•Insist 10% equity to host communities must stand
•Say host communities unsuitably defined, criminalized
•Argue oil states ought to have rights of first refusal to acquire shares
By Emma Amaize, Udeme Akpan, Sebastine Obasi & Levinus Nwabughiogu
Barely a few days to the June 30 target of getting the Petroleum Industry Bill, PIB, passed into law, Host Communities of Nigeria Producing Oil and Gas, HostCom, the Pan-Niger Delta Forum, PANDEF, and experts have called for proper definition of oil communities in the bill.
They also insisted that the 2.5 per cent equity stake recommended in the bill for host communities was inadequate, saying it shouldn’t be less than 10 per cent, and clamoured for right of first refusal to oil states.
On equity stake for host communities, the bill in chapter 3, section 234 – 257, recommended: “Each settlor, where applicable through the operator, shall make an annual contribution to the applicable host community development trust fund of an amount equal to 2.5 per cent of its actual operating expenditure in the immediate preceding calendar year in respect of all petroleum operations affecting the host communities.
“The host communities development trust shall be incorporated- (a) within 12 months from the effective date for existing oil mining leases; (b) within 12 months from the effective date for existing designated facilities; (c) within 12 months from the effective date for existing for new designated facilities under construction on the effective date; (d) prior to the application for field development plan for existing oil prospecting licences; (e) prior to the application for field development plan for petroleum prospecting licences and petroleum mining leases granted under this Act; and (f) prior to commencement of commercial operations for licensees of designated facilities granted under this Act.”
Host communities unsuitably defined, criminalised — HostCom
However, the host communities rejected this provision in the bill, and asked for at least 10 per cent equity.
In a letter to the Senate President, dated May 5, 2021, the National Chairman of Host Communities of Nigeria Producing Oil and Gas, HostCom, Chief Benjamin Style Tamanarebi, stated: ‘’The inadequate definition of host communities as defined in the 2020 PIB cannot be determined by the operating companies without taking into account the extent of the negative impact of exploratory activities.
‘’Therefore, on-shore host communities as recommended, is defined as the project, host and directly impacted communities, 50 km radius of project site, which includes pipelines (Source: UNEP EU energy security).
‘’Subsequently, HostCom reiterates in strong terms its unwavering position as submitted at the hearing of both Houses of the National Assembly, especially the crucial areas as indicated in the various sections of the PIB as the mouth piece of the voiceless.”
10% equity participation
“We consider the 2.5 per cent too meagre. Specifically, “In Chapter 1. Part 1. The property and ownership of petroleum within Nigeria and its territorial waters, continental shelf and exclusive economic zone is vested on the government of the Federal Republic of Nigeria.
“(2) A mechanism to be set-up for the obtaining of approvals by the Minister in matters that affect Federation Account to include the producing states and host communities.
On the transfer of assets and liabilities of the new Nigerian National Petroleum Corporation, NNPC, to be registered as a private entity, the bill stated in its Chapter 1, Section 54: “The Minister of Petroleum Resources and Minister of Finance shall determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the Minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited.
“Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection (1) of this section, shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government.”
NNPC must be distinct from NNPC Limited
But HOSTCOM and other stakeholders kicked against it, demanding that the Governing Board needed to be expanded to accommodate each of the producing states and HostCom representatives.
They stated: ‘’HostCom reiterates that 5) Section 47, which deals with funding of the Authority and the proposed 1 per cent should be expunged since the National Assembly appropriates funds to the Authority on a first line charge in addition to four other sources of funds.
“Also, it argued that, “Part 6, Section 52, Midstream Gas Infrastructure Fund should be expunged and the Location of the Headquarters (HQ) of the Authority be in the major petroleum producing states.
‘’’The Minister shall within 3 months at the commencement of the Act incorporate the limited liability company, ownership of all NNPC Limited shares should be vested in the government of the federation at incorporation and held by the Ministry of Finance.’’
HostCom maintained further that NNPC Limited and any of its subsidiaries shall conduct their affairs on a commercial basis without recourse to government funds, adding that their memorandum and articles of association shall state these restrictions in the Bill.
‘’Let it be made clear that NNPC must remain a government national company and any sale of shares must be with the approval of the Federal Government, the Petroleum Producing States/HostCom and the National Assembly.” the HOSTCOM leader said. .
According to him, ‘’The assets NNPC controls belong to the federation, not the Federal Government alone. Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under sub section (1) of this section, shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the government.”
Rights of first refusal to oil states
Although the bill did not provide for rights of first refusal for oil producing states, HOSTCOM contended: “The petroleum producing states must be given rights to first refusal to acquire the shares since most of the assets NNPC Ltd manages are derived from petroleum got from the petroleum producing states.’’
On Section 55 of the bill which deals with appointment in NNPC limited. ‘’The Minister of Petroleum shall upon incorporation of NNPC Limited, consult with the Minister of Finance, and the governments of the Petroleum Producing Oil and Gas States and HOSTCOM for appointment in NNPC Limited.
‘’Board of NNPC Limited shall be determined by the shareholders of NNPC Limited in accordance with the provisions of the Companies and Allied Matters Act and the articles of association of NNPC Limited since NNPC Limited is not solely owned by government.”
PIB criminalizes host communities – PANDEF
Also reflecting on the bill, the pan-Niger Delta Forum, PANDEF, observed several inconsistencies and lacunae which, if allowed, would be exploited by ‘’settlors’’ which could create more problems than good for the oil and gas industry as well as host communities.
National Publicity Secretary of PANDEF, Ken Robinson, said: “The PIB criminalizes communities when it makes them responsible for the protection of oil facilities.
‘’Where there is any stoppage of upstream or downstream petroleum operations in respect of a petroleum asset or facility within a host community arising out of no fault of the operator, such community shall not be entitled to its portion of the Trust Fund accruing from such asset or facility for the period in which the asset or facility was not in use as a result of such stoppage.
“That subsection implies that the federal government is outsourcing the policing and protection of oil facilities to ‘host communities’. It is wrong to hold host communities hostage or accountable for the protection of oil facilities.
‘’It also offends natural justice to punish a whole community for the selfish act or crime of one or a few persons who may not even come from the community.
“If that provision is to encourage host communities to protect petroleum facilities in their communities, then it should rather sensitize the communities for such efforts and not punish them for crimes committed on their land.
‘’That runs against all norms of criminal law. Thus, a provision that ties benefits (like provision of electricity and water from flow stations to host communities) to continuous operations of oil, will better achieve that aim.
“The clause which puts liability on the communities should be expunged. Operators should be required to take specific steps, in line with international best practice, to make their infrastructure and operations as safe as practicable from sabotage.
Making host communities properties of oil companies
“The governance structure of the Host Communities Trust overtly makes the communities the property of the oil companies.
“The Bill should make it compulsory for members of the Board of Trustees of the Trust to come from the host communities and should give the host communities a stronger role in the selection process, financial management and administrative procedures of operating the Trusts.
“Another serious concern about the Bill is that it does not specify the criteria for the allocation of projects funded under the Trust Fund among the host communities and impacted communities.
‘’Given that there are over 3,000 oil and gas producing host and impacted communities, the allocation of funds among the communities will be fraught with difficulties and controversies, especially as some boundaries are disputed and not well-defined.
“It is important to restate that the sense of alienation of the Niger Delta people from the resources of their land, will continue until some affirmative policies and actions would guarantee the equitable participation and involvement of the host communities in the ownership and management of oil and gas assets.
“The fund should be used for both economic and physical infrastructure as well as other requirements of development, such as micro-finance for small-scale entrepreneurs, loan guarantees for local medium and large-scale entrepreneurs, agricultural support, educational supplies for school, health supplies for hospitals, human resource development and institutional capacity building.
“We must, therefore, go beyond the notion of corporate social responsibility (CSR), in the form of Host Communities Trust Fund, as proposed in the Bill, which is nothing more than mere acts of corporate goodwill, and reduces communities to “objects of pity. Unclear Process of Verification of Funds:
‘’The bill does not clearly define how to verify the operating expenditure for settlors. It was recommended that the operating expenditure OPEX which is audited from the previous year should be used to kick start the fund.
‘’Section 5 of the bill is a lapse as the term “shall” leaves much to be desired. Following past experiences, we recommend that a failure of the settlors to pay the agreed percentage of the operation expenses, OPEX, by the first day of the year, will attract an immediate suspension of their licenses.
‘’Failure to do so by the first day of the second month will attract an immediate withdrawal of the license of the settlor. For the settlor to get another license, the settlor must pay a penalty of 2 per cent and the balance before they get the license.
Lack of Timeframes
“The bill does not provide sufficient clarity on timeframes. Section 3 of the bill does stipulate the deadlines for the incorporation of a Trust in the host and impacted communities but fails to stipulate penalties for failing to do so as well as timelines for the actual implementation of projects and other activities.
“It was recommended that actual time frames be stated for the incorporation of the Trusts, and further recommended that the project duration should not exceed 24 months.’’
S’South govs maintain position on 10% equity
Since March, governors of South-South region have also demanded the upward review from 2.5 per cent to 10 per cent, of equity appropriated to the Trust Fund for host oil communities in the PIB.
They have not changed their position. Chairman of the South-South Governors’ Forum, Senator Okowa, had restated: “We are of the view that while we welcome the Host Community Trust Fund, we do believe that 2.5 per cent that as appropriated in that bill for the purpose of host community fund is inadequate.
“We have discussed with our people and collectively as leaders of the people in our various states and as leaders standing in on behalf of our people, we urge the National Assembly to increase the provision in the host community fund from 2.5 per cent to 10 per cent.
“This is in the best interest of our communities and the nation. A peaceful environment in the various oil communities would enable us have greater and seamless production, without any form of disruption going into the future,” he added.
National Assembly reacts
However, Ben Rollands Igbakpa, representing Ethiope Federal Constituency of Delta State, said the PIB as it was currently would not serve the needs of host communities;
He said: “Definitely, if the PIB is passed into law as it were, it will not serve the need of the host communities. There are so many issues. One is the proper definition of a host community. Then again, what is accruable to the host communities, the percentage is still unacceptable. So, it will not cure the defects.”
Similarly, Bede Eke, representing Aboh Mbaise/Ngor Okpala federal constituency of Imo State, said: “The truth is that the Petroleum Industry Bill (PIB) is long overdue for passage by the National Assembly and assented to by Mr. President.
‘’There is no doubt that the delay in its passage has led to loss of many years of benefits that would have accrued to Nigeria, which include and not limited to loss of local and foreign capital.
“As someone who represents a federal constituency in an oil producing state and which, of course, makes me a major stakeholder in the oil and gas sector, my last thought on the passage of the PIB revolves around the benefits accruable to host communities and its development.
‘’In other words, this bill if passed into law, will usher in sustained prosperity within host communities in terms of social and economic benefits.
“However, from a purely national level, its passage would guarantee the growth of the oil and gas industry, enhancing competitiveness and reforming a commercially- oriented and profit-driven national petroleum company.
‘’It is pertinent not to forget that the Nigerian petroleum industry has been governed by laws of over fifty years, so, the passage of the PIB will help the petroleum industry operate maximally in line with global standards.”
Also speaking, Kingsley Chinda representing Obio/Akpor federal constituency of Rivers State, said: “The PIB is better coming late than never. The oil sector framework is absolutely archaic and begs for an update to survive in a fast developing field.
‘’The PIB is inevitable now. I would say there are grey areas in the bill but again there, is no perfect bill. Subsequent amendments can take care of the lacuna in the bill.
“My major concern with the bill is its getting the assent of the President, as parochial issues of tribalism and host community benefits are still agitating some sectors of our polity.
‘’I pray we are more Nigerian representatives than tribal representatives. In the interest of Nigeria, the two most important bills that we ought to have passed a long time are PIB and Electoral Act Amendment Bill.”
Host Communities should unite — Spaces for Change
In an interview with Vanguard, the Executive Director, environmental advocacy group, Spaces for Change, S4C, Victoria Ibezim-Ohaeri, who noted some positive provisions, especially in the area of environmental protection, however, said: “Indeed, the litany of arrangements proposed above are praiseworthy, and if implemented, will lay the foundation for stronger environmental protection for the benefit of communities in and around the extractive zones.
‘’However, huge gaps remain. For instance, gas flaring, though prohibited, will be condoned in certain circumstances such as where it is required for facility start-up; or for strategic operational reasons, including testing.
“Furthermore, while the Bill requires operators to compensate for damage to sacred sites, commercial trees, individual or community property, it does not clarify the procedure or mechanism through which affected persons and communities can seek compensation or for ensuring that the legitimate concerns of those affected by environmental damage are addressed.
‘’The bill’s major design flaw is the non-inclusive arrangements proposed for the administration of the Host Community Development Trust. The planned framework for delivering community development trusts is neither empowering nor beneficial to oil-producing communities.
‘’It not only relegates host and impacted communities to the role of mere spectators in the management of the trusts, but also overlooks the existing community structures, the traditional institutions, including cultural and statutory organizations that have historically been responsible for undertaking community development in the host communities.
‘’As if that is not enough, some of the expansive regulatory powers for environmental matters in the petroleum industry vested on the commission and authority overlaps with the statutory responsibilities of the Oil and Gas Division of the Federal Ministry of Environment (FMOE).
‘’Nevertheless, the oil and gas communities have been urged to build consensus, targeted at ensuring that their demands are reflected in the nation’s Petroleum Industry Bill, PIB.
“We have been engaging host communities since 2012 and encouraged them to come forward and participate in the legislative deliberations. They have done just that.
‘’Also, Niger Delta states came forward to make presentations at the public hearing, making specific demands. What is now needed is consensus-building to articulate and table their issues in a compelling and unified manner.
‘’Host communities need to engage the National Assembly beyond the public hearing. It’s now time for the political leaders in the region to take positive steps in this direction.
“The major problems needing utmost attention include the fiscal terms agreeable to both sides (govt and operators); duplicative regulation, weak enforcement of standards, overlapping regulatory powers, hostility between operators and host communities, political interference in NNPC operations and so forth.
With the June date for passage, we can only hope lawmakers will do the right thing by addressing these cogent issues.”