A brief overview of the Petroleum Industry Act

For two decades, the Nigerian parliament had been in the quest to consolidate some of the Petroleum legislative enactments with further amendments and implementation frameworks inclusive, to give force, form and substance to these enactments rather than passing mere black letters or paper tiger legislation.

It is an irrefragable fact that antecedent attempts at passing the PIB in 2009, 2012 and 2018 failed because of factors. However, on August 16, 2021, President Muhammadu assented to the passage of the bill into law, lock, stock, and barrel.

A general overview of the PIA

As its explanatory memorandum reads, this Act provides legal governance, regulatory and fiscal framework for the Nigerian Petroleum Industry, and the development of the host communities. On this note, it is prima facie evidence that the Act strongly advocates for the recompense of all host communities in order to ensure development of such areas and sustainable acts of extraction, exploration and production in the said communities. It further accentuates the compliance of corporate social responsibility and environmental sustainable governance on the part of the stakeholder companies to the localities.

The Act contains a total of 319 sections, 5 chapters with a categorization into numbered parts.

Chapter 1: Governance and Institutions

Part I of chapter I containing sections 1 and 2 provides for the Vesting and Objectives; Part II (section 3) provides for Powers of the Minister while Part III which covers sections 4-28 provides for the Nigerian Upstream Regulatory Commission. Part IV which covers sections 29-52 makes provisions for the Midstream and Downstream Petroleum Authority. Part V is the Ultimate part and is dedicated to the Nigerian National Petroleum Company Limited and has a total of 13 sections (precisely sections 53-65).

Chapter 2: Petroleum Administration

Part I thereof from sections 66 and 67 contains General Administration – objectives and management of the petroleum resources. Part II straddles sections 68 to 110 and makes significant provisions for the Administration of Upstream Petroleum Operations and Environment. Part III begins with section 111 and ends with section 124 – focusing on the General Administration of Midstream and Downstream Petroleum Operations.

Part IV is dedicated to the Administration of the Midstream and Downstream Gas Operations from sections 125-173. Part V is for Administration of Midstream and Downstream Petroleum Liquid Operations and is addressed in sections 174 – 208.

Other matters related to the Midstream and Downstream Operations are captured in Part VI from sections 209 to 215 while Part VII provides for the Common Provisions for Upstream, Midstream and Downstream Petroleum Operations in sections 216-233.

Chapter 3: The Host Community

Packed in sections 234 to 257, it includes the objectives contemplated in introducing this segment of the Act, methods, and procedures necessary for the implementation of the aims of the drafters of the Act and how to bring the benefits envisaged to the traumatized communities hosting the petroleum assets and operations. Creation of trust funds, sources of funding and such other important provisions necessary are also contained in this part.

Chapter 4: Petroleum Industry Fiscal Framework

This chapter is made up of eleven parts. Part I provides for the objectives and Administration in sections 258 and 259 while sections 260 to 266 are dedicated to Hydrocarbon Tax. Part 3 is for the Ascertainment of Chargeable Tax (sections 267 and 268); sections 269 to 272 is Part 4, for the Ascertainment of Chargeable Profits and Consolidation for Tax Purposes.

Part 5 has Chargeable Persons in sections 273-276, while sections 277 to 287 are for Part 5 and Part 6 and focus on ‘Applicability, Accounts and Particulars.

Part 7, containing sections 288 and 289 is for Appeals in respect of the Taxes. Part 8 is titled ‘Collections, Recovery and Repayment of Tax’ and covers sections 290 – 296.

For Offences and Penalties, Part 9 covers sections 297 – 301 while Part 10 contains one section (section 302) which provides for the Application of Companies Income to Petroleum Operations. Chapter 4 ends with Part 11 which is General Provisions divided into sections 303-306.

Last but not the least, Chapter 5 is made up of the Miscellaneous Provisions concerning legal proceedings, pre-action notice, consequential amendments, repeals, saving provisions, transfers, interpretation, citation and the schedule.

Acts repealed by the PIA

• Associated Gas Reinjection Act, 1979 CAP A25 Laws of the Federation (LFN) 2004, and its amendments;
• Hydrocarbon Oil Refineries Act No. 17 of 1965, CAP H5 LFN 2004;
• Motor Spirits (Returns) Act, CAP M20 LFN 2004;
• Nigerian National Petroleum Corporation (Projects) Act No. 94 of 1993, CAP N124 LFN 2004;
• Nigerian National Petroleum Corporation Act (NNPC) 1977 No, 33 CAP N123 LFN as amended, when NNPC ceases to exist pursuant to section 54(3) of this Act;
• Petroleum Products Pricing Regulatory Agency (Establishment) Act 2003;
• Petroleum Equalisation Fund (Management Board etc.) Act No. 9 of 1975, CAP P11 LFN 2004;
• Petroleum Equalisation Fund (Management Board, etc.) Act, 1975;
• Petroleum Profit Tax Act Cap P13 LFN 2004, (PPTA); and
• Deep Offshore and Inland Basin Production Sharing Contract Act (DOIBPSCA), 1993 CAP D3, LFN 2004 and its 2019 amendment.

In a bid to ensure rapid implementation of this Act, President Muhammadu Buhari has approved a steering committee to oversee the process of implementation of the newly signed Petroleum Industry Act (PIA). The steering committee is headed by the Minister of State for Petroleum Resources, Timipre Sylva.

The president, who announced this while marking the passage of the PIA, which he signed into law on August 16, said Nigeria lost an estimated $50 billion worth of investments in 10 years, created by the uncertainty of non-passage of the PIB, lack of progress and stagnation in the petroleum industry.

Conclusively, the Petroleum Industry Act is a highly commendable enactment by the Nigerian parliament. However, the binding force of law to the letter remains a mere puff without the implementing force for the better which is essential for the transition of the production, development and regulatory stance of the Petroleum Industry.

Contributed by: David Ademola

David Ademola is a final law student at the Olabisi Onabanjo University. He is an environmentalist, an energy law enthusiast and an incoming intern at the Duale Alex & Adedipe Law practice. He is the co-founder of the Energy law Club and also the President of infinity foundation, a charitable organization. He equally served as a mentor at the Vanguard Africa initiative where he tutored cohorts transformational leadership.

Credit: Nairametrics