Kyari sheds light on issues in Petroleum Industry Act 2021

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has said that the 3 per cent operating expense allocated to host communities in the recently assented Petroleum Industry Act 2021 is more than the 30 per cent profit share for oil exploration in the ‘frontier basins’.

The NNPC GMD made this revelation on Tuesday when he featured as a guest on NTA’s ‘Good Morning Nigeria’ breakfast show.

Kyari streseed that 30 per cent profit share for oil exploration in the ‘frontier basins’ is about $400 million per annum while the 3 per cent operating cost to accrue to host communities is about $500 million annually.

He also said the Host Communities Fund would be within the control of the host communities, and would not be managed by the NNPC.

“The resources are coming from the host communities, it should go back to benefit them,” Kyari noted.

It would be recalled that President Muhammadu Buhari signed the controversial Petroleum Industry Bill 2021 into law last week Monday, after about 20 years of legislative stalemate of the bill. Now known as the PIA, the legislation would regulate all aspects of the oil sector.

By assenting to the bill, the President approved at least 30 per cent of the profit to be generated by the proposed Nigerian National Petroleum Company Limited to go to the exploration of oil in ‘frontier basins’, according to Section 9 of the PIB.

The PIB also makes provision for the establishment of a Nigerian Upstream Regulatory Commission which will be responsible for the technical and commercial regulation of upstream petroleum operations and also promote the exploration of frontier basins in Nigeria.

The frontier basins include Chad Basin, Gongola Basin, Sokoto Basin, Dahomey Basin, Bida Basin, Benue Trough, Anambra Basin, amongst others.

At the moment, crude oil is obtained from eight states in the Niger Delta region which include: Abia, Akwa Ibom, Bayelsa, Delta, Edo, Imo, Ondo and Rivers States.

The 19 northern state governments had in 2016 intensified their search for oil and gas in the region with the appointment of a British firm to carry out the exploration activities which was sequel to Buhari’s directive to the Nigerian National Petroleum Corporation to increase the tempo of the crude oil find in the North-East.

The NNPC GMD blamed the grievances of some people in the Niger Delta on a misunderstanding of what constitutes 3 per cent operating expense and what constitutes 30 per cent profit share.

He said, “For instance, when you say 30 per cent profit oil and gas from NNPC shares or from PSC, it is a very small number. The percentages appear very outrageous but 30 per cent of what? Nobody has sat down to look at it. When you say profit oil 30 per cent, it probably comes down to less than $400 million per annum.

“But when you come to the host communities, you have three per cent of our operating expense. We spent about $16 billion in fiscal 2020 in our operating expense across the industry. So, when you take three per cent of that number it comes above $500 million far above the budget of NDDC.

“You can see that those percentages don’t reflect the realities that we are trying to achieve by this. And for profit oil, there are lots of uncertainties around it because if you don’t make profit it is zero but you must spend money to do operating expense.

“We are very sure that provisions that are meant for host communities will be implemented and delivered.”