the development of the economic and social

infrastructure of the communities within the petroleum producing

areas.

Every upstream petroleum-producing company shall remit on a

monthly basis 10% of its net profit:

onshore, shallow waters and offshore- remittance to be made

directly into the PHCF

Deep-water areas – remittance directly to the Fund for the benefit

of the petroleum producing littoral States

Page 33: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

10%10%

100%

Profits generated

PPHC Fund

Profits generated

Share for Communities

Fund

State Governments of 8 littoral

states

Community Funds (PML

cover)

Strategic Community

Fund

90% 10%

1) There shall be established a Petroleum Producing Host Communities Fund (“Fund”). The total value of the fund will be equal to 10% of the Profits (defined as Total Revenues minus Royalties and minus Costs minus Tax).

2) The fund shall consist of two main components:-

1) A direct Community Fund which shall be maximum of 90% of the PPHC, which shall be remitted to Communities covered by PMLs

2) A Strategic Community Fund which shall be maximum of 10% of the PPHC, to be utilized for communities not covered by PMLs.

3) Distribution of the funds to each community will be guided by regulations to be promulgated by the Minister of Petroleum Resources

Petroleum Host Community Fund

The new Bill establishes the Host Communities Trust Fund, but does notdefine “host community’ rendering that description amenable to several

interpretations.

Page 34: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

10. National Petroleum Assets Management Corporation (NPAMC)

A holding company operating fully on commercial principles: Acquire and manage investments of the government in the

Nigerian upstream petroleum industry Undertake such other activities as are necessary or expedient for

giving full effect for the performance of its functions e.g. acquisition and maintenance of subsidiaries

Funding: (1) monies made available by the government for the purpose of funding the subsidiaries (2) such monies as may be received by the Corporation in the course of its operations

The NPAMC, though incorporated under the Companies and Allied Matters Act, but shall not be subject to the provisions of the Fiscal Responsibility Act and Public Procurement Act, both of 2007

Following the incorporation of the NPAMC, assets and liabilities comprising exclusively the interest in all the unincorporated joint ventures held by the NNPC and excluding the assets that the government may have vested in the NOC shall be vested in the NPAMC (12-24 months)

PIB Institutional Alignment Cont’d

Page 35: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

NPAMC Board

PIB Institutional Alignment Cont’d

***UPI Board

a. Minister as Chairman

b. The PS, Federal Ministry of Finance

c. MD of the Management Company

(Subsidiary to be established by the

Corporation)

d. 2 persons to be appointed by the

president

Page 36: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

11. National Oil Company (NOC) A public company limited by shares and vested with certain

assets and liabilities of the NNPC (to be incorporated no later than 3 months after the effective date)…Initial shares to be held by a nominee of the MPR and MOF incorporated on behalf of the Federal Government:

Within 6 years from the date of incorporation of the NOC: up to 30% of the authorized shares of the NOC shall be divested to the public

Following the incorporation of the NOC, assets and liabilities held by the NNPC except the interests in the unincorporated joint ventures and Nigerian Gas Company Limited shall be vested on the NOC within 12-24 months from the effective date

The NOC shall be subject to the Governance rules of the SEC

The NOC shall not be subject to the provisions of the Fiscal Responsibility Act and Public Procurement Act, both of 2007

Page 37: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

12. National Gas Company PLC (NGC Plc.) A public company limited by shares and vested with certain

assets and liabilities of the NNPC: Within 6 year from the date of incorporation of the NGC Plc.: up to

40% of the authorized shares of the NGC Plc. shall be divested to the public

Following the incorporation of the NGC Plc., assets and liabilities held by the NNPC except the Nigerian Gas Company PLC shall be vested on the NGC Plc. within 12-24 months from the effective date

The NGC Plc. shall be subject to the Governance rules of the SEC The NGC Plc. shall not be subject to the provisions of the Fiscal

Responsibility Act and Public Procurement Act, both of 2007

166: prior to vesting of the assets and liabilities of the NNPC on the NGC Plc., the Minster may give to the Board of Directors of NNPC directions in writing and the BOD shall comply with every such direction

Page 38: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB Institutional Alignment Cont’d

13. Other Institutions

1. The Petroleum Training Institute (PTI), established by the PTI Act

2004 shall remain a parastatal supervised by the Minister

2. The Nigerian Content Development and Monitoring Board,

established by the Nigerian Oil and Gas Industry Content

Development Act 2010, shall remain a parastatal under the

Minister

Page 39: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB Institutions :COMPARATIVE ANALYSIS

AGENCIES FUNCTIONS BOARD C E O’s STAFF C O S FUNDING REMUNERATION PENSIONPetroleum Technical Bureau

Specified. Pg 16 sec. 10

Not Specified Not Specified Specified. Pg 17 sec. 11

Specified. Pg 17 sec. 11 (2)

Not Specified Specified. Pg 17 sec. 11 (2)

Specified. Pg 17 sec. 12 (1&2)

Upstream Petroleum Inspectorate

Specified. Pg 19 sec. 15

Specified pg 21 sec.17 (NUPENG & PENGASSAN)

Specified. Pg 24 sec. 23

Specified. Pg 26 sec. 28

Specified. Pg 27 sec. 32

Specified. Pg 26 sec. 30

Specified. Pg 24 sec. 24 & pg 26 sec 29 Oil & Gas

Specified. Pg 26 sec. 30

Downstream Petroleum Regulatory Agency

Specified. Pg 32 sec. 45

Specified. Pg 36 sec. 47 (NUPENG & PENGASSAN)

Specified. Pg 39 sec. 53

Specified. Pg 40 sec. 58

Specified. Pg 41 sec. 59

Specified. Pg 42 sec. 62

Specified. Pg 37 sec. 49, pg 39 sec 54

Specified. Pg 41 sec. 60

Petroleum Technology Development Fund

Specified. Pg 48 sec. 76

Specified. Pg 48 sec. 77

Specified. Pg 51 sec. 84

Specified. Pg 53 Sec. 88

Specified. Pg 53 Sec. 88 (3)

Specified. Pg 46 Sec. 74, pg 47 Sec. 75

Specified. Pg 50 sec. 79, pg 52 sec 85, pg 53 sec 89 Oil & Gas

Specified. Pg 53 Sec. 90

Petroleum Equalization Fund Management Board

Specified. Pg 58 sec. 103

Specified. Pg 57 Sec. 101. NLC, TUC

Specified. Pg 59 Sec. 105

Specified. Pg 60 Sec. 107

Not Specified Specified. Pg 60 Sec. 108 (Note pg 56 sec 100 (4)

Not Specified Not Specified

Petroleum Host Community Fund

Specified. Pg 63 sec. 118

Not Specified Not Specified Not Specified Not Specified Specified. Pg 63 sec. 118 (a & b)

Not Specified Not Specified

Page 40: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB Institutions :COMPARATIVE ANALYSIS Cont’d

AGENCIES FUNCTIONS BOARD C E O’s STAFF C O S FUNDING REMUNERATION PENSIONNigerian Petroleum Assets Management Company Limited

Specified. Pg 64 sec. 120

Specified. Pg 68 sec. 131

Not Specified. However, MD as a board member

Transfer of staff, etc pg 189 Sec 356

Transfer of staff, etc pg 189 Sec 356

Specified. Pg 64 sec. 121

Specified. Pg 52 sec. 85, pg 53 sec. 89 pg 69 sec. 133, Oil & Gas

Transfer of staff, etc pg 189 Sec 356

Transition from NNPCPg 76 sec 155Transition from NNPC

Transition from NNPC

Transition from NNPC

Pg 76 sec 155 Pg 76 sec 155 Pg 76 sec 155

Nigerian Content Development & Monitoring Board

NOGICD Act 2010 NOGICD Act 2010 NOGICD Act 2010 NOGICD Act 2010 NOGICD Act 2010 NOGICD Act 2010 NOGICD Act 2010 NOGICD Act 2010

PTI Act, CAP. 16 of the Laws of the

PTI Act, CAP. 16 of the Laws of the

PTI Act, CAP. 16 of the Laws of the

Petroleum Training Institute

PTI Act, CAP. 16 of the Laws of the

PTI Act, CAP. 16 of the Laws of the

PTI Act, CAP. 16 of the Laws of the

PTI Act, CAP. 16 of the Laws of the

PTI Act, CAP. 16 of the Laws of the

Transition from NNPC. Pg 76 sec. 155

Transfer of staff, etc pg 189 Sec 356

Transfer of staff, etc pg 189 Sec 356

National Gas Company Plc

Not Specified Transfer of staff, etc pg 189 Sec 356

Transfer of staff, etc pg 189 Sec 356

Transfer of staff, etc pg 189 Sec 356

Transfer of staff, etc pg 189 Sec 356

National Oil Company

Transition from NNPC. Pg 76 sec. 155

Not Specified Transfer of staff, etc pg 189 Sec 356

Transfer of staff etc pg 189 Sec 356

NB: The present NNPC will become 3 companies-National Oil Company Plc (Government 70% ;30% will be made available to members of the public. ), National Gas Company Plc – (present NGC, govt 51% ,49% to public) and National Petroleum Asset Management Corporation - this will be a holding company fully-owned by the government

Page 41: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

41

2012 PIB:FISCAL FRAMEWORK

Page 42: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework

DESIGN CONSIDERATIONS and Thrust of Federal Government:

A main objective of the PIB is to –’Establish a progressive fiscal framework that encourages further investment in the petroleum industry while optimizing revenues accruing to the Government’. The design considerations for Fiscal framework according to the federal government technical subcommittee on PIB led by Osten Olorunsola are to: Improve overall competitiveness in the oil and gas sector. Maintain per cent government revenues from onshore/swamp and shallow

offshore for crude oil and condensate at the current level. Increase government revenues from deep-water PSC operations, through

adjusted royalty rates. Create attractive fiscal terms for gas in all terrains. Improve savings index by reducing tax rate (Sole risk/JV) and eliminating

investment based fiscal incentives. Special incentive provisions (increased production allowances) included for

PSCs in onshore/swamp/shallow offshore to partially compensate for investor value erosion compared to sole risk operators in these terrains.

Page 43: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

Principles for Royalties and Tax : Fiscal regime (Royalty and Tax) predicated on production as

opposed to terrain and investment respectively Royalty by Production

Captures the output of a company as opposed to its location Creates a fair balance between small and big producers

operating in the same terrain Enables operators to continue to make fair returns during field

decline Royalty by Price

Trigger mechanism is fair to all irrespective of the terrain Self adjusting rate based on the price of crude oil

Abrogation of Royalty by Terrain

Page 44: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

The Nigerian Hydrocarbon Tax (Sections 299 – 352) which shall be administered &

collected by the Federal Inland Revenue Service. S.313 provides for the following as

assessable tax :

50% for onshore and shallow water areas

25% for bitumen, frontier acreages and deep water areas

Where petroleum operations fall in geographical areas that are subject to different tax

rates, NHT shall be levied on the proportionate parts of the profits arising from such

operations.

The Company Income Tax ( Section353, page 184): Previously, in the upstream

sector, companies’ income tax (CIT) is only levied on gas profits. Under the PIB, CIT will be

30% of all assessable profits, and is not deductible from NHT. There are incentives in the

Companies Income Tax Act such as tax holidays which will be retained for LNG companies.

A tax holiday is also available for any company which supplies gas solely for the domestic

market.

It is important to note that the PIB does not amend/delete paragraph (h) of section

19(1) of the CIT Act, Cap 60, LFN, 1990, which exempts “the profits of any company

engaged in petroleum operations” from CIT. It may be expedient for the Bill to

specifically delete this paragraph to avoid potential controversy on the liability of

profits derived from petroleum operations to CIT.

Page 45: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

Royalties(Section 197):

The PIB does not specify the basis and percentage of royalties to be paid by companies engaged in petroleum operations. However, the Bill empowers the Minister for Petroleum Resources (‘the Minister’) to make regulations in that regard. However it is expected that royalties will be by price and production rather than the current practice where it is by terrain.

Contributions to the Petroleum Host Communities Fund (Sections

116 – 118): All upstream petroleum producing companies shall remit, on a monthly basis,

to the Petroleum Host Community Fund (PHC Fund), 10% of net profits from their onshore, shallow water and deep water operations. “Net profit” is defined in the PIB as “the adjusted profit less royalty, allowable deductions and allowances, NHT and companies income tax.”

However under the current regime, all producing and gas processing companies operating onshore and offshore in the Niger-Delta area are required to contribute 3% of their total annual budget to the Niger-Delta Development Commission Fund (NDDC Fund) pursuant to the Niger-Delta Development Commission (Establishment) Act (NDDC Act).

Since the NDDC Act is not one of the statutes listed for repeal under the PIB ,Companies will to contribute to the PHC Fund and the NDDC Fund. Contributions made by a company to the PHCF are to be set off against its ‘total fiscal rent obligations’. Fiscal rent is the aggregate of royalty, Nigerian Hydrocarbon Tax and Companies Income Tax obligations arising from upstream petroleum operations.

Page 46: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

Penalty for Gas Flaring (Sections 275 – 283):

The PIB prohibits the flaring of natural gas after a ‘flare-out date’ to be specified by the Minister via regulations. Based on section 306(k) of the PIB, gas flaring penalty will not qualify as a tax deductible expense, as is currently the case.

Payment of Renewal Bonus (Section 185):

Section 185(2) requires lessees under a PML arrangement to pay “a renewal bonus of an amount specified in the lease” at the time of renewing the PML. Based on section 306(l) of the PIB, renewal bonuses are specifically disallowed for NHT purposes.

Page 47: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

Deductions Allowed: for tax purposes are:

expenses wholly, exclusively, necessarily and reasonably incurred for the purpose of upstream petroleum operations.

Sums ‘set aside in a fund’ as decommissioning and abandonment expenditure have now been explicitly specified as tax-deductible. This implies that only funded provisions would be allowable

Interest incurred on capital employed for upstream petroleum operations is tax deductible, except where the interest relates to operations under a Production Sharing Contract (PSC)

Contributions to the Petroleum Host Communities Fund are allowable Contributions to pension and other similar schemes/funds are tax-

deductible. The need to obtain approval for these contributions has been removed, as long as the scheme/fund is in line with the Pension Reform Act.

Page 48: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

Deductions Disallowed deductions include: all general, administrative and overhead expenses incurred

outside Nigeria in excess of 1% of capital expenditure and 20% of any expenses incurred outside Nigeria except for goods or services not available domestically in the required quantity or quality.

legal and arbitration costs related to cases against the tax authorities or the Federal Government except awarded to the company during the legal or arbitration process .

Others include costs incurred in organising or managing any partnership, joint venture or other arrangement between or among companies, gas flaring charges, insurance costs payable to an affiliate of the company,

any signature or production bonuses costs of obtaining and maintenance of a performance bond

under a PSC Any cost arising from fraud, wilful misconduct or negligence on

the part of the company

Page 49: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’d

The requirement to pay CIT (in addition to the NHT) is not new in the taxation of petroleum companies in other jurisdictions. However,

The rates of the two tax types, together with other fiscal provisions of the PIB, will most likely result in an increase in the effective tax rate of many companies under the PIB regime. This is a contentious issue as the govt claim that the effective increase is just 1%. However the IOCs disagree and cite for instance that: PSC companies that currently pay PPT at a rate of 50% of chargeable

profits, will be liable to NHT and CIT at a combined rate of about 55% (i.e., 30% CIT plus 25% NHT). This is aside from the fact that the companies will give up the relatively more favourable Investment Tax Credit (ITC) /Investment Tax allowance (ITA) that currently applies, for Production Allowance (PA)and General Production Allowance (GPA)

JV companies that are yet to fully amortise their capitalised pre-production expenses are currently liable to PPT at a reduced rate of 65.75%; whereas they will be liable to NHT and CIT at a total rate of about 80% under the new regime.

JV companies that currently pay PPT at 85%, it would appear on the surface that they will pay lower corporate tax at a total rate of 80% under the PIB. However, considering that the companies will no longer enjoy PIA, will not be entitled to PAs and GPAs except for gas operations, and may have a significant proportion of their offshore expenses disallowed, the companies may well have a higher effective tax under the PIB.

Page 50: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’dOffshore/Onshore/Swamp/Shallow :Tax rates and other allowances Comparison

50

Current TermsTaxes/allowances

Proposed TermsTaxes/Allowances

Tax credits / Allowances replaced by production allowance under the proposed terms

Petroleum Profits Tax RatesDuring cost recovery (yr1 - yr5) 65.75%After cost recovery (yr6+) 85.00%Company income tax (on gas revenues) 30.00%

Investment (Initial) Allowance RatesOnshore 5.00%Offshore 10.00%

Capital (Annual) Allowance RatesYear 1 - year 4 20.00%Year 5 19.00%retention 1.00%

Tax Rates RatesHydrocarbon tax - oil & condensate 50.00%Company income Tax 30.00%

Capital (Annual) Allowance RatesYear 1 - year 4 20.00%Year 5 19.00%retention 1.00%

Production Allowance - crude oil & condensateOnshore:

0 - 10 MMBbls

10 - 75 MMBblsShallow offshore:

0 - 20 MMBbls

20 - 150 MMBbls

Lower of $30/bbl or 30% of OSP

Lower of $12/bbl or 30% of OSP

Lower of $30/bbl or 30% of OSP

Lower of $12/bbl or 30% of OSP

Source: Osten Olorunsola PIB Technical Sub Committee

Page 51: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

2012 PIB: Fiscal Framework Cont’dOffshore/Onshore/Swamp/Shallow :Tax rates and other allowances Comparison - cont’d

51

Current TermsTaxes/allowances

Proposed TermsTaxes/Allowances

Production Allowance - natural gas

Onshore:

0 - 1,000 bcf

> 1,000 bcf

Shallow offshore:

0 - 2,000 bcf

> 2,000 bcf

Lower of $1.0 MMBtu or 30% of gas value

Lower of $0.3 MMBtu or 30% of gas value

Lower of $1.0 / MMBtu or 30% of gas value

Lower of $0.3 / MMBtu or 30% of gas value

Source: Osten Olorunsola PIB Technical Sub Committee

Page 52: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB….Fiscal Comparison – Deepwater PSCsTax rates and other allowances

52

Current TermsTaxes/allowances

Proposed TermsTaxes/Allowances

Tax credits / Allowances replaced by production allowance under the proposed terms

Taxes RatesPetroleum Profits Tax rate 50.00%

Investment (Initial) Allowance/Credit Rates1993 PSCs - Tax credits 50.00%Others - tax allowance 50.00%

Capital (Annual) Allowance Rates

Year 1 - year 4 20.00%

Year 5 19.00%

retention 1.00%

Source: Osten Olorunsola PIB Technical Sub Committee

0 - 200m 16.67%200 - 500m 12.00%500 - 800m 8.00%

800 - 1000m 4.00%> 1,000m 0.00%

Basis: Water Depth

Avg. Prod, BOPD Deepwater Avg. Prod, MMSCFD Deepwater

< 50,000 5.0% =< 500 MMSCFD 5.0%

50,001 - 100,000 12.5% > 500 MMSCFD 12.5%

> 100,000 18.5%

Avg. Prod, BOPD Deepwater

=< 50,000 BOPD 5.0%

> 50,000 BOPD 12.5%

Crude oil & Condensate Natural Gas

Condensate from natural gas

Tax Rates RatesHydrocarbon tax 25.00%Company income Tax 30.00%

Capital (Annual) Allowance Rates

Year 1 - year 4 20.00%

Year 5 19.00%

retention 1.00%

Page 53: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

PIB….Fiscal Comparison – Deepwater PSCsTax rates and other allowances

53

Current TermsTaxes/allowances

Proposed TermsTaxes/Allowances

Production Allowance:

Crude oil & condensate:

Natural Gas:

0 - 3000 bcf

> 3000 bcfCondensate from Natural Gas:

0 - 300 MMBbls

> 300 MMBbls

Lower of $20/bbl or 30% of OSP

Lower of $3/bbl or 30% of OSP > 250 MMBbls

Lower of $0.50 MMBtu or 30% of gas value

Lower of $5/bbl or 30% of OSP

Lower of 30% of gas value or $1.0/MMBtu

Lower of $15/bbl or 30% of OSP 0 - 250 MMBbls

Source: Osten Olorunsola PIB Technical Sub Committee

Page 54: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

54

OTHERS • Repeals• Issues and Main

Concerns

Page 55: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Existing laws that will be repealed upon passage of PIB into law: s.354

Associated Gas Re-injection Act, CAP A25, Laws of the Federation of Nigeria 2004

Motor Spirits (Returns) Act, CAP M20, Laws of the Federation of Nigeria 2004

Petroleum Act, CAP 10 Laws of the Federation of Nigeria 2004

Petroleum Products Pricing regulatory Agency (Establishment) Act, 2003

Petroleum Equalization Fund (Management Board, etc) Act, CAP P11 Laws of the Federation of Nigeria 2004

Petroleum (Special) Trust Fund Act, CAP P14 Laws of the Federation of Nigeria 2004

Petroleum Technology Development Fund Act, CAP P15 Laws of the Federation of Nigeria 2004

Deep Offshore and Inland Basin Production Sharing Act, CAP D3 Laws of the Federation of Nigeria 2004. Except for section 16 sub-sections 1 and 2

Petroleum Profits Tax Act, CAP P13 Laws of the Federation of Nigeria 2004

NB:The NNPC act, NNPC Projects Act and NNPC amendment act shall be deemed to be repealed on the date that the Minister signifies by legal notice in the gazette that the assets and liabilities of the NNPC are fully vested in successor entities. For Subsidiary legislations – see s.354(3)

Page 56: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Issues and major concerns:

TRANSFER OF STAFF: There is a fundamental difference in the transfer of staff for staff of DPR

and PPPRA , from that of NNPC. Subsection 3 PIB Provision: From the date of vesting of the assets and liabilities of NNPC

in the National Oil Company (NOC), staff performing functions relating to those assets and liabilities shall be regarded as having transferred services to the National Oil Company. Contrast this with that of DPR and PPPRA

All staff with duties relating to upstream operations of the DPR in the Ministry of Petroleum Resources shall be deemed to have transferred their services to the Upstream Petroleum Inspectorate (UPI) on terms and conditions no less favourable than those previously obtained

From the effective date, the staff of the Petroleum Products Pricing Regulatory Authority (PPPRA) shall be deemed to have transferred their services to the Downstream Petroleum Regulatory Agency (DPRA) on terms and conditions no less favourable than those previously obtained

From the date of vesting of the assets and liabilities of the NNPC (in the NOC, NGC, and the Management Company) the staff performing the functions relating to those assets and liabilities shall be regarded as having transferred their service

Any transfer of services by virtue of above provisions shall be regarded as continuous for the purpose of pension and gratuity

Page 57: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Issues and major concerns:

TRANSFER OF STAFF cont’d : Arising from our broad policy thrust and the fundamental difference in the

transfer of staff for staff of DPR and PPPRA , from that of NNPC. We demand that:

The bill only mentioned the staff of the NNPC, Department of Petroleum Resources and the Petroleum Products Pricing Regulatory Agency (PPPRA) but silent on the subsidiaries of the NNPC, such as NAPIMS, PPMC and the refineries among others. Subsections 1, 2 and 6 clearly captured pension and gratuity of the staff of DPR and PPPRA.

a. The bill should also take care of the issue of transfer of staff in NNPC subsidiaries, such as NAPIMS, PPMC and the refineries

b. None of the staff that transits shall be asked to leave service until a minimum of five (5) years after transition.

c. After the Five (5) years, the union must be involved in reorganisation/rightsizing cum negotiation of exiting staff

d. Staff, who transit, shall transit with their union status.

Page 58: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Issues and major concerns: cont’d

Powers of the Minister: The powers of the Minister under the PIB are excessive and capable of destroying the laudable objectives of the PIB. The wide powers given to the minister of petroleum to make regulations on practically all issues including (i) gas flaring (ii) distribution of the revenues from the Petroleum Host Communities Fund (iii)recommendations of all persons to be appointed into all boards in the PIB(iv) power to send persons into prison (v)determining royalties and rentals.

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. These powers include so many discretionary powers.

These wide powers run counter to the following objectives of the PIB: Create efficient and effective regulatory agencies; Promote transparency and openness in the administration of the

petroleum resources of Nigeria Create a conducive business environment for petroleum operations; Enhance exploration and exploitation of petroleum resources in Nigeria

for the benefit of the Nigerian people

Page 59: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Powers of the Minister cont’d:

Accordingly we demand that: The appointment and removal of the chief executives and Board members of the

Upstream Inspectorate, Downstream Petroleum Regulatory Agency, the National Oil Company, the Asset Management Corporation should follow the process of appointment for other regulatory agencies such as the National Electricity Regulatory Commission (NERC) or Nigerian Communications Commission (NCC) ;

The appointment and removal should be ratified by the Senate; The appointment must be for a specific term (of Four years) and renewable for another

term; The appointment must be through competitive process of selection and open to all

qualified Nigerians either home or abroad;

Appointment to all boards of institutions in the PIB should go through the same process as outlined above

Section 6 (2) PIB Provision: The minister may in writing delegate to any other person or institution any power or function conferred on him by or under the Act except the power to make orders and regulations . We think this subverts every other provision in Section 6 (1). We demand that if the Minister will delegate his/her power or function, such delegation must be subjected to the following: The person/delegate should have experience on any of his/her duty relating to the

institution; Duties not related to the functions of any of the institutions outlined in the Act/Bill

should be delegated to any officer not less than a director with sufficient knowledge about the subject matter of delegation.

Issues and major concerns: cont’d

Page 60: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Issues and major concerns: cont’d

Powers of the Minister cont’d :

Section 7 Right of Pre-Emption. Section 8. Regulations (5) PIB Provision: The Minister may not publish at the

same time or in the same manner the notice of all matters referred to in subsection (4) of this section;

(6). PIB Provision: Notwithstanding the provision of subsection(2) of this section, the Minister may, due to the exigency of the circumstances make any regulation without conducting an inquiry, where he deems it necessary to do so.

We demand that : a. Subsection 5 & 6 should be expunged from Act because of the tendency of their being subject to abuse and discretionary.

Section 13. Establishment of the Upstream Petroleum Inspectorate Subsection (4) PIB provision: The Inspectorate shall be structured into

departments, as its board, with the approval of the Minister, may from time to time deem appropriate for the effective discharge of functions under this Act.

We demand that: The phrase “with the approval of the Minister,” should be expunged from the paragraph. The board of the Inspectorate should be responsible for its actions and inactions without the Minister’s interference

Page 61: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

Issues and major concerns: cont’d

Powers of the Minister cont’d :

Section 166 of the PIB Provide that: Prior to vesting of the assets and liabilities of the NNPC on the NGC Plc, the Minister may give to the Board of Directors of NNPC directions in writing and the BOD shall comply.

We demand that : This section should be expunged as it negates the whole essence of the Bill, as the Minister is given all power to do and undo.

Observation: The PIB does not state which assets and liabilities will be vested with the NOC, but it would seem likely that NPDC operated assets may be among them as well as the country’s refineries. In the PIB, there is no mention of the fate of Production Sharing Contracts, management of which currently sits with NAPIMS. We understand that these may be allocated to the new NOC, rather than NPAMC on the basis that NNPC is currently the concession holder on PSC blocks and the IOCs are the contractors. in section 166,

These matters may also include labour matters.

Page 62: THE 2012 PETROLEUM INDUSTRY BILL(PIB): AN OVERVIEW Chika Onuegbu JP,FCA PENGASSAN National Industrial Relations Officer.

The End

There are so many other changes in the PIB such as the divestment of shares of the NOC, NGC, Presidential Power to Grant Licenses and Leases under section 191 (which inconsistent with the transparency objectives), power to accept gift by agencies in the PIB etc.

So , I urge you to obtain a copy of the PIB and read it for your self. Avoid reading the PIB through the opinion of others.

Nevertheless, PENGASSAN working with NUPENG and FORSTER/CPPA will be organising an interactive session on PIB on the 13th and 14th of November 2012. Please ensure that you attend and participate effectively.

Thank you for your attention!