“This Petroleum Industry Act is confusing! I wish I can get someone to explain to me what it is all about” Rowland said as he scrolled up and down his phone.
“What other explanation do you want to know other than that they have cheated the Niger Delta once again with 3% of oil profits going to host communities while 30% goes to develop the North! I wonder why our representatives from the Niger delta passed this atrocious bill!” Mudiaga replied in an angry tone.
The two men, colleagues at the corporate Institution had gone to the restaurant across the road to get some lunch at lunch break.
“Whatever reason, it is I am just glad that the act has been passed at last after so many years of stalling,” Rowland said with a shrug.
“It would have been better if the bill was not passed than for them to pass this version. We will not accept it! We will protest and ensure that this is repealed!” Mudiaga announced.
“Calm down bro, your blood dey too hot” Rowland said in a mellow tone.
“No! We won’t calm down! We must address this injustice! The Petroleum Industry act is very unfair, isn’t it Jarus?” Mudiaga questioned, turning to the man who sat at the table adjacent to theirs.
Dressed in a grey coloured long-sleeved Ralph Lauren shirt atop a black cotton chinos trouser, Jarus had been listening to the two men while eating from his plate of fried rice with barbecued catfish. He smiled at the men and drew his seat closer to theirs.
“There are five misconceptions about The Petroleum Industry Act which I feel I should address before a war starts from misinformation,” Jarus said.
“Yes please, break it down for us” Rowland replied nodding.
“Alright, l am listening” Mudiaga replied, leaning back on his chair.
“There are top five misinformation on Petroleum Industry Act(PIA)” Jarus began to speak…
1. NNPC is being privatized
No, NNPC is not privatized. NNPC is only becoming a limited liability company subject to CAMA, to be named NNPC Ltd (C will also now mean Company, not corporation). The share is still 100% government-owned.
A major difference is, before PIA, NNPC had its own law: NNPC Act 1977, which guided it. Now, NNPC Ltd will be subject to law guiding other companies in Nigeria. PIA repeals (abolishes in layman’s term) the NNPC Act.
NNPC Ltd will run like a company with full profit/commercial motive (did it ever have loss motive?). 20% of its profits to be retained for its growth and 80% remitted to government as its shareholder.
2. 30% Frontier exploration fund (FEF) is bigger than 3% Host community levy (HCL)
There are two things wrong with this info. First, the bases of computation are different. The base for FEF is profit oil/gas, the base for HCL is prior-year operating expenses.
Second, the 30% FEF applies only on NNPC’s profit oil/gas, while 3% HCL applies on opex of all upstream companies in Nigeria and there are over 50 of them. So mere comparison of the headline % without regard to bases and number of companies in each bucket is misinformation.
Noteworthy that I also personally think that that commitment to FEF is too big in light of the country’s financial situation, dire need of revenue for other things, but the facts stated above need to be corrected.
3. NNPC to contribute 30% of its profits to FEF
This is wrong. There is a difference btw NNPC profits vs NNPC profits oil & profit gas. The former is the corporate accounting profit, as in when all its expenses as a company are deducted from its revenues, what is left.
This is not the profit the Petroleum Industry Act is talking about as the base of the 30% of FEF. What PIA is talking about is profit oil and profit gas from NNPC’s upstream oil & gas contracts (production sharing, profit sharing & risk-sharing contracts). Profit oil/gas is what is left after royalty, tax and operating cost are deducted from crude oil or crude gas production in any of the contract types above. It’s an upstream thing, so it means profits from NNPC subsidiaries like NGC are not part of it. In short, it’s not the corporate profit of NNPC as a group.
4. Frontier Exploration = North
Wished I could avoid mentioning this, but section 9 that establishes FEF actually says the fund will be used for the development of “frontier acreages”. The definition section says “frontier acreages” would be as defined by a Regulation by Commission.
Effectively, the Commission (ie successor to DPR) will later issue a Regulation to define and say where the “frontier acreages” are. However, it is expected that frontier basins would be part of these frontier acreages and PIA listed Anambra, Dahomey, Bida, Chad & Benue trough as the basins which would be effectively (but not exhaustively) part of frontier acreages. From that list, 2 of the 5 determined frontier fields are not in the North. So frontier exploration fund use is not only for the North. Now sounding like I’m defending FG? No, just the law.
5. PIA has become effective
No, PIA is not yet in force. While the signing by the president means it has become a law, it doesn’t mean it became effective on the day it was signed. A gazetted version will be issued that says the date of commencement.
A couple of provisions there will also not start immediately, eg the Minister of Finance will incorporate NNPC Ltd with CAMA within 6 months after the effective date. In short, the date of signing is not necessarily the effective date. And the effective date is not yet public.
“so that’s it” Jarus declared as he leaned back on his seat.
“Wow, this is premium information, thanks for breaking it down!” Rowland stated.
“Oh, I guess I won’t be joining the Niger Delta militants any longer,” Mudiaga said with a smile.
The three men laughed out loud.
Iniobong Leroi Umoh is a storyteller, a satirist and creative writer. He blurs the line between reality and fiction and seeks to create a connection with the reader through engaging content. His works have been featured across various online and offline platforms. He hopes to one day travel around the world on a luxury yacht, sipping expensive wine and documenting all his experiences in a journal.
You can send him a mail at firstname.lastname@example.org.