Nigerian University don gets down to the nitty-gritty of the country’s new Petroleum Industry Act

The Associate Professor of Civil & Environmental Engineering made the disclosure at the one day sensitization workshop organized by the Delta State Ministry of Oil and Gas, at the Prof. Chike Edozien Secretariat on August 9, 2022.

Speaking on the theme “The PIA-How Best can the Host Community Manage it for Maximum Benefit”, Owamah, who is currently the Director of Academic Planning at the Delta State University, Abraka and a Fellow of the Nigerian Society of Engineers, said that the aim of the PIA was to create an environment more conducive for growth of the oil and gas sector and to address the legitimate grievances of communities most impacted by extractive industries. He noted that the relationship between host communities (HC) and oil companies, over the years, has not been cordial.

Owamah did inform the participants, which comprised mainly representatives of oil companies and their host communities in Delta State that the hostilities may have contributed to the massive theft of crude oil, vandalization of pipelines and the incessant shutdown of major oil fields.

According to the guest speaker, “the problem could have been the reason the Nigerian government is unable to meet its OPEC crude oil production quota of about 1.8 million barrels per day in recent times”.

Dr Owamah highlighted some of the earlier initiatives undertaken by government to address the issue  such as the setup of the Derivation Fund – funded with 13% of oil revenue from the Federation Account and paid to oil-producing states, creation of the Niger Delta Development Commission (NDDC) in 2000–funded with NDDC Levy of 3% of total annual budget of oil producing companies, creation of the Ministry of Niger Delta Affairs in 2008, with the total budget allocation of about N584.6 billion between 2008 and 2022 and the Amnesty Programme to Niger Delta Militants in 2009.

He noted that it was the inability of these initiatives to address the frosty relationship between host communities and petroleum companies that led to promulgation of the Petroleum Industry Act (PIA) which has now introduced the requirement for specified petroleum industry operators to establish a Host Communities Development Trust Fund (HCDTF). Owamah noted that the PIA overhauls the regulation and governance of the oil and gas industry by providing for two regulatory agencies, which are the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority, (NMDPRA) responsible for the regulation of their respective sector in the petroleum operations, and can sue and be sued in their own name.

On the key provisions of the PIA, Owamah said that regrettably, the PIA provides that 30% of the profits of the NNPC Ltd will be used to finance exploration in other basins in the country, called the “Frontier Exploration Fund”.  Another provision of the PIA which aims to address the frosty relationship between oil companies and host communities is the creation of the Host Community Development Trust Fund (HCDTF), whose purpose will be to foster sustainable prosperity, provide direct social and economic benefits from petroleum to host communities, and enhance peaceful and harmonious coexistence between licensees or lessees and host communities.

According to Owamah, the HCDTF is a fund to be set up for the benefit of communities situated in or appurtenant to the area of operation of petroleum companies or operators to cater to the infrastructural development and economic empowerment of host communities.

The guest speaker also clearly stated that in incorporating the HCDTF, the operator would consult with the host communities to appoint a board of trustees and apply to the Corporate Affairs Commission (CAC) for registration of the HCDT.

In his words, “the management of the HCDTF is the responsibility of the board of trustees, management committee, and the advisory committee.”

Owamah explained that the settlers and HC representatives present that while the operations of the HCDTF would be governed by the provisions of the PIA, the Companies and Allied Matters Act, regulations issued by the regulators and the constitution of the HCDTF, the operator is required to oversee the activities of the board of trustees and committees of the HCDTF, the funds and expenditures of the HCDTF.

Owamah made the audience to know that for upstream operations, the HCDTF is to be funded with 3% of the operator’s annual operating expenditure of the preceding year. He also mentioned other sources of fund for the HCDTF as donations, grants or honoraria, and any profit and interest accruing on reserve funds of the HCDT.

“Funds made available to the HCDT are to be used exclusively for the development of the host communities in accordance with the Host Community Development Plan (HCDP) prepared by the operator and approved by the NUPRC (the Commission) or the Authority as the case may be”, he said, adding that in preparing the HCDP, the operator is required to conduct needs assessments in the host communities and determine the effect of the petroleum operations, the strategy to be adopted and the projects to undertake to meet the communities’ needs.

According to Owamah, the HCDT funds are to be utilised as follows: 75% to be allocated to execution of projects, 20% to be reserved for investment, and no more than 5% is to be allocated for the administrative cost of running the HCDT. Funds spent on projects are to be accounted for by the operator and the board of trustees of the HCDT.

The university don further elucidated that the PIA provides that where there is sabotage or vandalism to petroleum installations or designated facilities within a host community, that community shall forfeit, to the extent of the cost of the repairs, its entitlement under the HCDTF as such creates a sense of responsibility for the safety of petroleum installation and facilities within host communities.  The provisions for environmental degradation fund and others were also mentioned by the guest speaker.

The event was chaired by the Honourable Commissioner of the Delta State Ministry of Oil and Gas, Prince Emmanuel Amgbaduba with the Permanent Secretary of the Ministry, Mrs Gladys Aghogho Puegeren in attendance.