TESTING THE SANCTITY OF PIA WITH $1.28BN SEPLAT DEAL
The fireworks between the Presidency and the National Upstream Petroleum Regulatory Commission (NUPRC) over Seplat Energy Plc’s planned acquisition of the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Delaware, for $1.28 billion may be scandalous to the Nigerian business environment but not without its lessons.
The signing of the Petroleum Industry Act (PIA) last year by President Muhammadu Buhari, after over 20 years of politicking, was seen as a breath of fresh air because it was expected to effectively regulate the country’s petroleum industry without undue interference.
Experts and industry players insist that the Seplat deal, which has led to a back and forth movement between the Presidency and NUPRC, has shown that influential people would not allow strong institutions to evolve and enforce the sanctity of the laws in regulating the industry.
The Seplat deal was mooted in February this year and the transaction involved the acquisition of ExxonMobil Nigeria’s entire offshore shallow water business. According to the deal, ExxonMobil Nigeria’s shallow water business is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations.
However, the Nigerian National Petroleum Company Limited (NNPC) has a pre-emptive right over the asset and that right was cemented last month via a legal victory, which temporarily blocked Exxon Mobil Corporation from selling assets in Nigeria to Seplat Energy Plc.
But a memo from the Minister of State, Petroleum Resources, Mr Timipre Sylva, Daily Sun learnt, shows an attempt to override the regulatory powers of NUPRC as enshrined in the PIA.
With the court verdict in favour of the NNPC in the bag, industry watchers were taken aback when reports emerged on Monday that President Muhammadu Buhari had approved the Seplat-Mobil deal be cemented.
This is because the same transaction had initially been disapproved on July 5 this year by the President who doubles as the Minister of Petroleum Resources.
To avoid being confined to a lame duck status having failed to end petrol subsidy regime as stated by the PIA, the NUPRC Chief, Mr Executive Gbenga Komolafe, on Monday, clarified that the Commission remains the sole regulator in dealing with such matters in the Nigerian upstream sector.
In a statement personally signed by him, the NUPRC boss stated that the issue at stake is purely a regulatory matter and the Commission had earlier communicated the decline of Ministerial assent to ExxonMobil in that regard.
He called on all parties involved in the deal to maintain the status quo, which in this case referred to the decline of Ministerial Assent.
In reaching the decision, NUPRC said it relied on Section 95, sub-section 10 of the PIA which states: “Where the application for an assignment or a transfer of a petroleum prospecting license of petroleum mining lease is refused, the commission shall inform the applicant of the reasons for the refusal and may give reasonable time within which further representations may be made by the applicant or by third parties in respect of the application.”
Sub-section 14 of Section 95 also states: “For the purpose of this section, change of control means any person or persons acting jointly or in concert, to acquire direct or indirect beneficial ownership of a percentage of the voting power of the outstanding voting securities of the holder, by contract or otherwise, that exceeds 50 per cent at any time.”
Similarly, sub-section 15 states: “A holder of a petroleum exploration license shall not assign, novate or transfer his license or any right, power or interest without prior written consent of the Commission.”
Also, Section 95, sub-section 8 states, “Where the consent of the minister is granted in respect of the application for a transfer, the Commission shall promptly record the transfer in the appropriate register.”
Sub-section 9 adds, “The Commission shall communicate the refusal or approval of an application for an assignment, novation or transfer of a license or lease in writing to the applicant.”
But shortly after Komolafe issued the statement affirming the no-consent position of the Commission as a regulator in the deal, Sylva issued the memo faulting the move.
In the letter, the Minister power drew the attention of Komolafe to the fact that NUPRC is still an agency under the Ministry of Petroleum Resources.
He claimed that the regulatory power given to the Commission under the PIA 2021 is also embedded in the Minister’s role as stated in Section 3(b) of the PIA 2021.
In the letter, Sylva went further to claim that contrary to what was stated by Komolafe, the Ministerial Consent was granted in exercise of the powers conferred on the Buhari who is himself the Minister of Petroleum Resources by the provisions of Paragraphs 14-16 of the First Schedule to the Petroleum Act, 1969.
When the PIA was enacted, operations of the downstream sector of the petroleum industry were expected to have been deregulated immediately. Under the new law, only the dynamics of the market forces of demand and supply were supposed to determine the prices of petroleum products throughout the country.
By implication, the commencement of the implementation of the PIA meant the end of the era of the Federal Government subsidizing the distribution and supply of petroleum products across the country, which has caused the country enormous financial hemorrhage over the years.
However, due more to the need to pander to selfish political sentiments, rather than the overall interest of the people and the country’s economy, the provision in the PIA that supported the removal of subsidy in the pricing template of petroleum products in the country was suspended, initially for six months, and later indefinitely.
The NPRC lost the battle to assert itself here, apparently because as a product of the PIA itself, after the merger of the defunct Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA), and Petroleum Equalisation Fund (PEF), it was too young to confront the powers that were and assert its authority to defend its mandate.
In July, at the public presentation of the draft 2023-2025 medium-term expenditure framework (MTEF)/fiscal strategy paper (FSP) in Abuja, the Minister of Finance, Budget & National Planning, Zainab Ahmed, said whether the fuel subsidy regime is removed or retained in the 2023 budget, the government would spend between N3.36 trillion to about N6.72 trillion.
Experts and players insist the sanctity of laws be respected, otherwise, the petroleum industry would not make any headway.