Recently, the new Nigerian National Petroleum Company Limited (NNPC) was unveiled.
Some of the implications and intriguing facts about the Petroleum Industry Act (“PIA”) 2021 are being highlighted.
A DIFFERENT BALL GAME
President Muhammadu Buhari in compliance with Section 53 of the Petroleum Industry Act (“PIA”) 2021 on 18th July 2022 at the Federal Capital Territory, Abuja unveil the new Nigerian National Petroleum Company Limited (NNPC).
Some of the implications and intriguing facts about the Petroleum Industry Act (“PIA”) 2021 are highlighted below:
GOVERNANCE AND INSTITUTIONS
The objective is to ensure good governance and accountability, the creation of a commercially oriented national petroleum company, the NNPC Limited, and fostering a conducive business environment for petroleum operations. The minister, two new regulatory bodies- the Nigerian Upstream Regulatory Commission (the “Commission’) and the Midstream and Downstream Regulatory Authority (the “Authority”), and the Nigeria National Petroleum Company Limited (“NNPC Limited”) successor company to the Nigerian National Petroleum Corporation are the four distinct players in the sector.
JOINT VENTURE PARTNERS
Section 65 of the Act encourages NNPC Limited and its joint venture partners to explore the use of incorporated joint venture companies. Consequently, the firm may be required to declare dividends to its shareholders as well as withhold 20 percent of profit as retained earnings to grow its business like any other incorporated entity incorporated under the CAMA.
ASSET AND LIABILITY
Section 54 of the PIA, provides that all assets and liabilities of the NNPC will be transferred to NNPC Ltd within the first 18 months of the PIA coming into effect. Further to that, Subsection 2 of the Act states that any assets, interests, or liabilities not transferred shall remain that of the NNPC until extinguished or transferred to the government. This means that some toxic assets may be excluded. With this transition taking effect, existing contracts and Joint Operating Agreements (JOAs) with NNPC will be evaluated and transferred in line with agreed principles to ensure business continuity.
Previous government guarantees shall still be enforceable subject only to Section 92(3)(a) of PIA which made any stability provisions or guarantees provided by NNPC in respect of oil prospecting licenses or oil mining leases to be converted null and void.
No new action shall be deemed to have been created by the transfer of assets, interest or liabilities. However, pending actions may be enforced or continued by or against NNPC Limited.
The Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated shall hold all shares in NNPC Limited in equal proportions on behalf of the Government.
NNPC Limited is expected to operate at par with its industry peers across the world while acting as an enabler company that will foster the development of other sectors of our economy and delivers value to stakeholders.