After over two decades of “dilly-dallying” on one of the most important bills in the country, the President of the Federal Republic of Nigeria, Muhammadu Buhari, yesterday, signed the Petroleum Industry Bill (PIB) into law. The bill provides a legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry and the development of host communities. The main objective of the bill is to promote the exploration and exploitation of petroleum resources in the country for the benefit of its citizens and foster sustainable prosperity within host communities.

In a broader perspective, the bill would see the introduction of two new regulatory bodies in the oil & gas industry. According to provisions of the bill, NNPC Limited will be retained as a limited liability company saddled with the primary responsibility of handling the Joint Ventures (JVs) and Product Sharing Contracts (PSCs) on behalf of the government, vested in the Ministry of Finance. The newly introduced bodies include a regulator for the upstream segment called Nigerian Upstream Regulatory Commission (NURC) and a regulator for the midstream & downstream segment of the industry called Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). There will also be the creation of a midstream gas infrastructure fund, which would be primarily funded by levies on downstream petroleum product sales.

On the tax and royalties front, the bill aims to get quick and early revenue for the government by charging early royalties. Royalties also vary across the type of project, output, and current market prices, as opposed to the current royalty charges in the industry, which are mostly flat regardless of output levels. This will encourage drilling even at lower costs and varying production output. A potential sweetener for International Oil Companies (IOCs) and Exploration and Production (E&P) firms is the reduction of company income tax paid to the government. The bill repeals the Petroleum profit tax and introduces a new Hydrocarbon tax. 
   

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