BEYOND THE JARGONS – PIB FOR DUMMIES

A bill is a draft of a proposed law that is still undergoing legislative scrutiny. When it is passed by the National Assembly, it becomes an Act. No other bill has been more popular since Nigeria’s return to democratic rule in 1999 than the current Petroleum Industry Bill (PIB) – maybe the Freedom of Information Bill comes near. The reason is not far-fetched: anything petroleum in Nigeria generates passionate interest.

Every lettered Ade, Ada and Adamu is aware that there is a contentious bill by the name PIB, but other than the professionals – journalists, informed oil sector workers, regulatory and professional services providers, industry watchers and analysts – and some politicians, few people understand what the PIB is about. In this essay, I have attempted to explain the PIB in the most basic of terms.

WHAT IS PIB?
PIB is a bill that, when passed as an Act, becomes the master reference law that governs the Nigerian petroleum industry – from the upstream division (exploratory, development and production activities) through the midstream (gas processing) to downstream (servicing, refining, distribution, transportation, marketing/retailing).

BACKGROUND
Shortly after President Olusegun Obasanjo assumed office in his first term, he set up a committee, called the Oil and Gas Industry Committee (OGIC), with a mandate to take a comprehensive look at Nigeria’s oil and gas sector and offer better ways of managing the industry. Obviously, many of the laws and regulations guiding the industry had been around for long, some far back 1950’s, and although they had undergone amendments, the federal government considered it necessary to take an holistic review of the industry with a view to getting the best of it by all stakeholders. The OGIC was led by Mr. Rilwanu Lukman, veteran petroleum engineer and former Secretary-General of OPEC, and had other oil industry eggheads. The committee submitted its report, and its recommendations formed the basis of Petroleum Industry Bill, which has since been subjected to further reviews and adjustments.

http://jarushub.com/2013/05/20/beyond-the-jargons-pib-for-dummies/

WHAT DOES PIB SEEK TO ACHIEVE?

The Bill seeks to:
• Create a conducive business environment for petroleum operations
• Enhance exploitation and exploration of petroleum resources in Nigeria for the benefit of Nigerians
• Optimize domestic gas supplies, especially for power generation and industrial development
• Encourage investment in Nigerian petroleum industry
• Optimize government revenue
• Establish profit-driven oil entities
• Deregulate and liberalize the downstream petroleum sector
• Create efficient and effective regulatory agencies
• Promote the development of Nigerian content in the oil industry
• Protect health, safety and the environment in petroleum operations

KEY IMPLICATIONS/OBJECTIVES TO NOTE FROM THE ABOVE

• More jobs for Nigerians – as it will become illegal to employ foreigners for certain skills that can be sourced locally
• Where such skills are sourced from abroad due to unavailability locally, a local understudying the expat is a requirement
• The above is applicable not only to skill, but to materials sourcing
• The above means more jobs for Nigerian local contractors, especially those from the oil producing regions
• Gas is still under-focused in Nigeria and the potential from this source of energy lays untapped. PIB seeks to maximize this. If well explored, this will boost power supply in Nigeria
• Government revenue from oil industry will increase. This means more funds in the hands of government to engage in developmental activities, ideally
• The downstream sector becomes fully deregulated. In other words, subsidy will fully go.
• Subsidy removal is not totally bad, if there are no distortions to market – this is my personal opinion as an economist (well, accountant with academic training in economics)
• Environmental protection – what Saro Wiwa and co fought for, and the initial grudge of the Niger Delta militancy – will be addressed to a large extent

WHO OWNS THE OIL?
The PIB vests ownership and management of all petroleum resources, offshore or onshore, in the Federal Government of Nigeria, which manage them on behalf of all Nigerians. This means irrespective of where the oil is found, it belongs to the government of Nigeria. Of course, equity calls for special consideration for localities where the resources are mined. This is taken care of by the Revenue sharing laws and other provisions of this Bill like the Host Community Fund.

http://jarushub.com/2013/05/20/beyond-the-jargons-pib-for-dummies/

NOTABLE AGENCIES THAT WILL BE ESTABLISHED OR RESTRUCTURED BY PIB

• PETROLEUM TECHNICAL BUREAU (PTB): This will be a special unit under the office of the Minister of Petroleum. It will be peopled by professionals from both the upstream and downstream sectors and charged with the responsibility of rendering professional support to the minister

• UPSTREAM PETROLEUM INSPECTORATE (UPI): The UPI will regulate technical and commercial activities in the upstream sector. It will be responsible for issuing licences and permits. Representatives on Federal Mistry of Finance, NUPENG, PENGASSAN etc will part of UPI board, in addition to other professionals appointed by the president. The UPI is not profit-driven, it will therefore not pay income tax

• DOWNSTREAM PETROLEUM REGULATORY AGENCY (DPRA): This is to be the downstream industry, what the UPI is to the upstream industry. So if you want to set up a filling station, for instance, you approach DPRA.

Note that the Directorate of Petroleum Resources (DPR) currently does what UPI and DPRA will be doing. In other words, PIB unbundles DPR into UPI and DPRA


• THE PETROLEUM TECHNOLOGY DEVELOPMENT FUND (PTDF): The PTDF will continue to exist. The objective of the PTDF is to develop and train manpower necessary to service the petroleum industry in Nigeria. The body gives scholarships to Nigerians, sponsors and supports researches etc

• THE PETROLEUM EQUALIZATION FUND (PEF): The PEF continues to exist under the regime PIB seeks to introduce. The PEF is responsible for accounting for the ‘subsidy’ – the leverage given to Nigerians by making oil marketers sell at prices below market price i.e equalizing. But what is unclear to me is how this will continue to exist when subsidy will be totally removed. But my guess is the continuous existence will be to take care of the backlogs in the equalization funds accounting or to continue its function until after final subsidy is finally removed, the scrapped.


• THE PETROLEUM HOST COMMUNITIES FUND (PHCF): Host communities are communities where petroleum resources are found i.e the Niger Delta and other areas it will be found in the future (like my village in Kwara…lol). The PIB will require oil and gas producing companies to contribute an amount (10% of their profits after adjusting for Hydrocarbon Tax and Companies Income Tax) into this Fund. The funds will be used to develop the economy and infrastructure of these communities. A community that still goes ahead to destroy assets of companies producing in their locality will forfeit their share of PHCF. A good deal, if you ask me.

• THE NATIONAL PETROLEUM ASSETS MANAGEMENT CORPORATION (NAPEMC): The NAPEMC will be responsible for managing government investments in the upstream industry. It will have subsidiaries to carry out different aspects of these activities. It will take over assets and liabilities of NNPC, will be incorporated and fully profit-driven. It is not a regulatory entity. NNPC employees shall be transferred to this entity.

• THE NATIONAL OIL COMPANY (NOC): This will also be an offshoot of NNPC, but unlike NAPEMC which will be a limited liability company, the NOC will be listed on the Stock Exchange, meaning you and I can buy its shares. Up to 30% of its share will be available for grabs by the public. Certain employees, assets and liabilities of NNPC will also be transferred to the NOC.

• THE NATIONAL GAS COMPANY (NGC): This will also be listed as a PLC and certain employees, assets and liabilities of NNPC will be transferred to it.

TAXATION
The PIB effectively repeals the Petroleum Profits Tax Act (PPTA), which has been governed fiscal framework in the upstream sector pre-PIB. Upstream oil and gas companies will now be subject to
• Companies Income Tax (CIT): Like the downstream businesses. It remains at 30% of adjusted profits
• Hydrocarbon Tax (HCT): This is a new tax to be introduced by the PIB for upstream operators. The rate is 50%
Roughly, the effective tax rate in the upstream industry comes to around 80%. It should be noted the repealed PPTA ranges from 66.75% to 85%. So it may be net benefit or hit to companies depending on their operations.

Education Tax remains unchanged at 2% of assessable income.

CONCLUSION
Although I have summarized the PIB in layman language, it no doubt goes beyond this. A lot of technical jargons and complexities have been left out to avoid derailing from the objective of this article. It should also be noted that the PIB has not been finally passed, but this essay is based on the latest version as at the time of doing this summary. There will surely be changes to the Bill before the final version is passed into law, but the major areas covered in this write-up are not expected to significantly change.

http://jarushub.com/2013/05/20/beyond-the-jargons-pib-for-dummies/

This is good information to educate the populace. I agree that high view bills need to be published for public education before they become laws or acts. Another one is the bill about grazing reserves. You should do a similar info release to bring and spread awareness on that bill.

Inspite of your good intention, which I admire and support, I do want to encourage that you be more open to views from unpopular source. I wish you had brought this topic up back when you were a moderator and coordinator for the monthly political debates.

Dudu_Negro: This is good information to educate the populace. I agree that high view bills need to be published for public education before they become laws or acts. Another one is the bill about grazing reserves. You should do a similar info release to bring and spread awareness on that bill.

Inspite of your good intention, which I admire and support, I do want to encourage that you be more open to views from unpopular source. I wish you had brought this topic up back when you were a moderator and coordinator for the monthly political debates.

I agree.Its insightful.

Very informative. Good write up.

Fvck PIB , what d common man need is QUALITY AND QUANTITY of good road, good health care, corruption free state, good education, security of lives and property, justice 4 ALL , 3 square meal , etc.

dridowu: Fvck PIB , what d common man need is QUALITY AND QUANTITY of good road, good health care, corruption free state, good education, security of lives and property, justice 4 ALL etc.

A fool wants the ANSWERS but does not want to see the FORMULA. Guy, it is the FORMULA that produces the ANSWERS and without using the FORMULA you'll not arrive at the ANSWERS.

The PIB will provide jobs, jobs and more jobs. The PIB will also increase govt revenue which can be used to provide more good roads, better health services,etc. So guy, look beyond your nose

Sincere 9gerian:
A fool wants the ANSWERS but does not want to see the FORMULA. Guy, it is the FORMULA that produces the ANSWERS and without using the FORMULA you'll not arrive at the ANSWERS.

The PIB will provide jobs, jobs and more jobs. The PIB will also increase govt revenue which can be used to provide more good roads, better health services,etc. So guy, look beyond your nose

Nice response.

The PIB is fine on paper. But the problem again is, Nigeria's problem has not been the law but people implementing the laws. One wonders whetherb people to carry out the provisions of PIB will come from Mars.

But let's give it benefit of doubt.

op thanks a lot

Sincere 9gerian:
A fool wants the ANSWERS but does not want to see the FORMULA. Guy, it is the FORMULA that produces the ANSWERS and without using the FORMULA you'll not arrive at the ANSWERS.

The PIB will provide jobs, jobs and more jobs. The PIB will also increase govt revenue which can be used to provide more good roads, better health services,etc. So guy, look beyond your nose

Thousands of bills have been passed and many more will still be pass but nothing to show 4 it from local govt level down to Federal. We can pass bills 1millions times but do we implement it, we only implement on papers. Like jarus says, benefit of doubts , but 4 me , speechless on dat
Provide d basic amenities that the common man needs then we can say d elected official ( president 2 councillor) are working.

An enlightening piece indeed. Thanks

Wow very Good...
But Wait Guys Lemme Finish this meal...
I'll be back

Read about it last week and to me, it seems reasonable to an extent. One good thing about it is that the oil and gas companies are obligated to sell natural gas here in Nigeria rather than exporting it. Now, why i say to an extent is: at a time when there are calls to decentralize the nation and practice true federalism, giving the FG full power on this is not something I advocate......that's just my thought though.

Considering the fact that it will improve the life of an average Nigerian, I dunno why NASS keeps stalling. Is it the 10% that goes to host communities?

dridowu: Fvck PIB , what d common man need is QUALITY AND QUANTITY of good road, good health care, corruption free state, good education, security of lives and property, justice 4 ALL , 3 square meal , etc.

dridowu: Fvck PIB , what d common man need is QUALITY AND QUANTITY of good road, good health care, corruption free state, good education, security of lives and property, justice 4 ALL , 3 square meal , etc.

if i may ask what has been the contentious issue with regards to passing it into law. I will appreciate if jarus can clarify some points here. Why are the oil companies kicking against the passage of the PIB bill into law using subltle means. Also the issue of Northerners complaining about the amount of money that will be going to the oil producing area if passed into law.

This PIB happens to be a very debatable issue,as Petroleum happens to be the main stay of the Nigerian Economy..The Issue of 10% to Host communities seems to be a Big problem for the northern National assembly members - they are of the opinion that the NIGER DELTA DEVELOPMENT COMMISSION (NDDC) and the Ministry of Niger Delta affairs are taking care of that.

There was another issue on bill which concerns issuing of Licenses,heard the bill put that in the hands of the Minister in charge of the Petroleum department.

dridowu: Fvck PIB , what d common man need is QUALITY AND QUANTITY of good road, good health care, corruption free state, good education, security of lives and property, justice 4 ALL , 3 square meal , etc.

Pls Go back to school..... I mean start from sec sch again...You really need to be educated. Its the illiteracy made the Hausas render NNPC useless and give more power to foreign oil companies

kekerazi: This PIB happens to be a very debatable issue,as Petroleum happens to be the main stay of the Nigerian Economy..The Issue of 10% to Host communities seems to be a Big problem for the northern National assembly members - they are of the opinion that the NIGER DELTA DEVELOPMENT COMMISSION (NDDC) and the Ministry of Niger Delta affairs are taking care of that.

There was another issue on bill which concerns issuing of Licenses,heard the bill put that in the hands of the Minister in charge of the Petroleum department.

Greed Greed Greed by the North is what is keeping this bill from being passed and the SW is helping them. With all that the North and SW has laid their hands on in oil industry they still frustrate this Bill. They are evil. If the Oil is in the North or SW will these happen. The Oil has developed Abuja and Lagos why cant the communities who own the oil have just 10%, but foreign oil companies are taking 40% and yet the Northern law makers have not protested.

tdade: Considering the fact that it will improve the life of an average Nigerian, I dunno why NASS keeps stalling. Is it the 10% that goes to host communities?

That's one of the contentious areas - some people hold that we are giving too much to teh host communities. Their state governments collect higher cut thru the derivation principle already, there is the NDDC Fund (which mandates producing companies to remit 3% of their annual budget to the NDDC) for development of teh host region, there is the minsitry of Niger Delta too with its budget. Now, Host Community Fund. I also hold that we are giving too much to the host region. That is one major point of contention in the NA.

Other major points of contention are:

Too much power to the minister of petroleum, who can issue and withdraw, licence almost at will (although there is a facade of advisory team)

The provisions don't favour IOCs - and sure to fight back

CHESSBOARD:

Pls Go back to school..... I mean start from sec sch again...You really need to be educated. Its the illiteracy made the Hausas render NNPC useless and give more power to foreign oil companies

its a free world bro, u can say whatever u like but let dm pass d bill billion times , if d basic amenities are not provided dn d bill is useless

dridowu: its a free world bro, u can say whatever u like but let dm pass d bill billion times , if d basic amenities are not provided dn d bill is useless

he big man no hard feelings ok..... but the passage of that bill will do Nigerians and the depleted host communities alot good. I am a Niger deltan and i know what the environment look like over here, and beside jobless youths need to be engage, Do you know the number of youths that got jobs during the militant period, petty jobs foreigners left here, but yet we dont need militants to create such jobs but PIB bills.....thanks

it a good dealit a good dealit a good deal

Hw long will it take to make this bill an Act?, since frm 1999 whc is abt 14yrs. Boys ar nw men and men ar nw old men. Nawao ooo!

Good info. When you think of good ideas or proposals think Nigerians but when it comes implementation it is zero. With the contents of the bill the future holds goods for nigerians, but considering the antecedent of our leaders nothing to rejoice about. Behold where is the modular refineries GEJ promised last year? May God heals Nigeria.

Gud one..but how realistic can dis PIB get me a job wif a 2-1 in geology frm delta state

Ose ghan mr jarus,you just broaden my knowledge about this brouhaha. But my usuall grouse about this is the inability of nigerians to utilise its benefit just like other bills before now (FIB).

KEY IMPLICATIONS/OBJECTIVES TO NOTE FROM THE ABOVE

• More jobs for Nigerians – as it will become illegal to employ foreigners for certain skills that can be sourced locally
• Where such skills are sourced from abroad due to unavailability locally, a local understudying the expat is a requirement
• The above is applicable not only to skill, but to materials sourcing
• The above means more jobs for Nigerian local contractors, especially those from the oil producing regions

I look forward to the day this will happen (if it ever does) and pray there is a spill over effect in the formal sector of the construction industry where innumerable vagabonds are paraded as so called expatriates!

Fine write up,very educative.
But mind u OFFA s not a village.lol

jisky: Fine write up,very educative.
But mind u OFFA s not a village.lol

LOL. Village is generally used to mean 'hometown' in Nigeria.

DaVinChiSam: Wow very Good...
But Wait Guys Lemme Finish this meal...
I'll be back

Enjoy your own part of the national cake jor.