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ABOUT THE PIA 2021

The PIA 2021 was enacted to provide for the legal, governance, regulatory, and fiscal framework for the Nigerian Petroleum Industry. It also provides the establishment of host communities fund and other related matters in the upstream, midstream and downstream sectors of the petroleum industry.

The PIA also created specific institutions to drive the operations of Nigeria’s petroleum sector through the formation of the Nigerian National Petroleum Company (NNPC) Limited, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The PIA 2021 (a legislation that embodies 5 Chapters, 319 Sections, and 8 Schedules), comes with an array of provisions and innovations that will affect the private, public sector and stakeholders in the oil and gas industry. It ushers in a new dawn for Nigeria’s Oil & Gas Industry and opens a new page of prosperity for Nigerians.

1.0 IMPERATIVES FOR OIL INDUSTRY REFORM

a. COVID-19:

The Pandemic shook the entire world and upset global demand for oil

b. Climate Change:

Sustained conversations on renewable energy and climate change have put immense pressure on fossil production

c. Declining Cost of Alternatives:

Some alternatives to fossil fuels are declining in cost. Thus, becoming more competitive

d. Uncertain Future in Demand/Supply of Oil:

Uncertainty in oil demand creates a dilemma on how much of it to produce

e. New Acreages for licensing globally:

More oil is being found around the world, and there are competing sources of oil supply

f. Volatility in oil prices:

Fluctuations in oil prices has become a recurring concern in the global O&G industry.

2.0 OBJECTIVES OF THE PIA

The PIA has several objectives, which are condensed into four:

A. Acceleration of Economic Growth:

• Increase investments to drive oil and gas production
• Investments in midstream gas infrastructure
• Promote frontier exploration

B. Establishment of Good Governance:

• Effective and predictable acreage management system
• A strong regulatory framework

C. Promotion of Competitiveness:

• Transform NNPC in to a viable commercially based and self-sustaining national oil Company

D. Alignment with Global Best Practice

• Transparent, competitive and non-confidential contracts
• Improved environmental measures
• Assist host communities achieve their aspirations

3.0 PIA COMPONENTS & FOCUS OBJECTIVES

There are four components and focus areas of the PIA. These include:

A. ADMINISTRATIVE

• Redefined licensing framework acreage management
• Environmental stewardship and sustainability
• Gas: a fuel for national development
• Linkages with rest of the economy
• Modern and optimal regulatory framework

 B. GOVERNANCE

• Redefined Ministerial powers
• Two strong independent regulators: Upstream (The Commission) and Midstream & Downstream (The Authority)
• Creation of NNPC limited
• Voluntary migration to incorporated joint ventures (IJVs)

 C. FISCAL

• Predictable and Stable
• Win-Win framework
• Competitiveness & Attractiveness
• Preservation of existing revenues to aid planning
• Generous incentives for release of arbitral awards

 D. HOST COMMUNITY

• Establishment of a trust type structure
• Avoidance of bureaucratic structure
• Transfer of ownership of entitlement to host communities
• Project selection and execution by host community

 4.0 PIA: WHAT HAS CHANGED IN THE NEW LEGISLATION

Under the new PIA regime, significant changes will occur in Nigeria’s Oil & Gas Indutsry. Some of these changes include:

 A. ESTABLISHMENT OF THE REGULATORY INSTITUTIONS

• Upstream Regulator – NUPRC (The Commission)
• Midstream & Downstream Regulator – NMDPRA (The Authority)

 B. TRANSFORMATION OF NNPC INTO NNPC LIMITED

• NNPC will be an independent commercial entity governed by the Company & Allied Matters Act (CAMA) Provisions.

C. ESTABLISHMENT OF ENABLYING CATALYTIC FUNDS

• Host Communities Development Fund
• Midstream & Downstream Gas Infrastructure Fund
• Frontier Exploration Fund
• Environmental Remediation Fund
• Decommissioning and Abandonment Fund

 D. FISCAL FRAMEWORK

• Renewed Model Contracts and Licenses
• Regulations to provide clarifications on grey areas and drive

 

PIA: / WHAT HAS CHANGED/WILL CHANGE IN THE MIDSTREAM/DOWNSTREAM

The Nigerian Midstream & Downstream Petroleum Regulatory Authority (NMDPRA)

 For Nigeria’s Petroleum Midstream/Downstream sector, the following will occur, post PIA:

• Technical midstream & downstream role of DPR transferred to NMDPRA.
• Commercial Role of PPPRA transferred to NMDPRA.
• Deregulation of petroleum products prices now enshrined into the Law, with caveat & quasi regulation by NMDPRA.
• Increased commercial powers on infrastructure and gas prices, anti-trust,
• Governance structure Board & 7 Executive Directors to be appointed by the President and confirmed by the Senate.
• Minister not the Board Chairman
• Midstream Gas Infrastructure fund 0.5% of wholesale petroleum products and natural gas. To make investments in gas projects.

PIA: WHAT HAS CHANGED/WILL CHANGE IN THE UPSTREAM

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC)

For Nigeria’s Petroleum Upstream sector, the following shall happen, post PIA:

• Department of Petroleum Resources (DPR), Nigeria’s petroleum regulatory agency, will have most of its Upstream functions metamorphosed into a new entity, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC)
• Extant scope of Upstream regulation transferred to NUPRC
• NUPRC will have a Governance structure which includes a Board + Six Executive Commissioners to be appointed by the President and confirmed by the Senate.
• Minister not the Board Chairman.
• Acreage management role strengthened.
• Commercial responsibilities added cost control, cost benchmarking (CHA, CTA, Open access to pipelines)
• Frontier Exploration moved from NNPC
• Implement curtailment where necessary.

PIA: WHAT HAS CHANGED/WILL CHANGE IN NNPC

The Nigerian National Petroleum Company (NNPC) Limited

For Nigeria’s National Oil Company, the NNPC, several things will significantly change post-PIA:

• NNPC is now a company guided by Company and Allied Matters Act (CAMA) 2020 Principles
• Ministry of Finance is Main Shareholder of the NNPC Limited
• There is no more recourse to government funding (appropriation) for NNPC Limited
• Minister to transfer certain assets to NNPC Limited from the defunct NNPC
• NNPC Limited to support winding down of NNPC assets
• Minister is no longer the Board Chairman
• NNPC Limited to pay dividends to Government
• There is provision for Incorporated Joint Venture (Voluntary)