Nigeria set to overhaul oil sector

President Umaru Yar'Adua has put all machinery in motion to implement recommendations of the Oil Sector Implementation Committee (OSIC) to restructure the oil and gas sector. The bill has been sent to the National Assembly as an executive bill. Presidency sources informed that the president has been thoroughly embarrassed by the barrage of scandals and corrupt practices as revealed by various presidential panels as well as committees of the National Assembly.
"The president felt very embarrassed by the various allegations of corrupt practices in the oil sector. But he did not want to pursue isolated cases of corruption which he feels the anti-corruption agencies should investigate. The president opted for a holistic restructuring of the oil sector which he believes will be more beneficial to Nigeria in the long run," said the source.

The bill, if and when it becomes law, seeks to transform the Nigerian National Petroleum Corporation (NNPC) into a commercially viable oil giant that will compete with Shell, ExxonMobil, Total, Chevron and other multi-national oil companies in oil block bidding, exploration, development and production, both locally and internationally.
The new NNPC, according to the bill, will be called the Nigerian National Petroleum Company (NNPC) Limited and is expected to operate like Brazil's Petrobras, Malaysia's Petronas, Saudi Arabia's Aramco and other government-owned but commercially viable national oil companies that scout for oil blocks anywhere in the world, without relying on their home government for funding.

A member of the OSIC told that the committee took into consideration all the legal and operational pitfalls which have been exploited by oil industry operators to defraud the nation.
"We have finished work on the bill which we have submitted to the president. The office of the Minister of Justice and Attorney General of the Federation has also made inputs into the bill and as I am talking to you, the bill is with the National Assembly. I can assure Nigerians that if the bill becomes law, it will bring sanity into the Nigerian oil sector."
Giving insight into the new bill, the source said aside from restructuring the oil sector, it also seeks to reposition the entire oil and gas sector in view of the contemporary challenges, both globally and domestically.

The new bill will also set up the Nigerian Petroleum Inspectorate (NPI) to replace the current Department of Petroleum Resources (DPR) and will be responsible for the technical regulation of all upstream and downstream activities of the entire oil and gas industry. Another provision of the new bill is the National Petroleum Assets Management Agency (NAPAM) to regulate the cost and commercial operations of the upstream sector.
"NAPAM will be responsible for the regulation of all exploration and production activities in the upstream including government owned assets (NNPC Ltd), international oil companies and indigenous producers, whether marginal or otherwise, in all shores -- inland, continental shelf and offshore," the source said.

In the downstream sector, the bill seeks to create a Petroleum Products Regulatory Agency (PPRA) as the downstream commercial regulator. PPRA will among other things, issue, renew, suspend or cancel permits or licences and also ensure that quality service is provided by the operators to the consumers in conjunction with the consumer protection council.
The new bill, when it becomes law, will also develop and ensure an effective price regulation mechanism to strengthen competition, prevent collusion and cartel formation. For the reform bill to become an effective law, all the existing laws regulating the oil and gas sector are to be repealed.

Some of the laws to be repealed include the Petroleum Act 1969 and Amendments, Petroleum Profit Tax Law and Amendments, NNPC Act 1977, PPPRA Act and the Oil Pipelines Act. Others are the Associated Gas Re-injection Act and Regulations, Petroleum Equalisation Fund (PEF) Act, Petroleum Technology Development Fund (PTDF) Act and other outdated laws in the oil sector.
National Assembly sources inform that the lawmakers are in full support of the president's initiative as contained in the bill and are poised to pass it into law and send to Yar'Adua for his final assent as soon as possible.

But for the urgency of the 2009 budget, the lawmakers would have concluded work on the bill by now.
The two chambers of the National Assembly share the same anxiety about the oil and gas sector which provides over 90 % of Nigeria's foreign exchange earnings.