PIB: Southern Governors Demand 5% Share for Host Communities

The PIB provides also for the creation of a Host Communities Development Trust. The oil operators (settlors) are obliged to incorporate a trust for the benefit of the host communities
PIB Southern Governors opt for Five Percent for Host Communities

Governors of Nigeria’s southern states have rejected the proposed three per cent share to host communities in the Petroleum Industry Bill recently passed by the House of Representatives.

In a communique issued at the end of their meeting in Lagos, Monday, the Governors said instead, they supported five per cent share to the communities.

The Governors commended the lawmakers for the passage of the PIB after protracted stalling.

The House of Representatives, last week, passed the bill which also proposed 30% profit on oil to be used for “frontier explorations,” after five years of delay.

“However, the Forum rejects the ownership structure of the proposed Nigeria National Petroleum Company Limited (NNPC).

“The Forum disagrees that the company be vested in the Federal Ministry of Finance but should be held in trust by Nigeria Sovereign Investment Authority (NSIA) since all tiers of Government have stakes in that vehicle.”

Late President Umar Yar’Adua introduced the PIB to the sixth National Assembly but the lawmakers failed to pass the bill.

President Goodluck Jonathan reintroduced the bill to the seventh Assembly in 2012 but it did not get concurrent passage from both chambers.

Things to Know About the Petroleum Industry

1. What is the Petroleum Industry Bill?

The Petroleum Industry Bill is a law presented to the National Assembly in 2008. It seeks to introduce far-reaching reforms in Nigerian’s oil and gas industry.

2.    Why do we need the Petroleum Industry Bill?

The PIB is essential because nearly all petroleum-related laws, including the Petroleum Act of 1969 are outmoded. In other words, they are no more relevant and globally competitive globally. With the advancement in technology, the volatility of oil prices, climatic changes influencing the driving forces of the global economy makes it imperative to review extant laws to align the industry to current realities.

3. What are the objectives of the Petroleum Industry Bill?

The bill aims at engendering good governance, best practices, and ease of doing business in the industry through improved environmental compliance, clarifying roles and responsibilities of officials and institutions and transforming NNPC into a commercially viable enterprise.

4.    What Regulatory Institutions are to be established?

The bill proposes the Upstream Regulatory Commission for upstream operations, including the granting of petroleum exploration licenses.

It also provides for the establishment of the Midstream and Downstream Regulatory Authority for midstream and downstream operations.  

5.    What about the Host Communities Development Trust?

The PIB provides also for the creation of a Host Communities Development Trust. The oil operators (settlors) are obliged to incorporate a trust for the benefit of the host communities and shall make an annual endowment, based on a certain percentage of their yearly operating expenditure.

6.    What are the environmental concerns in the PIB?

All licensees or oil companies are required to make financial contribution to an Environmental Remediation Fund for the rehabilitation or management of negative environmental impact with respect to the license or lease. Financial contributions depend on the size of the petroleum operations and the level of environmental impact that may exist. 

The regulator may apply the Fund towards the rehabilitation, remediation or management of harmful environmental impact only when the licensed operator lacks the capacity, or is unable to undertake the rehabilitation or management of any negative impact on the environment effectively.

7.    Why did previous administrations fail to pass the PIB into law?

The previous administrations failed to pass it into law due to contradicting political interests, and regional interests.

8.    Why has it become possible to pass it?

It was more enhanced by a combination of factors, including the commitment of the President Muhammadu Buhari-led administration, host communities and oil and gas operators. Unlike the past when community issues were widely condemned, the conversation about Host Community Trust Fund shifted to community representation, the structure of the fund, and equity stakes.

9. When will it eventually become an Act?

It is clear that the PIB will become an Act this year. It will bring about the restructuring of institutions, attracts local and foreign direct investments, enhance probity and accountability in the oil and gas industry.

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