PIGB: Changing narratives for better future

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…Stakeholders urge the president to expedite action on bill

By Douglas Jaro

Nigeria has lost huge investments in her oil sector largely because there is no policy direction and institutional framework to drive the oil industry to desired level. Apparently showing concern about the situation, the Emerald Energy Institute (EEI), University of Port Harcourt, had a Discourse on Petroleum Industry Governance Bill (PIGB).

Professor Omowumi Iledare, Director of EEI disclosed to participants and stakeholders who attended the Discourse titled, “Nigeria Petroleum Industry Reforms” that EEI is providing its accretion on what the government can do. According to him there is capacity and transparency gap as the country’s policy is not sustainable with ailing downstream and lack of open market structure. “For the sake of the future generation, we must not allow sentiment to overwhelm us but there is need to discuss the issue and come to an agreement keeping in perspective the maximization of society well-being beyond us.” Beyond sentiment, there is need to plan how the country’s oil sector will move forward, Iledare opined.

The Professor of Petroleum Economics revealed that PIGB is already on the president’s desk awaiting his assent. He stated further “In the governance bill, there is a clear role definition of who is in charge of policy and performance share. But at present, what the industry has is amorphous and no one is in charge.”

The University don was of the view that the overall objectives of the governance bill is to promote growth, sustain revenue to the government and finding a way to “reward effort instead of outcome.” He explained that for many years, the upstream licensing has been kept for too long and there will be a philosophy for operators to either ‘drill or drop’ so as to create level playing field for all.

According to Iledare, this is the first time in the history of PIB where there is committed ownership of the bill with readiness to pass it into law. There is so much confidence in the technical team with “the interest of the nation at heart.” The team is monitored by the National Assembly (NASS). He added that the governance bill addresses sustainability of the industry with effective license terms. Governance is required for good business; it will not personalize the management of economic resources but institutionalize it because institution has power.

He emphasized that “If there is a bad governance as it is over the years with regards to institutions that manage the country’s oil and gas, all it has are: inefficiency, red tape, maladministration, corruption and secrecy. But, the new PIGB that is on the president’s desk awaiting assent reduces all issues and challenges. Everything is transparent and it gives room for rule of law, transparency, participation, accountability and sustainability.

The core objectives of the governance bill are to create efficient and effective governing institutions with clear and separate roles for the petroleum industry. It establishes a framework for the creation of commercially oriented and profit driven petroleum entities that ensure value addition and internationalization of the industry. There are provisions to ensure that if an operator defaults, he will be prosecuted.

Professor Iledare noted that the governance bill is not rigid for the country, it is written with the expectation that future generation will benefit from it. It is to guide the industry and the future of the country. The design principles of PIGB includes: clear separation of roles and distinct accountabilities. Also, it encompasses full coverage of the value chain; upstream, downstream and midstream. Iledare submitted that there is minimal interference. For instance, “If the Petroleum Commission decides to close a petroleum station, nobody will call any Commissioner, even the president will not be able to mediate.” He disclosed that Nigeria has subsidized risk and gas projects are subsidized from petroleum revenue, this has been put under control. PIGB does not give room for employment if there are no values added.

Speaking at the Discourse, the don observed that at present, the Nigerian oil industry is incoherent with overlap functions. It has zero accountability with duplication of agencies, the new PIGB will allow different institutions to align based on policy. The Minister of Petroleum can only coordinate affairs but not necessarily controlling. “When you coordinate, you are designing the policy that each of them will follow and you can call them to be accountable, that is the policy and structure with an arbiter which is NASS that will take up oversight functions.” Iledare explained.

In terms of structure and organization, institutional mandates and controls are clearly defined. There is a policy direction for all institution managing the affairs of the industry by the minister. He made it clear that the minister is the driver of industry policy and supervises other arms because he is the only official who attends the Federal Executive Council. While there will be industry watchdog, an independent supervisor and monitor. Also, the government investment will be well managed and it could invest in shares for commercial viability.

With regards to structure, the Emerald Director posited that each institution will have its own Board of Directors, while regulators will regulate, inference and promote, “there will be no more command and control, but carrot and stick, the regulator is going to be the referee among three stakeholders; the government, the industry and the people.” PIGB prevents regulator from taking sides on behalf of government against operators, it has to ensure there is no partiality, “he must ensure compliance with coordination to promote and advocate for the oil industry.”

Going forward, the governance bill will be commercially spelt out as the National Oil Company will be run like other national interests across the globe. Part of the objectives of PIGB is to ensure that the Nigerian National Petroleum Corporation (NNPC) is equally in status like PETROBRAS, STATOIL among others. At present, NNPC is the most inefficient compare to other national oil companies due to government interference. “If the NNPC is severed from political influence, it will be like Shell and of good interest to the nation,” Iledare added. This is what the governance bill will do. He said, if “Seplat, an indigenous company can go to stock exchange in London, why can’t NNPC that has control of over sixty percent of total reserve in Nigeria?”

Besides, Iledare revealed further that PIGB has separated roles for accountability purposes, removed ministerial and presidential discretion of awards. He stated thus: “it is inefficient to give leases to people who do not have proper valuation. Although, there could be strategic reason for discretion but it will be the Commissioners, not the President.”

As part of policy campaign, the governance bill promotes meritocracy in appointment and put political leaders to check. The petroleum industry will be on the right track, all that it requires from industry operations will be done. The bill has met its set objectives with better foundation and the governance institutions are enhanced. There are policy contractual framework, revenue management and fiscal administration. As Nigerians await the passage of the bill, purposeful implementation will be the key for the industry. There is a provision for transition and amendment as well.

However, in contributing to the Discourse at the interactive session, participants and stakeholders urged the president to expedite action and sign the bill. They were of the opinion that if the bill is signed with the efforts put in place by professionals and industry experts, the country’s oil sector will move forward and attract investors who will drive the sector like a private concern.

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