{"id":969,"date":"2022-09-13T08:36:51","date_gmt":"2022-09-13T08:36:51","guid":{"rendered":"https:\/\/tonciaenergy.com\/new\/?page_id=969"},"modified":"2022-09-13T09:09:16","modified_gmt":"2022-09-13T09:09:16","slug":"communique","status":"publish","type":"page","link":"https:\/\/tonciaenergy.com\/new\/communique\/","title":{"rendered":"Communique"},"content":{"rendered":"\n

FISCAL MANAGEMENT IN THE UPSTREAM OIL AND GAS ECONOMY WITH AN OVERVIEW OF PETROLEUM INDUSTRY BILL (PIB) TRAINING\/WORKSHOP:<\/strong><\/p>\n\n\n\n

ORGANIZED BY<\/strong> TONCIA ENERGY CONSULTING AND PROFESSIONAL SERVICES LIMITED<\/strong><\/p>\n\n\n\n

FOR<\/strong> MEMBERS OF THE COMMITTEE ON PETROLEUM RESOURCES (UPSTREAM), HOUSE OF REPRESENTATIVES, NATIONAL ASSEMBLY UNDER THE AUSPICES OF PETROLEUM TECHNOLOGY DEVELOPMENT FUND, PTDF, IN DUBAL \u2013 UAE<\/strong><\/p>\n\n\n\n

MARCH 14 \u2013 18, 2017.<\/strong><\/p>\n\n\n\n

COMMUNIQUE<\/u><\/strong><\/p>\n\n\n\n

INTRODUCTION<\/strong><\/em><\/strong><\/p>\n\n\n\n

In furtherance of its institutional mandate and policy, the PTDF facilitated a policy review and capacity development training\/workshop which was organized by Toncia Energy Consulting and Professional Services Limited for Members of the Committee on Petroleum Resources (Upstream), House of Representatives, National Assembly, from March 14 to March 18, 2017, in Dubai, United Arab Emirate. The theme of the training\/workshop was Fiscal Management in the Upstream Oil and Gas Economy with an Overview of the Petroleum Industry (PIB). The objective of the training\/workshop is to strengthen the knowledge base and capacity of participants in the petroleum industry to enable them contribute effectively in the process of the passage of the Petroleum Industry Bill (PIB).<\/p>\n\n\n\n

Participants benefited from numerous presentations, overviews, technical sessions and exchange of ideas on the petroleum industry and their pitfalls and constraints vis \u2013 a \u2013 vis international best standards and some of the major provisions of the Petroleum Industry Bill (PIB) which is presently before the National Assembly.<\/p>\n\n\n\n

OBSERVATIONS<\/strong><\/p>\n\n\n\n

The major observations of the training\/workshop on the petroleum industry are as follows:<\/p>\n\n\n\n

1.\u00a0\u00a0 That the operating environments of oil production in Nigeria are characterized by both onshore production (land and swamp) and offshore production (shallow and deep);<\/p>\n\n\n\n

2.\u00a0\u00a0 That, in general, oil production fields vary from marginal, giant and supergiant, but Nigeria\u2019s fields are characterized mainly by marginal (small) fields and a few giant fields, but without any supergiant field;<\/p>\n\n\n\n

3.\u00a0\u00a0 That the key regulators in the Nigerian petroleum industry are: FIRS, SIRS, NNPC, DPR, NCS, NCDMB, NDDC and NIMASA;<\/p>\n\n\n\n

4.\u00a0\u00a0 That the current major operational problems in the industry concerns are acceptable metering accuracy, operating conditions, and meter type\/maintenance\/calibration, metering points, effective monitoring,\u00a0 contractual agreements between parties, and Government regulations and taxations.<\/p>\n\n\n\n

5.\u00a0\u00a0\u00a0 Based on the NEITI (2013) report, it has been identified that there are concerns with<\/p>\n\n\n\n

the administration of royalty payments and reporting in the Nigerian oil and gas industry. The key issues relate to (i) poor metering of production, and (ii) Effectiveness of monitoring system.<\/p>\n\n\n\n

6.\u00a0\u00a0 Gas flaring<\/p>\n\n\n\n

RECOMMENDATIONS<\/strong><\/p>\n\n\n\n

In the light of the foregoing, the training\/workshop agreed on the following recommendations:<\/p>\n\n\n\n

(a)<\/strong>\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Offshore concessions<\/strong><\/p>\n\n\n\n

Recommendation:<\/strong><\/p>\n\n\n\n

That, in view of the prevailing state of technology, current royalty terms should be revised to include royalty payments up to water depths of 3000 m;<\/p>\n\n\n\n

(b)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Restructuring of NNPC<\/strong><\/p>\n\n\n\n

Recommendation:<\/strong><\/p>\n\n\n\n

That the NNPC should be restructured possibly on the model of LNG, in view of the urgent need to improve its efficiency and effectiveness;<\/p>\n\n\n\n

(c)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Administration of royalty and bonuses<\/strong><\/p>\n\n\n\n

Recommendation:<\/strong><\/p>\n\n\n\n

That payment of royalty should be based on fiscalised production volumes at the wellhead or\/and flow station;<\/p>\n\n\n\n

That selling price of Nigerian crude to always reflect the quality\/grade of the oil;<\/p>\n\n\n\n

That using a centrally advised official selling price for the sales of all Nigerian crudes be considered;<\/p>\n\n\n\n

That improving the current two-term payment of bonus to a five-term payment at rates tied to the reserves of the asset be considered;<\/p>\n\n\n\n

That improving the current monitoring system of the oil and gas industry be considered;<\/p>\n\n\n\n

That revising the existing metering guidelines and system (e.g. metering points) as per the attached proposals and international best practices for both onshore and offshore operations be considered;<\/p>\n\n\n\n

(d)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Gas flaring<\/strong><\/p>\n\n\n\n

Recommendation:<\/strong><\/p>\n\n\n\n

That the existing mechanisms should be strengthened in favor of monetizing associated-gas as against paying penalties;<\/p>\n\n\n\n

(e)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Informing NASS Leadership<\/strong><\/p>\n\n\n\n

Recommendation:<\/strong><\/p>\n\n\n\n

That appropriate awareness should be created for the leadership of the National Assembly on key issues concerning the petroleum industry, the draft PIB and the recommendations which emanated from this training\/workshop;<\/p>\n\n\n\n

(f)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 NASS oversight<\/strong><\/p>\n\n\n\n

Recommendation:<\/strong><\/p>\n\n\n\n

That the National Assembly should vigorously strengthen its oversight mechanisms on all aspects of the petroleum industry in view of the current overriding impact of the industry on the national economy;<\/p>\n\n\n\n

Conclusion\/Appreciation<\/strong><\/p>\n\n\n\n

The need and appropriateness of the training\/workshop cannot be overemphasized in view of the fact that the petroleum industry plays pivotal role in the Nigerian economy. The PIB is designed to strengthen the industry and tackle its current constraints as analyzed in the training\/workshop. By and large, the training\/workshop has significantly improved the capacity of the participants to participate in the legislative process for the passage of the PIB.<\/p>\n\n\n\n

The training\/workshop expressed profound appreciation to the PTDF for appreciating the importance of PIB and facilitating the training\/workshop. The training\/workshop also appreciated the organizer, Toncia Energy Consulting and Professional Services Limited for its excellent organizational ability. Finally, the training\/workshop also thanked the Hon. Speaker for his usual understanding, and particularly for releasing Hon. Members of the committee on Petroleum Resource (upstream) to travel out of the country for the training\/workshop despite pressing need for attention of Members at home while considering national budget is ongoing.<\/p>\n\n\n\n

\n\n\n\n
\n\n\n\n\n\n\n\n
<\/a>UNDERSTANDING THE PETROLEUM INDUSTRY ACT (PIA) 2021<\/u><\/strong><\/p>\n\n\n\n
COMMUNIQUE ISSUED AT THE END OF A FIVE-DAY TRAINING\/WORKSHOP FOR SENIOR OFFICERS OF THE MINISTRY OF PETROLEUM RESOURCES \u2014 ORGANISED BY TONCIA ENERGY RESOURCES AND PROFESSIONAL SERVICES IN JEMMYLAND HOTEL, MARARABA, NASARAWA STATE<\/u><\/strong>.<\/strong><\/p>\n\n\n\n
An elaborate engagement was held with the Senior Officers of the Ministry of Petroleum Resources between 21^{st<\/sup> and 25^{th<\/sup> March, 2022 with Major focus on the Petroleum Industry Act (PIA). The training was sponsored by PTDF and facilitated by TONCIA ENERGY RESOURCES, ABUJA.<\/p>\n\n\n\n}}
At the meeting, the following were observed and considered as upsides of the PIA:<\/em><\/strong><\/p>\n\n\n\n
GOVERNANCE AND INSTITUTIONS<\/em><\/strong><\/strong><\/p>\n\n\n\n
It was recognized that the enactment of the Petroleum Industry Act (PIA) would drive reforms by strengthening governance andinstitutions thereby ensuring transparency and accountability in oil and gas resource management (Sections 3, 5 & 31-33). The clear delineation of roles (Policy, Regulatory and Commercial), helps potential investors gain clarity of the Nigerian oil and gas landscape (Parts 2, 3 and 4).<\/li>
The PIA provides for the incorporation of a commercial and profit-focused Nigerian National Petroleum Company (NNPC) Limited, under the Companies and Allied Matters Act (CAMA). It also provides for the establishment of the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.<\/li><\/ol>\n\n\n\n
ADMINISTRATION<\/em><\/strong><\/p>\n\n\n\n
It is acknowledged that the ACT would serve to avoid economic distortions such as removal of Fuel Subsidy. It will ensure a competitive market for the distribution of petroleum products and natural gas in Nigeria; and avoid cross-subsidies among different categories of consumers.<\/li><\/ol>\n\n\n\n
This ACT would also promote exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people and promote sustainable development of the industry, ensure safe, efficient transportation and distribution infrastructure.<\/li><\/ul>\n\n\n\n
The ACT has also been commended for a clear disaggregation of licensing regimes to ensure effectiveness. It has also positioned NNPC LTD to be competitive by its various provisions.<\/li><\/ul>\n\n\n\n
HOST COMMUNITIES<\/em><\/strong><\/p>\n\n\n\n
The PIA provides a 3% equity stake of operators OPEX to Host communities (communities\/places that host Oil and Gas Assets). It provides opportunities for host communitiesto realize the full potential of their petroleum wealth through the following:<\/li><\/ol>\n\n\n\n
Provides socio-economic benefits from petroleum operations to host communities.<\/li>
Enhances peaceful and harmonious coexistence between Settlers and host communities.<\/li>
Creates framework to support the development of host communities.<\/strong><\/li><\/ol>\n\n\n\n
The fund is categorized and specifically allotted in this order: 75% goes to capital projects; 20% will serve as a reserve; and 5% will cater for administrative expenses.<\/li><\/ul>\n\n\n\n
FISCAL REGIME<\/em><\/strong><\/p>\n\n\n\n
The Petroleum Profit tax is now replaced with the Hydrocarbon Tax and the Companies Income Tax.<\/li><\/ol>\n\n\n\n
The regime is simpler, clearer and more efficient than the previous.<\/li><\/ul>\n\n\n\n
The new fiscal regime stipulates royalties which are lower and more favorable.\u00a0<\/li><\/ul>\n\n\n\n
The Midstream petroleum operations and large-scale gas utilization industries will benefit from Gas Utilization Incentives. Investors in gas pipelines will benefit from a 10-year tax holiday.<\/p>\n\n\n\n
Hydrocarbon Tax of 15% -30% on profits from crude oil production.<\/li>
Education Tax at 2% will no longer be tax deductible<\/li>
Cost price ratio limit of 65% of gross revenue, excess may be carried forward.Less Hydrocarbon Tax Concession on Deep Offshore<\/li>
Frontier Basin Royalty of 2.5% \u2013 5% for Natural Gas will attract more investment<\/li>
PIA, 2021 opens up exploration and development in the Frontier Basin by allocating 30% of NNPC Profit Oil<\/li><\/ol>\n\n\n\n
CONCERNS IN THE PETROLEUM INDUSTRY ACT (PIA)<\/em><\/strong><\/p>\n\n\n\n
The following were identified as the downside of the PIA:<\/em><\/strong><\/p>\n\n\n\n
GOVERNANCE AND INSTITUTIONS:<\/em><\/strong><\/strong><\/p>\n\n\n\n
Making the Minister an institution instead of the Ministry of Petroleum Resources.<\/li>
The non-recognition of the Department of Gas Resources, Ministry of Petroleum Resources(2008 National Gas Supply and Pricing Regulations),whose functions were taken to Commission and Authority (Section 32).<\/li>
No Special Policy Funding Provision for Ministry of Petroleum Resources because of its Specialized responsibilities as recognized in Sections 21 and 44 of the PIA.<\/li><\/ol>\n\n\n\n
ADMINISTRATION<\/em><\/strong><\/p>\n\n\n\n
Lack of clear Independence of Regulator i.e The President also serving as the Minster<\/li>
Duplication of duties among Regulatory bodies<\/li><\/ol>\n\n\n\n
The downstream, midstream and upstream sectors are part and parcel of just one industry. Many players in the industry operate in more than one sector and having them constantly liaising with two different regulators is unnecessary and lacks any visible benefit. The provisions for two regulators should be expunged for the sake of the country.<\/p>\n\n\n\n
HOST COMMUNITIES<\/em><\/strong><\/p>\n\n\n\n
Percentage of representatives from host communities on the Board of trustees are not specified<\/li>
No fund for community policing of petroleum assets<\/li>
Section 234, subsection 4 empowers the settlor to make adjustment where funds available are not sufficient to fund ongoing operation without consultation with host communities. This a recipe for confrontation from the host communities.\u00a0<\/li>
Section 257 (2) \u2013 forfeiture of contribution to the Host Community Trust Fund as a result of vandalism, sabotage or other civil unrest. There should be a clause to indicate that such vandalism, sabotage or other civil unrest were caused by the host community as established by the commission and not a form of sabotage by outside forces or near communities.<\/li><\/ol>\n\n\n\n
FISCAL REGIME<\/em><\/strong><\/p>\n\n\n\n
Disparity in Tax regimes especially for deep offshores where Companies have been given a zero to 5% Hydrocarbon Tax concession could lead to excessive Divestments of onshore and shallow water assets.<\/li><\/ol>\n\n\n\n
The PIA , does not necessarily recommend commensurate punishment for flare gas data log offenders. It merely recommends a fine of extra $2.50.<\/li><\/ul>\n\n\n\n
The CAPEX and OPEX of Gas infrastructure be ring-fenced to Gas fields; CAPEX and OPEX of oil infrastructure be ring-fenced for oil fields.<\/strong><\/li><\/ul>\n\n\n\n
RECOMMENDATIONS<\/u><\/strong><\/p>\n\n\n\n
Proper Definition of the Ministry of Petroleum Resources as the organ for policy making in the Nigerian oil and gas industry<\/li><\/ol>\n\n\n\n
\u00a0Expand the provision for staff movement to include the Department of Gas Resources, Ministry of Petroleum Resources (see National Gas Supply and Pricing Regulation, 2008)<\/li>
Establish the national policy fund and define source of funding e.g 1-5% of profit from NNPC Limited or revenue collected by Commission and Authority<\/li>
The ACT should be amended to specify the numbers of representatives on the Board of trustees of Host Communities Trust Fund to avoid conflict.<\/li>
It has to be\u00a0\u00a0 proven beyond reasonable doubt that the communities are responsible for vandalism before they are held liable.<\/li>
A percentage should be provided from the host communities fund to enable the communities to police the assets in their domain.\u00a0 In that regard, the communities can be held liable for any vandalism of assets in their domain.<\/li>
We proposed that adjustment made by settlor when fund are insufficient to settle ongoing operations be carried out with consultation with host communities.<\/li><\/ol>\n\n\n\n
A Petroleum Policy Fund should be created for the\u00a0 Ministry of Petroleum Resources as was provided for the Commission and the Authority and also a remuneration enhancement allowance for staff of the Ministry of Petroleum Resources be established.<\/li>
Frontier Basin Royalty Rate should be established for Crude Oil similar to the provision for Natural Gas<\/li>
Artificial Intelligence should be considered in the monitoring of every drop of petroleum from Petroleum fields to enhance accuracy in payment of taxes.<\/li>
The Ministry of Petroleum Resources should collaborate with the\u00a0 National Orientation Agency and other relevant stakeholders to sensitize the host communities and Nigerians as a whole on provisions of the PIA;<\/li>
The International Oil Companies (IOCs) and other players operating within the host communities should be sincere, transparent and faithfully adhere to the provisions of the PIA on Host Communities Development Fund;<\/li>
The Host Communities should ensure that their representatives on the Board of the Trust Fund, Management Committee and Advisory Committee are persons with impeccable character and integrity; and<\/li>
The Ministry of Petroleum Resources should, as a matter of its ethical responsibility facilitate and meticulously monitor the implementation of the Host Communities Development Fund as stipulated in the PIA.<\/li><\/ol>\n\n\n\n
Overall, it was agreed by the participants and stakeholders that the signing into Law of the PIA is a great step in the right direction for the requisite reform of the Petroleum Industry, however, ensuring comprehensive implementation is imperative to take care of the governance spectrum, environmental issues and fiscal matters in the industry.<\/p>\n<\/body>","protected":false},"excerpt":{"rendered":"
FISCAL MANAGEMENT IN THE UPSTREAM OIL AND GAS ECONOMY WITH AN OVERVIEW OF PETROLEUM INDUSTRY BILL (PIB) TRAINING\/WORKSHOP: ORGANIZED BY TONCIA ENERGY CONSULTING AND PROFESSIONAL SERVICES LIMITED FOR MEMBERS OF THE COMMITTEE ON PETROLEUM RESOURCES (UPSTREAM), HOUSE OF REPRESENTATIVES, NATIONAL ASSEMBLY UNDER THE AUSPICES OF PETROLEUM TECHNOLOGY DEVELOPMENT FUND, PTDF, IN DUBAL \u2013 UAE MARCH<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"om_disable_all_campaigns":false,"footnotes":""},"class_list":["post-969","page","type-page","status-publish","hentry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/pages\/969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/comments?post=969"}],"version-history":[{"count":5,"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/pages\/969\/revisions"}],"predecessor-version":[{"id":978,"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/pages\/969\/revisions\/978"}],"wp:attachment":[{"href":"https:\/\/tonciaenergy.com\/new\/wp-json\/wp\/v2\/media?parent=969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}