The Petroleum Industry Bill (PIB) 2020, which has just passed first reading at the National Assembly, has stripped the Minister of Petroleum Resources of the controversial discretionary powers to award and revoke oil licenses.
An analysis of the Bill by e360, (which was obtained from petroleumindustrybill.com) reveals that the bill has provided for two new regulatory agencies known as the Nigerian Upstream Regulatory Commission, which is empowered with awarding oil prospecting or mining licenses, and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.
As against provisions in the existing Petroleum Act where the minister is empowered with discretionary powers to award or revoke bid licenses, the new bill provides that the minister can only act upon the recommendation of the Commission to grant oil Licenses or Leases and can only revoke and assign interests based on the Commissions recommendations.
Outlining the minister’s powers under the Governance and Institutions section in Chapter 1, the bill reads, “The Minister shall upon the recommendation of the Commission, grant Petroleum Prospecting Licenses and Petroleum Mining Leases through the processes established in this Act; upon the recommendation of the Commission, and pursuant to the provisions of this Act and the Regulations, revoke and assign interests in Petroleum Prospecting Licenses and Petroleum Mining Leases.”
Recall that this has been a subject of advocacy by CSOs and industry experts who over the years have called for a repeal of the minister’s discretionary powers arguing that it is negatively affecting outcomes of oil bid rounds.
e360 gathered that previous bid rounds revealed a sharp decline in interest from serious investors – local and foreign – in the country’s marginal oil fields. For example, it was learnt that in 2005, only 57 percent of the oil blocks offered for auction secured at least one bid, the number dropped to 40 percent by 2007.
This, analysts say was because many of the serious investors were concerned about the law regulating operations in the oil industry, complaining that the legal framework cedes too much power to the Minister of Petroleum Resources to award or revoke licenses based on his or her discretion.
Many serious investors are believed to opt out of the bid process as they felt the licensing rounds were mere cosmetic processes for government officials to reward their allies and associates with oil assets.
Meanwhile, in fulfilling calls for a transparent bidding process and reassuring investors that Nigeria was ready for business, the bill emphasized that subject to the provisions of sections 71(5), 74(3), 81(1) and 93(2) of the Act, petroleum prospecting license or petroleum mining lease shall only be granted based on a fair, transparent and competitive bidding process.
“The grant of a petroleum prospecting license or a petroleum mining lease on a previously appraised area or a surrendered, relinquished or revoked petroleum mining lease in, under or upon the territory of Nigeria, shall be by an open, transparent, competitive and non-discriminatory bidding process conducted by the Commission pursuant to section 73(3) of this Act,” the Bill stated.
According to the Bill, in determining a winning bidder, parameters such as call for bids published locally and internationally, prescribing a technical, legal, social, economic and financial requirement, including the minimum experience and capacity for an applicant, must be met.
It further provided for a transparent and competitive process to include an electronic bidding process, open to the public and conducted in the presence of representatives of the Nigerian Extractive Industry Transparency Initiative (NEITI), Ministry of Finance and Ministry of Petroleum Resources.
On the Licensing round guidelines, the bill provided that the license or lease acreages must be included, the term and minimum work obligations as well as requirements to be fulfilled by the bidders and the pre-qualification criteria. Others are list of documents required and criteria for the evaluation of technical capacity, financial competence and legal status of interested parties, including technical and financial assessment of the bid as well as details and cost for the acquisition of relevant data and studies.
The Bill also spelt out conditions, responsibilities and timelines for exploration, prospecting and mining licensees, in an attempt to reverse Nigeria’s acreage management from being one of the sloppiest in the world.
Part of the Commissions technical regulatory functions, according to the Bill is to keep public registers of licenses, leases, permits and other authorizations. These include Beneficial Ownership, award, renewal, assignment, amendment, suspension and revocation
A further analysis of this section by e360 shows that it addresses some of the gaps identified by the Nigeria Natural Resource Charter (NNRC) in its 2019 Benchmarking Exercise Report (BER).
The 2019 BER had identified unchecked discretionary powers, non-transparent bidding process, multiplicity in license administration and acreage management as some major administrative gaps in the Nigerian oil sector.