Already 20 years in the making, Nigeria's Petroleum Industry Bill (PIB), which passed its first reading in the Senate last month, has been delayed yet again and will not now be debated in the House of Representatives until the first quarter of 2021.


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Addressing a joint executive-legislature leadership retreat this week at the Presidential Villa in Abuja, Minister of State for Petroleum Resources Timipre Sylva said lawmakers currently need to focus on the 2021 Appropriation Bill that must be passed before the end of December.

However, he expressed confidence that a consensus existed within National Assembly to expedite passage of the PIB and that it would emerge for presidential assent early next year.

Participants in Nigeria's ongoing marginal fields licensing round may conclude the awards process before reforms are passed, but the new legislation would impact suitors seeking acreage under the next conventional licensing round, set to follow the current exercise.

Sylva's decision to delay the PIB will disappoint contractors hoping that greater institutional and fiscal clarity in laws governing the sector might incentivise incremental onshore developments and trigger final investment decisions for major deep-water projects, such as Bonga South West-Aparo.

Oil creek militants have in recent years held back from resuming attacks on oil infrastructure, but delays in the PIB and the deployment of development funds — amid signs that the presidency is poised to scrap the amnesty programme for ex-fighters — have spiked agitation.

Conscious of the need to placate growing disaffection within creek communities, the proposed PIB specifies that host communities must receive 2.5% of audited operating expenditure in any block, paid into an endowment fund.

This would apply not only to field development and production operations, but also to exploration activity and even midstream operations, while failure to comply would result in licence revocation.

Previous legislative proposals required 10% of operating expenses be paid into a Petroleum Host Communities Fund and there had even been a move to also apply this to ‘transit communities’ such as settlements through which a pipeline passed.

Transit communities are not addressed under the PIB version submitted to the National Assembly, while the levy proposed falls far short of activist demands.

Failure to satisfy community aspirations, whether by trust contributions or direct corporate social responsibility initiatives, have in the past resulted in widespread lockdowns, agitation and outright vandalism.

As such, maintaining peace in the Niger Delta will hinge on how the proposed law is implemented.

Much will depend on the legitimacy of individuals appointed to boards of trustees and the probity of the operator in managing the endowment fund within the strict 5% cap imposed on administrative running costs.

It is now proposed that 70% of the endowment fund shall be allocated to a separate capital fund from which disbursements should be made to all host communities within the catchment area, and 20% to a reserve fund — both fully accounted on an annual basis.

Another 10% would go into a special project fund for impacted communities, and management of this facility would be the exclusive preserve of the operator.

In each case it would be the operator that must take the lead and responsibility for compliance on behalf of partners, as already pertains with the Niger Delta Development Commission, for which operators contribute 3% of their annual budget.

In addition, the new PIB would impose a 30% corporate income tax on upstream operations and replace petroleum profit tax with a hydrocarbon tax at a rate of 50% for onshore and shallow-water operations and 25% for deep-water and frontier acreage.

Lawmakers also have to decide if state-owned Nigerian National Petroleum Corporation should be transformed into a limited liability company, and agree a framework for establishing new upstream and midstream regulatory authorities.

One of the most innovative proposals is the inauguration of a Midstream Gas Infrastructure Fund (MGIF) chaired by the Minister for Petroleum Resources, to incentivise gas use by investing in midstream gas operations held under public-private ownership.

The MGIF would be funded with a 1% levy on the sale and production of gas and petroleum products, but would also accept grants and funding from “multi-lateral agencies and bilateral institutions” focused on the development of midstream gas infrastructure in Nigeria.