HB 16: Petroleum Refineries (Incentives, Regulation and Miscellaneous Provisions) Bill, 2015

Bill Analysis:

SHORT TITLE

Petroleum Refineries (Incentives, Regulation and Miscellaneous) Bill, 2015

OBJECTIVE OF THE BILL

The objectives of the Bill are to:

• Provide for the licensing, regulation and incentives of Petroleum Refineries in Nigeria;
• Create a regulatory framework for the Nigerian petroleum refining industry

NUMBER OF CLAUSES/PARTS

The Bill has 28 clauses including interpretation and citation.

APPLICATION

The Bill shall apply to the refining of petroleum products in whole or in part within the territory of Nigeria

IMPLICATIONS OF THE BILL

If the Bill is passed, a regulatory framework for the Nigerian Petroleum Industry shall be established to: -

• Promote the implementation of national policy(ies) relating to petroleum products refining as may from time to time be modified and amended;
• Encourage local and foreign investments in the Nigerian petroleum refining industry;
• Ensure fair competition in all sectors of the Nigerian Petroleum refining industry and also encourage participation of Nigerians in ownership, control and management of petroleum refineries;
• Ensure the provision of certain incentives to encourage the refining of petroleum products in Nigeria for local use and for export.

GENERAL PROVISIONS OF THE BILL

1.    Requirement of License: -

The Bill provides under Clause 3 that no person shall operate a petroleum refinery in Nigeria unless he is authorized to do so under an operating license.

2.   Publication of Licensing Process: -

The Department of Petroleum Resources (DPR) shall from time to time determine and cause to be published a regulation on its licensing process, specifying the class of persons who are eligible to apply for licenses.

DPR shall publish from time to time its licensing procedures, which may include auction, selection process, public tender, invitation or competitive bidding process. DPR shall be guided by the principles of transparency, fairness and non-discrimination in the formulation of licensing procedures, issuance of petroleum refinery licenses and preparation of license conditions and terms.

3.  Declaration and Registrations: -

DPR may from time to time, make written declarations stating terms and conditions that licenses are subject to. Every declaration shall be registered as soon as practicable and a register maintained for all such declarations (Clause 5).

4.   Notice to Affected Licenses: -

Notices shall be made in writing to licensees affected by the declaration before DPR makes the declaration as provided under this Bill. The licensees may make written submissions to DPR within a time frame specified by DPR, but not less than 30 days from the date of the written notice. The follow-up actions by DPR shall be determined by the written submissions made by the affected licensees (Clause 6).

5.    Expiration, Modification or Revocation of Declaration: -

DPR may at any time amend, modify, vary or revoke any license condition or declaration regarding a license. The processes regarding declarations shall apply with revocation, expiration and modification. This involves notice in writing to the licensees to notify them of the action.

6.    Term and Conditions of Licensing: -

A license granted to a licensee shall be personal and shall not be sub-granted, leased out or assigned to any other party except with a written approval from DPR. A licensee shall at all times abide by the conditions of his license (Clause 8).

7.     Issuance of Direction: -

DPR may from time to time issue directions in writing to any person regarding the compliance or non-compliance of any licensing conditions or provisions of this Bill (when passed into law) or its subsidiary legislation (Clause 9). Before issuing a direction, DPR shall first issue a notice in writing to the person specifying the nature of required compliance.

The department shall issue a notice in writing to the person specifying the nature of required compliance and the person shall be granted opportunity to be heard or may submit a written submission within a reasonable time period.

At the expiration of the notice, DPR shall consider the reasons provided by the person before taking a decision on whether to issue a direction requiring the person to take specific action towards ensuring non-contravention of conditions of his license. Notice of the direction shall be issued not later than 30 days from the date the decision was made on the direction.

8.      Modification/Revocation of Direction: -

Clause 10 provides that DPR may revoke, vary or modify a direction and the procedure set for the issuance of a direction is followed in its revocation or modification. A written notice is issued to the person before the revocation or modification takes place.

9.      Registers: -

DPR shall maintain a register of all directions issued including any written instrument modifying, revoking or varying a direction.

DPR shall maintain another register for all matters that are required to be registered under this Bill (when it becomes law) and its subsidiary legislation. At its discretion, DPR may summarize the contents of a material for inclusion in the register and exclude aspects of the material, if it considers necessary (Clause 13).

10.    Public Access to Registers: -

For a fee specified by DPR, a person may inspect the register, make a copy or extract information from it. DPR shall from time to time publish guidelines in regard to its various registers, providing details of the registers and access procedures for members of the public (Clause 14).

11.    Regulations and Guidelines: -

DPR may make and publish regulations and guidelines for written authorizations, permits, licenses, etc. and other materials necessary for giving effect to this Bill (when passed into law). Regulations made under this Bill shall not come into effect until it is approved by a simple resolution of the National Assembly

12.     Regulation Review: -

DPR may review, as and when it deems necessary any rules and regulations that are in effect at the time of review, and may in the process vary, repeal or modify such regulations that are no longer necessary in the national interest or for any reason that the DPR thinks relevant (Clause 16).

13.      Exclusive Competence on Competition Laws: -

DPR shall have exclusive competence to determine, pronounce upon, administer monitor and enforce compliance of all persons with competition laws and regulations whether of a general or specific nature, as it related to the Nigerian petroleum refining industry.

14.      Anti-Competition Practices: -

A licensee shall not engage in anti-competitive practices – conducts which have the effect of substantially lessening competition in any aspect of the Nigerian petroleum refining industry. DPR may from time to time publish guidelines to clarify the meaning of substantial lessening of competition in the Nigerian petroleum refining industry.

A licensee shall not enter into any understanding, agreement or arrangement whether legally enforceable or not, which provides for rate-fixing, market-sharing, boycott of another competitor, etc. (Clause 18)

15.     Dominant Operators: -

DPR may determine that a licensee is in a dominant position in any aspect of the Nigerian Petroleum refinery market. DPR may publish guidelines, which clarify how it shall apply the test of dominant position to licensees (Clause 19(2)). The various elements that could be taken into account by DPR include

• the relevant economic market;
• global technology and commercial trends affecting market power;
• market share of the licensee, etc.

DPR may direct a licensee in a dominant position to cease a conduct in that market which has or may have effect of substantially lessening competition in any aspect of the Nigerian petroleum refinery industry for authorization for the conduct.

16.     Exemptions: -

A licensee may apply to DPR prior to engaging into any conduct, which may be construed to have the purpose or effect of substantially lessening competition in any aspect of the Nigerian petroleum refinery industry. DPR may authorize the conduct if it is satisfied that authorization is in the national interest (Clause 20).

17.     Product Pricing: -

Licensees shall not impose prices for refined products without the approval of the appropriate authority (Clause 21). Licensees shall publish their prices and modification thereto as may be approved from time to time by the appropriate authority. The prices shall be fair and not discriminatory, shall be structured and shall not contain discounts that unreasonably prejudice competitive opportunities of other providers.

The appropriate authority may from time to time make such regulations on determination and publication of product price and such regulations shall not be valid unless it is approved by a regulation of the National Assembly (Clause 21(6)).

18      Exportation of Refined Products: -

A licensee may export any kind or quantity of refined petroleum products provided that it is done according to the provisions of this Bill (when it becomes law). DPR may make regulations prescribing such requirements concerning local supply of refined petroleum products that must be met by any licensee before he is authorized to export refined petroleum products.

19.     Modification to Existing Legislations: -

The provisions of any law or enactment conferring regulatory functions on any other department or agency of government shall be read with such modification so as to bring them into conformity with the provisions of this Bill (when it becomes law) (Clause 24).

20.     Incentives: -

Licensees shall be entitled to the following incentives –

• legislative provisions pertaining to taxes and levies shall not apply to refineries under this Bill;
• crude oil to be procured by licensed refineries at 50% of the prevailing market prices or the cost of production of crude, whichever is lower;
• rent-free land for a period of 10years, after which rent shall be determined by the appropriate authorities
• up to 25% of production to be exported against a valid permit and on supervision of the department.

21.     Income Tax Relief: -

The provisions of the Industrial Development (Income Tax Relief) Act with respect to pioneer status apply to any licensee under this Act who sends at least 70% of his annual production for consumption within Nigeria.

22.    Offences and Penalties: -

Any person who exports refined petroleum products without the appropriate licenses or permits commits an offence and on conviction, is liable to a fine 7 times the value of the goods or to imprisonment for a term not exceeding 1 year or both.

Anyone who uses technical facilities which compromises public safety as may be defined from time to time by the Department commits an offence and on conviction is liable to a fine not below N1million or imprisonment for a term not exceeding 1 year or both (Clause 23(2)).

Any person who operates a petroleum refinery in Nigeria without being authorized to do so under an operating license commits an offence and is liable upon conviction to –

• a fine not less than the initial fee for the license;
• a fine not exceeding 10 times the initial fee for the license
• imprisonment for a term not exceeding 1 year or both fine and imprisonment

A person who fails to comply with the direction of DPR as provided under Clause 9 of this Bill shall be liable to a fine to the DPR in such amount as the department may at its discretion impose.

ANY SIMILAR EXISTING BILL

A Bill before the House of Representatives called Oil Producing Companies (Mandatory Investment in Petroleum Refining) Bill, 2017, sponsored by Hon. Kingsley O. Chinda is similar to this Bill as they both apply to petroleum refining.

CONCLUDING ISSUES

The Bill seeks to create a regulatory framework for the Nigerian petroleum refining industry to ensure fair competition, encourage participation of Nigerians in the ownership, control and management of petroleum refineries, as well as ensure the provision of incentives to encourage local refining. Though promoting local ownership and encouraging local refining will help the economy (as it would reduce expensive importation of refined products), the National Assembly is at the verge of passing the Petroleum Industry Governance Bill (PIB), which seeks to replace Department of Petroleum Resources (DPR) with another entity. The implication is that this Bill will be inapplicable as the department it seeks to empower will no longer be in existence.

However if the PIB is not passed by the National Assembly and assented to by the President, and this Bill is passed into law, any provision of any legislation that is inconsistent with the provisions of this Bill shall to the extent of such inconsistency, be void (Clause 24). It is the duty of the lawmakers to make policies that will help stabilize the economy of Nigeria, and in light of that, decide which Bill is priority and take it forward.

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