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LAGOS, May 26 (Reuters) - The long-awaited oil governance bill passed by Nigeria's upper chamber of parliament proposes breaking up the state oil company into three commercial entities supported by a regulatory body and a fund to oversee the distribution of money.
The Petroleum Industry Governance Bill, passed on Thursday by the Senate, is part of planned reforms that make up the sprawling Petroleum Industry Bill (PIB), discussed for over a decade following several redrafts, aimed at revamping the OPEC member's energy sector.
The PIB is a central plank of President Muhammadu Buhari's reform plans because oil sales provide 70 percent of government revenue in Africa's biggest economy but the energy sector has been hobbled by mismanagement and endemic for decade.
The governance bill - which must be passed by the lower chamber of parliament and receive the president's approval before becoming law - deals with management of the Nigerian National Petroleum Corporation (NNPC), the powerful state oil company which critics say is opaque and retains too much power.
It is one of a number of expected bills under the overarching PIB and does not deal with aspects of most interest to oil companies, such as fiscal terms for upstream projects.
The 191-page document states that the objective is to "create efficient and effective governing institutions with clear and separate roles for the petroleum industry" while improving transparency and accountability.
The governance bill proposes the creation of three commercial entities - the Nigeria Petroleum Assets Management Company, National Petroleum Company and the Nigeria Petroleum Liability Management Company.
Assets and liabilities of NNPC would be split between the three companies.
And the bill opens up opportunities for private investment. It says not less than 10 percent of shares of the National Petroleum Company will be divested within five years or its creation, rising to 30 percent within a decade.
The Petroleum Equalisation Fund would be created to "ensure efficient distribution of petroleum products throughout the federation" and also "collect and provide funding for infrastructural development throughout the federation".
And the Nigeria Petroleum Regulatory Commission would oversee compliance with the laws related to the petroleum industry, including the maintenance of environmental standards, and carry out evaluations of national reserves.
The regulatory body would also have the power to grant, amend, renew, extend or revoke any licence or lease required for petroleum exploration.
That power, in a previous version of the bill, lay with the petroleum minister but the governance bill passed by the Senate states that it transferred this to the Commission "to ensure separation of duties and provide for checks and balances".
If the governance bill is passed by parliament's lower chamber, the House of Representatives, it would require presidential approval to become law.
"The bill could still get hung up by political wrangling in the House," said Josh Holland, an analyst from IHS Markit.
Buhari has been on medical leave in Britain since 7 May and has handed over power to his deputy, Yemi Osinbajo. (Additional reporting by Camillus Eboh and Libby George in London; editing by David Evans)