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PIA 2021 by Isaac Odedere.pptx

  1. Petroleum Industry Act (PIA) of 2021 By Isaac Odedere
  2. Petroleum Industry Act (PIA) of 2021 By Isaac Odedere
  3. Table of Contents ● Introduction ● Objectives ● Key provisions ● Fiscal Regimes ● Host community/PIA ● Oil discovery in Nigeria 1956 (Oloibiri)
  4. Introduction
  5. Introduction ● The PIA (PIB) was presented to the NA by Obasanjo administration two decades ago to address and impose transparency and accountability in the petroleum sector. ● OPTS initially objected to the bill coupled with insincerity (ethnic bias) of Nigerians towards it ● Different versions of the bill spread the floor of NA members ● At the end of the day, in 2015 amendment was made to the bill and split into four parts ○ The Petroleum Industry Governance bill (PIGB) ○ The Petroleum Industry administration bill (PIAB) ○ The Petroleum Host Community Bill (PIHCB) ○ The Petroleum Industry Fiscal Bill (PIFB) ● There are two resulting bodies: The Nigerian Upstream Petroleum Regulatory Commission and Midstream and Downstream Regulatory Authority.
  6. Objectives
  7. Objectives 1. Open, competitive and transparent upstream awards 2. Rules for lifting crude, midstream and downstream 3. Defined processes for shaves in NNPC and xxx operations 4. Increase access to information thanks to NEITI (The Nigerian Extractive Industries Transparency Initiative) 5. Clarity in Revenue flows 6. Better NNPC oversight and corporate governance
  8. Key objectives
  9. Key Provisions in PIA
  10. Key Provisions in PIA ● The Minister of Petroleum Resources is the overall head in petroleum matters, both locally and internationally ● Establishment of the Nigerian Upstream Petroleum Regulatory Commision ● Establishment of the Nigerian midstream and downstream petroleum regulatory authority ● Incorporation of the Nigerian National Petroleum Company Limited with NNPC Limited. CAC under the companies and allied matters. All assets and liabilities are to be transferred to NNPC ltd
  11. Gratuity of licenses and leases ● PPL (Petroleum Prospective Licenses) onshore/swamp ⥶ 6 years ● Deep offshore/frontier ⥶ 10 years ● PML (Petroleum Mining Licenses) ⥶ 20 years
  12. Key Provisions in PIA (2) ● Abolition of gas flaring? ○ Adherence to the law now ● Domestic gas obligation ○ Natural gas master plan => Dometic Gas Obligations (DGSO) ● Deregulation of the downstream sector ○ The authorities to oversee tariffs for pipelines, bulk storage, etc. ● Petroleum host community fund. Social and economic benefits to the host communities
  13. Fund allocation ● 2.5% of E & P company opex into the fund ● 75% of the endowment fund => capital fund ● 20% Reserve fund ● 50% goes to administrative fund ● Where there is sabotage or vandalism to installation, the host community will forfeit the funds and bear the cost of repairs ● All mid and downstream operators are to incorporate HCDT otherwise licenses will be revoked ● Board of trustees => CAC for registration
  14. Fiscal Regimes
  15. Fiscal Regime No more petroleum profits tax but Nigeria hydrocarbon tax (NHT) Onshore & shallow water is 50% Deep offshore/frontier is 25% Corporate tax is 30%
  16. Fiscal Regime (continued) Royalties: Depends on production and price Production onshore areas is 15% Shallow water is 12.5% Frontier basics & deepshore is 7.5%
  17. Price ● Below $50 per barrel => 0% ● At $100 per barrel => 5% ● Above $100 per barrel => 10% ● Frontier exploration 3% of project fund ● Oil and profit gas of NNPC limited
  18. Host Community/PIA
  19. Host Communities ● Involvement of government to be minimized ● Lack of timeframe ● Global mou by companies with multiple settlors ● Inadequate community representation ● Funding concerns
  20. Host Communities (2) ● Companies and community hostilities ○ Crude oil theft vandalization of pipelines and shutdown of wells results in inability to meet OPEC quota (1.3 million to 1.5 million => 800,000bopd) ● Past Intervention by government ○ Derivation fund 13% of oil revenue from federation account ○ Creation of the ministry of niger delta in 2008 with a budget allocation of 584 million naira ○ Creation of Niger Delta Development Commisiion (NDDC) with 3% of the total annual budget of oil producing companies ○ Now, host communities development trust (HCDT) => MoU by multinational companies -> corporate social responsibility (CSR).
  21. Conclusion
  22. Conclusion ● Harmony between host community and operator ● Trust will reign ● Management of the funds matter ● Transparency and monitoring of community funds
  23. Areas to be addressed ● Dispute resolution ● Definite contribution of mid/downstreams to the fund partnership by operators ● Laudable objectives if implemented well => monitoring ● Economic model available in the industry
  24. Thank you