The Nigerian Petroleum Industry Bill (PIB) is currently being considered for passage into law in distinct parts, each instalment dealing fully with the matters to which it pertains. It is understood that this piecemeal approach represents a policy measure for the convenient management of the controversies which have historically plagued the PIB. The first part to be enacted, the Petroleum Industry Governance and Institutional Framework Bill aims to create efficient and effective governing institutions, with clearly delineated roles within the petroleum industry. It will also establish a framework for the creation of commercially oriented and profit-driven petroleum entities and promote transparency and accountability in the administration of petroleum resources in Nigeria.
The Bill breaks up the Nigerian National Petroleum Corporation (NNPC) into two companies: the Nigerian Petroleum Assets Management Company (NPAMC) and a national oil company (NOC), known as the National Petroleum Company. The NPAMC is expected to manage the NNPC's oil and gas investments in assets where the government is not obligated to provide any upfront funding such as production sharing contracts.
In contrast, the NOC is envisaged as an integrated oil and gas company operating as a fully commercial entity. While its initial shares would be held on behalf of the government by the Ministry of Finance and the Bureau of Public Enterprises, the Federal Government is required to divest at least 30% of the shares within six years of incorporation. The NOC will manage the NNPC joint venture assets and meet any resulting cash call obligations. This replaces the system of waiting for federal allocation for funding and would ensure that the entity is better poised to promptly meet its cash call obligations.
A new industry regulator, to be known as the Nigeria Petroleum Regulatory Commission (NPRC), will also be established and merge together the Department of Petroleum Resources and the Petroleum Products Pricing Regulatory Agency. The NPRC will issue, renew and cancel licences, permits and authorisations and regulate petroleum prices, among other functions.
It is expected that the passage of the Petroleum Industry Governance and Institutional Framework Bill will address the institutional and structural concerns which previous industry regulations have been unable to tackle. It remains to be seen how the burning issues of the applicable fiscal terms, gas flaring and deregulation of the downstream sector will be subsequently addressed and if indeed the passage of the Bill will wholly address the issue of regulatory uncertainty that has held back the much needed investments in the oil and gas sector.