PIGB: Are we ready for the impending change?

Bukola Saraki

One of the most significant bills passed by the 8thnational assembly is the Petroleum Industry Governance Bill (PIGB). The significance of the passage of the bill is essentially attributable to its prolonged stay in the national assembly, moving from one dispensation to another. It started as Petroleum industry Bill (PIB) before it metamorphosed into the current PIGB which is unbundled into six segments – Petroleum Industry (Governance & Institutional Reforms) Bill; Petroleum Industry (Downstream Petroleum Administration Reforms) Bill; Petroleum Industry (Upstream Petroleum Administration Reforms) Bill; Petroleum Industry (Fiscal Framework & Reforms) Bill; and Petroleum Industry (Revenue Management Reforms) Bill.

On March 28th 2018, the senate passed the Senate passed the harmonised version of the Petroleum Industry Governance Bill (PIGB). The bill, according to the national assembly, has subsequently been forwarded to the president for his assent; though it is discouraging that discordant tunes are trailing the next stop of the bill. Whilst the general public assumed the bill had been forwarded to the president, the presidency claims otherwise. The senior special adviser to the president on national assembly matters, Sen. Ita Enang in a statement stated that “Further to several inquiries by the media, interest groups and the public in respect of the within named bill (PIGB), may I please state that the said bill has not yet been transmitted by the national assembly to the president.” Corroborating this position, the Vice Chairman, Senate Committee on Petroleum Upstream, Senator GershomBassey, who represented the senate president, BukolaSaraki, at the 2018 Oil & Gas Public Lecture Series organized by the Institute of Oil and Gas Research & Hydrocarbon Studies in Abuja, stated that “What we know is that we have passed the PIGB in the Senate and in the House of Reps, the rest is administrative.”Whatever the case may be, the fact remains that the bill has been passed and will be signed by the president very soon.

Nevertheless, the PIGB has been rightly described as a major legislative intervention in the oil and gas industry in Nigeria. It is perhaps the most far-reaching legislative intrusion in the industry in Nigeria. Many have commended the bill as ground breaking. Analysts have opined that it will extensively impact the oil and gas industry positively and attract investments into the country. Truly, the lofty expectations and promises are valid based on the intents of the law. For instance, one of the most defining elements of the bill is the unbundling of the Nigerian National Petroleum Corporation (NNPC) from its current composition to a proper commercial entity. The unbundling will result in the introduction three new entities – Nigeria Petroleum Asset Management Company (NPAMC), Nigeria Petroleum Liability Management Company and Nigeria Petroleum Company (NPC).The motive behind this major insertion is commendable as it willreturn the NNPC to its original purpose, which is to be a strictly business venture. Currently, the NNPC acts more as a regulator than a commercial business entity.  It is expected that the new Nigeria Petroleum Company (NPC) will be privately run, competing efficiently in the oil and gas industry. Whilst this provision of the law is laudable the major question has remained how the government intends to achieve the independence and business mindedness of the corporation when the minister of petroleum will still remain the chairman of the board.How do we ensure that the national oil company does not become contaminated like the NNPC when the selection of management could still be politically influenced? How do we ensure that staffing of the corporation is not subjected to federal character at the expense of competence and merit?

Ultimately, the question we should be asking the government is how and who will manage the change process that will naturally come with the signing of the bill. The reality before us is that from the day the president signs the bill into law, a new era of industry governance is ushered and the old order recedes. This reality is pregnant with many issues that have not been adequately addressed in the whole legislative process. A top official in a multinational, who prefer to be anonymous said “The PIGB is a major intervention that will shake the oil and gas industry in Nigeria to its root. We do not seem to be fully aware of what we are about to do. In fairness, the legislation will turn around the industry in the long term especially with respect to how the NNPC operates.  However, the short term impacts will be shuddering, especially now that we seem not to be ready for the consequences.” For instance, a pertinent concern for multinational corporations is what becomes of existing contract before the board of the NNPC.

Similarly, with the scrapping of some parastatal and the introduction of new ones, there is bound to be labour issues. For the parastatal that will be scrapped, how are we disengaging the labour force considering the knotty nature of labour issues in the oil and gas industry? We are still battling labour disputes from the liquidation of Nigerian Airways. And for the new agencies that will be created, do we have the expertise to run them and are we training people to fill the vacant position? If truly the new entities especially the Nigeria Petroleum Company are to be run privately and efficiently, there is no way the new companies can absorb all staff from the companies. These are some of the issues our policy makers need to be ready to deal with. The petroleum industry bill is good and perhaps the most progressive legislative intervention in the oil and gas industry in recent times. However, the management of change that will be heralded the moment the bill is signed into law requires careful preparedness. As of today, it appears many stakeholders are essentially excited about the bill and how it will impact the industry in the long run without paying attention to the short term transition hiccups that will be encountered. Unfortunately, the short term bottleneckscan potentially have long term detrimental effects if not properlymanaged.

Another important element in the on-goingprocess that lawmakers may not have taken into consideration is the attempt to legislate on the corporate social responsibilities of the companies in the oil and gas industry. For instance, the Petroleum Host Communities Development Bill attempts to legislate on the emotional aspect of companies operating in the Niger Delta. The host community bill requires oil companies to set up a Trust for the benefit of the community or communities within their area of operation.A section of the bill stipulates that “For the purpose of setting up the Trust, the Settlor shall appoint and authorize a body of trustees, “Board of Trustees”, who shall apply to the Corporate Affairs Commission to be registered as a corporate body under Part C of the Companies and Allied Matters Act in the manner hereafter provided.”  For starters, this against the contemporary participatory approach to company-community engagement, and places too much burden on the oil companies. More so, the provision naturally pits the oil companies against the community, especially the ones with intra-ethnic crises. Already, many of the multinationals are being accused of deploying divide and rule tactics by their host communities. How then do we expect the same communities to accept appointees of the oil companies as Board of Trustees of a Trust that is meant to cater to their need? Obviously, lawmakers did not envisage this interpretation of the proposed law because they were essentially trying to ensure the host communities get the best deals from what is extracted from their environment, which is fair intention.

Sadly, the oil companies in the country restrain from commenting extensively on government policies because the same government is a major partner through the NNPC in virtually all joint venture projects executed in the industry. In essence they do not want to be seen as confrontational to their senior partner. The oil companies are well aware of the transitional challenges they will face from the day the president assents to the bill and how this will impact business. Whilst some of these multinationals are already strategizing to mitigate the impacts of the new legislation, one is worried if the government is fully ready for the immediate challenges and how to alleviate the effect. The consequences of ill-preparedness is that the new law may end up shaking the industry in the short term to the extent that policy makers may question if the decision to pass the law was right in the first instance.

Positively, there is still a window for strategic preparedness. The importance of managing the process smartly and professionally is predicated on the role the oil and gas industry plays in the sustenance of the nation’s economy. Any careless or ill-thought out decision has the potential to stall the growth of the industry and ultimately impact the economy badly. The consequences are enormous and unimaginable if we do not manage this process appropriately. Nonetheless, the consolation lies in the long term capability of the PIGB to turn around the oil and gas industry. It is a good start for the sector and amendments to the law will further shape the industry to become what it should really be. But for now, the government needs to put strategy in place to effectively manage the change that will be heralded by the PIGB as we await the presidential assent.