The Group Managing Director of the Nigerian National Petroleum Corporation, Mr Mele Kyari alongside Dr Timothy Okon, managing partner of TENO Energy Resources and Professor of commercial and industrial law, Dr Joseph Abugo recently broke down the Petroleum Industry Act and its implementation.
In a live show on the Nigerian Television Authority to discuss the multifaceted issues surrounding the PIA, Kyari said the PIA is a law that has come with a great deal of expectations. When asked if it was a breather or the commencement of even more herculean work for him, he stated that it was for the oil industry and not just him but then it is a big relief for the oil and gas industry globally not just in this country.
The GMD further explained that the industry got stagnated because of clarity around our physical environment, availability framework and also the very fact that the laws that were executed in the industry were still archaic in the sense that the petroleum market itself is the petroleum back 1960 and there hadn’t been any significant change to the provisions of the petroleum.
According to him, there were several amendments and some regulations that were put in place to support the petroleum industry, but what they all did was set a list not adequate to bring change to the industry and as such, the industry got stagnated and investments got stalled.
More so, partners and investors decided to practically quit the country owing to the unfavourable climate and physical environment. Even still, the industry has not been very competitive as they haven’t moved with time and society While, other industries, particularly the petroleum industry has been developing into a much modern industry, the Nigerian petroleum industry got stuck.
So, having the petroleum industry act in place today according to Kyari is simply a jump from what has been known and is completely archaic to a very modern oil and gas industry.
He added that the world and entire industry has been waiting for this structure to come up but most importantly, for compliance in the industry as the change that eluded the industry and consequently the country for many years has finally come through the PIA. Hence, it’s a very good omen for the country and industry.
Dr Okon, a player in the industry, while airing his expectations on the show said, first and foremost, the industry is having some suitability in the physical framework and as the GMD mentioned, it’s flexible, as it recognizes what existed in the past and what needs to exist in the future.
In his words, “there’s optionality which simply means that if you choose to remain with what you have, you are at liberty to do so but if you choose to respond to the significant incentives that the physical system offers, then you’d be under a new framework.”
His second point was around the recognition of the meets’ stream. According to him, the legislation has a proper regulatory framework over the mainstream. So, you have the mainstream and downstream authority, for example, that will clarify many issues as regards gas and how you need to monetize it especially domestically.
He further stated that if we want our GDP to grow as a country, there’s a need for us to process hydrocarbons at home and most importantly, a regulatory framework that enables that activity with someone to oversee it.
The third component which is simply the National oil company now, in section 53 of the Act, was a clearly stated objective that it would be commercial, it needs to be profitable, and fit for a purpose type of organization.
Meanwhile, as a limited liability company, it needs to respond to the incentives that it’s been granted to compete and do commercial deals that reflect a benefit not only to the company itself but broadly to the generality of the Nigerian people.
Dr Joseph Abugo, the legal SAN and the Professor of commercial and industrial law, who has authored several publications and books on corporate law said that one of the key provisions of the petroleum industry is the transition of the NNPC from the statutory corporation to a limited liability company.
He also spoke about the potentials, pitfalls, the likely issues that should be appraised in this course of this transition.