The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has approved 75 Host Community Development Trusts.
Of the number, 41 have been fully incorporated by the Corporate Affairs Commission (CAC).
Speaking at the Host Community sensitization workshop for implementation of the HCDT on Wednesday in Abuja, the Commission’s Chief Executive, Engr. Gbenga Komolafe, said 19 Fund Managers hand have been pre-qualified to commence the process of establishing a baseline of ongoing community development projects, in preparation for their migration to the HCDTs.
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Engr. Komolafe, however, stated that the commission has developed an industry intelligent digital automated platform for reporting and monitoring the Host Community Development Trust (HCDT).
The platform, which is developed by the commission in partnership with an Original Equipment Manufacturer (OEM), is for transparent administration of the Host Communities’ provisions of the Petroleum Industry Act (PIA) 2021.
The portal has been designed to meet specific requirements of HCDT as enshrined in the PIA and will aid all stakeholders (including the Settlors, Board of Trustees, Management Committees, Advisory Committees, Fund Managers etc) to fulfil their obligations to host communities and promote accountability and transparency in the management of the HCDT programme.
It is also to enable quick feedbacks from the stakeholders and the public for the Commission to carry out its regulatory oversight effectively.
The workshop, therefore, was to deliberate on the operation and funding of the platform to be hosted by the Commission.
Engr. Komolafe reiterated that the PIA represents a significant shift in the way the oil and gas industry in Nigeria operates.
“It recognises the critical role of host communities and provides a framework for their participation in the sector’s development. The establishment of the HCDT will create a more equitable distribution of the industry’s benefits and reduce the social and economic disparities in the country.
“The Commission shall continue to provide requisite support and guidance for the full implementation of the Law. Therefore, we urge all stakeholders to continue to work together to ensure the successful implementation of the PIA. We must all play our part in creating a sustainable and equitable oil and gas industry that benefits all Nigerians, particularly those in the host communities.”
In his address entitled “Implementation of the Host Communities Development Trust, a critical statutory prescription under the PIA, 2021,” the CCE said with the unveiling of the Host Communities Development Regulations as well as the template, the Commission has now defined clear navigational path regarding the administration, management, and allocation of funds for development of host communities as well as clear grievance resolution mechanism for settlement of disputes.
“Our objective in this workshop is to create further awareness on this very important piece of legislation and provide updates on the Commission’s activities geared towards the implementation of the regulations for Nigeria’s oil and gas industry, provide a clear roadmap for the implementation of the Host Communities Development Trust to enhance peaceful and harmonious co-existence between oil and gas industry operators and host communities, and ultimately support the development of host communities.
“While the Commission is prioritising efforts towards increasing oil and gas production and ensuring maximum Federation revenue through the optimisation of oil and gas value chain, the efforts have been constrained by myriad of challenges ranging from insecurity, low investment, de-prioritisation of funding of hydrocarbon development arising from energy transition.
Currently, Nigeria has the technical allowable capacity to produce about 2.5 million barrels of oil per day. However, arising from the highlighted challenges, our current production hovers around 1.5 million barrels of oil and condensate per day.
“To further stem the tide of sabotage and third-party interferences on oil and gas critical infrastructure, the PIA has in effect domesticated the protection of our oil and gas infrastructure to the Host Communities. One critical milestone under the PIA is the incorporation of Host Communities Development Trust (HCDT) by the settlor provided for in Section 235 as well as appointment of Board of Trustees (BOT) by the settlor in consultation with the host communities.
“Settlors are the Oil and Gas companies operating within host communities. Section 240 (2) of the PIA stipulates that each settlor, where applicable through the operator, shall make an annual contribution to the applicable host communities development trust fund of an amount equal to 3% of its actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities for which the applicable host community’s development trust fund was established.
“In addition, Section 247 of the Act requires the Board of Trustees (BoT) to set up a Management Committee which shall be responsible for the general administration of the HCDT Fund. The Management Committee in turn is required to set up an Advisory Committee, which advises on activities as well as monitors and reports progress of projects being executed in the community to the Management Committee.
The Act requires that the host communities should be represented in the BoT, Management Committee and Advisory Committee.
“Section 244 of the Act also provides an allocation formula upon which the BoT shall, on annual basis, allocate sums of money from the HCDT fund, as follows: 75% to the capital fund to be disbursed for projects in each of the host communities; 20% to the reserve fund to be invested for the utilization of the host communities development trust whenever there is a cessation in the contribution payable by the settlor; and an amount not exceeding 5% to be utilised solely for the administrative cost of running the trust and special projects.
In Section 245, the Act bestows the responsibility on the settlor to provide to the BoT a matrix for distribution of the trust fund to the host communities.
“On the other hand, the Act under 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.”
“In exercising these powers, the Commission had consulted widely with industry stakeholders in line with Section 216 of the PIA, 2021 and on 28th of June 2022 made a tremendous stride by unveiling the Nigeria Upstream Petroleum Host Communities Development Regulations, 2022 as well as the Host Communities’ Development Trust Implementation Template to give meaning and intent to the spirit of the Act.”
The workshop featured presentations on: Introduction to Industry Digital Automated Portal (IDAP) for Host Community Development; Incorporation of Host Communities’ Development Trust Fund: The Commission’s expectations and way forward; Host Community Development Trust Incorporation and CAC processes; HCDT Incorporation; Challenges and Success Stories by SPDC; and Effective project implementation tools for timely and quality project delivery.
Deliberations centred on funding approach of the Industry Digital Automated Portal (IDAP) for HCD/the administration of 3% OPEX; Remittance of Outstanding HCDT Fund; and Relationship and handling of traditional institutions by HCDT.
