Proposed PIA Amendment: A Note Of Caution

In spite of the seeming chaos that governs most of what we do in Nigeria, there is an observable symmetry in the way government policies are communicated to the citizenry. It is not clear if the pattern of communication is by design, but is has become so regular that any serious-minded citizen would discountenance it at his own detriment. It often starts with snippets of information on the intended policy circulating in the rumour mill. Then it makes its way into the digital/online media, and progresses into the traditional media (especially the print media).

Having transformed from rumour into news, this is usually the point where the relevant ministry or agency comes up to deny, confirm, modify, or shed more light on it, depending on the position of the administration.

The information about the plan to amend the Petroleum Industry Act 2021 has been going through that cycle over the past few weeks. It has transformed from a virile rumour into a potent news. The only segment of the metamorphosis it is yet to undergo, like an insect, before it either dies or grows wings to fly into the realm of policy, is the denial or confirmation stage. One critical aspect of the communication pattern, as has been observed over the years, is that if there is no substance in the news, the denial comes very swiftly. That the news of the proposed amendment of the PIA has been in the public space for a full week without denial could only mean that there could be some substance in it.

While we await the confirmation of the news and its ultimate metamorphosis into a policy of the Federal Government, it is pertinent to x-ray some of the provisions the proposed amendment appears to have been designed to bring about and their implications for Nigeria and its citizens. From what has been reported in the media so far, the proposed amendment which has been reported to be sponsored by the Ministry of Finance is designed with the objective of addressing the “escalating fiscal leakages and revenue loss confronting the Federation.” The reports also indicate that areas targeted for amendment include Section 8 which establishes the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as the body charged with the regulation of upstream operations.

The amendment, according to the reports, would see the NUPRC replacing the NNPC Ltd as the representative of the government in all model contracts attached to licenses and leases provided for in Section 85. This would mean that the NUPRC would become the concessionaire in all existing Production Sharing Contracts, Profit Sharing Contracts, and Risk Service Contracts. Section 53 of the PIA is also slated for amendment to make the Ministry of Finance Incorporated (MOFI) the sole owner of the shares of the NNPC Ltd as against the extant situation where the company’s shares are split 50:50 between MOFI and the Ministry of Petroleum Incorporated.

In trying to analyse the implications of the above proposed amendments to the PIA, it would be nice to understand what the situation was prior to the passage of the PIA. It is not news that the oil and gas sector is one of the foremost revenue earners for the Federal Government and the Nigerian Federation. This makes it a sector of prime interest to every administration, especially when there are gaps between projected and realised/actual revenues. This was what led the President Olusegun Obasanjo administration to set up the Oil and Gas Sector Reform Committee (OGSRC) in 2000 to look at why the industry was consistently not meeting revenue targets and recommend solutions.

Amongst the numerous observations of the committee were that some of the laws that governed the industry were not only obsolete but also created uncertainty which made prospective investors wary of committing capital to further asset development projects. The work of the OGSRC laid the foundation for the Petroleum Industry Bill which took almost 20 years to pass due to politics. For the whole of the period that the PIB lagged, Nigeria regressed as a prime investment destination as most of the International Oil Companies refrained from big ticket investments that could boost production, preferring to mark time by managing already existing assets without making further commitment in terms of capital injection. This was because there was no clarity around the fiscal terms upon which investment decisions could be taken.

Another critical area that bred uncertainty, apart from the fiscal terms, was the lack of clear delineation of roles amongst agencies in the sector. Of particular notoriety was the dual role of the then Nigerian National Petroleum Corporation as an operator and regulator, a situation that made the old NNPC to be like a judge in its own court when in dispute with Joint Venture and PSC partners.

The enactment of the PIA in 2021 has successfully put paid to issues of uncertainty in the system and has gradually begun to restore investors’ confidence. Investors may not have started falling over themselves over opportunities in the Nigerian Oil and gas sector yet, but the reports show that things are not the same as they were in the pre-PIA era. In fact, a recent report credited to the Chief Executive of the NUPRC, Mr. Gbenga Komolafe, put the investments in field development plans at $18bn.

The NUPRC boss who spoke at the Africa Energy Week in Accra, Ghana, disclosed that: “In 2025 alone, the commission has approved 28 new field development plans, unlocking 1.4 billion barrels of oil and 5.4 TCF of gas, adding an expected 591,000 barrels of oil per day and 2.1 BSCFD of gas. These FDPs, with $18.2bn in CAPEX commitments, underscore Nigeria’s transformation into one of the most dynamic and attractive upstream investment frontiers in the world.

“Other results include the $5 bn FID for the Bonga North deep offshore development and the $500m Ubeta Gas Project signal renewed long-term commitments, with additional FIDs expected in projects like HI NAG Development, Ima Gas, Owowo Deep Offshore, and Preowei Fields.”

The proposed amendment to make the NUPRC the concessionaire in place of the NNPC Ltd appears to be a reintroduction of uncertainty into the system with NUPRC serving as a regulator and an operator at the same time. This would definitely lead to erosion of investors’ confidence as it would be an over-stretch of the imagination to expect PSC partners to believe that they could get justice if a dispute broke out between them and the concessionaire (NUPRC) which is also the regulator. The sponsors of the amendment need to carefully consider the impact that this proposed provision could have on investors’ confidence. It would be counter-productive to introduce an amendment into a law that could totally negate what the law is fundamentally designed to achieve.

The proposed amendment to have the NUPRC serve as concessionaire could also present grave unintended legal implications for the country. A direct agency of government playing the concessionaire role could inadvertently expose the Nigerian Federation to litigation that could involve forfeiting national assets globally if disputes get out of hand. With NNPC Ltd serving as the concessionaire, the Federation is insulated from legal hazards, and there would be limits to liabilities from legal infractions.

The sponsors of the amendment would do well to look closely at the legal risk that the proposed amendment holds for the country before going ahead with it.
The other proposed amendment that could have grave implications for the nation in general, and the national oil company in particular, is the provision that seeks to transfer all the shares of the NNPC Ltd to the MOFI.

The PIA provides for the NNPC Ltd to commence a process of listing on the capital market as part of deepening its commercial focus. Transferring all the shares to one government entity at a time when activities should be in high gear for the company’s Initial Public Offering creates the impression that the government does not want to let the company go. The move has the potential of reversing the modest gain of having the company operate as a true limited liability company without direct government control or interference.

It is really difficult to understand how pushing the NNPC Ltd deeper into government’s control could help plug fiscal leakages when the real reason the company has failed to live up to its full potential over the years is government or political interference. Whatever may be the immediate reasons for contemplating the amendments to the PIA, it behoves the sponsors to understand that laws should not just be made for a season or to serve parochial interests.

No matter the ‘noble’ interests the proposed amendments are designed to serve today, the sponsors may not be there tomorrow when those same provisions would be used by others for purposes that could undermine national progress and development.

Ben Ekori, a social commentator and public affairs analyst, wrote this piece from Lagos.