Posts

Petroleum Industry Bill (PIB): 20 things to note

The New Petroleum Industry Bill (PIB): Top 20 Changes You Should Know!

The PIB seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and development of Host Communities. It contains 5 Chapters, 319 Sections and, 8 Schedules.

Below are the key changes:

Chapter 1 – Governance and Institutions

1. The key objective is ensuring good governance and accountability, creation of a commercially oriented national petroleum company, and fostering a conducive business environment for petroleum operations.

2. Creation of the Nigerian Upstream Regulatory Commission responsible for the technical and commercial regulation of the upstream petroleum operations; and the Nigerian Midstream and Downstream Petroleum Regulatory Authority responsible for the technical and commercial regulation of the midstream and downstream operations in Nigeria. The Commission and Authority are exempted from the provisions of any enactment relating to the taxation of companies or Trust Funds

3. Imposition of up to 1% levy on the wholesale price of petroleum products sold in the country (0.5% each for the Authority Fund and Midstream Gas Infrastructure Fund)

4. Incorporation of a commercial and profit focused NNPC Limited under CAMA within 6 months from commencement of the new law with ownership vested in the Ministry of Finance Incorporated (and Ministry of Petroleum Incorporated) on behalf of the Federation to take over assets, interests and liabilities of NNPC. This structure is expected to pave the way for eventually sale of shares to Nigerians.

5. Any assets, interest and liabilities not transferred to NNPC Limited will remain with NNPC until extinguished or transferred to the government after which NNPC shall cease to exist. Transfer and sale of the shares are subject to approval by the government and endorsement by the National Economic Council.

6. NNPC Limited will earn 10% of proceeds of the sale of profit oil and profit gas as management fee while 30% will be remitted to Frontier Exploration Fund for the development of frontier acreages in addition to 10% of rents on petroleum prospecting licences and mining leases.

Chapter 2 – Administration

7. The main objective is to promote the exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people and promote sustainable development of the industry, ensure safe, efficient transportation and distribution infrastructure, and transparency and accountability in the administration of petroleum resources in Nigeria.

8. Avoid economic distortions and ensure a competitive market for the sale and distribution of petroleum products and natural gas in Nigeria; and avoid cross-subsidies among different categories of consumers.

9. The Commission is required to develop a model licence and model lease to include a carried interest provision giving NNPC Limited the right to participate up to 60% in a contract.

Chapter 3 – Host communities development

10. The main objective is to foster sustainable prosperity within host communities, provide direct social and economic benefits and enhance harmonious co-existence.

11. Any company granted an oil prospecting licence or mining lease or an operating company on behalf of joint venture partners (settlor) is required to contribute 3% – 5% (upstream Companies) and 2% (other companies) of its actual operating expenditure in the immediately preceding calendar year to the host communities development trust fund. This is in addition to the existing contribution of 3% to the NDDC. The Fund is tax exempt and any contributions by a settlor is tax deductible.

12. Board of trustees and executive members of the management committee may include persons of high integrity and professional standing who may not necessarily come from any of the host communities.

13. Available funds are to be allocated 75% for capital projects, 20% as reserve and 5% for administrative expenses. However, a community will forfeit the cost of repairs in the event of vandalism, sabotage and other civil unrest causing damage to petroleum facilities or disruption of production activities.

Chapter 4 – Fiscal framework

14. The key objective is to establish a progressive fiscal framework that encourages investment in the Nigerian petroleum industry, provides clarity, enhances revenues for the government while ensuring a fair return for investors.

15. FIRS to collect Hydrocarbon Tax of 15% – 30% on profits from crude oil production, CIT at 30% and Education Tax at 2% which will no longer be tax deductible. The Commission will collect rents, royalties, and production shares as applicable while the Authority will collect gas flare penalty from midstream operations. Late filing of tax returns will attract N10m on the first day and N2m for each subsequent day the failure continues. A N20m fine is applicable to an offense where no penalty is prescribed.

16. Generally, expenses must be wholly, reasonably, exclusively and necessarily incurred to be tax deductible. However, a cost price ratio limit of 65% of gross revenue is imposed for hydrocarbon tax deduction purposes, any excess cost incurred may be carried forward.

17. No tax deduction for head office costs while tax deduction of interest on monies borrowed is subject to the satisfaction of the commission that the fund was employed for upstream operations and the interest rates reflect market conditions.

18. Royalties are payable at the rates of 15% for onshore areas, 12.5% for shallow water, and 7.5% for deep offshore and frontier basins, 2.5% – 5% for natural gas. In addition, a price-based royalty ranging from 0% – 10% is payable to be credited to the Nigerian Sovereign Investment Authority.

19. Gas utilisation incentive will apply to midstream petroleum operations and large-scale gas utilisation industries. An additional 5-years tax holiday will be granted to investors in gas pipelines.

Chapter 5 – Miscellaneous provisions

20. The PIB repeals about 10 laws including the Associated Gas Reinjection Act; Hydrocarbon Oil Refineries Act; Motor Spirit Act; NNPC (Projects) Act; NNPC Act (when NNPC ceases to exist); PPPRA Act; Petroleum Equalisation Fund Act; PPTA; and Deep Offshore and Inland Basin PSC Act. It amends the Pre-Shipment Inspection of Oil Exports Act while the provisions , PPTA, Oil Pipelines Act, Deep Offshore and Inland Basin PSC Act.

House of Reps pass Petroleum Industry Bill

The House of Representatives has just passed the Petroleum Industry Bill (PIB).

This comes after the House Committee of the Whole, on Thursday, considered the report of the Ad hoc Committee on PIB and passed the bill. The report was laid on Wednesday by the Chairman of the Ad hoc Committee, Mohammed Monguno (APC, Borno).

The current version of the PIB is titled, “A Bill for an Act to Provide Legal, Governance, Regulatory and Fiscal Framework for the Nigerian Petroleum Industry, the Development of Host Community and for Related Matters.”

Among others, the various provisions in the bill seek to scrap the Petroleum Equalisation Fund and the Petroleum Products Pricing Regulatory Agency with a view to replacing them with a new agency to be known as the Nigerian Midstream and Downstream Regulatory Authority, which would be saddled with the responsibility of carrying out technical and commercial regulation of the midstream and upstream petroleum operations in the industry.

NNPC, NOSDRA pledge collaboration to stem oil spills

The Nigerian National Petroleum Corporation (NNPC) and the National Oil Spill Detection and Response Agency (NOSDRA) have expressed their willingness to work closer aimed at mitigating the incidences of oil spills across the country.

Group Managing Director of the NNPC, Mallam Mele Kyari, made this known when he received the Director General of NOSDRA, Mr. Idris Musa, along with his management team at the NNPC Towers in Abuja on Wednesday.

Kyari stated that as a National Oil Company, the NNPC pipelines, flow stations and assets spread across the country were jointly owned by the Federation.

He maintained that the Corporation produces crude oil to maintain a balance sheet for the nation, noting that the NNPC had taken several steps to deploy technology to stem incidences of oil spill.

“We have taken a number of steps to stem oil spill by deploying technology in order to make sure that whenever there is an oil spill incidence, it is contained almost immediately. We contain the incidences of oil theft, pipeline vandalism and acts of saboteurs and we intend to bring it to the barest minimum,” Kyari said.

He noted that the NNPC operated both crude oil and petroleum products pipelines adding that the Corporation was collaborating with all its partners to curb incidences of oil spill in all areas of its operations.

The NNPC helmsman said the Corporation would also forge closer ties with NOSDRA to proactively forestall oil spill in areas that are prone to incessant incidences.

Earlier, the Director General of NOSDRA, Mr. Musa, said the Agency was prepared to partner the NNPC in mitigating oil spill in all areas of its oerations stressing that the partnership would ensure a good operating environment for the operators and the inhabitants.

He added that breaking of petroleum products pipelines did not provide food, water and good environment for the people rather the malaise bleeds the national purse of revenues that would have being used to provide developmental infrastructure for the various tiers of government.

Kachikwu to x-ray oil and gas investment opportunities at NCDMB forum

Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu has been confirmed as lead discussant on the available and emerging investment opportunities in the Nigerian Oil and Gas Industry, at the forthcoming Nigerian Oil and Gas Opportunity Fair (NOGOF).

Kachikwu is to play a lead role in the discussions at the forum on the values of stake holder’s investment in the oil and gas industry, according to a Leadership report.

The Minster’s participation was confirmed by the executive secretary of NCDMB, Engr. Simbi Wabote. The event is scheduled to hold on April 4-5 2019, at the new headquarters of the Nigerian Content Development and Monitoring Board (NCDMB) in Yenagoa, Bayelsa State.

One of the major roles of the NCDMB is to establish, maintain and operate the Joint Qualification System (NOGICJQS), in conjunction with industry stake holders

Wabote also disclosed that the group managing director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru and chief executives of the international operating companies are also expected at the event themed “Maximizing Investments into the Nigerian oil and gas”.

Wabote added that “it is important for the investors and other stakeholders to have a line of sight to projects opportunities in the funnel so they can position themselves for the desired growth.’’

According to him, NOGOF forum is  to share information about available opportunities to investors who had established fabrication yards, engineering houses, pipe mills, pipe coating yards, cable manufacturing and other facilities since the implementation of the Nigerian Content Act in 2010.

FG working to phase out gas flaring, says Baru

*Gas processing plant commissioned in Delta

The Federal Government is working on a gradual phasing out of the gas flare era in the oil/ gas- rich Niger Delta Region.

It has also urged gas producing companies in the region to enhance its activities in other to be of value to the government in its strides to end the epidemic of gas flaring, by taking advantage of available gas processing plants around the region.

This was stated on Thursday by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr Maikanti Baru, while speaking at the commissioning of the Egbaoma Gas Processing Plant in Ebedei community, Ukwani council area of Delta State.

According to the Nation, Baru added that with the operations of the Ebedei Processing Plants, the gas flare in the Umutu gas field should be out before the end of the year, mandating all gas producing companies in the Delta area to seize the opportunity now provided by PNG Gas Limited in the area and help crusade to end gas flaring in the country.

Commending the operators of the gas processing company; PNG Gas Limited for pioneering gas development efforts locally Dr. Baru said the federal government is aggressively pursuing an extension of domestic gas supply capacity to 5 BSCFD ( billion standard cubic feet per day ).

As part of the expansion project the NNPC boss notified that the gas pipline infrastructure network system is equally being expanded, adding that the Obifu – Obrikom to oven (OB3) gas pipeline a 2 BSCFD capacity pipeline, which is a project aimed at the creating a gas grid across the country, should be ready before the end of the year’s second quarter.

After the inspection and commissioning of the gas plant, Dr.  Baru in his address to journalist said “ my visit here is to reassure the investors here that the gas that is being flared will go into the OB3 and that this flare, God willing, before the end of this year will be out. “I am also encouraging the other producers who are flaring to connect their gas into this gas plant so that they can add value by processing it, removing the liquid that they can sell at a higher value and of course, putting out the flares and monetising lean gas.

“At this juncture, may I urge the operators whose assets are at close proximity to this plant and the OB3 pipeline to seize the opportunity presented by this gas plant to collaborate with PNG Gas limited to supply gas to maximise the plant’s capacity access and commercialise all existing flares and further develop the significant had reserves of ITcf in the area. I see this initiative as the beginning of an end to the last mile of gas flaring in Nigeria” he said.

The chairman and chief executive officer Owel- Linkso Group, promoters of PNG Gas limited, Engr. Charles Osezua in his welcome address stated that his company had invested about $60million in the Egbaoma Processing Plant, with capacity to process some 30 MSCFD of wet gas. In his statement he added that about 500 Nigerians have become commercial beneficiaries of the operations of the processing plants, while more than 500 homes are being serviced with the LPG place.