Opinion
Implementation Of Host Communities Development Trusts In Iwereland
By Gbenga Komolafe
Presentation made by Engr. Gbenga Komolafe, the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, NUPRC at the Iwereland Petroleum Communities Summit on the implementation of the Host Communities Development Trusts in oil-producing Itsekiri communities under the Petroleum Industry Act, 2021 at Àghòfen, Ajamimoghaaa -Warri, Delta State
Protocols
Your Excellency, the Executive Governor of Delta State,
Your Royal Majesty, the Crown Ogiame Atuwatse III – The Olu of Warri Kingdom,
Distinguished Senators, Your Honourables, Members of the National and State Assemblies here present,
Commissioners,
Members of the Press,
Ladies and Gentlemen,
It is a great honour and royal privilege for me to be invited to make a presentation at this special summit with a theme “The implementation of Host Community Development Trusts in Oil Producing Itsekiri Communities under the Petroleum Industry Act 2021” hosted by the Crown, His Royal Majesty Ogiame Atuwatse III – The Olu of Warri.
2. I must say a ‘Big Thank You’ to Your Royal Majesty, Ogiame Atuwatse III – The Olu of Warri, for organizing this very important summit especially at this particular time, the first of its kind in Nigeria. Your Excellencies, Ladies and Gentlemen, We are witnessing for the first time a concerted, deliberate and focused effort by a highly revered Monarch to create awareness and provide critical information that will empower Nigerian citizens within the host communities with the knowledge required to access the robust benefits provided by the Federal Government under the Petroleum Industry Act 2021.
3. Your Royal Majesty, Excellencies, Ladies and Gentlemen, as you are aware, Nigeria as a country has come a long way in the oil and gas business. Our journey to prosperity began in 1956 when oil was discovered in Oloibiri in Bayelsa State, in the Niger Delta region, with an initial production of 5,000 barrels of oil per day. Nigeria would later shoot its output to over 2.0 million barrels of oil per day placing the country on the global chart of oil and gas producing nations and becoming an important member of international organisations such as the Organisation of Petroleum Exporting Countries (OPEC).
4. In Africa, Nigeria is ranked the 2nd in Oil Reserves and 1st in Oil Production. In OPEC, Nigeria is the 8th in Oil Reserves and 7th in Oil Production. In the World, we are 11th in Oil Reserves and 15th in oil Production. Although oil and gas sector contribute about 80% of Government revenue and about 95% of Nigeria’s foreign exchange earnings, its contribution to the country’s GDP is less than 10%.
5. While the Commission is prioritizing efforts towards increasing oil and gas production and ensuring maximum economic recovery in Nigeria through the optimisation of oil and gas value chain, there have been challenges limiting the country from making the much-desired progress. Currently, Nigeria has the potential to produce about 2.3 million barrels of oil per day being the technical allowable. Unfortunately, the country can only produce about 1.9 million barrels of oil per day out of which only about 1.35 million barrels of oil per day is received at the terminals due to massive crude oil theft and pipeline vandalism.
6. Your Royal Majesty, Ladies and Gentlemen, in the first Quarter of 2022 alone, out of about 141 million barrels of oil produced and total of total volume of about 9 million barrels of oil was lost to crude oil theft. This amounts to a loss in Government revenue of about 1 billion United States Dollars (at $116 per barrel) or about 434 Billion Naira (at CBN rate of N 415/$) which is about 90% the size of Delta State’s budget of N479 billion for the 2022 fiscal year (Source: Thisdaylive). These monies could have otherwise been available for developmental projects such as building of hospitals, schools, roads, provision of electricity and portable water, etc. More saddening, and undesirable, is the fact that sabotage of oil and gas facilities results in additional remediation cost to the Government as well as environmental degradation, soil and water contamination, threat to human life, source of livelihood, wildlife and marine life (fishes), crops resulting from spills.
7. Ladies and Gentlemen, it is in recognition of all these and the need to optimize oil and gas resources development and production that the Federal Government, with the support of the 9th NASS, passed the Petroleum Industry Bill (PIB) into law. The shift to the present-day PIA has been quite a challenging 20-year journey. The commencement of that journey produced the first draft of the Petroleum Industry Bill, culminating in the final passage of what we have come to know today as the Petroleum Industry Act (PIA) 2021. Ladies and gentlemen this is a landmark achievement by President Muhammadu Buhari.
8. Your Royal Majesty, the enactment of the PIA has opened a new opportunity in the oil and gas industry with extensive provisions designed to foster sustainable prosperity of host communities and enhance peaceful and harmonious co-existence of oil companies with their host communities. Your Excellencies, Ladies and Gentlemen, it is rewarding that Section 235 of the Act specifically provides for the incorporation of Host Communities Development Trust (HCDT) by the Settlor for the benefit of the host communities. The Settlors are the Oil and Gas companies operating within host communities. While the Act bestows the responsibility to set up HCDT and appoint Board of Trustees on the settlor, it shall do so in consultation with the host communities.
9. In addition, Section 247 of the Act requires the Board of Trustees to set up a Management Committee which shall be responsible for the general administration of the Host Communities Development Trust Fund. The Management Committee in turn is required to set up an Advisory Committee who advises on activities as well as monitors and reports progress of projects being executed in the community to the Management Committee. It will interest us to note that the Act requires that the host communities should be represented in the Board of Trustees, Management Committee and Advisory Committee.
10. On the other hand, the Act in Section 235(6) empowers the Commission to “make regulations on the administration, guide and safeguard the utilization of the trust fund and have the oversight responsibility for ensuring that the projects proposed by the Board of Trustees are implemented”. The PIA as a document of law alone can not be implemented without development of the Regulations which will give meaning and intent to the Act. As such, Your Royal Majesty, Excellencies, Ladies and Gentlemen, I am happy to disclose that the Commission under my watch has concluded arrangements to ensure that the Regulations guiding the implementation of the host community development fund under the PIA 2021 comes into effect before the end of June 2022. The development will signal the commencement of seamless implementation of the host community development fund for the benefit of oil producing communities.
11. Accordingly, the Commission, empowered by the PIA, has steered our focus towards working with the host communities and other stakeholders to ensure business investments in the oil and gas sector are adequately protected while ensuring the safety and sustainability of the environment. As our commitment to you, we shall ensure that the 3% deduction required from the Settlor’s annual OPEX is not shortchanged and that funds are remitted in good time. We shall also ensure that projects and programmes proposed by the HCDT are implemented as well as ensure fair and adequate compensation for damaged environment and apply sanctions where necessary on defaulters.
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