View Point PIB and its implications

By Oghenekevwe  Laba

THE years of neglect of oil communities may soon give way to an era of peace and massive development in oil communities as the draft Petroleum Industry Bill (PIB) submitted to National Assembly by President Goodluck Jonathan recommended increase funding for oil-rich areas.

The draft bill recommended the creation of the Petroleum Host Communities Fund (PHCF) which will be saddled with the responsibilities of mobilising funds for mitigating environmental degradation as well as speeding up the development of communities where oil is produced.
Basically, this is slanted to involve the oil-producing communities in the joint ownership of oil and gas assets. The bill, in essence, compels the oil major and the government to plough back ten per cent of their proceeds derivable from a given community to develop such community.
Every company that is involved in oil and gas exploration and production, under Section 118 of the bill, is required to remit into the fund on a monthly basis, 10 per cent of its net profit, which the reform bill defined as the adjusted profit minus the Nigerian hydrocarbon tax and minus the companies’ income tax.

The new PIB also provided that profit derived from petroleum operations in deep water areas would be remitted directly in equal shares to each state government of the eight host communities' states of the federation. Subsequently, if the law takes effect it means that the eight oil  producing states in the Niger Delta region will be smiling home with approximately additional $1.1Billion annually. This approximates to about N176 Billion.

The importance of the Bill in term of infra structural, social and economic development in the Niger Delta region cannot be over emphasised. For instance, the bill made provision for effective engagement and participation of host communities in all economic benefits, arising from oil and gas activities in their areas. In order words, host communities are stakeholders in any company processing oil in its territory. In the area of infrastructural development, the companies are required to present a well-articulated sustainable community development plan consistent with the PIB guidelines for an effective sustainable engagement programme. Also, the PIB makes it mandatory for all oil and gas companies operating in the country to strictly adhere to the Local Infrastructural Development and Maintenance Guidelines.

Furthermore, the  PIB did not only ensure that all oil and gas companies must give support for educational and skill acquisition training programmes for indigenes of the host communities, but the Bill also instructed  that they should provide employment for them, especially, in the operational segments of the oil and gas industry. Equally the bill compels oil and gas companies to employ host community citizens in their employments and contract awards, especially on community related development projects. What this means is that there are ready made jobs for those who newly acquired one skill or the other, while those unemployed will also be absolved by the host communities’ company.

If the new PIB is passed into law and the fund accruing to Petroleum Host Communities Fund (PHCF) is effectively implemented it will lead to sustainable peace in the region as the restive youth will be educated and have gainful employment. If there is peace in Niger Delta region, it will create enabling environment for oil producing companies to work without molestation. The resultant effect is increase in oil production, which will subsequently boost the national economy.

Defending the need for sanity in the Niger Delta Region as road map to social-economic development,

Senior Special Adviser to the President on Niger Delta Affairs, Mr. Kingsley Kuku, in one of the round table discussion with the Senate Committee, however, said that ownership of equity by members of the oil-producing communities was critical in ensuring sustainable peace in the region, especially with the post amnesty programme.

While making a strong case for Niger Delta to own equity stakes in the oil companies operating in the region, Kuku said: “It is only a mad man, who will destroy what belongs to him. If the people of Niger Delta see that they have equity stakes in the oil companies, they will know that the pipelines that pass through their communities must be protected because it is in their interests to do so.

“I have always said this – the fundamental reasons that led to militancy in the region must be addressed. These include underdevelopment, ownership of oil companies, environmental remediation and land rights. The key objective of the amnesty proclamation was to help create conditions for the stabilisation, consolidation and sustenance of security situation in the Niger Delta as pre-requisite for promoting economic development in the zone, which is the nation’s oil and gas base,” he added.

Still on peace and security, former Special Adviser to the President on Petroleum Matters, Dr. Emmanuel Egbogah, had noted that the introduction of the 10 per cent profit from oil revenue to host communities was an incentive for them to protect oil installations.

Even though the bill did not say specifically how much would be realized, but Egbogah was quoted to have said the provision would make available up to $1.1 billion yearly, which is equivalent of N176 billion. He had said: “The PIB will give local communities 10 percent equity participation and those that are impacted by the industry will receive dividends amounting to $1.1 billion or more.” Such an amount of money annually will go a long way in the infrastructural and social development of the oil producing communities.

The PIB is also aimed at discouraging host communities from vandalizing facilities belonging to oil companies in their domains. It warned that where an act of vandalism, sabotage or other civil unrest occurs that causes damage to any petroleum facilities within a host community, the cost of repair of such facility shall be paid from the Petroleum Host Community Fund entitlement. This condition, the bill explained, might not hold if it was established that no member of the community was responsible.

This clause will not only bring about safe guiding the property of the oil companies it will prevent environmental degradation as a result of spillage from vandalized oil pipe lines. If the water and soil are not polluted, that means members of the host communities will be able to practice their traditional occupation which is farming and fishing and as such better their living standard.

Be that as it may, critics are of the view that the Petroleum Host Communities Fund could be faced with management challenges which may result in its not seeing the light of the day. While it easy to come up with blue prints such as the PHCF, it is however difficult to execute it effectively taking the corrupt nature of the society we are into consideration.

Consequently, the National Coordinator of Foundation for Environmental Rights, Advocacy and Development (FENRAD), an environmental rights group, Mr. Nelson Nwafor, has called for the review of the proposed PHCF clause in PIB.

Nwafor said that with the increasing trend of corruption in the downstream sector of the oil industry, there was a need for the review of the PHCF proposal in the proposed bill to know who would controls the fund as many would want to go for it for selfish interest.

Nwafor decried the level of impunity in the oil and gas sector especially the report on petroleum subsidy scan, and stress that with the kind of corruption in the sector, which is mind boggling, to raise the formation, realisation and utilisation of the host community fund might not be achieve.

For effective accountability and utilisation of the fund, Nwafor called for a constitution of the state and local government board to oversee the payments and disbursement of the funds to the community. He suggested that members of the board shall be community representatives who are not politicians so that the process will not be hijacked.

Once again, we are confronted with one of the landmark achievements of this administration. PHCB clause in PIB is the best thing that has ever happen to the people of Niger Delta region. Thanks to President Goodluck Jonathan and Minister of Petroleum Mrs. Allision-Madueke for pursuing a progressive transformational agenda.

For the first time in our history, Jonathan set out to reform our energy sector. Through the Minister of Petroleum, he appointed distinguished former senator Udoma to lead a panel for the formulation of a new comprehensive legislation that will govern our oil sector. That panel has submitted its report and the report is the New PIB BILL. With the new PIB and the clause of Petroleum Host Communities Fund we are sure that the revolution in the oil industry has started.

Laba is a Lagos-based journalist.