In today’s series, we look to examine some of the contentious contents of the act. First, the act also proposes that companies granted prospecting or mining lease are required to contribute 3.0% – 5.0% (upstream companies) and 2.0% (downstream companies) of actual operating expenditure in the immediately preceding year to the host communities development trust fund. This is in addition to the existing contribution of 3.0% to the NDDC. All contributions by the companies are tax deductible while the Fund is tax exempt. The Board of Trustees and Executive members of the management committee for the fund may not necessarily come from any of the host communities, implying these host communities have limited control in this regard.

The act proposes that while 10.0% of realised profit on oil & gas sales will be paid to NNPC Limited as management fees, 30.0% of realised profit will be remitted to Frontier Exploration Fund for the development of frontier acreages. Lastly, the PIB will repeal the PPPRA (Establishment) Act 2003,  while the new tariff framework is now set to be reviewed by the downstream regulator. The bill highlights that any pricing tariff framework with regards to petroleum pricing shall be cost-reflective, in the foreign currency or naira equivalent in which the respective initial cost was incurred as applicable under the regulations. This essentially paves the way for a cost-reflective pricing regime for petroleum marketers. However, the government reserves the prerogative to intervene when it considers prices exploitative.

Representatives of the southern states (who are the main oil producers) have kicked against the plan to commit 30.0% of realised profit to oil exploration in frontier acreages (mainly northern basins like Gongola, Sokoto, Chad etc.). In addition, the 3.0% – 5.0% of actual operating expenditure allocated to host communities remains inadequate according to the representatives. Lastly, we struggle to see how the FG would successfully deregulate the downstream segment without furious opposition from the public via labour & trade unions.     

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