ENERGY
In August, President Muhammadu Buhari approved a steering committee which would oversee the implementation of the Petroleum Industry Act (PIA). But as if in a hurry to see the process considered as early as possible, he has since then taken other steps to fully ensure that the law that will unlock the enormous potential in the oil and gas industry is put into operation. Emmanuel Addeh writes that while some of the decisions have been greeted with some applause, others have attracted mixed feelings
Roughly six weeks ago, President Muhammadu Buhari signed into law the Petroleum Industry Bill (PIB), a piece of legislation that will serve as the framework for operations in the oil and gas industry.
Having suffered several setbacks for close to 20 years, starting from the period the entire process was first initiated, the bill, now an Act, underwent arguably the most tortuous journey in the history of law-making in the country.
In his first major move, Buhari picked members of the PIA steering committee which is headed by the Minister of State, Petroleum Resources, Timipre Sylva, while the Executive Secretary, Petroleum Technology Development Fund (PTDF) serves as head of the coordinating secretariat and the implementation working group.
However, the process was fully triggered last week when Buhari in his capacity as Nigeria’s Minister of Petroleum Resources, under Section 53(1) of the new Act, directed the incorporation of the NNPC Limited.
The president also approved the formation of a new board, which would be overseen by Senator Ifeanyi Ararume as well as replacing the board member representing the South-south, Senator Magnus Abe, with Constance Harry-Marshal, a lawyer.
He also dropped Dr. Stephen Dike, whose position will be officially filled by Senator Margaret Chuba Okadigbo, former Senate President, Chuba Okadigbo’s widow.
Buhari retained the services of the GMD, NNPC, Mallam Mele Kyari as Chief Executive Officer and Mr Umar Ajiya as Chief Financial Officer of the corporation on the new board.
A Political NNPC Incorporated?
The appointment of a board for the proposed NNPC Limited has generated the most controversies of all the steps so far taken to begin the process of implementing the new law.
The view by many critics is that for a company that is transitioning to a fully commercialised entity and looking to do away with the perception that it is perpetually tied to the apron strings of the federal government, it was an own goal to have selected non-industry actors to man those positions.
Although a number of the appointees to the board have considerable experience in the oil and gas industry, yet their exposure to politics, many believe would detract from the verve and focus required of a behemoth like the NNPC in transition.
“Whatever the case, this board won’t deliver the level of governance that the National Oil Company (NOC) needs for an Initial Public Offer (IPO). Nigeria, they say, never misses an opportunity to miss an opportunity!
“This decision has serious implications for the new NOC, particularly its governance and funding going forward. By law, the NOC may not have recourse to funding from public funds. That road is now permanently blocked.
“So, it has to seek alternative sources of funding for the several projects that need to be undertaken through the transition. The industrialised nations, the international development banks and the major financial institutions are aligned on climate change and will minimise spend on upstream crude oil projects as we rundown to 2030.
“After that period, expect zilch for oil projects. This leaves natural gas projects as the only hydrocarbon that will be supported by the global financial community and that will not be automatic anyway,” a top industry source who preferred to remain anonymous told THISDAY.
He added that NNPC’s partners are also under immense pressure to minimise spending on fossil fuel projects, hence there will be more divestments from lower quality assets and provinces.
Accordingly, save for deepwater offshore and gas-prone Nigerian assets, he noted that Nigerians should not expect NNPC’s IOC partners that would ordinarily support the funding of upstream projects to come to the table.
He added: “The next possible option would have been an IPO, but the PIA says shares can only be sold by competitive bidding and does not explicitly provide for an IPO route. Without doubt, this option must have been on the table for inclusion in the PIB but inexplicably not taken aboard.
“Politics and discipline however hardly walk together in Nigeria. One of the drivers for the PIB over the long season was that Nigeria needed to insulate its NOC from the political system. The appointment of this board kills a great story for an IPO. To be blunt, this is a poison pill – you can’t take a political board to global investors more so given the history of the predecessor corporation,” the top industry henchman noted.
Aside Ararume and Okadigbo, other members of the board are: Dr. Tajudeen Umar (North-east), Mrs. Lami Ahmed (North-central), Mallam Mohammed Lawal (North-west), Constance Harry Marshal (South-south) and Chief Pius Akinyelure (South-west).
The appointments further appeared to have gone against the letters of the new PIA which recommends that appointees into the board must have experience in the oil and gas or related areas.
For instance, described as a career politician, Ararume from Imo State was the pioneer state chairman of the defunct All Peoples Party (APP) and later the All Nigeria Peoples Party (ANPP) in Imo State between 1998 and 1999 and was elected to the Senate to represent Imo North (Okigwe) constituency.
In his comments, Ghana National Petroleum Corporation, Petroleum Commerce Research Chair, University of Cape Coast Oil & Gas Studies, Prof Wunmi Iledare, noted that the new board looked more like “business as usual” despite the planned commercialisation of the national oil company.
Iledare opined that the likelihood of investors having confidence in the board is “very low,” adding that it appears government has made up its mind to continue to fund NNPC Limited, which is not even incorporated
The Upstream, Midstream & Downstream Boards
But the dampening effect of the announcement of the NNPC Ltd. board seemed to have been quickly erased by the list of persons to head the upstream as well as the midstream and downstream agencies sent to the national assembly by the president.
For the upstream, the president nominated Isa Ibrahim Modibbo as Chairman, while the Chief Executive Officer was listed as Mr. Gbenga Komolafe. In addition Hassan Gambo was mentioned as Executive Commissioner, Finance and Accounts while Ms. Rose Ndong is the Executive Commissioner, Exploration and Acreage Management.
The president further retained Mr. Sarki Auwalu who currently heads the Department of Petroleum Resources (DPR) as the Chief Executive Officer of the proposed midstream and downstream authority.
He listed the Chairman of the authority as Idaere Gogo Ogan, Abiodun Adeniji as Executive Director, Finance and Accounts, and Ogbugo Ukoha as Executive Director, Distributions Systems, Storage and Retail Infrastructure.
But Komolafe’s appointment has generated a lot of excitement within the industry, given his antecedents and his many years of experience in the industry.
A core oil and gas man, Komolafe has held leadership positions at various levels of the industry as well as the possession of three degrees in three different fields of academic research.
President Seeks Fresh Alterations to New Law
In his letter to the lawmakers, President Buhari also requested amendments to the new PIA and expansion of the membership of the boards of the upstream regulatory commission as well as the midstream and downstream petroleum regulatory authority.
The president hinged his desire to alter the new law on the need to ensure national balance in appointments into the boards in a request which was contained in a letter dated September 16, 2021, and read during plenary on Tuesday by the Senate President, Ahmad Lawan.
Furthermore, Buhari requested amendment to Sections 11(2)(b) and 34(2)(b) which provides for the administrative structure of the PIA 2021, to increase the number of the non-executive members from two to six on the upstream as well as the midstream and downstream boards.
In addition, the president proposed the deletion of sections 11(2)(f), 11(2)(g), 34(2)(f) and 34(2)(g) from the Act, which would see the removal of the ministries of petroleum resources and that of finance from both boards.
“The proposed amendments will increase the membership of the board from nine to 13 members, that is, representing 44 per cent expansion of the board size. This composition would strengthen the institutions and guarantee national spread and also achieve the expected policy contributions,” Buhari noted.
However, the belief is that the president could have simply made it a south, north appointments if indeed it was necessary, rather than over-populating the boards with a nominee from each geopolitical zone.
On the removal of the two ministries from the boards of the agencies, the president explained that they already have clear-cut roles and could carry out those responsibilities without necessarily being on the boards.
“The two ministries already have constitutional responsibilities of either supervision or inter-governmental relations. They can continue to perform such roles without being on the board.
“It is also important to note that administratively, the representatives of the ministries in the board will be directors – being same rank with directors in the institutions. This may bring some complications in some decision making especially on issues of staff related matters,” he maintained.
Will It Prompt a Floodgate of Amendments?
But with the proposed amendments sent to the national assembly by the president, the fear is that there could be a floodgate of calls for new alterations to the contentious areas of the law.
Although, the lawmakers are yet to openly begin deliberation on the new portions of the law, where the president is seeking amendments, there are already calls from some quarters asking constituents to pressure their representatives to use the opportunity of the president’s request to make other necessary alterations.
For instance, the state governors have expressed concern over the 30 per cent allocation for frontier exploration in the PIA, saying if implemented, it will deplete the Federation Account from which they draw from monthly.
The governors are also against the vesting of ownership of the NNPC Limited in the Federal Ministry of Finance Incorporated and the Ministry of Petroleum Resources, without mentioning the states and the local governments who are supposed to be co-owners.
To this end, the governors recently set up a six-man committee, which is headed by the Delta State Commissioner for Finance, Fidelis Tilije and with Bola Oyebamiji from Osun; Dr Doris Anite, Imo; Dr Regina Boniface, Plateau; Lawan Adamu, Borno; while Babangida Umar, Jigawa, serves as the secretary, to table their grievances to the Federation Account Allocation Committee (FAAC).
In addition, oil-producing communities have also kicked against the three per cent allocated to the host communities in the Act and their exclusion from owning shares in the NNPC Limited.
Although the president may not be favourably disposed to changing any other part of the new law aside the propositions he has sent, it’s inevitable that pressure will continue to mount on the need to tweak a number of sections in the law.
