The Petroleum Industry Act (PIA) has introduced significant reforms that are reshaping the way stakeholders approach operations in Nigeria’s oil and gas industry. During the recent webinar on the PIA’s influence, a key question was posed to Mr. Okusami, a renowned industry expert: What changes should stakeholders be on the lookout for, and how should they prioritize addressing these shifts?
Dual Regulatory Structures: A Challenge or an Opportunity?
One of the most immediate changes brought about by the PIA is the introduction of dual regulators. As Mr. Okusami explained, many stakeholders are grappling with how to navigate this dual structure, which mirrors practices seen in other countries like Canada, Malaysia, and Mexico. The dual regulators — one overseeing upstream activities and the other midstream and downstream operations — have created some friction, particularly in coordination. However, as Mr. Okusami noted, efforts are being made to smooth over these issues, allowing companies to better manage their operations across the different sectors.
A particular challenge posed by this regulatory structure is the segregation of businesses between the upstream, midstream, and downstream sectors. Companies that operate across these areas are required to spin off their operations into separate entities, a process that involves careful legal and operational adjustments.
Host Community Obligations and Accountability
The introduction of Host Community Development Trusts under the PIA has been another pivotal change. Companies are now required to contribute financially to these trusts, with the goal of fostering development and accountability in the communities that host oil and gas operations. While many companies have already begun making contributions, there is still a need for greater accountability from both sides. As Mr. Okusami pointed out, companies are asking their host communities, What have you done with the funds we provided?
This question of accountability is crucial for fostering trust between oil companies and the host communities, ensuring that the funds are being used effectively for local development. It also opens up avenues for further contributions, as companies can justify increased investments if they see tangible results from their initial contributions.
Decommissioning and Environmental Accountability
Environmental concerns are also at the forefront of the PIA’s implementation. The Act introduces decommissioning and abandonment (DNA) obligations, requiring companies to set aside funds for environmental remediation once their oil and gas operations come to an end. This ensures that companies take responsibility for the environmental impacts of their activities, which, as Mr. Okusami noted, are often more severe in Nigeria than in other countries.
Without fulfilling these DNA obligations, companies cannot complete divestments, ensuring that environmental protection becomes a non-negotiable aspect of business operations in the oil and gas sector.
Open Communication Between Regulators and Stakeholders
Finally, Mr. Okusami praised the willingness of regulators under the PIA to engage with industry stakeholders. While not all regulations are perfect, there is a growing trend of open dialogue, where companies can provide feedback on the practical implications of new guidelines. This has led to adjustments and refinements that make the PIA more workable for businesses, further enhancing the Act’s effectiveness.
The PIA has undoubtedly brought about profound changes in Nigeria’s oil and gas sector, from dual regulatory structures and business segregation to host community accountability and environmental responsibilities. Stakeholders need to prioritize adapting to these changes by fostering better communication with regulators, ensuring transparency with host communities, and addressing environmental impacts proactively.
For a more in-depth discussion on how the PIA is transforming the industry, click here to watch the full video of our webinar.Â