OREANDA-NEWS. January 26, 2018. Nigeria's National Assembly has passed the Petroleum Industry Governance Bill (PIGB), a key piece of legislation aimed at reforming state-owned NNPC and the country's oil and gas regulatory bodies.

The bill, which was approved by the upper Senate in May last year, today secured approval by the lower House of Representatives and now only needs signing by President Muhammadu Buhari to go into effect.

The PIGB will split NNPC into two distinct branches — National Petroleum Company (NPC) and the Nigeria Petroleum Assets Management (NPAM). NPC will be responsible for the state's majority stakes in upstream joint ventures with foreign partners such as Shell and ExxonMobil, while NPAM will oversee Abuja's interests in the offshore production-sharing contracts.

NPC would be "an integrated oil and gas company operating as a fully commercial entity" and allowed to raise financing independently of government to fund its majority stake in the joint ventures.

NNPC built up debts of over $5bn to its joint venture partners because central government has for years struggled to meet its joint venture financing obligations. This has led to a series of delays in oil and gas projects. NNPC has entered into a series of "alternative financing" arrangements with its upstream partners to clear debts.

By allowing NPC to raise finance from banks and other sources, government would not need to fund the joint ventures from the national budget.

NPC would be allowed to list and sell part of its shares "at a later date."

NPAM will be tasked with responsibility for the "management of the federation oil and gas investments in assets where government is not obliged to provide funding." NPAM will have responsibility for NNPC's offshore production sharing contracts with firms such as ExxonMobil and Shell.

A third company could be created out of NNPC, specifically to hold NNPC's financial liabilities.

The bill "will enhance the commercial focus, performance, transparency and accountability as well as provide the necessary platforms for a lasting solution to the perennial [joint venture] funding [issue]."

The plan is for NPC and NPAM to be incorporated within six months of passing of the bill into law and the transfer of assets from NNPC to the new firms is to be done within 12 months of incorporation.

The PIGB will also create a new regulator, the NPRC, which would assume functions formerly conducted by a host of often overlapping state bodies, including the Department of Petroleum Resources and pricing agency the PPPRA.

The power to grant exploration and production licences and execute bidding rounds would transfer to the NPRC from the oil ministry. Nigeria has been plagued by flawed licence awards and bidding rounds in the past, with upstream blocks assigned to politically connected companies with little or no experience of the oil sector. NNPC's main foreign upstream partners — Shell, Total, Italy's Eni, ExxonMobil and Chevron — have not participated in licensing rounds in the country in over a decade.