Energy
President Buhari to scrap NNPC, PPPRA as he submits new PIB to National Assembly
The President has recommended the scrapping of the NNPC and PPPRA in the new PIB submitted to the National Assembly.
President Muhammadu Buhari has proposed the scrapping of the Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Pricing Regulatory Agency (PPPRA) in the new long-awaited Petroleum Industry Bill 2020 which has just been transmitted to the National Assembly.
According to a report from Punch, the president has proposed the creation of the Nigerian National Petroleum Company Limited that will inherit the assets and liabilities of the NNPC to be determined the Minister of Petroleum and the Minister of Finance as well as the establishment of Nigerian Upstream Regulatory Commission and The Nigerian Midstream and Downstream Petroleum Regulatory Authority.
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The bill proposes that the petroleum minister shall within 6 months from the commencement of the Act, incorporate a limited liability company called the Nigerian National Petroleum Company Limited (NNPC Limited) under the Companies and Allied Matters Act.
Sections of the bill state, “The Minister (of Petroleum) and the 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.’’
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“NNPC shall cease to exist after its remaining assets, interests and liabilities other than its interests, assets, and liabilities transferred to NNPC Limited or its subsidiaries under subsection 1 of this section shall have been extinguished or transferred to the government.”
“The minister shall be at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted which shall form the initial paid-up share capital of the NNPC Limited and the government shall subscribe and pay cash for the shares.’’
It also states that the “ownership of all shares in NNPC Limited shall be vested in the government at incorporation and held by the Ministry of Finance incorporated on behalf of the government.”
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The bill also states that the proposed Nigerian Upstream Regulatory Commission will be responsible for the technical and commercial regulation of upstream petroleum operations while the new Nigerian Midstream and Downstream Petroleum Regulatory Authority shall be responsible for the technical and commercial regulation of midstream and downstream petroleum operations in the petroleum industry.
The new bill technically scraps the PPPRA with the creation of the new agencies that will now carry out the PPPRA’s functions.
Nairametrics had reported last week that President Buhari was expected to submit the Petroleum Industry Bill (PIB) to the National Assembly early this week following his approval.
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The PIB which is an oil reform bill has been in the works for about 20 years starting with the administration of former President Olusegun Obasanjo and is key to the repositioning of Nigeria’s Oil and Gas Industry under its post-COVID-19 agenda as the main laws governing oil and gas exploration have not been fully updated since the 1960s due to some contentious issues like taxes, payments to local communities, terms and revenue sharing within Nigeria.
Successive administrations have tried without success to pass the bill that is supposed to reform the oil and gas sector.
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The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), had disclosed that the delay and non-passage of the bill have made international investors start losing confidence in the country’s oil and gas industry.
During President Buhari’s first term, the Eighth NASS split the bill into four parts namely the Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and Petroleum Host Community Bill — in a bid to fast-track its passage into law.
However, after the passage of the PIGB by the National Assembly, the president declined to sign the bill because of the retention of 10% of the revenue generated by the Petroleum Regulatory Commission which they considered too high and the whittling down of the powers of the Minister for Petroleum.
Business
NNPC says NO to petrol pump price hike in May
There would be no increase in the ex-depot price of Premium Motor Spirit in the month of May 2021.
The Nigerian National Petroleum Corporation (NNPC) has assured Nigerians that there would be no increase in the ex-depot price of Premium Motor Spirit, popularly known as Petrol in May.
This was disclosed by the Group Managing Director of NNPC, Mele Kyari, on Monday via the Corporation’s Twitter handle.
It tweeted, “There would be no increase in the ex-depot price of Premium Motor Spirit in the month of May 2021.”
Ex-depot price is the cost of petrol at depots, from where filling stations purchase the commodity before dispensing to final consumers.
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Also, the GMD announced that there would be no increase in the ex-depot price of Premium Motor Spirit (PMS) in the month of May 2021.
— NNPC Group (@NNPCgroup) April 19, 2021
Kyari also added that Petroleum Tanker Drivers had suspended their proposed strike after the intervention of NNPC in the impasse between the PTD and the National Association of Road Transport Owners.
“We have given our commitment to both NARTO and PTD that we will resolve the underlining issue between them and come back to the table within a week so that we’ll have a total closure of the dispute,” he added.
READ: Oil marketers give conditions to resume fuel importation
What you should know
- NNPC has maintained an ex-depot price of N148/litre since February despite the hike in the actual cost of the commodity, hence incurring subsidy of over N120bn monthly.
- Also in March, the NNPC said it would maintain its ex-depot price for petrol until the conclusion of ongoing engagement with the organised labour and other stakeholders.
Energy
NCDMB’s Oil and Gas Parks and their many adversaries
New businesses within the NOGAPS will face intense competition from foreign OEMs that do not have to battle with tariffs, a harsh business terrain and different tax treatment.
In 2018 the Nigerian Content Development and Monitoring Board (NCDMB), the body saddled with driving the development of Nigerian content in the Nigerian oil and gas sector, did a groundbreaking of the Nigerian Oil and Gas Park Scheme (NOGAPS), a scheme that involves the construction of sprawling oil and gas parks in Bayelsa, Imo and Cross Rivers State.
In a visit last week to one of the parks currently under construction in Emeya 1, Ogbia, Bayelsa State, the Minister of Petroleum for State, Chief Timipre Sylva, expressed delight at how the project was quickly progressing and was now at 70% completion. Mr Simbi Wabote, Executive Secretary of the NCDMB, during the visit also noted that the Oil and Gas Park project “is in line with the Federal Government’s mandate to develop indigenous capacities for the oil and gas industry.”
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While this is highly commendable, as the project will indeed reduce Nigeria’s dependence on import of oil and gas equipment and provide jobs for local indigenes -which would likely reduce restiveness in the area-, there exist significant challenges to this project achieving its goals.
Perhaps one of the biggest of them is the African Continental Free Trade Area (AfCFTA) regime which is expected to open Nigeria’s borders to an influx of imports from other countries within Africa. Beyond opening the borders, however, the tax treatment given to domestically produced items will be no different from similar products imported, and the typical tariffs for imported items will be removed.
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This essentially means that large and established original equipment manufacturers (OEMs) from other African countries may on the basis of their economies of scale be able to supply the same products produced in the oil and gas parks at lower rates. A report by Dun & Bradstreet reveals that in Africa, countries like Guinea, Gabon, Burkina Faso and Ghana that flank Nigeria play host to various oil and gas OEMs.
With the large oil and gas market Nigeria has, these companies will seek to make inroads into Nigeria under the AfCFTA regime. This will mean that the new businesses within the NOGAPS will face intense competition from foreign players that do not have to battle with tariffs and different tax treatment. Additionally, the Nigerian culture of preferring imported products over domestically manufactured ones might play a role in this, particularly if the prices of the imported ones even up with domestically produced ones or only have a slim margin.
READ: NNPC says local operators must improve capacity to achieve low cost of oil production
If the patronage for Innoson vehicles is anything to go by, in a market where there is no real difference in price between that and the domestically produced ones, we will see a preference for imported products.
All of this will be further aggravated by Nigeria’s doing business difficulties. Things like delays in obtaining permits, approvals and licenses, the corruption that accompanies these processes, weak currency and dual exchange rates, poor infrastructure and lack of power supply abound. While the Nigerian businesses struggle with this, their foreign counterparts get to produce under more convenient conditions and are thus able to deliver within time and without the additional costs passed to consumers through these poor doing business practices.
While Mr Wabote has promised that the park in Ogbia will have dedicated power supply, it is hard to imagine that this power will not significantly cost the businesses if they are served at maximum capacity. At number 131 on the World Bank’s Ease of Doing Business Ranking, a park would not solve Nigeria’s problems, only a positive commitment to fix these doing business issues will.
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The christening of a park as an “oil and gas park” in the 21st century, where countries of the world –and indeed private companies- are working towards achieving increased use of cleaner energy sources, is counterintuitive. The park should be an energy park that integrates significant research and development in its function as well as innovation and production of renewable energy equipment, both adapted to benefit from local conditions and standardized for export purposes.
It seems too, that not much consideration has been given to export of these equipment, as the parks earmarked so far are in landlocked Imo, port-less Bayelsa and Cross River that feeds into Cameroon, which is not a very prime market, although the DRC on the other end could attempt to compensate for this. It might be worth considering, the setting up of a park in Lagos – perhaps in the same vicinity as the Dangote refinery.
The park would benefit from being able to supply equipment to the refinery (especially as the refinery starts production in early 2023). It will also be able to tap into the global market through export via the Lekki port. This might also be a good time for the Agge deep sea port mulled by the Bayelsa State government to come onstream to open up the Ogbia park to a global market.
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