Friday, 13 March 2015

House Removes Presidential Power to Grant Oil Licences, Leases

Two years and about four months after the House of Representatives kick-started hearing on the Petroleum Industry Bill (PIB), yesterday the lower chamber came out with its recommended amendments to the bill, including stripping the president of discretionary powers to grant oil licences and leases.

In place of the discretionary award, oil licences and leases will be awarded through competitive bids.

This was one of the nine recommendations the House made, just as it retained four aspects of the PIB including Sections 225-229, which provides for the existence of three conventional licences, namely: Petroleum Exploration License (PEL), Petroleum Prospecting Licence (PEL) and Petroleum Mining Lease (PML).

The House equally expunged the powers of the Minister of Petroleum Resources over the National Oil Company (NOC), Upstream Petroleum Inspectorate Agency (UPIA), Downstream Petroleum Regulatory Agency (DPRA), Asset Management Company (AMC) and other corporate entities to be established by bill when enacted.

These recommendations were submitted in a report of the ad-hoc committee of the House chaired by its Chief Whip, Hon. Isyaka Bawa Bwari, which was mandated to review all 363 sections and annexures in the bill.

According to the report of the 23-man ad-hoc committee, in place of the discretionary powers of the president, the granting of licences and leases will be subject to competitive bids.

“The discretionary power of the president to grant petroleum licences and leases, as contained in Section 191 of the bill is completely removed. Instead, the committee recommended competitive bids for the award of such licences and leases,” the report said.

“The rationale behind this amendment is simply to avoid the practice whereby the power for the award of oil blocks is discretionary,” it added.

On the committee's recommendation for reducing the powers of the Minister of Petroleum, the report said: “The powers conferred on the minister over the control of newly established agencies in the petroleum industry appear to be enormous and capable of undermining the independence of the regulatory agencies.

“Therefore, the committee, in its wisdom, has recommended the removal of powers given to the minister either to serve as chairman or to recommend to the president the appointment of chairmen of the boards of such agencies.

“The rationale behind the removal of the ministerial powers is to ensure smooth running of the agencies without undue influence, and to guarantee independence of the same, which is in line with current global practice.”

The committee also expanded coverage of the Petroleum Host Community Fund to include “any community where oil facilities and installations, such as pipelines, depots and refineries are located”, thus widening the coverage of the fund beyond the oil producing communities of the Niger Delta to other parts of the country.

The report rationalised this recommendation as an “innovation intended to allay the raging distrust between oil producing and non-oil producing communities in the country”.

In the same vein, a Frontier Oil Services Agency (FOSA), to be funded through taxes from oil operations and budgetary allocations, will be created “to step up exploration activities in various frontier acreages of Nigeria’s oil industry, which comprises Anambra, Sokoto, Benin, Chad, Bida and Benue basins”.

The report also recommended the divestment of 30 per cent of the shares of the Nigerian National Petroleum Corporation (NNPC or National Oil Company) to be sold through a public offer on the Nigerian Stock Exchange (NSE).

“Forty-nine per cent of Nigerian Gas Company (NGC) shares are to be divested in a similar way, while oil production measurements are to be made at the flow stations not at the point of export,” the report added.

Section 203, which provides for the Environmental Remediation Fund was retained, in addition to Section 323, which stipulates punishment for gas flaring.

Another aspect of the bill retained in the report was Section 414(3) on sanctity of petroleum contracts.


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