Important things you should know about Nigeria's new Petroleum Act

Highlights of the new Act that will now govern operations in the sector going forward

The new Petroleum Industry Act mandates that the Nigerian National Petroleum Corporation (NNPC) will be commercialised within the next six months, effectively transforming the national oil company into a limited liability company.

Added to that is the establishment of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which shall be responsible for the technical and commercial regulation of upstream petroleum operations.

According to the new law, the commission will ensure compliance with all applicable laws and regulations governing upstream petroleum operations in a manner to minimise waste and achieve optimal government revenue as well as promote healthy, safe, efficient and effective conduct of upstream petroleum operations.

But despite the hue and cry from some groups in the Niger Delta on the need to increase the host communities’ fund, the new Act retained three per cent of total expenditure by the oil companies for the previous year for oil-producing areas and 30 per cent of NNPC Limited’s profit oil and gas in product sharing, profit sharing and risk service contract for frontier basins exploration.

Nigeria’s President Muhammadu Buhari signed the Petroleum Industry Bill into law, which will now to be known as Petroleum Industry Act.

With the new act, the entire framework for doing business in Nnigeria’s oil sector changes fundamentally.

See some of the highlights of the new Act that will now govern operations in the sector going forward:

What You Need To Know About Nigeria’s New Petroleum Act

• FG to Conclude Commercialisation of NNPC by February 2022

•  retains 3% for host communities, 30% for frontier basins

• New law creates two regulatory agencies for oil industry

• Commission to collect rents, royalties, production share

• Downstream authority to collect gas flare from midstream

• PIA imposes 1% levy on wholesale price of petroleum products

• Corporation to retain 10% of profit as management fee

• Oil companies to be sanctioned for understating profits, overstating losses

• New legislation repeals 10 existing laws

• BoT, executive members of host communities’ board may not be indigenes

• Oil areas to distribute funds for capital projects (75%), reserve (20%), administrative (5%)

• Bill divided into fiscal, administrative, governance and institutions as well as host communities

• Host communities’ fund to be set up within 12 months from Monday

• All employees of NNPC deemed new staff of NNPC limited

• When incorporated, board appointments to be made by shareholders, not the president alone

• Host communities to forfeit entitlement to extent of damage in cases of vandalism