The petroleum and Industry Bill 2012 (Part iii)

shall be published on the website of the Corporation for public notice not later

than 31st of July of each year.

142.  Exemption from income tax

(1)  All income derived by the Corporation from the sources specified in section

121 shall be exempt from income tax and all contributions to the Corporation

made by persons subject to the payment of tax shall be tax deductible. 72

(2)  The Corporation may, subject to the approval of the Board and the conditions

of any trust created in respect of any property, invest all or any of its funds in

any security prescribed by the Trustees Investment Act, or in such other

securities as the Board may approve.

143.  Legal proceedings

(1)  Subject to the provisions of this Act, the provisions of the Public Officers

Protection Act shall apply in relation to any suit instituted against the

Corporation a member of the Board or an officer or employee of the

Corporation.

(2)  No suit shall lie against the Corporation a member of the Board or any of its

officer or employees for any act done in pursuance or execution of this Act or

any other law or enactment, or of any public duty or authority in respect of any

alleged neglect or default in the execution of this Act or any other law or

enactment, duty or authority, or be instituted in any court unless it is

commenced—

(a)  within three months after the act, neglect or default complained of; or

(b)  in the case of a continuation of damage or injury, within six months

after the ceasing of the act complained of.

(3)  No suit shall be commenced against the Corporation or any officer or

employee before the expiration of a period of one month after written notice of

the intention to commence the suit shall have been served on the Corporation

by the intending plaintiff or his agent.

(4)  The notice referred to in subsection (3) of this section shall clearly and

explicitly state the cause of action, the particulars of the claim, the name and

place of abode of the intending plaintiff and the relief being  claimed.

144.  Service of court processes on Corporation

A notice, summons or other document required or authorized to be  served on the

Corporation under the provisions of this Act or any other law or enactment may be

served by delivering it to the office of the Managing Director of the Asset

Management.

145.  Restriction on execution against the Corporation’s property

(1)   In any action or suit against the Corporation, no execution or attachment of

process in any form shall be issued against the Corporation unless not less

than three months’ notice of the intention to execute or attach has been

given to the Corporation.  73

(2)  Any sum of money which may by the  judgment of any court be awarded

against the Corporation shall, subject to any direction given by the court

where no notice of appeal against the judgment has been given, be paid

from the Fund of the Corporation.

146.  Indemnity

(1)  Every member of the Board and every employee of the Corporation shall be

indemnified out of the assets of the Corporation against any liability incurred

in defending any proceeding against the Corporation, whether civil or

criminal, if such proceedings are brought against the  a member of the Board

or employee in their official capacity.

(2)  Notwithstanding the provisions of subsection (1) of this section, the

Corporation shall not indemnify any member of the Board or employee or

staff  of the  Corporation for any liability incurred as a result of the wilful

negligence of the member or employee, as the case may be, or conduct or

acts which such a person knew or ought to have known to be unlawful.

147.  Protection of land belonging to the Management Company

(1)  Land vested in the Management Company shall not be liable to be acquired

compulsorily under any enactment or law; and notwithstanding anything in

any other enactment or law, no mining operations shall be carried on, in or

under any land vested in the Management Company or any land over which

the Management Company  is entitled to rights of support for the benefit of

lands so vested except with the prior consent in writing of the Minister.

(2)  For the purpose of this section, “land” includes any land under water beyond

the territorial waters ofNigeriato whichNigeriais for the time being entitled

to any exclusive rights.

I.  NATIONAL OIL COMPANY

148.  Incorporation of the National Oil Company

The Minister shall, not later than three  months after the effective date, take such

steps as are necessary under the Companies and Allied Matters Act to incorporate

the National Oil Company as a public company limited by shares, which shall be

vested with certain assets and liabilities of the NNPC.

149.  Exemption from application of certain existing laws   74

The National Oil Company shall not be subject to the provisions of the Fiscal

Responsibility Act 2007 and the Public Procurement Act 2007.

150.  Share holding in the National Oil Company

At the time of its incorporation, the initial shares of the National Oil Company shall be

held by a nominee of the Ministry of Petroleum Resources and Ministry of Finance

Incorporated on behalf of the Government.

151.  Divestment of shares of the National Oil Company

Notwithstanding the provisions of section  150  of this Act, the Government shall at

any time within six years from the date of incorporation of the National Oil Company,

divest up to thirty percent of the authorised shares of the National Oil Company to

the public in a transparent manner on the Nigerian Stock Exchange.

152.  Transfer of assets and liabilities

(1)  Following incorporation of the National Oil Company, the assets and liabilities

held by the NNPC on behalf of the Federal Government of Nigeria except the

interests in the unincorporated joint ventures and Nigerian Gas Company

Limited shall be vested in the National Oil Company within twelve to twentyfour months from the Effective Date.

(2)  The transfer of liability or obligation under this section releases the NNPC

from the liability or obligation with respect to the transferred assets.

(3)   The National Oil Company shall without further assurance be entitled to

enforce or defend all obligations for or against NNPC in respect of the portion

of interests mentioned above as if the National Oil Company were the original

party to such obligations.

(4)   In relation to the transferred assets, all bonds, loans, financing agreements,

alternative financing agreements, joint operating agreements, production

sharing agreements, sole risk agreements, hypothecations, securities, deeds,

contracts, instruments, documents and working arrangements subsisting

immediately before the initial transfer date and to which NNPC was a party

shall,  on and after the initial date, be as fully effective and enforceable

against or in favour of the National Oil Company as if, instead of NNPC, the

National Oil Company had been named therein.

(5)  Any pending action or proceeding  in relation to the transferred assets,

brought by or against NNPC immediately before the initial transfer date may

be enforced or continued, as the case may be, on and after that date by or

against the National Oil Company in the same way as if this Act had not been

passed. 75

(6)  Notwithstanding the provision of subsection (2) of this section:

(a)  no action or other proceeding shall be commenced against the National

Oil Company in respect of any employee, asset, liability, right or

obligation if, had there been no transfer, the time for commencing the

action or other proceeding would have expired; and

(b)  the transfer of assets and liabilities to the National Oil Company under

subsection  (1) of this section shall not be deemed to –

(i)  constitute a breach, termination, repudiation or frustration of any

contract, including a contract of employment or insurance;

(ii)   constitute a breach of any Act, regulation or by-law; or

(iii)  constitute an event of default or force majeure;

(iv)  give rise to a breach, termination, repudiation or frustration of

any licence, permit or other right;

(v)  give rise to any right to terminate or repudiate a contract,

licence, permit or other right; and

(vi)  give rise to any estoppel.

(7)  Subsection (6) of this section shall apply to the contracts as may be

prescribed by any regulation made for this purpose.

(8)  Subject to subsection (7) of this section, nothing in this Act and nothing done

as a result of a transfer under subsection (1) of this section shall create any

new cause of action in favour of:

(i)   holder of a debt instrument issued by the  NNPC before the transfer

date; or

(ii)  party to a contract with the NNPC that was entered into before the

transfer date.

(9)  Any guarantee or surety which was given or made by the Federal Government

ofNigeriaor any other person in respect of any debt or obligation of the

NNPC, and which was effective immediately before the initial transfer of the

principal debt or obligation, shall remain fully effective against the guarantor or

surety on and after the initial transfer date in relation to the repayment of the

debt or the performance of the obligation, as the case may be, by the National

Oil Company to which the principal debt or obligation was transferred.

(10)  The assets of the subsidiaries of the NNPC listed under the Public Enterprises

Privatisation and Commercialisation Act shall be de-listed from the Effective 76

Date of this Act and the power of attorney earlier assigned to the Bureau of

Public Enterprises shall stand vacated.

153.  Exemption from stamp duty

Stamp duty shall not be chargeable under the Stamp Duties Act  in respect of any

transfer made or transaction entered into pursuant to this Part on which, except for

the exemption granted under this section, stamp duty would have been payable and

in particular, and without derogation from the foregoing, no stamp duty shall be

chargeable:

(a)  during the incorporation of the National Oil Company and the successor

companies or any subsequent increase to their authorised share capital, prior

to the transfer of a majority interest to the public or private investors; or

(b)  in respect of any other transfer of rights and assets pursuant to this Part.

154.  Transfer of employees to the National Oil Company

The transfer of employees of NNPC to the National Oil Company shall be in

accordance with provisions of section 358 of this Act.

155.  Directions to NNPC on matters related to transition

Prior to the vesting of the assets and liabilities of NNPC in the National Oil Company,

the Minister may give to the Board of Directors of  NNPC directions in writing to

ensure the proper transfer of the assets and liabilities of NNPC to the National Oil

Company, and the Board of Directors shall, without delay, comply with every such

direction.

156.  Management and governance of the National Oil Company

(1)  Upon incorporation of the National Oil Company in pursuance of section 148

of this Act, the National Oil Company shall be organized and managed on the

basis of the provisions of its Memorandum and Articles of Association.

(2)   The National Oil Company shall be subject to the Governance Rules of the

Securities and Exchange Commission.

157.  Certain exemption from rates

(1)  Oil pipelines and other installations belonging to the National Oil Company

shall not be regarded as hereditaments or tenements to be valued for rating

purposes

(2)  For the purposes of this subsection, the expression “oil pipelines and other

installations” include oil rigs, refineries, power generating plants, pumping 77

stations, tank farms and similar installations but do not include office or

residential buildings.

(3)  Except as provided in subsection (1) of this section, nothing in this Act shall

be deemed to exempt the National Oil Company from liability for any tax, duty,

rate, levy or other charge whatsoever, provided that the National Oil Company

shall not be liable to pay any such tax, duty, rate, levy or charge unless every

company liable to tax under this Act is also liable for such payment.

158.  Protection of National Oil Company’s land

(1) Land vested in the National Oil Company shall not be liable to be acquired

compulsorily under any enactment or law;

(2) Notwithstanding anything in any other enactment or law, no mining operations

shall be carried on, in or under any land vested in the National Oil Company

or any land over which the National Oil Company is entitled to rights of

support for the benefit of lands so vested except with the prior consent in

writing of the Minister.

(3)  For the purpose of this section, “land” includes any land under water beyond

the territorial waters ofNigeriato whichNigeriais for the time being entitled to

any exclusive rights.

J.  NATIONAL GAS COMPANY PLC

159.  Incorporation of the National Gas Company

The Minister shall, not later than three months after the Effective Date of this Act,

take such steps as are necessary under the Companies and Allied Matters Act to

incorporate the National Gas Company Plc as a company, limited by shares, which

shall be vested with certain assets and liabilities of NNPC.

160. Exemption from certain existing Legislation

The National Gas Company Plc shall not be subject to the provisions of the Fiscal

Responsibility Act 2007 and the Public Procurement Act 2007.

161.  Shareholding in the National Gas Company Plc

At the time of its incorporation, the initial shares of the National Gas Company shall

be held by a nominee of the Ministry of Petroleum Resources and Ministry of

Finance Incorporated on behalf of the Government.

162.  Divestment of shares of the National Gas Company Plc

Notwithstanding the provisions of section 161 of this Act, the Government shall at

any time within six years from the date of incorporation of the National Gas Company 78

Plc, divest up to forty nine percent of the shares of the National Gas Company to the

public in a transparent manner on the Nigerian Stock Exchange.

 

163.  Transfer of assets and liabilities

(1)  Following incorporation of the National Gas Company Plc, the assets and

liabilities held by NNPC on behalf of the Federal Government of Nigeria

except Nigeria Gas Company Plc shall be vested in the National Gas

Company Plc within twelve to twenty-four months from the Effective Date.

(2)  The transfer of liability or obligation under this section releases the NNPC

from the liability or obligation with respect to the transferred assets.

(3)   The National Gas Company Plc shall without further assurance be entitled to

enforce or defend all obligations for or against NNPC in respect of the portion

of interests mentioned in this section as if the National Gas Company Plc

were the original party to such obligations.

(4)  In relation to the transferred assets, all bonds, loans, financing agreements,

alternative financing agreements, joint operating agreements, sole risk

agreements, hypothecations, securities, deeds, contracts, instruments,

documents and working arrangements subsisting immediately before the

initial transfer date and to which NNPC was a party shall,  on and after the

initial date, be as fully effective and enforceable against or in favour of the

National Gas Company Plc as if, instead of NNPC, the National Gas

Company Plc had been named therein.

(5)  Any pending action or proceeding  in relation to the transferred assets,

brought by or against NNPC immediately before the initial transfer date may

be enforced or continued, as the case may be, on and after that date by or

against National Gas Company in the same way as if this Act had not been

passed.

(6)  Notwithstanding the provision of subsection (3) of this section:

(a)  no action or other proceeding shall be commenced against the National

Gas Company Plc in respect of any employee, asset, liability, right or

obligation if, had there been no transfer, the time for commencing the

action or other proceeding would have expired, and

(b)  the transfer of assets and liabilities to the National Gas Company Plc

under subsection  (2) of this section shall not be deemed to –

(i)  constitute a breach, termination, repudiation or frustration of any

contract, including a contract of employment or insurance;

(ii)   constitute a breach of any Act, regulation or by-law; or79

(iii)  constitute an event of default or force majeure;

(iv)  give rise to a breach, termination, repudiation or frustration of

any licence, permit or other right;

(v)  give rise to any right to terminate or repudiate a contract,

licence, permit or other right; and

(vi)  give rise to any estoppels.

(7)  Subsection (6) of this section does not apply to the contracts as may be

prescribed by any regulation made for that purpose.

(8)  Subject to subsection (7) of this section, nothing in this Act and nothing done as

a result of a transfer under subsection (1) of this section shall create any new

cause of action in favour of a –

(i)   holder of a debt instrument issued by NNPC before the  date; or

(ii)  party to a contract with NNPC that was entered into before the transfer

date.

(9)  Any guarantee or surety which was given or made by the  Government of

Nigeriaor any other person in respect of any debt or obligation of NNPC, and

which was effective immediately before the initial transfer of the principal debt or

obligation, shall remain fully effective against the guarantor or surety on and

after the initial transfer date in relation to the repayment of the debt or the

performance of the obligation, as the case may be, by the National Gas

Company Plc to which the principal debt or obligation was transferred.

164.  Exemption from stamp duty

Stamp duty shall not be chargeable under the Stamp Duties  in respect of any

transfer made or transaction entered into pursuant to this Part on which, except for

the exemption granted under this section, stamp duty would have been payable and

in particular, and without derogation from the foregoing, no stamp duty shall be

chargeable:

(a) during the incorporation of the National Gas Company Plc and the successor

companies or any subsequent increase to their authorised share capital, prior

to the transfer of a majority interest to the public or private investors; or

(b)  respect of any other transfer of rights and assets pursuant to this Part.

165.  Transfer of employees to the National Gas Company

The transfer of employees of NNPC to the National Gas Company shall be in

accordance with provisions of section 358 of this Act. 80

166.  Directions to NNPC on matters related to transition

Prior to vesting of the assets and liabilities of NNPC in the National Gas Company,

the Minister may give to the Board of Directors of NNPC directions in writing in order

to ensure the proper transfer of the assets and liabilities of NNPC  to the National

Gas Company, and the Board of Directors shall, without delay, comply with every

such direction.

167.  Management and  governance of the National Gas Company upon

incorporation

(1)  Upon incorporation of the National Gas Company in pursuance of section 159

of this Act, the National Gas Company shall be organized and managed on

the basis of the provisions of its Memorandum and Articles of Association.

(2)  The National Gas Company shall be subject to the Governance Rules of the

Securities and Exchange Commission.

168.  Certain exemption from rates

(1)  Gas pipelines and other installations belonging to the National Gas Company

shall not be regarded as hereditaments or tenements to be valued for rating

purposes, and for the purposes of this subsection, the expression “Gas

pipelines and other installations” include Gas rigs, refineries, power

generating plants, pumping stations, tank farms and similar installations but

do not include office or residential buildings.

(2)  Except as provided in subsection (1) of this section, nothing in this Act shall

be deemed to exempt the National Gas Company from liability for any tax,

duty, rate, levy or other charge whatsoever, provided that the National Gas

Company shall not be liable to pay any such tax, duty, rate, levy or charge

unless every company liable to tax under this Act is also liable for such

payment.

169.  Protection of National Gas Company’s land

(1) Land vested in the National Gas Company shall not be liable to be acquired

compulsorily under any enactment or law;

(2) Notwithstanding anything in any other enactment or law, no mining operations

shall be carried on, in or under any land vested in the National Gas Company

or any land over which the National Gas Company is entitled to rights of

support for the benefit of lands so vested except with the prior consent in

writing of the Minister. 81

(3)  For the purpose of this section, “land” includes any land under water beyond

the territorial waters ofNigeriato whichNigeriais for the time being entitled to

any exclusive rights.

 

PART III

UPSTREAM PETROLEUM

170.  ADMINISTRATION OF ACREAGE

(1)  All acreage for exploration, development and production of petroleum in

Nigeriashall be administered by the Inspectorate.

(2)  The title to all data related to upstream petroleum operations are accordingly

vested in the Federal Government and shall be administered by the

Inspectorate.

171.  National grid system

(1)  The Inspectorate shall adopt a national grid system for petroleum acreage

management and such grid system shall be based on the Universal

Transverse Mercator (U.T.M.) coordinate system.

(2)  The basic unit shall be a parcel of two by two kilometers, subject to

adjustment zones and the national boundary, in which case a parcel shall be

the part of the parcel in the adjustment zone or on Nigerian territory as

described in subsection (1) of this section.

(3)   The Inspectorate shall define a numbering system for the parcels which shall

allow for the subdivision and aggregation of these parcels.

(4)  The grid system shall be used for the definition of licence and lease areas,

relinquishments, bid procedures, identification of well locations, petroleum

conservation measures and such other regulatory and acreage management

procedures.

(5)  Subject to the provisions of subsection (1) of this section any current

boundaries of licences and leases that do not conform with the new grid

system shall remain unaltered, and parcels shall be apportioned accordingly.

172.  Licences and leases

(1)  Subject to this Act, the Minister may grant:

(a)   a   petroleum exploration  licence to carry out exploration on a nonexclusive basis; 82

(b)   a petroleum prospecting licence to prospect for petroleum; and

(c)   a  petroleum mining  lease, to search for, win, work, carry away and

dispose of petroleum.

(2)  Subject to the provisions of this Act, where the Minister decides to grant a

licence or lease under this section, it shall be awarded –

(a)   to the winning bidder pursuant to the bid process prescribed in section

190 provided the winning bidder has complied with all requirements

specified in the bid process; or

(b)   directly to the existing licensee or lessee pursuant to the provisions of

section 193 of this Act;

(3)  Subject to the provisions of this Act, the Minister may grant a petroleum

exploration licence to any qualifying company over any area, excluding areas

that are  the  subject of petroleum prospecting licences or petroleum mining

leases.

(4)  Every petroleum prospecting licence or petroleum mining lease shall be in

respect of petroleum.

(5)  A licence or lease under this section may be granted only to a company

incorporated inNigeriaunder the Companies and Allied Matters Act or any

corresponding law.

(6)  It shall be a condition under any petroleum exploration licence, petroleum

prospecting licence and petroleum mining lease that at all times the operator

of the upstream petroleum operations shall be a company that qualifies as an

operator.

173.  Power to enter into contracts

(1)  Where the Minister grants any licence or lease under subsection (1) of section

172 of  this Act, the licensees or lessees, by such grant and without further

assurance, shall be empowered to enter into any contract for the exploration,

prospecting, production and development of oil or gas, or both,  as the case

may be, in respect of any licence or lease held by the  licensees or lessees,

upon such terms and conditions as the  licensees or lessees may determine,

and with any company qualified under conditions prescribed by this Act.

(2)  The power to enter into contracts given under this section shall not confer the

right to assign an interest in any licence or lease, except in compliance with the terms of section 194 of this Act. 83

174.  Confidentiality clauses

(1)  Confidentiality clauses or other clauses contained in licences, leases, agreements or contracts for upstream petroleum operations that are for the purpose of preventing access to information and documents by third parties in respect of any payments of royalties, fees and  bonuses of whatever nature, and taxes, shall be void and of no effect.

(2)  Subsections (1) and (4) of this section shall not apply to proprietary industrial property rights owned by any of the parties to a licence, lease, agreement or contract to which the said subsections (1) and (4) apply, which shall be exempted from the scope of mandatory disclosure to the extent that confidentiality in such cases is protected by any law in force inNigeriarelating to the freedom of information, or by any treaty obligations of Nigeriaunder international law.

(3)  The question as to whether information or documents are proprietary industrial property rights and within the ambit of subsection (2) of this section shall be decided by the owner of such information and where the Inspectorate disputes such determination, the matter shall be decided by an independent expert appointed by the Inspectorate and the relevant licensee or lessee.

(4)  Every company involved as licensee, lessee or contractor shall for each license and each lease provide a yearly summary of all revenues and costs on which the payments under subsection (1) of this section were based within three years after the expiration of each calendar year and the provisions with respect to confidentiality under subsection (1) of this section shall apply to the requirement to provide such summaries.

(5)  The Inspectorate shall define the required detail and classification of the summary under subsection (4) of this section and such summaries shall be non-confidential and published on the website of the Inspectorate together with the revenue information pursuant to subsection (1) of this section.

(6)  The text of any subsisting or future licence or lease or contract with the

National Oil Company and any amendments or side letters thereto shall not be confidential and shall be published on the website of the Inspectorate and the provisions of sub-section (1) of this section shall apply.

(7)  The texts pursuant to subsection (6) of this section shall be on the website of the Inspectorate within one year after the commencement of this Act,  and where such information is not supplied to the Inspectorate, a company in default shall be liable to a penalty of US $ 10,000 for every day such information is not available after the date required by the Inspectorate.

(8)  All geological, geophysical, geochemical and other technical petroleum data obtained during upstream petroleum operations as determined by the 84

Inspectorate shall be provided directly to the national petroleum data bank of the Inspectorate electronically  within  three months of such data being obtained by any licensee or lessee and hard copies within one month thereafter.

(9) The data referred to in subsection 8 of this section shall not be confidential, except for data obtained under a petroleum exploration and prospecting licences for a period of five years or until such time the exploration period ends or the related acreage is relinquished, whichever is the earlier.

(10)  With respect to petroleum exploration licences, the Inspectorate may agree to

a period of confidentiality where the licensee obtains the data for the main

purpose of selling the data to interested parties.

(11) All data in the national petroleum data bank shall be accessible for any

interested person under such access agreements as may be determined by

the Inspectorate.

(12)  All information pursuant to subsection (1) of this section shall be nonconfidential and the Inspectorate shall publish this information on their

website.

175.  Petroleum exploration licence

(1)  The holder of a petroleum exploration licence shall have the non-exclusive

right to carry out geological, geophysical and geochemical exploration for

petroleum within the area of his licence and to drill coreholes not deeper than

one hundred and fifty meters using only percussion drilling techniques unless

otherwise allowed by the Inspectorate.

(2)  A petroleum exploration licence shall be valid for not more than three years

and shall not include any right or option to win, get, work, store, carry away,

transport, export or otherwise treat petroleum discovered in or under the said

licence area.

(3)  Any petroleum exploration shall be under the supervision of the Inspectorate.

176.  Petroleum Prospecting Licence

The holder of a petroleum prospecting licence shall have:

(a)  the exclusive right to carry out petroleum exploration operations within the

area of its licence; and

(b)  have the right to carry away and dispose of crude oil, natural gas or bitumen

won during prospecting operations as a result of production tests, subject to

the fulfilment of obligations imposed by or under this Act  or any other

enactment in force at the time. 85

177.  Duration and area of Petroleum Prospecting Licence

A petroleum prospecting licence shall be –

(a)  with respect to onshore and shallow water areas, for a duration of not more

than five years, consisting of an initial exploration period of three years and a

renewal period of two years, with a possibility for further extensions due to an

appraisal period pursuant to subsection (8)  of  section of this Act and

significant gas discovery periods, pursuant to subsection (11) of section 178

of this Act and other extensions permitted under this Act and the petroleum

prospecting licence area shall not be more than five hundred  square

kilometres and not less than one parcel    (four square kilometers); and

(b)  with respect to deep water areas and frontier acreage, for a duration of not

more than eight years, consisting of an initial exploration period of five years

and a renewal period of three years, with a possibility for further extensions

due to appraisal periods, pursuant to subsection (8) of section 178 of this Act

and significant gas discovery periods, pursuant to subsection (11) of section

178 of this Act and other extensions permitted under this Act and the initial

petroleum prospecting licence area shall not be more than one thousand

square kilometres and not less than one parcel  (four square kilometers).

178.  Work commitment, commercial discovery and significant gas discovery

during petroleum prospecting licence

(1)  A petroleum prospecting licence shall contain the requirement for the licensee

to commit to a work programme.

(2)  The work-programme referred to under subsection (1) of this section shall

oblige the licensee to:

(a)  explore the relevant area, using geological, geophysical and any other

acceptable methods of investigation for the purpose of arriving at the

prospects until the area has been adequately explored for that purpose;

(b)  commence seismic investigations  provided the licensee has not

already begun to do so; and

(c)  within eighteen months of granting such licence to begin drilling

operations with a modern petroleum well drilling outfit.

(3)  During the initial period, the licensee shall commit to the drilling of at least one

exploration well to a specified minimum depth, provided that the licence may

require more than one well to a minimum depth.

(4)  Where the licensee requests a renewal,  the licensee shall, except where the

Inspectorate otherwise authorizes,  commit to the drilling of at least one

further exploration well to a specified minimum depth, provided that the 86

licensee may require more than one well to a minimum depth during such

renewal.

(5)  An exploration well shall be a well that in the opinion of the Inspectorate is

aimed at discovering petroleum in a separate geological feature or structure in

which petroleum has not been previously discovered.

(6)   Any exploration well drilled in excess of the minimum work programme

specified in the licence during the initial period can be credited to the work

obligation under the renewal.

(7)   Where the licensee makes a petroleum discovery during the initial period or

renewal, it shall inform the Inspectorate within one hundred and twenty days

or within such extended time frame as granted by the Inspectorate, after

making such discovery whether the licensee considers that the petroleum

discovery merits appraisal.

(8)   Where the licensee considers that a discovery merits appraisal, it shall submit

for approval to the Inspectorate:

(a)  a commitment to an appraisal programme of a duration of not more

than two years and of a scope and nature that will permit the licensee

to declare a commercial discovery in case results of the appraisal are

positive; and

(b)  the appraisal area which shall not be larger than the parcels covering

the reasonable outer boundary of the discovery as well as a zone of not

more than five  kilometres surrounding such outer boundary.

(9)  Upon the approval of the appraisal programme and appraisal area by the

Inspectorate, the licensee shall promptly carry out the committed appraisal

programme.

(10) The Inspectorate shall decide on the appraisal programme and appraisal area

within sixty days after the submission.

(11)  Upon the completion of the appraisal programme, the licensee shall:

(a)  declare a commercial discovery;

(b)  declare a significant gas discovery; or

(c)  inform the Inspectorate that the discovery is of no interest to the

licensee.

(12)  Where a significant gas discovery has been declared, the licensee shall be

entitled to retain such significant gas discovery area for a retention period of

not more than ten years from the date of such declaration.  Where the 87

petroleum prospecting licence has otherwise expired pursuant to subsection

(16) of this section, the significant gas discovery retention area shall continue

to subsist until the expiration of the retention period or the declaration of a

commercial discovery.

(13) Any significant gas discovery retention area shall be selected in the same

manner as an appraisal area pursuant to paragraph (b) of subsection (8) of

this section and may be approved by the Inspectorate.

(14)  Where a commercial opportunity to sell the gas materializes based on

information provided by the Inspectorate with respect to domestic gas demand

during the retention period provided for in subsection (12)  of this section, the

Inspectorate shall invite the licensee to make a declaration of a commercial

discovery pursuant to subsection (11)  of this section  with respect to the

significant gas discovery and present a development plan with a commitment

to execute such development plan pursuant to section 179 of this Act.

(15)  Where the licensee fails to make a declaration of a commercial discovery

within one year of the invitation of the Inspectorate pursuant to subsection

(14) of this section the petroleum prospecting license shall be revoked,

provided that any such commercial declaration has to be made prior to the

end of the retention period pursuant to subsection (12) of this section.

(16)  Where the licensee fails to make a declaration of a commercial discovery prior

to the expiration of the retention period pursuant to subsection (12) of this

section, the significant gas retention area shall be relinquished, and where the

last significant gas retention area has been relinquished, the licence shall

expire.

(17)  Where the licensee declares the discovery of no interest pursuant to

paragraph (c) of subsection (11) of this section, the Inspectorate may require

the relinquishment of the parcels that cover the extent of the discovery.

(18)   The licensee shall not commence work required under this section unless it

has an approved Nigerian content plan, with respect to:

(i)  the drilling of wells during the initial exploration period pursuant to

subsection (2) of this section;

(ii)  the drilling of wells during the renewal of the exploration period

pursuant to subsection (3) of this section;

(iii) the appraisal work pursuant to subsection (8) of this section, and

(iv)  any work on a significant gas discovery pursuant to subsection (12) of

this section. 88

179.  Commercial discovery and development plan

(1)  Where the licensee declares a commercial discovery pursuant to paragraph

(a) of subsection (11), of section 178 of this Act, the licensee shall within the

period provided for in subsection (5) of this section, submit a field

development plan  for  the commercial discovery to the Inspectorate as well

as a commitment to carry out the work described in the development plan in a

manner acceptable to the Inspectorate.

(2)  The Inspectorate shall evaluate the development plan and where the

development plan meets all requirements established by the Inspectorate, the

development plan shall be approved pursuant subsection (5) of this section.

(3)  The Inspectorate shall only approve the development plan where the plan:

(a)  meets the technical standards that are required for the related works;

(b)  results in the maximum recovery of crude oil, natural gas or

condensates or bitumen, taking into consideration a reasonable

economic framework;

(c)  meets adequate health, safety and environmental standards;

(d)  includes an approved Nigerian content plan pursuant to subsisting

relevant law on Nigerian content development;

(e)  includes an approved environmental management plan pursuant to

section 200 of this Act and an acceptable decommissioning and

abandonment plan;  and

(f)  provides for the elimination of routine gas flaring.

(4)  Where a licensee does not submit a development plan and work commitment

pursuant to subsection (1) of this section, the licence may be revoked.

(5)  Where the licensee has declared a commercial discovery, the appraisal period

or the significant gas discovery retention period shall be extended from the

respective maximum periods of seven or ten years and the licence shall

continue to subsist until the process regarding the grant of a lease has been

completed, without prejudice to the provisions of section 181 of this Act

provided the licensee shall submit a development plan meeting all

requirements pursuant to subsection (3) of this section within two years after

declaring a commercial discovery.

(6) The Inspectorate shall give its final decision to approve or disapprove a

development plan within sixty days after the submission of the development

plan that meets the criteria of subsection (3) of this section.   89

180.  Unitisation

(1)  Where  a petroleum discovery in the license area extends beyond the

boundaries of the license area, the Inspectorate may require that the

upstream petroleum operations related to such discovery shall be carried out

on the basis of a unitized development with the licenses or leases into which

such discovery extends.

(2) The unitized development may include non-straddling reservoirs so as to

optimize the development.

(3)  Where some or all of the area into which such discovery extends is not under

any licence or lease, the Inspectorate shall promptly offer the open area for

bids pursuant to section 190 of this Act.

(4)  The licensees, lessees or licences and leases of the area or areas into which

such discovery extends shall make a proposal to the Inspectorate for a joint

development plan  of the discovery within two years after the request  by the

Inspectorate.

(5)  If the proposal is not approved by the Inspectorate or the parties do not

present a unitization proposal pursuant to subsection (4) of this section, in the

time specified by the Inspectorate, the Inspectorate may require an expert

appointed by the Inspectorate to prepare the unitization proposal, at the

expense of the licensees or lessees as the case may be and such plan shall

be binding on all related licensees and lessees.

(6)  In the event that a unitized field continues in production after one or more

leases expire, the Inspectorate shall grant extension of such leases so as to

allow the unit to reach the end of production.

181.  Petroleum Mining Leases

(1)  A petroleum mining lease shall be granted for parcels of each commercial

discovery of crude oil or natural gas, or both, or bitumen to the licensee of a

petroleum prospecting licence who has –

(a)  satisfied all the conditions imposed on the licence or otherwise

imposed on the licensee by this Act; and

(b)   received approval for the related development plans from the

Inspectorate.

(2)  A petroleum mining lease may be granted pursuant to the provisions of  this

Act  where a prospective lease area contains:

(a)  a discovery of crude oil or natural gas or both,   or condensate which in

the opinion of the Inspectorate is commercial; 90

(b)  a petroleum field or fields with suspended wells or continuing

commercial production, where the corresponding petroleum mining

lease has been revoked or has expired; or

(c)  a bitumen deposit.

(3)  Subject to subsection (6) of this section, a licensee may propose that a

separate petroleum mining lease be granted for each commercial discovery in

the petroleum prospecting licence, prior to the expiration of the petroleum

prospecting licence.

(4)  Notwithstanding the grants of any petroleum mining leases under subsection

(3) of this section, the petroleum prospecting licence shall continue for the

remaining licence area subject to the relinquishment provisions of the licence.

(5)  The area of a petroleum mining lease shall contain every parcel within the

outer boundary of the field as determined by an independent engineering firm,

and approved by the Inspectorate, based on oil-water contacts or other

reservoir limits and includes a zone surrounding such boundary consisting of

all parcels that are in whole or in part within one kilometre of such outer

boundary, provided, however,  that the lease shall not contain any parcels that

are –

(a)   outside the original licence area from which the lease is derived;

(b)  in areas relinquished by the licensee; or

(c)  part of any parcels that were already granted under another petroleum

prospecting licence or petroleum mining lease.

(6)  Where during the petroleum prospecting licence period the outer boundary of

the commercial discovery changes, due to further drilling and other

exploration, or due to further petroleum discoveries in deeper or shallower

formations, the Inspectorate may approve a modification of the area of the

petroleum mining lease to include such further parcels as are appropriate

based on the criteria established in subsection (5) of this section and subject

to a competitive bid process.

(7)  Where two or more petroleum mining leases derived from the same petroleum

prospecting license, in the opinion of the Inspectorate constitute a single field

based on an interpretation of geological or petroleum engineering data that

proves that the field is a single field, such leases shall be considered as one

petroleum mining lease, even if their boundaries do not join with another lease

and the granting date of such single lease shall be the date of the first lease

that was granted unless otherwise decided by the Inspectorate.

(8)  A petroleum mining lease shall not consist of an area that is less than one

parcel. 91

182.  Exclusive right to conduct operations

(1)  A lessee shall have the exclusive right to carry out upstream petroleum

operations in or under the lease area.

(2)  A petroleum mining lease shall also contain the right to continue to explore

and prospect deeper formations.

(3)  A petroleum mining lease for the purpose of carrying out upstream petroleum

operations shall only be granted on the basis of a firm commitment to:

(a)  develop and produce the bitumen deposit, crude oil,  gas or

condensate in the lease area in accordance with the approved

development plan;  or

(b)  restart or continue petroleum production.

(4)  During the term of the lease, the Inspectorate shall-

(a)  verify the implementation of the work commitments and compliance

with the approved field development plan;

(b)  monitor the capital and operating costs; and

(c)  ensure that the upstream petroleum operations at all times are carried

out at the required standards under this Act.

183.  Domestic gas supply obligations

(1)   The Inspectorate shall determine in accordance with section 269  of this Act,

the needs of the domestic  gas market  in accordance with the Domestic Gas

Demand requirement and shall on such basis impose Domestic Gas Supply

Obligation (‘’DGSO’’) and ensure that all lessees comply with such Domestic

Gas Supply Obligations.

(2)   During the periods as determined pursuant to subsection (1) of this section,

the Inspectorate shall require the lessee producing gas to carry out all such

works and operations as may be required to increase production in order to

dedicate specific volume of the gas produced towards the requirements of the

domestic market.

(3)  The volume of gas to be dedicated by each lessee for the Domestic Gas

Supply Obligation shall be based on an allocation system among lessees as

determined by the Inspectorate from time to time. 92

(4)  The Inspectorate shall at all times ensure that the weighted average

benchmarked unit costs of supply of the fields dedicated to the Domestic Gas

Supply  Obligation shall not be in excess of the benchmarked unit costs of

fields dedicated to:

(a)  exports; or

(b)  sales of wholesalers in the domestic market pursuant to  subsection (3)

of section of this Act.

(5)  Any lessee who fails to  comply with the Domestic Gas Supply Obligation as

directed by the Inspectorate shall not be entitled to supply gas to any gas

export operations in addition to such other penalties as may apply under this

Act and where the lessee is only supplying gas to gas export operations, the

lessee shall be directed by the Inspectorate to suspend production.

(6)   The Inspectorate in consultation with the National Gas Company shall

determine when the gas market has attained full market status and advise the

Minister on discontinuation of the DGSO concept.

184.  Duration and renewal

(1)  A petroleum mining lease shall be granted for a maximum term of twenty

years, provided , that where a petroleum mining lease is derived from a

petroleum prospecting licence where a commercial discovery has been

declared pursuant to paragraph (a) of subsection (11) of section 178 of this

Act, such license shall be allowed to use up its initial, renewal and appraisal

period such that:

(a)  the overall period shall run for twenty-seven years from the date of the

grant of the related petroleum prospecting licence for onshore and

shallow water areas;  or

(b)   the overall period shall run for thirty years from the date of the grant of

the related petroleum prospecting licence for deep water areas and

frontier acreages; and

(c)  where a petroleum mining lease is to be granted for a petroleum

prospecting licence which is yet to expire, the term of the petroleum

mining lease shall be the aggregate of the mandatory term of twenty

years and the balance of term for the petroleum prospecting licence as

contained in paragraph (a) and (b) of this subsection.

(2)  For petroleum mining leases, the following provisions shall apply –  93

(a)  where a petroleum mining lease is not in commercial production within

the development period of paragraphs (c) or (d) of this subsection, from

the granting of the petroleum mining lease, such lease may be revoked

at the end of such development period, which period is included in the

duration established in this subsection;

(b) the acreage shall be vested with the  Government   and may be subject

to a new grant in accordance with subsection (1)of section 190 of  this

Act;

(c)  the development period for petroleum mining leases granted pursuant

to subsection (2) of section181 of this Act shall be established in such

leases; and

(d)  the development period for petroleum mining leases granted pursuant

to subsection (1) of section   of this Act shall be:

(i)    five years for onshore and shallow water  leases,  and

(ii)  seven years for  deep water leases  and    leases in frontier

acreages, for the first  Petroleum Mining Leases derived from

the licence, and  ten years for subsequent  Petroleum Mining

Leases derived from the licence.

(3)  Where a lease continues to be in commercial production, the lease may be

renewed in accordance with section 184 and other provisions of this Act for a

further term of not more than ten years and upon the termination of such

renewal, the area shall be relinquished and may be subject to a new grant in

accordance with subsection (1) of section 190 of this Act.

(4)   From the effective date, where a lease has been in commercial production but

such production has terminated and no commercial production has occurred

from the lease for a period of one hundred and eighty days other than for

reasons of force majeure, repairs, maintenance, upgrading of facilities, new

construction of facilities or other causes as presented to and endorsed by the

Inspectorate, the lease may be revoked.

(5) Where a lessee intends to suspend production for more than hundred and

eighty days, and intends to recommence production at a later date, such

lessee shall submit to the Inspectorate a specific plan and commitment to

restart production.

185.  Conditions for renewal of lease

(1)  Not less than twelve months before the expiration of a petroleum mining

lease, the lessee may apply in writing to the Minister for a renewal of the lease

either in respect of the whole of the leased area or any part thereof and the

renewal may be granted if the lessee has paid all fees, rent and royalties 94

under this Act due in respect of the lease and has performed all its obligations

under the lease.

(2)  The terms and conditions that shall apply to such renewal shall be the

prevailing conditions for new petroleum mining leases at the time of renewal

and the lessee shall pay a renewal bonus of an amount specified in the lease

on the date of such renewal.

(3)  Subject to the advice of the Inspectorate, the Minister shall make regulation to

provide for terms and conditions for the renewal of leases.

186.  Relinquishment

(1)  Every petroleum prospecting licence, which initially is larger than ten parcels,

shall provide for the obligation to relinquish a number of parcels equal to at

least fifty per cent of the original licence area upon the expiration of the initial

exploration period, provided, that any acreage included in petroleum mining

leases, appraisal and significant gas discovery retention areas may be

retained by the licensee and will  not require relinquishment.

(2)  Upon the expiration of the renewal period for a petroleum prospecting licence,

the licensee shall relinquish all parcels which are not part of petroleum mining

leases, appraisal areas or significant gas discovery retention areas.

(3)  Upon the expiration of any appraisal period of a prospecting licence, all

parcels related to the appraisal area shall be relinquished unless the licensee

has declared a commercial discovery for such appraisal area.

(4)  Upon the expiration of any significant gas discovery retention period of a

petroleum prospecting licence, all acreage related to the significant gas

discovery retention area shall be relinquished unless the licensee has

declared a commercial discovery for such significant gas discovery retention

area.

(5)  Ten years after the granting of a lease for the purpose of producing crude oil

or natural gas, or both, or  condensate, or bitumen the lessee may retain all

parcels that are in commercial production or for which firm commitments have

been made to the satisfaction of the Inspectorate and shall relinquish all other

parcels.

(6)  The licence or lease shall not contain any priority rights, optional rights or

negotiation rights for the licensee or lessee with respect to acreage

relinquished by the licensee or lessee.

(7)  The relinquished acreage shall be vested in the Government   and   may be

awarded on the basis of a bidding round pursuant to section 190 of this Act.  95

(8)  Any rent paid in respect of the area of the lease to be relinquished shall not be

refundable, and such relinquishment shall be without prejudice to any

obligation or liability imposed by or incurred under the lease or any contract

entered in pursuance thereof before such relinquishment.

(9)  The shape and size of the area to be retained and of the area to be

relinquished or surrendered shall be as approved by the Inspectorate.

187.  Surrender of licence

(1)  Without prejudice to any provisions on relinquishment, a licensee or lessee

shall be entitled at any time to surrender part or whole of the licensed or

leased area provided at least three months notice in writing is given to the

Inspectorate prior to such surrender and provided such licensee or lessee has

complied with all obligations under the licence or lease and complies with any

surviving obligations.

(2)  No rent paid prior to the surrender shall be refundable.

188.  Rights of Way

(1)  Subject to the provisions of all the relevant laws and on such terms and

conditions as may be approved by the Inspectorate, the licensee or lessee

shall be entitled to such rights of way for the laying, operation and

maintenance of pipelines, telephone lines and the like through or across the

surrendered area or areas as the licensee or lessee may reasonably require:

(a)  for the carrying on of operations under the licence or lease; or

(b)  for inter-communication and passage between retained areas and, in

the case of offshore licences or leases, between retained areas and

onshore lands.

189.  Rights of way reserved to the Inspectorate

(1) There shall be reserved to the Inspectorate over the retained area, such rights

of way, easements or other rights as in its opinion are necessary or desirable

for the laying, operation and maintenance of pipelines, telephone lines and

power lines; and any right of way or other rights so reserved shall continue for

the benefit of any entity to whom the Inspectorate may subsequently grant the

same to the extent that it may so grant them pursuant to the regulations made

by the Minister for that purpose on the advice of the Inspectorate.

(2)  Licensees and lessees may not object to the grant of rights of way,

easements or other rights over any areas of a petroleum prospecting licence

or petroleum mining lease unless they affect the health, and safety of their

personnel  or the environment of licensee’s or lessee’s activities. 96

190.  Award process

(1)  The grant of a petroleum prospecting licence or a petroleum mining lease not

derived from a petroleum prospecting licence in respect of any territory in,

under or upon the territory of Nigeria shall be by open, transparent and

competitive bidding process conducted by the Inspectorate pursuant to  the

provision of subsection (2) of this section.

(2)  The winning bidder shall be determined on the basis of the following bid

parameters:

(a)  single bid parameter, which can be based on:

(i)  a signature bonus;

(ii)  a royalty percentage in addition to the relevant subsisting royalty

percentage;

(iii)  a work commitment in terms of number of wells to be drilled to a

specified minimum depth during the initial exploration period; or

(iv)  work units.

(b)  a combination of the parameters indicated under paragraph (a) of this

subsection,  based on a point system that is self-assessable by the

bidder in such a manner that the bidder will bid the respective points

and the highest points determine the winning bidder.

(3)   There shall be no grant of discretionary awards, except as provided under

section 191 of this Act.

(4)  The Minister shall direct the Inspectorate to call for bids in accordance with a

process that shall be made available to the general public through

publications on the website of the Inspectorate and in at least two newspapers

with international coverage and two newspapers with national coverage.

(5) Where the Minister directs for a call for bids pursuant to sub-section (1) of this

section, the Inspectorate shall propose  the technical, legal, economic and

financial requirements as well as the minimum experience and capacity

necessary for prospective licensees, and lessees,   which shall be contained

in guidelines prepared by the Inspectorate and approved by the Minister, and

without prejudice to the provisions of subsection (2) of this section, licensees,

lessees and contractors shall be chosen in accordance with these guidelines.

(6)   All bids received based on the bid parameters established in subsection (2) of

this section shall be processed in accordance with the published guidelines

and monitored by the Nigeria Extractive Industries Transparency Initiative

(NEITI).   97

191.  Powers of the President to grant licences and leases in special

circumstances

Notwithstanding the provisions of subsection (3) of section 190 or any other provision

of this Act, the President shall have the power to grant a licence or lease under this

Act.

192.  Right of participation

A licence or lease may include the right of the Government to a participating interest

in the licence or lease and in this case the Minister may exercise this right to

participate in accordance with the terms of the said licence or lease.

193.  Relinquishment from current licences and leases and marginal fields

(1)  With respect to any existing oil prospecting licences or oil mining leases,

including such licences and leases that are subject to production sharing

contracts, the holder of the oil prospecting licence or oil mining lease

(“holder”) shall select prior to the relinquishment date or expiration date as

applicable within such oil prospecting licences or oil mining leases, the

portions of such licences and leases that the holder intends to continue to

explore, develop and produce or to propose as discoveries for appraisal,

significant gas discovery  retention areas or a commercial discovery pursuant

to this Act and based on the parcels pursuant to the acreage selection

process established in this Act as follows:

(a)  discoveries which in the opinion of the holder merit appraisal pursuant

to subsection ( 7) of section 178 of this Act and for which the licensee

or lessee is prepared to present the appraisal programme pursuant to

this Act;

(b)   discoveries which the holder has made a declaration of a commercial

discovery pursuant to subsection (1) of  section 179 of this Act and is

prepared to submit a development program pursuant to this Act;

(c)  discoveries which the holder has made a declaration of a significant

gas discovery pursuant to  subsection (12) of section 178 of this Act;

(d)  discoveries which development is underway based on an approved

development plan;

(e)  discoveries in which regular commercial production is occurring; and

(f)   for the remaining acreage, the holder shall have the option to select all

or part as a petroleum prospecting licence effective on the conversion

date for the purpose of carrying out further exploration, provided the

holder commits to the drilling of a well of at least 3000 meter deep 98

below the ground surface or the sea bed, as applicable, during the

renewal period and all other obligations pursuant to this Act, except

that the work commitment during the initial exploration period under

section 178 does not have to be carried out in view of the past work of

the holder.

(2)  On or prior to the relinquishment date or expiry date as applicable, the holder

shall relinquish all parcels from the oil prospecting licence or oil mining lease

areas with the exception of the parcels selected pursuant to subsection (1) of

this section.

(3)  The relinquishment date for the purpose of subsections (1) and (2) of this

section shall be the latest of:

(a)  two years after the commencement of this Act;

(b)  the expiration date of the oil prospecting licence;  or

(c)   the expiration date of the oil mining lease.

(4)  The Inspectorate shall convert the areas selected pursuant to subsection (1)

(a) and (b) of this section into appraisal areas of petroleum prospecting

licences under this Act and areas selected pursuant to subsection (1)(c) of

this section  into significant gas discovery retention areas of petroleum

prospecting licences under this Act, subject only to the areas complying with

the selection methodology established under this Act and with respect to

paragraph (a) of  subsection (1)  of this section the approval of the appraisal

program. Where the lessee or licensee selects acreage pursuant to paragraph

(f) of subsection (1) of this section, the Inspectorate  shall convert such area

subject only to the areas complying with the selection methodology

established under this Act.

(5)  The Inspectorate shall convert the areas selected pursuant to paragraphs (d)

and (e) of subsection (1) of this section, into petroleum mining leases under

this Act with a term of 20 years, subject only  to the areas complying with the

selection methodology established in subsection (5) of section 193 of this Act.

(6)  Marginal field operators shall be entitled to apply for petroleum mining leases

for the fields being operated as marginal fields at the Effective Date and such

petroleum mining leases shall be granted to such marginal field operators and

such leases shall be subject to all the provisions of this Act.

(7)  The Inspectorate shall carry out the bidding process pursuant to the

provisions of section 190 of this Act over any parcels relinquished pursuant to

subsection (2) of this section and not granted to marginal field operators

pursuant to subsection (6) of this section. 99

194.  Assignment, mergers and acquisitions

(1)  Where a licensee, lessee or production sharing or service contractor is taken

over by another company or merges, or is acquired by another company

either by acquisition or exchange of shares, including a change of control of a

parent company outside Nigeria, it shall be deemed to be and treated as an

assignment within Nigeria and shall be subject to the terms and conditions of

this Act and any regulations made under it.

(2)  A licensee, lessee or contractor shall not assign his licence, lease or contract,

or any part thereof, or any right, power or interest therein without the prior

written consent of the Minister.

(3)  An application for assignment shall be in accordance with terms and

conditions specified within this Act and any regulations made under it.

(4)  The Minister may consent to an assignment if the proposed assignee is able

to show to the satisfaction of the Minister that –

(a)  the proposed assignee is of good reputation;

(b)  the proposed assignee has sufficient technical knowledge, experience

or financial resources to enable it effectively carry out the

responsibilities under the licence,  lease or contract which is to be

assigned; and

(c)  where the proposed assignee is to serve as operator, such assignee

has proven operating experience or is supported by a competent

operator under a technical service agreement with respect to

operations to be carried out under the licence,  lease or contract which

is to be assigned.

(5) Fees prescribed by the Minister in regulations shall be payable for assignment

as provided in this section.

(6)  The Minister  may waive payment of the fee, if  he is satisfied that the

assignment is to be made to a company in a group of which the assignor  is a

member, and is to be made for the purpose of re-organisation in order to

achieve greater efficiency and to acquire resources for more effective

petroleum operations.

(7)  Any assignment pursuant to this section shall be fully disclosed by the

company to the Service in its tax return. 100

195.  Grounds for revocation of licence or lease

(1)  The Minister on the advice of the Inspectorate may revoke a licence or lease if

the licensee or lessee:

(a)  is controlled directly or indirectly by a person who is a citizen of, or

subject of any country which is a country the laws of which do not

permit citizens of Nigeria or Nigerian companies to acquire, hold and

operate petroleum concessions on conditions which the Minister finds

to be reasonably comparable to the conditions upon which such

concessions are granted to subjects of the country;

(b)   in the opinion of the Inspectorate, is not conducting operations

continuously and in a vigorous and businesslike manner and in

accordance with good oil field practice;

(c)  is not fulfilling his obligations under the conditions of his licence or

lease;

(d)  fails to pay fees or its rent or royalties as they fall due, whether or not

they have been demanded by the Inspectorate, within the period

specified by or in pursuance of this Act;

(e)  has failed to furnish any reports on its operations that are prescribed by

this Act or any other Act in force within the stipulated time;

(f)  has assigned or otherwise transferred its  interest in the licence or

lease to any person or company without the prior written consent of the

Minister as is required by section 194;

(g)   in the opinion of the Inspectorate, is not implementing its

environmental management plan in accordance with good oil field

practice; and

(h)  has not complied with such other specific requirements for which

revocation is a consequence of non- compliance under this Act.

(i)   has obtained or acquired the licence or lease on the basis of false

representations or corrupt practices; or

(j)   is owned or controlled by a former or present public officer who has

obtained the licence or lease through misuse of public office.

196.  Representation permitted before revocation

(1) Where the Minister receives information from the Inspectorate of any of the

acts listed in section 195, of this Act the Minister shall within one month of the

matter coming to his knowledge, inform the licensee or lessee in writing of the 101

grounds on which a revocation is contemplated and shall invite the licensee or

lessee to make any representation to the Minister within a reasonable time

taking into consideration the act in question and if the Minister is satisfied with

the explanation, the revocation process shall terminate forthwith.

(2) Where the Minister is otherwise dissatisfied with the explanation, the Minister

may ask the licensee or lessee to rectify the matter complained of pursuant to

subsection (1) of this section within a specified but reasonable period.

(3)  Where –

(a)   a matter relates to subsection (1) of  this section and a licensee or

lessee is unable to offer explanation or does not rectify the matter

complained of within the specified period, the Minister may revoke the

licence or lease;

(b)   a matter relates to subsection (2) of  this section and a licensee or

lessee is unable to disprove the matters under of subsection (1) of

section 195 the Minister shall revoke the licence or lease.

(4)  Notice of revocation sent to the last known address of the licensee or lessee

or his legal representative in Nigeria and published in the Federal Gazette

shall, for all purposes, be sufficient notice of the revocation of the licence or

lease.

(5)   Revocation shall be without prejudice to any liabilities which the licensee or

lessee may have incurred, or to any claim which may be made by the Federal

Government against the licensee or lessee.

197.  Fees and Royalties

There shall be paid in respect of licences, leases and permits under this Act such

royalties, fees and rentals as may be contained in this Act and in any regulations

made by the Minister pursuant to this Act.

198.  Protected objects

(1)  In the course of upstream petroleum operations, no person shall injure or

destroy any tree or object which is:

(a)  of commercial value;

(b)  the object of veneration to the people resident  within the petroleum

prospecting licence or petroleum mining lease area, as the case may

be.

(2)  A licensee or lessee who causes damage or injury to a tree or object of

commercial value or which is the object of veneration shall pay fair and 102

adequate compensation to the persons or communities directly affected by the

damage or injury.

199.  Compensation

(1)  The amount of compensation payable under section 198 shall be determined

by the Inspectorate in consultation with designated persons and

representatives of the person whose protected objects have been damaged

and the licenses or lessees, in accordance with regulation made by the

Minister on the advice of the Inspectorate.

(2)  Where a licensee or lessee fails to pay compensation, the license or lease

may be suspended until the amount awarded is paid.

(3)  Where the licensee or lessee fails to make payment within thirty days after the

suspension of the said licence or lease in accordance with subsection (2) of

this section, the Minister may revoke the licence or lease.

200.  Environmental quality management

(1)  Every licensee or lessee engaged in upstream petroleum operations shall,

within one year of the commencement of this Act, or within three months after

having been granted the license or lease, submit an environmental

management plan to the Inspectorate for approval.

(2)  The environmental management plan shall contain the licensee’s or lessee’s

written:

(a)  environmental policy, objectives, and targets; and

(b)  commitment to comply with relevant laws, regulations, guidelines and

standards;

(3)  The environmental management plan shall:

(a)  establish initial baseline information and a program for collecting further

baseline information concerning the affected environment to determine

protection and remedial measures and environmental management

objectives;

(b)  investigate, assess and evaluate the impact of the licensees or lessee’s

proposed exploration and production activities on:

(i)  the environment; and

(ii)  the socio-economic conditions of any person who might be

directly affected by the upstream petroleum operations; 103

(c)  develop an environmental awareness plan describing the manner in

which the applicant intends to inform his employees of any

environmental risks which  may result from their work and the manner

in which the risks may be dealt with in  order to avoid pollution or the

degradation of the environment; and

(d)  describe the manner in which the licensee or lessee intends to –

(i)  modify, remedy, control or stop any action, activity or process

which  causes pollution or environmental degradation;

(ii)  contain or remedy the cause of pollution or degradation and

migration of   pollutants; and

(iii)  comply with any prescribed waste management standards or

practices.

(4)  The Inspectorate shall approve the environmental management program if:

(a)  it complies with  subsection (1) of this section; and

(b)   the applicant has the capacity, or has provided for the capacity to

rehabilitate and manage negative impacts on the environment.

(5)  The Inspectorate, in approving the environmental management program shall

consider the comments of the Federal or State Ministries of Environment.

(6)  The Inspectorate may call for additional information from the licensee or

lessee and may direct that the environmental management programme in

question be adjusted in such ways as the Inspectorate may require.

(7)  The Inspectorate may at any time after it has approved an environmental

management programme and after consultation with the holder of the licence

or lease concerned, request an amendment of the environmental

management programme.

(8)  No chemicals shall be utilized for upstream petroleum operations, unless the

Inspectorate has granted the applicable permits.

201.  Gas flaring penalties

(1)  The lessee shall pay such gas flaring penalties as the Minister may determine

from time to time.

(2)   The lessee shall install all such measurement equipment as ordered by the

Inspectorate to properly measure the amount of gas being flared. 104

202.  Consultation with State Ministries and Departments

(1)  When considering an environmental management programme, the

Inspectorate shall consult with the Federal Ministry of the Environment and

the State Ministries of Environment within which the licence or lease is

situated and with any other relevant bodies within which the licence or lease is

situated.

(2)  The Federal and State Ministries of Environment and any other bodies that

the Inspectorate may consult, shall submit their written comments within thirty

days of the date of request.

203.  Financial contribution for remediation of environmental damage

(1)  As a condition for the grant of the  licence or lease and prior to the approval of

the environmental management  plan by the Inspectorate, every licencee or

lessee shall pay the prescribed financial contribution to an environmental

remediation fund established by the Inspectorate, subject to  audit by the

lessee,  in accordance with guidelines as may be issued by the Inspectorate

from time to time, for the rehabilitation or management of negative

environmental impacts with respect to the license or lease.

(2) In determining the amount of the financial contribution the Inspectorate shall

take into consideration the size of the operations and a reasonable level of

environmental risk that may be determined to exist.

(3)  If the licensee or lessee fails to rehabilitate or manage, or is unable to

undertake such rehabilitation or to manage any negative impacts on the

environment, the Inspectorate may, upon written notice to such  licensee or

lessee, use all or part of the fund contemplated in subsection (1) of this

section to rehabilitate or manage the negative environmental impact in

question.

(4)  The licensee or lessee must annually assess its environmental liability and if

necessary  increase its financial contribution to the fund referred  subsection

(1) of this section.

(5)  If the Inspectorate is not satisfied with the assessment and financial

contribution contemplated in subsection (4) of this section, the Inspectorate

may appoint an independent assessor to conduct the assessment and

determine the financial contribution and the licensee or lessee shall be obliged

to pay the fees of the assessor and the determined financial contribution.

204.  Abandonment, decommissioning and disposal

(1)  The decommissioning and abandonment of onshore and offshore petroleum

wells, installations, structures, utilities and pipelines shall be conducted in 105

accordance with good oil field practice and in accordance with regulations and

implemented  by the Inspectorate, provided that such guidelines, standards

and regulations shall be in line with the guidelines and standards set by the

International Maritime Organisation with respect to offshore petroleum

installations and structures.

(2) No decommissioning or abandonment shall take place without the approval of

the Inspectorate.

(3)  The Inspectorate shall by written notice, require a licensee or lessee to

provide plan for  the decommissioning and abandonment of a well, project or

installation, structure, utility and pipeline where such decommissioning or

abandonment is required by the guidelines or regulation or  in line with good

oil field practice.

(4)  A licensee or lessee may request the Inspectorate by written notice to issue a

notice pursuant to subsection (3) of this section.

(5)  Upon such  notice as provided in subsection (3) of this section, the lessee or

licensee, shall prior to any decommissioning or abandonment submit to the

Inspectorate, a programme setting out:

(a)  an estimate of the cost of the proposed measures;

(b)  details of measures proposed to be taken in connection with the

decommissioning of disused installations, structures or pipelines as the

case may be;

(c)  clear descriptions of the methods to be employed to undertake the

work programme, which shall be in line with best oil field practices, and

environmental  standards; and

(d)  steps to be taken to ensure maintenance of and safeguard health,

safety and the environment where any installations, structures or

pipelines are to remain disused and in position, or are to be partly

removed.

(6)  Except for the abandonment of wells, upon the submission of the

decommissioning programme by the licensee or lessee to the Inspectorate,

consultations shall be made with interested parties and other relevant public

authorities and bodies.

(7)  The programme referred to in subsection (4) of this section shall not be

approved unless all relevant environmental, technical and commercial

regulations or standards are met.

(8)  Before the Inspectorate approves an application or programme for

decommissioning or abandonment, it shall ensure that:

(a)  considerations and recommendations are taken in the light of individual

circumstances;  106

(b)  the potential for reuse of the facility or  pipeline in connection with

existing or  further hydrocarbon developments is considered before

decommissioning;

(c)     all feasible decommissioning options have been considered and a

comparative assessment made;

(d)  any removal or partial removal of an installation, structure or pipeline is

to be performed in a manner that guarantees sustainable

environmental  management; and

(e)   any recommendation to leave an installation, structure or pipeline in

place is made with regard to its likely deterioration and to the present,

possible, and future effects on the environment.

(9)  The Inspectorate may recall any licensee or lessee responsible for the

decommissioning or abandonment programme with respect to a licence or

lease that has expired to carry out its decommissioning and abandonment

obligations under this Act.

(10)  The Inspectorate shall ensure that a list of all the petroleum installations,

structures and pipelines onshore and offshore Nigeria and their current status

is compiled and made available or accessible to the public.

(11)  The Inspectorate shall require a lessee to set up and manage an

abandonment fund for the purpose of abandonment, decommissioning and

disposal for the use by the lessee during abandonment, decommissioning or

disposal with the approval of the Inspectorate and such funds shall be

accessible by the Inspectorate in case the lessee fails to carry out the

obligations under this Act.

205.  Regulation regarding abandonment and decommissioning

(1) The Minister shall, on the advice of the Inspectorate,  issue regulations  on

abandonment  and decommissioning processes and procedures, to which

each licensee and lessee shall be bound.

(2) In the absence of regulations at the commencement of production, the

Inspectorate shall issue directives to such licensee or lessee regarding the

abandonment and decommissioning of oil and gas, or bitumen installations

within their licence or lease area, as the case may be.  107

PART IV

DOWNSTREAM LICENSING

206.  Licensing

(1)  Subject to the provision of this Act the Agency shall have power to grant

downstream licences, which shall include but not limited to licence for –

(a)  constructing and operating a process plant, including those for gas

liquefaction;

(b)  constructing and operating a petroleum transportation pipeline for

crude oil or gas or condensate or petroleum products;

(c)  constructing and operating a petroleum transportation network;

(d)  constructing and operating a petroleum distribution network.

(e)  undertaking the supply of downstream products or natural gas; or

(f)  owning and running a downstream products or natural gas processing

or retail facility.

(2)  The Agency shall grant licences in respect of the utilisation of all chemicals

used for downstream petroleum operations in Nigeria including chemicals

used in the processing, distribution and storage of petroleum products in

Nigeria.

(3)  A person shall not conduct any downstream petroleum operations without a

licence issued by the Agency.

207.    Conditions for licencing

(1)  Conditions to be included in a licence issued pursuant to this Act may require

the licensee to –

(a)  comply with any directions given by the Agency  in relation to matters

specified in the licence;

(b)   undertake or refrain from undertaking anything specified in the licence;

(c)   secure the approval of the Agency  prior to undertaking anything

specified in the licence;

(d)   comply with industry codes, standards and market rules;

(e)   provide any required information related to the licence and permits to

the Agency ; 108

(f)   restrict the use of certain types of information deemed to be sensitive

by the Agency , provided that this condition is not in contravention  of

any law relating to freedom of information that may be in force at the

time;

(g)   prepare and submit to the Agency  such information and periodical

reports as the Agency  may require;

(h)   operate its licensed  and related facilities, if any, according to the

standards of a reasonable and prudent operator in the  downstream

petroleum sector  as may be specified by the Agency ; and

(i)  publish terms of access to its facilities as required by the Agency .

(2)  Conditions applicable to a licence may cease to have effect or may be

modified under circumstances specified in the licence or in regulations made

pursuant to this Act.

(3)  Licences granted by the Agency to licensees of the same class shall contain

similar conditions, which shall be standard licence conditions for that class

and any differences in conditions contained in licences issued to licensees of

the same class shall only be for objectively justifiable reasons.

(4)  Subject to the provisions of this Act, the Agency shall have the power to

include special conditions specific to a particular licence, provided that such

special licence conditions shall be designed to meet specific circumstances

and shall not unduly disadvantage one licensee in relation to another.

(5)  The Agency may specify a date after the grant of a licence on which licensed

activities shall commence.

(6)  The Agency may provide that a licensed facility shall be for:

(a)  the exclusive use of the licensee;

(b)  all or part of the period of the licence;

(c)  a specific purpose;

(d)  a specified geographical area, or route; or

(e)  any combination of the foregoing.

208.     Modification or amendment of a licence

(1)  The Agency may grant, renew, modify or extend licences issued pursuant to

this Act.  109

(2)  An application for the grant, renewal, modification or extension of a licence

shall be submitted to the Agency in the form and manner prescribed by

regulations issued by the Minister on the advice of the Agency and payment of any prescribed fee, together with such information or documents as may be prescribed in the regulations.

209.    Assignment of licences

(1)  No licensee under this Part shall, directly or indirectly, assign or transfer its licence or any rights or obligations arising from such licence without the prior written consent of the Agency.

(2)  An application for the assignment or transfer of a licence shall be made to the Agency.

(3)  The Agency may require the applicant to publish a notice of the application in

such form and manner within the period as may be prescribed in regulations.

(4)  In determining whether a licence may be assigned or transferred, the Agency

shall –

(a)  follow the same procedures with such modifications as may be appropriate in the circumstances;

(b)  apply the same rules and criteria, and consider the same issues as if the party to whom the licence is being assigned or transferred is itself applying for a new licence; and

(c)  if required by the regulations, consider the representations made to it by third parties in respect of the application.

(5)  The Agency shall, subject to subsection (4) of this section, communicate its refusal or approval of an application for the assignment or transfer of a licence in writing.

(6)  The Agency shall advise the applicant of the reasons for its refusal of  an application for an assignment or a transfer of a licence, and specify the period within which further representations may be made by the applicant or by third parties in respect of the application.

(7)  The Agency shall grant its consent to an assignment or transfer of a licence, subject to such conditions as it may consider appropriate.

210.    Surrender of a  licence

(1)  A licensee may apply to the Agency to surrender its licence where –

(a)  the licensed activity is no longer required; 110

(b)   in the opinion of the licensee, the licensed activity is not economically justifiable;

(c)  the licensee has failed to commence licensed activity within the time frame specified in the licence; or

(d)  another qualified person is willing and able to assume the rights and obligations of the licensee concerned in accordance with the requirements and objectives of this Act.

(2)  A licensee applying to surrender its licence shall, where applicable, comply with all requirements of the law in respect of relinquishment and decommissioning of installations and reclamation of land.

(3)  Where the licensee has commenced activities and has ongoing operations, it shall, unless a shorter period is stipulated in the licence, give the Agency at least twelve months notice in writing of its intention to cease its activities.

211.    Revocation or suspension of licence

The Agency may suspend or revoke a licence where –

(a)  the licensee has breached or continues to breach a condition of the licence, a

regulation, or a provision of this Act; and

(b)  on the expiry of a six months notice of intention to suspend or revoke the licence issued by the Agency, the licensee fails to remedy the breach of the conditions of the licence.

212.    Grounds for the revocation of a licence

A licence may be revoked –

(a)  where the licensee –

(i)  becomes insolvent or bankrupt;

(ii)  enters into an agreement or composition with its creditors;

(iii)  goes into liquidation, except as part of a scheme for an arrangement or amalgamation.

(b)  upon the transformation or dissolution of the licensee unless it is for the purpose of amalgamation or reconstruction and provided the prior consent of the Agency  has been obtained; or  .111

(c)   where a licensee fails to commence activities within the period of time prescribed in the licence; or

(d)  where the licensee is in breach of the conditions of his licence or the provisions of this Act or any regulation made in pursuance of   this Act.

213.    Register of licence

(1)  The Agency shall establish, maintain and make publicly available a register of all licences issued, revoked, suspended, surrendered or withdrawn and all modifications and exemptions granted for the purposes of this Act.

(2)  The officer registering the issuance of a licence or any modifications or exemptions as contemplated under subsection (1) of this section shall require an acknowledgment of the receipt of a copy of the licence modification or exemption in such form as may be prescribed.

214.    Preparation of licences and duplicates

(1) All licences or exemptions granted by the Agency under this Part shall be prepared in duplicate, and a copy given to the licensee while the Agency retains the   other copy.

(2) The Agency shall ensure that licences issued under this Part are bound up in a book of the appropriate series and serially numbered.

(3)  The Agency shall not prepare any licence until the requisite fees have been paid by the licensee.

215.    Register of memorials

The Agency shall enter in the appropriate register a memorial of the extensions, transfers, surrenders, revocations, exemptions, forfeitures, change of addresses, change of names or any other matter affecting the status of or any interest in any licence registered under this Part together with the date of such entry.

216.    Effect of registration

The registration of any licence registered under this Part shall be conclusive evidence –

(a)  that the rights described in the licence are vested in the person named therein as the licensee; and

(b)  of the conditions and other provisions binding on the licensee.  112

217.    Public access to registers

(1)  The registers required under sections  213 and 215 of this Act shall be accessible to the public.

(2)  On payment of the prescribed fee, a member of the public shall be entitled to obtain a certified true copy of any document or record contained in the registers referred to in subsection (1) of this section.

218.    Disclosure of confidential or other information

(1)  Where:

(a)  any employee of the Agency obtains information relating to the financial affairs of any licensee, or to any commercial secret in the course of duty or otherwise howsoever;  and

(b)  any other person obtains such or other information required to be kept confidential under the provisions of this Act from any employee of the Agency, the person shall not make use of such information, nor disclose it to any other person except under the conditions stated in subsection (2) of this section.

(2)  Subsection (1) of this section shall not prohibit any licensee or person from disclosing any information required to be kept confidential:

(a)  for the purpose of legal proceedings under this Act or any other law;

(b)  to the extent that it may be necessary to do so for the purpose of this Act or any other law; or

(c)  to another employee of the Agency.

(3)  An employee of the Agency shall not, for personal gain, make use of any confidential information acquired in the course of duty or otherwise howsoever for a period of five years after the date on which the person ceases to be an or employee of the Agency.

219.    Contravention and enforcement of licence conditions

(1) Where it appears to the Agency that a licensee is contravening, has contravened, or is likely to contravene any of the conditions of the licence, the Agency may publish a notice in such manner as it considers appropriate to draw the attention of other persons affected or likely to be affected by the contravention or threatened contravention of the licence.

(2) The notice shall – 113

(a)  specify the actual or potential contravention;

(b)  direct the licensee to do, or not to do, such things as it may specify;

(c)  specify the remedy and the period of time for compliance; and

(d)  notify the licensee of its intention to issue an enforcement order.

(3)  The licensee and any other interested party shall be entitled to make

representations against or in support of the enforcement notice within the date

specified in the notice.

(4)  If a licensee fails to comply with a notice served pursuant to subsection (1) of

this section, the Agency may issue an enforcement order.

(5)  Failure to comply with an enforcement order shall constitute an offence under

this Act.

(6)  The Agency may not issue an enforcement order where –

(a)  the licensee is able to demonstrate to the satisfaction of the Agency

that it is not contravening or about to contravene a condition of a

licence; or

(b)  the licensee has ceased to contravene a condition of a licence,

provided that if the earlier contravention was deliberate, the Agency

may, at its discretion, impose an appropriate penalty as determined by

regulations made pursuant to this Act.

(7)  If the licensee fails to comply with the enforcement order, the Agency may

institute legal proceedings at the Federal High Court against the licensee to

ensure compliance.

(8)  Subject to the regulations made pursuant to this Act, the Agency may adjust

from time to time the penalty referred to in subsection (6)(b) of this section to

reflect current rates of inflation.

220.    Regulations

Subject to the advice of the Agency, the Minister may make regulations prescribing anything required to be prescribed for operations in the downstream sector including

(1)  prescribing additional activities to be undertaken on the basis of a licence; or

(2)  providing generally for matters relating to downstream licences granted under

this Act and operations carried on under this Act, including – 114

(a)  regulating the construction, maintenance and operation of installations used in the downstream sector;

(b)  regulating refineries and refining operations;

(c)  regulating the importation, handling, storage and distribution of

petroleum products and other flammable oils and liquids, and in

particular (without prejudice to the generality of the foregoing) –

(i)  prohibiting the  importation of petroleum or petroleum products

except at specified ports or places;

(ii)  prescribing the notice to be given and the person by whom the

notice shall be given on the arrival at a port of a ship carrying

petroleum or petroleum products as cargo;

(iii)  defining dangerous petroleum and dangerous petroleum

products, prescribing anchorages for ships carrying dangerous

petroleum or dangerous petroleum products as cargo and

requiring those ships to proceed to and remain at those

anchorages;

(iv)  regulating the loading, unloading, transport within a port,

landing, trans-shipment and shipment of petroleum and

petroleum products;

(v)  providing for the licensing of lighters and other craft to carry

petroleum and petroleum products within a port;

(vi)  prescribing conditions and restrictions to be imposed upon

vessels arriving at a port after having carried petroleum,

petroleum products, dangerous petroleum or dangerous

petroleum  products;

(vii)  providing for the examination and testing of petroleum and

petroleum products, and prescribing the test to be applied to

ascertain its flash-point and the method of applying those tests;

and

(viii)  regulating the transport of petroleum and petroleum products,

prescribing the quantity of petroleum and petroleum products

which may be carried in any vessel, cart, truck, railway wagon or

other vehicle, the manner in which they are to be sorted when

being carried, the receptacles in which they shall be contained

when being so carried and the quantities to be contained in

those receptacles, and providing for the search and inspection of

any such vessel, cart, truck, railway wagon or other vehicle; 115

(d)  forms to be used for the purposes of this Act;

(e)  fees to be charged in connection with the licences and permits issued in

pursuance of this Act;

(f)  the procedure, form, criteria, timescale and fees for licence applications,

including any criteria for the grant of the licence and the grounds on which

licences may be refused;

(g)  the duration of licences and the procedure, form, criteria and timescale for

their renewal;

(h)  the procedure, form and timescale for publishing notification of a licence

application or renewal;

(i)  the procedure, form, criteria and timescale for licence modifications, including

the process for changing standard and special licence conditions and the

public consultation process required as part of the licence modification

procedures;

(j)  the procedure, form, criteria and timescale for the transfer or surrender,

suspension or revocation of a licence;

(k)  information required to be provided to the Agency;

(l)  conditions to guide the use of any licensed facility;

(m)  duration of licences for downstream operations;

(n)  procedure and conditions for modification, renewal, assignment and transfer

of  licences for downstream operations;

(o)  requirement for advertisement of application of licence or permit; and

(p)  relinquishment and decommissioning of installations and facilities.

 

PART V

DOWNSTREAM PETROLEUM

116

A:   OPERATIONS

221.    Deregulation

The pricing of petroleum products in the downstream product sector is deregulated to

ensure –

(a) a market related pricing;

(b) adequate supply of petroleum product;

(c) removal of economic distortions; and

(d) the creation of fair market value for petroleum products in the Nigerian

economy.

222.    Open Access

(1)  Any licensed company may be permitted access to the jetties, loading

facilities and storage depots or pipelines currently owned by downstream

operators, which are designated as ‘regulated open access facilities’ by the

Agency —

(a)  in the manner prescribed by this Act the regulations and other

guidelines and directives from the Agency; and

(b)  on commercially viable terms as may be determined by the Agency

from time to time.

(2)  Access to any of the regulated open access facilities shall take into

consideration the existing capacity in the said open access regulated facilities

prior to the access permit being shared amongst licensed petroleum

marketing or refining companies in proportion to their needs.

223.    Independent pipelines and depots.

(1)  Nothing in this Act shall preclude any licensed oil marketing company, bulk

consumer of petroleum products or independent refineries from constructing

and operating independent pipelines, depots or jetties for its exclusive use.

(2)  The pipelines and depots referred to in subsection (1) of this section shall be

subject to the regulation of the Agency.

224.  Tariff methodology

(1)  The Agency shall oversee the tariffs for: 117

(a)  transportation by pipelines;

(b)  bulk storage of petroleum products in depots designated by the Agency

as regulated open access facilities; and

(c)  any regulated open access facility.

(2)  Tariffs for activities referred to in subsection (1) of this section shall be set

according to one or more tariff methodologies adopted by the Agency for

regulating prices and such tariff methodologies shall:

(a)  allow an operator that operates efficiently to recover the full cost of its

business activities including a reasonable return on the capital invested

in such business;

(b)  provide incentives for continued improvement of the technical and

economic efficiency of the business;

(c)  provide incentives for the continued improvement of quality of services;

(d)  avoid undue discrimination among categories of consumers; and

(e)  gradually reduce cross-subsidies among different categories of

consumers.

(3)   In establishing tariff methodologies, the Agency shall take into account the

existence of any subsidy given to the operators from which they directly

benefit, any favourable financing terms, and any other matter that impacts

directly or indirectly on tariff methodologies.

(4)  Notwithstanding the provision of subsection (2) of this section, the Agency

shall have the power to establish tariff methodologies that reflect the terms

and conditions of a contract between operators or between an operator and

one or more eligible customers.

(5)  Prior to approving a tariff methodology the Agency shall give notice in at least

two newspapers with nationwide circulation and its website of the proposed

establishment of a tariff methodology and such notice shall:

(a)  indicate a period within which any aggrieved person may raise

objections on the proposed methodology; and

(b)  indicate the date of a public hearing the Agency shall conduct for

discussion of that methodology.

(6)  Prior to the establishment of the tariff methodology, the Agency shall: 118

(a)  consider any representations made by applicants, operators,

consumers, prospective customers, consumers associations,

associations of prospective customers and such other persons

reasonably interested; and

(b)  obtain evidence, information or advice from any person possessing

relevant expert knowledge.

(7)  The Agency shall fix a date upon which the tariff methodology shall come into

effect and it shall cause the notice of that day to be published in at least two

national newspapers and its website.

(8)  If it appears to the Agency that a tariff methodology should be changed, it

shall conduct a public hearing on the proposal to change the methodology and

give notice of it in accordance with the terms of subsection (5) of this section,

indicating the period within which any person may make representations to

the Agency in connection with the proposal.

(9)  The Agency may confirm the proposed changes to tariff methodology after

taking into account any objections or representations received in response to

notices issued under subsection (8) of this section and shall comply with the

provisions of subsection (7) of this section.

(10)  Every person upon whom any duty has been imposed in connection with

setting tariffs shall be so bound by the operative tariff methodology adopted

through the method prescribed in this section.

(11)  Every downstream operator shall display at its office a current copy of the

tariff methodology applicable to such operator.

(12)  A downstream operator shall not pass the costs of any fines or penalties

incurred under this Act or any other law on to the consumers as an

operational cost.

225.    National strategic stock

The Agency shall:

(a)  administer and ensure compliance, distribution and storage of the national

strategic stocks of petroleum products in accordance with regulations made

by the Minister on the advice of the Agency;

(b)  determine the amount to be charged as a levy for the financing of the national

strategic stock, which shall form part of the retail price of each petroleum

product; and 119

(c)  designate, in conjunction with the appropriate authorities and national security

agencies, the strategic points across the country where the national strategic

stocks shall be distributed and maintained.

226.    Price monitoring

(1)  The Agency shall monitor –

(a)  the prices of petroleum products applying in the domestic market to

ensure that there is no pricing collusion or manipulation; and

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