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PIB: Addressing the Ownership and Participation Question

PIB: Addressing the Ownership and Participation Question

By Ekemini Simon

A new law is in the pipeline. When passed, it is expected that it will change the narrative in oil and gas host communities.

It is a bill for an Act to provide legal,governance,regulatory and fiscal framework for the Nigerian Petroleum Industry, the development of host
communities and for related matters (otherwise known as the Petroleum Industry Bill,PIB), 2020.

The Petroleum Industry Bill (PIB), an omnibus law is meant to regulate the entire sphere of the oil and gas industry and repeal most existing legislations in the industry. Nigeria depends mostly on oil resources as a source of foreign exchange earnings.

The bill has been in contention over the years. It was passed into law in the preceding Assembly but was not assented to by the President. Interestingly, President Muhammadu Buhari in September, 2020 submitted the PIB to the National Assembly.

The bill has passed through second reading at both Chambers of the National Assembly. A Public Hearing is expected during the first quarter of 2021. The hearing will offer opportunities for the oil and gas host communities to make tangible contributions towards a law which will affect their lives and generations to come. Yet, one may be persuaded to ask if the provisions in this bill are adequate enough to address the agitations of oil and gas host communities.

INTERVENTIONS

Before the birth of this bill, there have been many agitations and interventions.
The interventions include the 13% of derivation captured under section 162 (2) of the 1999 Constitution, Niger Delta Development Commission Act where 15 % of total monthly statutory allocations due to member States from the Federation Account is paid. Still on NDDC Act, 3% of total annual budget of petroleum companies are paid and 50 % of monies dues to member States are paid. Other interventions include Memorandum of Understandings, Corporate Social Responsibilities and other Development Organizations.

According to Nigeria Extractive Industries Transparency initiative (NEITI) records, between 2000 to 2018, States of Oil and Gas Host communities have received N8.06 trillion as 13 % derivation. Akwa Ibom State tops the chart with N1.60 trillion within the period.

Despite these gains, agitation in the oil and gas host communities have persisted. According to Joe Nwakwue, Chairman, Society of Petroleum Engineers and Former Special Adviser ( Policy and Regulation) Hon Minister of State Petroleum, the underlying causes for agitation include structural deficiency of the Nigerian Federation, poverty and deprivation of the means of livelihood, environmental damage occasioned by oil spillage, gas flaring, oil and pipeline explosions, and lack of development and employment.

Others are distortions in the social and economic fabric of the local society, bad government/ corruption, alleged insensitivity of the Federal Government and divide and rule tactics of the oil companies.

Yet, Nwakwue notes that the thrust of all agitations is the loss of sense of ownership and participation by the host communities.

Review of Host Community Provisions in PIB 2020

PIB 2020 outlines its objective to include: fostering sustainable prosperity within host communities;
provide direct social and economic benefits from petroleum operations to host communities;
enhance peaceful and harmonious co-existence between licensees or lessees and host communities; and
create a framework to support the development of host communities.

Intriguingly, the bill has provided a new intervention programme for the host communities. It is called the host community fund.

The bill provides for the incorporation of Petroleum Host Communities Development Trusts by Settlors (Oil companies). It also provides direct social and economic benefits to host communities.
According to the bill, the host community fund will be funded by 2.5% of the actual Operating Expenditure (OPEX) of the settlor for the accounting period of the preceding year.

The bill provides for an Advisory Committee which will decide projects through engagement with the communities.

PIB: NOT YET UHURU

Despite the seeming laudable provisions, experts assert that the PIB does not address the main needs of oil and gas host communities.

For instance, a policy think-tank Orderpaper Advocacy Initiative notes this about the Host Community Development Fund “We estimate about N10 – 14b (upstream only) going into the funds annually. This will be grossly inadequate given the number of communities, terrain and development deficit”.

They recommend that funding provision should ensure materiality of funds for impact especially for communities with midstream assets.

Orderpaper further observe potentially over-bearing role of settlor. They advised that there is a need to ensure those manning the fund does not become a settlor affiliate.

They point out that tax deductibility places additional fiscal burden on operators that needs to be captured in fiscal design especially as it increases unit technical costs, reduced government take and investor returns.

” Is a holistic, streamlined approach on derivation, NDDC, Niger Delta not better for development? or is it too late?, Order Paper queries.

Most importantly, Order Paper stresses that the proposed legislation does not quite address the “ownership and participation ” question. How?

EXCLUSION OF OWNERSHIP AND PARTICIPATION IN PIB

Chapter 1, Part 1 and Section 1 of the Petroleum Industry Bill(2020) provides that: “The property and ownership of petroleum within Nigeria
and its territorial waters,continental shelf and Exclusive Economic Zone is vested in the Government of the
Federation of Nigeria.” This provision derives strength from Section 44 (3) of the 1999 Constitution of the Federal Republic of Nigeria as amended.

According to Orderpaper, this provision implies that Host communities may harbour the black gold in their bowels
but ownership of the resource is vested in the central government in Abuja.

Reports indicate that among the top oil producing countries of the world, Nigeria, Mexico, Brazil and Venezuela are the only countries where onshore oil reserves are exclusively owned by the Federal Government. Nigeria’s prevailing type of exploration is offshore with a centralized fiscal policy. Interestingly, countries like Argentina, Australia , Canada and the United States of America have decentralized fiscal policy of the oil sector.

With this practice coupled with the provision in the PIB (2020), experts posit that the agitations by the oil and gas host communities will continue since the loss of sense of ownership and participation isn’t addressed.

True to their prediction, in a communique issued at the host Communities Colloquium on the Petroleum Industry Bill (PIB) on November 17, 2020 in Imo State, stakeholders from host communities in the Niger Delta region noted in their observations that the PIB shies away from the fundamental ownership question which has lingered and agitated host communities for decades.

The stakeholders were made up of Oil Host Communities’ representatives, members of the National Assembly, Civil Society Organisations (CSOs), and the Media. The Communique was further endorsed by Pan Niger Delta Forum (PANDEF) and Stakeholder Democracy Network (SDN).

The Communique issued states “The PIB in its current form appears to be a palliative measure rather than a tool for solving real problems and supporting sustainable development in host communities.”

“The options of equity holding and royalty payments to host communities were identified for consideration as more appropriate beneficiation models”.

“The contribution of 2.5% of previous year’s Operating Expenditure (OPEX) of companies to the Host Communities Trust is subject to manipulations by companies”.

They assert that in any case, the contribution of 2.5% of OPEX is insufficient to address the risks and consequences of petroleum exploration and exploitation”.

The Stakeholders further observe that the level of discretion accorded to companies in organizing the Trusts is of concern to host communities.

They insist that the Bill appears to be unclear as to the fate of impacted communities, especially those in upstream operations of the Niger delta region.

Yet, In spite of the shortcomings highlighted, the Stakeholders point out that PIB 2020 is seen as a welcome development due to the inclusion of Host Community Beneficiation and should be thoroughly engaged by communities with the objective of making informed and cogent representations to the National Assembly. What then should be done to correct matters?

RECOMMENDATIONS

Orderpaper recommends that the use of royalties is global best practice. They note that equity participation is also a viable option with Indorama Eleme Petrochemicals standing as a successful example. This multi billion naira investment projected to hit $6.4 billion in 2025 has the host community holding 7.5 % equity participation.

In addition, the Niger Delta stakeholders insist that the PIB should be designed as a tool for resolving development challenges rather than as palliatives to host communities.

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“The Bill must clearly define what constitutes “host” and “impacted” communities, rather than leave that to the discretion of the companies”, they insist.

What is more, the Stakeholders call on the National Assembly to consult widely with host communities in the current process of passing the PIB to deepen ownership of the resulting legislation.

They recommend “This would include visits to host communities by the Committee members and holding some of the public hearings on the Bill in the oil-producing Niger delta region.”

“In line with the above resolution, members of the National Assembly from the Niger delta region have a responsibility to make granular consultations with their constituents and record their positions accordingly during debate and voting on the Bill.

They demand that the Bill should make it compulsory for members of the Board of Trustees of the Trust to come from host communities and give communities a stronger role in the selection process, financial management and administrative procedures of operating the Trusts.

The Stakeholders point out that the needs assessment, monitoring and evaluation for projects and programmes should be jointly conducted by both the communities and companies.

They advise ” The PIB should clearly set out timelines for implementation of projects and penalties for defaulting companies.”

“The PIB should adopt clearly defined incentive-based measures for protection of oil and gas assets rather than current punitive measures that leave wide room for abuse.”

“The contribution of companies to the Trust Fund should be increased from 2.5% to 5% of OPEX”.

“The Bill should recognize gender dimensions in the development and constitution of host communities structures in line with the 2019 Extractive Industries Transparency Initiative (EITI) Standard”.

PERSPECTIVE FROM AKWA IBOM NATIONAL ASSEMBLY MEMBERS

A National Assembly Member from oil and gas Host Communities in Akwa Ibom State has offered insight into his thoughts about the PIB.

When Contacted, the Member, representing Ikot Abasi Federal Constituency, Rt Hon Francis Udoyok says the bill is promising to his constituents hence has his support.

” There is every need to support the bill especially because of its importance to the host communities that have long been neglected and relegated to the background. Take for instance, Eastern Obolo has long been badly relegated and neglected by every level of government”, Udoyok states.

He notes that in December, he will hold a constituency briefing which will afford the people the opportunity to discuss their yearnings and aspirations as regards the bill.

On the issue of Ownership and Participation, Udoyok insists that it would not be a wise course to push beyond the provisions of the bill else the bill may not sail through.

The Lawmaker adds ” Yes, the issues of Ownership and Participation are important. But we have to understand the controversies that have trailed this bill for over 20 years without passage. We have to toe the line and get the law established. No law is rigid. We will get amendment in the future.”

” If we want to get everything now, we may not get the law passed. I am not satisfied. But there are dissatisfactions that cannot be pursued beyond a certain level. For the future of our great country and where we come from, it is important we support the bill for it to be passed.”

” The shortcomings will be addressed in due course. Laws are not static. They are subject to amendment as the need arises. The Nigerian constitution has passed through a lot of alterations. So, this bill, after being passed, will go through a lot of amendment which is the beauty of democracy in our contemporary society.”

Attempts to reach other National Assembly Members of Akwa Ibom Oil and Gas Host Communities, Member, representing Eket Federal Constituency, Hon Patrick Ifon and Senator representing Eket Senatorial District, Senator Akon Eyakenyi were unsuccessful. They neither responded to their calls nor text messages.

With the fears expressed coupled with recommendations posted, many look forward to a rich engagement during the public hearing on the bill thus find a lasting solution to the agitations of oil and gas host communities.

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