The much talked about Petroleum Industry Bill, popularly called the PIB, is according to experts a comprehensive proposal to overhaul of the state’s approach to managing the oil and gas industry’s operations. Designed to address all aspects of the sector, including institutions, fiscal policy, and community management, among others, the Oil and Gas Reform Implementation Committee was formed and tasked with overseeing this reform on April 24 2000. The Bill continues the age-long tradition of vesting the ownership of petroleum within Nigeria, its territorial waters, continental shelf and Exclusive Economic Zone, in the Government of the Federation of Nigeria.
In its current form, the PIB provides for sustainability consideration on economic, social, environmental and governance practices, providing direction on oil company taxes, the commercialisation of the NNPC, and the establishment of collective funds for oil-producing communities. It is structurally divided into five chapters: Governance and Institutions, Administration, Host Communities Development, Petroleum Industry Fiscal Framework and Miscellaneous Provisions.
The PIB has lofty goals and keen interest from a multiplicity of groups, each vying to manipulate the policy to suit their own perceived ends. Nonetheless, the PIB if passed will provide a framework for a conducive environment for sustainable business entities and communities, governed by appropriately separated and accountable governance systems.
Regardless of the palpable excitement surrounding the release of the PIB, the document as is will not yield the desired long-term results, a realisation that has spurred impassioned debate, although there is a general push to pass something, anything, with some semblance of change, to gain some much-needed traction.
While oil exploration actors have been known to address challenges faced by residents of host communities, they “face rising expectations to do more than simply mitigate negative impacts, they are expected to be sources of economic opportunity and to be reliable and trustworthy partners and neighbours in the long-term, as elucidated in the Community Engagement Standards. This is why it is critical that the PIB must make it its business to establish a legal and regulatory framework that is functional with strong sustainable community engagement mechanisms that provide a clear pathway for how leaseholders, operators, contractors and government can help communities truly become.
An often overlooked aspect of the PIB is the Host Community Bill (HCB) in which there are potential pitfalls. If we proceed chronologically and look at section 234 on objectives and regulations around community management, we can reasonably infer that without clearly defining community status whether as a host, access or impacted settlement, knowing the historical conflict tied to inappropriate recognition and thus resource allocation, as well as its impact on decision-making and advisory roles within governance systems, there will be cause for conflict.
Communities tend to get mixed signals around the duty of care owed its people by the government, and the PIB appears not to be keen on tackling this shortcoming. It is important that the state remains involved in providing adequate handholding and oversight for the leaseholder, or per PIB parlance, Settlor. This aloof governmental position is buttressed by section 235 (1) which provides that the “Settl[o]r shall incorporate a trust for the benefit of host communities for which the Settlor is responsible”, while section 240 (2) makes funding the exclusive responsibility of said Settlors, with no provision for percentage of revenue or oversight.
Linked to government oversight is the request by keen spectators to make the provision requiring the establishment of a Host Community Development Trust (HCDT) clearer as to whether a HCDT would be constituted for each host community or for a cluster of communities, as is obtainable within the GMoU model. The non-standardisation of host community management has been a major source of conflict over the years as has been reported by the media.
While sections 235 (7) and 251 (4) seek to correct past mistakes in which oil companies single-handedly determined community development projects which caused them to fail when they did not meet the needs and aspirations of the people, more guidance can be provided around iterative community engagement and participation such that the HCDT or its equivalent, which must be a representation of important stakeholder groups, is involved in the formulation of sustainable development plans.
Anecdotal evidence points to the fact that community distrust stems from the initial body-language of the perceived incursors into community homelands, and the time it takes for the companies to commence transparent communications in earnest. This should be the catalyst for prompt and focused engagement with a wide group of community stakeholders to engender opportunities for real-life and real-time bonding between a business and citizens of each community. If these relationships are formed early on, and realised beyond just community heads, there would be no need for the 12-month timeline for the establishment of the HCDT as recommended by the PIB in circulation. Some other valid concerns are around the potential lack of adherence to the timeframe, especially given the uncertainty of punishment for non-compliant companies.
The most concerning provision in the PIB is the gift of the sole power to appoint and determine the composition of the board of trustees to oil companies. This has two implications. First, it excludes oil-producing communities from the decision-making process. Second, the members would in practice be – let’s call a spade a spade – stooges, likely to compromise and pay allegiance to their paymaster, since the Settlor is to determine remuneration, discipline, etc. This is further exacerbated by the lack of requirement for host community members’ inclusion, diversity requirements such as for gender and youth, and the lack of cap for the total number of members to forestall voting impasses and possible high recurrent or personnel expenditure. Whereas every detail may not be spelt out in a legislation, it is important to capture such peculiarities given the importance to achieving the Sustainable Development Goals, to which Nigeria is a signatory, and the boost it would give to the nation achieving SDGs 5 and 10.
According to the UN Department of Political Affairs (2012), “The vast majority of the conflicts associated with [extractive industries] development have strong roots in the unfair and inadequate engagement of relevant communities and stakeholders.” The CES repeats that crucial messaging when it states that “the goal of community engagement is to build trust and relationships that lead to longstanding collaborations and ultimately, positive impacts that improve the lives of community members.”
I believe what this piece is summarising, in essence, is that the PIB, once passed, will be a masterstroke, but its well-meaning sponsors must bear in mind that when a piece of regulation, no matter how excellent or well-meaning, does not fully consider the interest of all the stakeholders to which that law may be applied, long term, avoidable problems are bound to arise.
In next week’s newsletter, we will delve more critically into community administration within the PIB.
Author ~ Bekeme Masade-Olowola
Have you accessed the Community Engagement Standards (CES), the holistic tool for companies and governments willing to deliver tangible and sustainable benefits to communities for their own sustained economic progress? For governments and companies looking to create sustainable relationships and harness the economic potential of communities, the CES is a significant instrument for achieving that. Check out and adopt the CES here.