The petroleum and Industry Bill 2012 (Part iv)

(b)  any activity of any operator in the downstream  petroleum sector that,

in the opinion of the Agency, is likely to adversely affect the prices of

petroleum products.

(2)  In monitoring the prices of petroleum products, the Agency shall coordinate

with other relevant authorities to –

(a)  inspect the metering of pumps and other facilities at retail outlets to

ensure they conform to existing national  standards , to the extent that

any distortion of such metering is likely to affect the prices of petroleum

products;

(b)  inspect all facilities at retail outlets to ensure that the products conform

to such quality standards as set by the Agency, to the extent that non–

compliance is likely to affect the prices of petroleum products; and

(c)  inspect any facility used in the storage and transportation of petroleum

products in whatever quantity, whether used legally or otherwise, to

ensure that no petroleum product is transported or stored in a manner

capable of creating scarcity or artificial hikes in the price of the

products.

227.    Offences

(1)  A person shall not –

(a)  obstruct or assault any officer of the Agency or any person authorised

by the Agency in the exercise of the powers conferred on to the Agency

under this Act;

(b)  refuse any officer of the Agency access to any premises, facilities or

retail outlets, or refuse to submit to a search of any premises, facilities

or retail outlets by any authorised officer or agent of the Agency

(c)  refuse to acknowledge the receipt of any summons by the Agency

issued and duly delivered to any person; or 120

(d)  fail to comply with any lawful demand, notice, order or requirement of

an officer or authorised person of the Agency in the execution of the

officer’s duties under this Act.

(2)  A person or company shall not –

(a)  engage in refining, marketing, distributing or operating any petroleum

or gas processing plant or transmitting facilities, terminal or premises

without a valid licence;

(b)  remove, destroy or damage any pipeline or other works or installations

utilised for the purpose of supplying petroleum products;

(c)  furnish a statement or incomplete information calculated to mislead or

wilfully delay or obstruct the Agency and its officers in the exercise of

their duties;

(d)  fail to cooperate with the Agency in its investigation of any suspected

crime or corrupt practice;

(e)  discriminate among third parties in the allocation of capacity, access to

regulated open access facilities and payment of tariffs; or

(f)  use or permit its pipelines, equipment, or other facilities to be used for

or in relation to the commission of any criminal or civil offence.

228.    Penalty

(1)  Any person who violates the provisions of section 226 of this Act commits an

offence and is  liable on conviction to payment of a fine which shall be as

prescribed by the Minister in a regulation made pursuant to this Act.

(2)  Where an offence has been committed under the provisions of section 227 of

this Act, the affected company or person shall discontinue the supply of

petroleum products until any damage, alteration, malfunction or loss has been

rectified and all safety issues have been resolved.

229.    Dispute resolution

The Agency shall be responsible for mediating in disputes between downstream

operators or between downstream consumers and downstream operators in the

downstream petroleum sector in respect of all matters to which this Act pertains and

in accordance with the provisions of this Act. 121

 

B:  SPECIFIC PROVISIONS APPLICABLE TO GAS

230.  Transportation pipeline owner licence

Notwithstanding the provisions of Oil Pipelines Act, the Agency may grant a

transportation pipeline owner licence, which may include the right to own, operate

and maintain a transportation pipeline within a route as defined in the licence.

231.    Duties of a transportation pipeline owner license

(1)  A transportation pipeline owner licensee shall undertake the activities

contemplated by the transportation pipeline owner licence in a manner best

calculated to comply with the obligations to:

(a)  operate and maintain economical, safe and reliable transportation

infrastructure, taking into account any strategic plans that may be

formulated by the Agency;

(b)  manage supply shortfalls and where feasible, meet requests of

customers for transportation above contractual volumes;

(c)  shut down its transportation systems in emergencies and in order to

carry out maintenance;

(d)  manage the transportation pipelines as a reasonable and prudent

operator; and

(e)  do nothing that, in the opinion of the Agency , prevents, restricts or

distorts competition.

232.    Conditions applicable

(1)  In addition to such conditions as may be imposed by the Agency under the

terms of this Act, a transportation pipeline owner licensee shall –

(a)  conduct its licensed activities safely and reliably in compliance with any

law then in force and prescribed health and safety regulations made

pursuant to this or any other Act;

(b)  have due regard for the effect of its licensed activities on the

environment and comply with requirements for environmental

protection, management, and restoration under this Act and any

applicable law; and 122

(c)  mark, maintain and secure the boundaries of any pipelines and

associated infrastructure constructed under the terms of its license

under any applicable law.

233.    Transportation network operator licence

(1)  The Agency may grant a transportation network operator license authorizing

the conduct of activities specified in the license, including:

(a)  the conveyance of gas through the transportation network;

(b)  balancing the inputs and off takes from the transportation network;

(c)  providing third party access to the transportation network; and

(d)  charging for the use of the transportation network.

234.    General duties of a transportation network operator

(1)  The transportation network operator shall exercise the rights and obligations

imposed on it in a manner best calculated to:

(a)  operate an efficient and economical transportation network for the safe

and reliable conveyance of gas in such a manner as is designed to

meet all reasonable demands for gas;

(b)   manage nominations and balancing mechanisms and an equitable

curtailment of gas transportation whenever technical or operational

expediencies so require;

(c)  ensure equitable and transparent access to the transportation network;

(d)  establish and publish terms and conditions for access to the network;

and

(e)  enter into agreements with transportation pipeline owners, distributors,

and, where appropriate, wholesale customers, for connection to and

operation of the transportation network.

(f) develop the Network code for own network in line with guidelines for

the network code by the Agency.

235.    Rights of a transportation network operator

(1)  Subject to the provisions of this Act and to facilitate the conduct of its licensed

activities, the Agency may grant to a transportation network operator – 123

(a)  the power to request and obtain from all users, information required to

operate the nominations and balancing mechanism, to operate the

network or to facilitate competition;

(b)  the right to recover, on the basis of an invoice, expenses reasonably

incurred in undertaking its licensed activities subject to any restrictions

or conditions imposed by the Agency with respect to both the level and

structure of its charges; and

(c)  the right to purchase gas for its own operations for purposes such as

testing and commissioning of facilities, for compression purposes and

for line fill.

236.    Conditions applicable to a transportation network operator license

In addition to such conditions as may be imposed by the Agency pursuant to this

Part, a transportation network operator licence may include an obligation to develop

mutually agreeable market rules among stakeholders in accordance with the

provisions of this Act.

237.    Gas Supply licence

(1)  The Agency may grant a gas supply licence to supply gas into the

downstream petroleum sector.

(2)  A producer of gas intending to supply gas into the downstream sector shall be

a qualified person within the meaning of the provisions of this Act and shall be

entitled to apply for and be issued a gas supply licence by the Agency.

(3)  A gas supply licence shall authorize the licensee (“supplier”) to sell and deliver

gas to purchasers of gas at any location in Nigeria.

238.    General duties of a Gas supplier

(1)  A supplier shall undertake the activities contemplated by the supply licence in

a manner best calculated to comply with the obligations to:

(a)  provide a reliable supply of gas to purchasers on request, provided that

it is economically feasible to do so; and

(b)  do nothing that, in the opinion of the Agency, may prevent, restrict or

distort competition.

239.    Rights of a supplier

(1)  Subject to the provisions of this Part and to facilitate the conduct of its

licensed activities, the Agency may grant to a gas supply licensee specific

rights and powers which may include – 124

(a)  the right to terminate gas supply to a customer in the event of nonpayment, following a notice period and disconnection procedure

specified in prescribed regulations;

(b)  the right to recover from a customer, on the basis of an invoice, and

subject to any restrictions or conditions imposed by the Agency with

respect to both the level and structure of a licensee’s charges:

(i)  all costs reasonably incurred in the supply of gas, inclusive of

the cost of gas, the cost of transportation and distribution of gas;

and

(ii)  license fees.

(c)  the right to enter a premises to remove meters, for the purpose of

reading meters, to test metering equipment and to disconnect

customers, such entry to be undertaken in accordance with a metering

code which shall be issued by the Agency..

(2)  The sale of gas to wholesale customers by a gas supply licensee shall be

subject to the provisions of this Act.

240.    Conditions applicable to a supply licensee

In addition to such conditions as may be imposed by the Agency pursuant to this

Part, a supply licensee shall –

(a)  ensure a reliable and efficient supply of gas to customers on request;

(b)  request security or apply a credit scoring methodology approved by the

Agency in deciding whether supply is economical;

(c)  subject to safety and network capacity constraints, supply gas on request to a

customer capable of paying for connection to the gas transportation network;

(d)  conduct licensed activities safely and reliably in compliance with any law in

force and any health and safety regulations issued pursuant to this or any

other Act; and

(e)  comply with customer protection measures in accordance with the provisions

of this Act .

241.    Gas Distribution licence

(1)  The Agency may grant a gas distribution licence conferring exclusive right to

own and operate a gas distribution system and to distribute gas within a local

distribution zone. 125

(2)  The holder of a distribution licence shall be entitled to apply for, hold and

operate a licence for the exclusive supply of gas within the local distribution

zone to customers that are not wholesale customers.

(3)  In considering an application for a gas distribution licence, the Agency shall

consider the potential demand for its use.

(4)  The geographical limits of each local distribution zone shall be defined in the

relevant distribution licence.

242.    Obligations of a distribution licensee

The holder of a gas distribution licence shall undertake the activities contemplated by

the gas distribution licence in a manner best calculated to comply with the

obligations:

(a)  to develop, operate and maintain an economical distribution network for the

safe and reliable conveyance of gas;

(b)  to ensure a reliable and efficient distribution of gas to customers on request,;

(c)  subject to safety and network capacity constraints, to distribute gas on request

to any customer capable of paying for connection to the distribution network;

(d)  to conduct licensed activities  safely and reliably, in compliance with any law

in force and any health and safety regulations issued pursuant to this or any

other Act;

(e)  to connect all customers within its local distribution zone in accordance with

prescribed regulations, if it is economically practicable to do so;

(f)  to co-operate with the Agency in the development of the Network Code;

(g)  to offer and publish terms and conditions of access to its distribution network

as required;

(h)  to comply with customer protection measures in accordance with the

provisions of this Act and any regulation made in pursuance of this Act; and

(i)  to do nothing to prevent, restrict or distort competition.

243.    Rights of the distribution licensee

(1)  Subject to the provisions of this Act and in order to facilitate the conduct of its

licensed activities, the Agency may grant the holder of a distribution licence

the right to: 126

(a)  enter the premises of a customer in order to read meters, to test

metering equipment or to disconnect customers and remove meters;

(b)  recover on the basis of an invoice, costs reasonably incurred in the

provision of appropriate infrastructure, subject to any restriction or

conditions imposed by the Agency with respect to both the level and

structure of a distributor’s charges.

(2)  Reasonably incurred costs referred to in subsection (1) of this section shall

include any amount paid to the Agency as fees.

244.    Conditions applicable to a gas distribution licensee

(1)  In addition to such conditions as may be imposed by the Agency  pursuant to

this Act, or that may be prescribed by regulations issued pursuant to this Act,

each gas distribution licensee shall:

(a)  conduct its licensed activities in accordance with safe and reliable

standards and in compliance with prescribed management, health, and

safety regulations issued pursuant to this Act or any other act;

(b)  having due regard to the effect of its licensed activities on the

environment, comply with any requirements for environmental

protection, management, and restoration under this Act and any law in

force;

(c)  mark, maintain and secure the boundaries of the pipelines constructed

as prescribed;

(d)  comply with customer protection measures set out in this Act.

(2)  The gas distribution licensee shall connect customers within its local

distribution zone in the manner prescribed by regulations issued pursuant to

this Act, provided that it is economical and practical to do so.

(3)  The Agency shall settle any disputes that may arise in relation to the

distribution network.

245.    Arrangements for gas distribution

The gas supply licensee shall consult stakeholders on proposed gas development

projects within its local distribution zone and shall duly consider all representations

received.  127

246.    Network code

(1)  In consultation with licensees and other stakeholders, the Agency shall

establish the guidelines for network code governing the operation of the

downstream gas network.

(2)  The guidelines for the network code shall include –

(a)  a connection policy, standard terms for connection to the transportation

network and distribution network, and a statement of the connection

charging methodology;

(b)  a mechanism by which users reserve capacity in the transportation

network or distribution network, and, in the event that at any time there

is a greater demand for access than there is available capacity, a

mechanism for allocating capacity between users; and

(c)   the nomination of:

(i)  the seller of the wholesale gas being conveyed;

(ii)  the purchaser of the wholesale gas being conveyed; or

(iii)  a willing third party to take responsibility for matters that may

arise with respect to gas in transit through the network, such

matters to include the amount of gas injected into or withdrawn

from the network, nominating volumes, payment for the use of

the network and payment for overruns and shortfalls of gas;

(d)  requirements for the provision of information to the transportation

network operator and the distributor about the volume, timing and flow

rate of injections into and withdrawals from the transportation network

or distribution network, as the case may be;

(e)  the structure of charges and the applicable tariffs charged for using the

transportation network and distribution networks;

(f)  where required, arrangements for balancing the wholesale gas being

conveyed;

(g)  registration arrangements;

(h)  metering, allocation and settlement arrangements; and

(i)   governance arrangements.

(3)  The Agency shall make copies of the guidelines for the network code

available to interested parties. 128

247.    Wholesale gas market

(1)  Following consultations with interested stakeholders, the Agency may request

the Minister to issue regulations:

(a)  defining the class or classes of customers that, from time to time, shall

constitute wholesale customers under this Act; and

(b) specifying the qualifying criteria for such classification.

(2)  Regulations made under subsection (1) of this section may be amended as

necessary to facilitate and encourage competition among suppliers, and any

amendment of such regulations which results in a change in the class of

customers shall not affect the rights and obligations of parties under gas

supply contracts entered into prior to such amendment.

248.    Wholesale customers

Wholesale customers shall be entitled to secure gas from any gas supply licensee.

249.    Third party access

(1)  A person shall be permitted access to a transportation pipeline, a

transportation network or a distribution network, as the case may be, for the

purpose of having gas transported to points of consumption, subject to

compliance with the prescribed terms and conditions for access stated in the

Network Code of the particular pipeline.

(2)  The Agency shall be primarily responsible for the development of guidelines

for the Network Code that shall set out standard terms and conditions for

connection to, access and use of the transportation and distribution networks.

(3)  Where a transportation or distribution pipeline is isolated from the main

transportation network or distribution, the Agency shall develop separate

terms of access for such isolated transportation or distribution pipeline.

250.    Access to gas transportation and gas distribution network

(1)  Third party access to the gas transportation network and gas distribution

network shall be:

(a)   on a non-discriminatory basis between system users with similar

characteristics;

(b)  in respect of any available capacity, provided that such capacity is not

subject to a previous contractual commitment; 129

(c)  in accordance with and governed by the terms and conditions of the

network codes approved by the Agency;

(d)  on the condition that the applicant requiring access is or becomes a

party to and undertakes to comply with the applicable gas network

code; and

(e)  subject to the pricing principles in sections 252 to 256  of this Act.

(2)  Connection agreements may be entered into between:

(a)  a gas customer and a gas distributor;

(b)  a gas transportation pipeline owner and a gas transportation network

operator;

(c)  a distributor and the transportation network operator, when a gas

distribution network connects to the main gas transportation network; or

(d)  a supplier and a transportation pipeline owner or transportation network

operator.

251.    Disputes in respect of third party access

(1)  Disputes in respect of third party access may be mediated by the Agency.

(2)  Any party not satisfy by the mediation of the Agency in connection with third

party access may seek redress at the Federal High Court.

252.    Gas pricing

(1)  Where the Minister on the advice of the Agency determines:

(a)  that a particular licensed activity is a monopoly service;

(b)  that competition has not yet developed to such an extent as to protect

the interests of customers; or

(c)  that a particular licensee is a dominant provider,

then the Agency shall have the power to regulate the prices charged or the

revenues earned by licensees in respect of such activities, in a manner

consistent with the Agency’s duties under this Act and in accordance with the

pricing principles set out in section 253 of this Act.

(2)  The Agency shall consult with licensees, industry participants and proposing

stakeholders before undertaking a price review or a methodology for to be 130

approved by the Minister regulating prices and revenues earned by licensees

providing monopoly or dominant services.

253.    Gas pricing principles

In the exercise of its powers to regulate prices charged for downstream gas and the

revenues earned by downstream gas licensees, the Agency shall at all times be

guided by the following principles:

(a)  gas prices shall be disaggregated into the component elements of the supply

chain, including the costs of wholesale gas, transportation, distribution and

supply;

(b)  the prices charged for each licensed activity shall reflect the costs incurred for

the efficient provision of that activity;

(c)  prices charged shall permit a reasonable return for licensees on their

investments; and

(d)  prices shall not discriminate between customers with similar characteristics,

such as similar size or a similar consumption profile.

254.    Approval and publication of charging structures and tariff and

pricing structures

(1)  Subject to price or revenue regulations issued pursuant to this Act, all

licensees in the downstream gas sector shall:

(a)  propose tariffs and tariff methodologies for the approval of the Agency,

prior to the application of such charges; and

(b)  impose tariffs in accordance with such approval.

(2)  Tariffs charged for the use of the gas transportation network shall reflect:

(a)  efficient investment and capital costs;

(b)  efficient operating and maintenance expenses; and

(c)  a reasonable return to licensees on their investments.

(3)   Regulated customer prices shall reflect:

(a)  the reasonable costs incurred in the purchase of wholesale gas;

(b)  the transportation tariff; 131

(c)  the distribution tariff, if the customer is connected to a distribution

network;

(d)  efficient supply charges covering billing, metering and other services

relating to gas supply; and

(e)  a reasonable return for the supplier.

255.    Wholesale gas prices

(1)  Wholesale gas supply between a supplier and a customer shall be negotiated

directly between the parties on an arm’s length basis and the gas transfer

price between an upstream gas producer and a downstream gas purchaser

shall reflect the costs of transfer between the parties.

(2)  The Agency shall have power to monitor wholesale gas supply transactions in

order to ensure that the transfer price between the wholesale gas supplier and

customer is undertaken on a transparent arms length basis.

(3)  Within fourteen days of the conclusion of a wholesale gas transaction, the

supplier shall provide the Agency with information relating to the transaction

including, where applicable, the cost incurred by the gas producer in the

production and supply of the gas and all other information relevant to the price

at which the gas is sold.

(4)  The information provided to the Agency by the supplier in compliance with the

provisions of subsection (3) of this section shall be classified by the Agency as

confidential information and may not be disclosed to any person or institution,

except the Service, for a period of five years commencing from the date of the

submission of the information to the Agency.

(5)  If supplier without reasonable excuse fails to provide the required information

within fourteen days, supplier will be liable to pay a penalty not exceeding

N1,000,000 per day until he provides the information where the supplier

knowingly –

(a)  conceals information required under subsection (3) of this section; or

(b)  provides information which is false or misleading in any material

particular with respect to the information required in subsection (3) of

this section.

256.    Transitional pricing arrangements

(1)  Where the Agency finds it imperative, a transitional pricing plan setting out

temporary or transitional pricing arrangements that allow for a gradual

transition towards pricing arrangements that comply with the pricing principles 132

outlined in section 253 of this Act shall be introduced and implemented by the

Agency.

(2)  The transitional pricing plan shall be formulated by the Agency in consultation

with the Ministers in charge of petroleum resources, finance, industries and

power and steel, and with gas producers, electricity producers, the National

Electricity Regulatory Commission and other key stakeholders.

(3)  The transitional pricing plan shall:

(a)  address cross-subsidies existing within the downstream gas sector

between customers, classes of customers, the gas sector and the

power and other industrial sectors at the effective date;

(b)  include, such matters as:

(i)  arrangements for eradicating the cross-subsidies referred to in

subsection (3) (a) of this section;

(ii)  the prescription of the period during which transitional pricing

arrangements will apply;

(iii)  implications for other parties and sectors;

(iv)  actions required to implement the plan; and

(v)  identification of the parties responsible for particular actions.

(4)  Where the Agency considers it necessary in order to facilitate the

implementation of the transitional pricing plan, the Agency may impose

special temporary licence conditions on licensees during the transitional

period, which conditions shall not disadvantage any licensee in relation to

another licensee of the same class.

257.    Determinations

(1)  The Agency shall investigate any case of suspected anti-competitive behaviour

and make necessary determinations thereon as contemplated under sections

262 and 263 of this Act.

(2)  The Agency may impose penalties if the licensee is adjudged to have

conducted its activities in a non-competitive manner.

(3)  A determination made by the Agency in respect of any matter within this Part

shall be legally binding and may be appealed against at the Federal High

Court. 133

258.    Consumer protection

(1)  In order to protect the interests of customers, the Agency may advise the

Minister to issue regulations requiring suppliers or distributors, as the case

may be, and by such means as the regulations may specify:

(a)  to publish their terms of supply or distribution;

(b)  to establish or to facilitate the establishment of a forum at which customers

are able to express their views and to raise concerns;

(c)  to formulate and adhere to such standards of performance as are, in its

opinion, necessary to ensure the safety, reliability and quality of supply and

distribution services to customers; and set penalties for failure to comply;

(d)   to  prepare and submit reports to the Agency indicating their performance

levels and the status of their operations in respect of licensed activities, at

such times as may be prescribed by regulations or in their respective licences,

and at least on an annual basis;

(e)  to develop and adhere to customer service codes, setting out the practices

and procedures to be followed in the conduct of specified licensed activities

including but not limited to practices and procedures for:

(i)  the installation, testing, maintenance and reading of meters;

(ii)  fault repairs and responses to customer emergencies;

(iii)  the connection and disconnection of customers;

(iv)  responding to customer complaints and complaint resolution;

(v)  billing and invoicing;

(vi)   the extension of payment and credit facilities;

(vii)  the provision of information to customers and the use and protection of

customer information; and

(viii)  the establishment of special services for economically or socially

disadvantaged customers.

(2)  All customer service codes shall be approved by the Agency prior to

publication and may be reviewed at intervals as may be considered necessary

by the Agency.

(3)  Customer codes shall be made available to all customers on request. 134

(4)  Licensees shall notify customers of customer service codes that must be

adhered to by licensees by advertising the availability of the customer service

codes in a form and manner prescribed in regulations issued pursuant to this

Act.

(5)  In developing customer protection regulations, the Agency shall:

(a)  consult with suppliers, distributors, and interested stakeholders; and

(b)  take into account existing procedures, practices and standards.

259.    Provision of service to customers

The Agency may, at its discretion and at such time or times as it deems appropriate,

designate distributors and suppliers of last resort to provide services to customers:

(a)  in the event that an existing distributor for a local distribution zone or a

supplier becomes insolvent, or is unable to provide licensed services, or has

had its licence suspended or revoked;

(b)  in the event that the distributor for a local distribution zone or supplier refuses

or fails to fulfil the terms of its licence to distribute or supply gas to customers;

and

(c)  in such other circumstances as the Agency may deem appropriate, provided

that any reasonable additional costs associated with the obligation to act as

distributor or supplier of last resort will be recoverable through appropriate

charging arrangements agreed with the Agency.

260.    Public service obligations

The Agency may, following consultations with licensees, customers, and other

interested stakeholders, advise  the Minister to issue regulations imposing public

service obligations on licensees in relation to matters including, but not limited to:

(a)  security of supply;

(b)  economic development and the achievement of wider economic policy

objectives;

(c)  environmental protection; and

(d)  health and safety.

261.    Public service levy

(1)  Where the Agency considers that it is in the wider public interest, the Agency

shall make recommendations to the Minister to issue regulations providing for 135

the recovery of any additional costs incurred in complying with the public

service obligations, through a public service levy, which may be imposed on

customers.

(2)  The amount of and mechanism for the collection and remittance of the public

service levy imposed on each customer shall be set out in guidelines issued

pursuant to this section.

262.    Competition and market regulation

A licensee or any other person having the ability to influence the terms and

conditions on which licensed activities are performed and the price at which

petroleum products are supplied shall not –

(a)  make it a condition for the provision or supply of a product or service that any

person acquiring such a product or service will be required to acquire or not to

acquire any other product or service either from the licensee or from any other

licensee, person or entity;

(b)  enter into any contract, arrangement collaboration or understanding, whether

legally enforceable or not, which provides for or permits the fixing of tariffs,

prices or charges for the purpose of, or in such a manner as to, manipulate

market prices or the price of any product or service;

(c)   engage in or conduct its activities, directly or indirectly, for purpose of market

sharing;

(d)  permit, allow, influence, direct or indirect exclusion of, or the imposition of any

embargoes or boycotts on, another licensee, operator or supplier of

equipment or apparatus; or

(e)  engage in any other conduct that the Agency deems anti-competitive.

263.    Power of the Agency to determine abuse of market power

(1)  The Agency shall have the responsibility to prevent and take action against

anti-competitive behaviour in the downstream gas sector.

(2)  Where in the opinion of the Agency there is, or may be, or there exists a

likelihood of, anti-competitive behaviour and in particular an abuse of market

power, the Agency may:

(a)  issue cease and desist orders as may be required;

(b)  require and compel the disclosure of information from such licensees;

(c)  undertake inquiries and investigations; 136

(d)  levy fines which shall be set out in regulations issued pursuant to this

Act from time to time.

(3)  Notwithstanding the provisions of this section, where there is an application by

a licensee or other person with the ability to influence the price of gas in the

downstream sector, and where the Agency considers that it would be in the

national interest or that it would be necessary to preserve or promote the

benefits of a properly functional and effectively competitive downstream gas

market, the Agency may—

(a)   give written approval for a specific activity upon such terms and

conditions as the Agency may deem appropriate;

(b)  in issuing the approval, impose such requirements as it deems fit and

require such undertakings as it deems appropriate from the applicant

as a condition precedent to the issuance of the approval;

(c)   withdraw an approval of a specific activity that it has granted subject to

such terms and conditions as it may, in its absolute discretion,

designate; and

(d)  advise the Minister to make regulations to prevent or mitigate any

conduct that may or is likely to lead to unlawful exercise of market

power that will prevent customers from obtaining the benefits of a

properly functioning and competitive downstream gas market.

(4)  Nothing in subsections (1) (2) and (3) of this section shall be construed to

preclude or restrict the right of the Agency or any person to seek an injunction

against any conduct prohibited in this Part.

(5)  Any person who wishes to proceed to court or to arbitration for the

enforcement of any of the provisions of this Part shall first notify the Agency.

(6)  The Agency shall, until such time as a Federal agency having the power to

pronounce upon, administer, monitor and enforce compliance with anticompetition laws is established and functional, have the exclusive

competence to determine, pronounce upon, administer, monitor and enforce

compliance with the provisions of this Act relating to anti-competition and with

any competition laws and regulations that govern or relate to the downstream

gas sector whether or not they are of a general or specific nature.

(7)  In the exercise of its powers under subsection (6) of this section, the Agency

may consider:

(a)  the relevant economic market;

(b)  global trends in the relevant economic market; 137

(c)  the effect on the number of competitors in the market and their

respective market shares;

(d)   the effect on barriers to entry into the market;

(e)  the effect on the range of services in the market;

(f)  the effect of the conduct on the cost and profit structures in the market;

(g)  the ability of any independent licensee or operator to make price or

tariff regulating decisions; and

(h)  any other matters which the Agency deems relevant.

 

264.    Competition and market monitoring

(1)  The Agency shall have responsibility to monitor the state of the gas market so

as:

(a)  to determine whether the downstream gas sector is ready for an

increased level of competition in retail and supply services in order that

it may advise  the Minister to issue regulations which allow for

increased level of competition in retail and supply services;

(b)  to determine whether there is a need for an organised market for

wholesale gas in order that it may take the relevant steps pursuant to

this Act to develop a wholesale market arrangement;

(c)  to assess whether the downstream gas sector is operating properly or

whether the existing market arrangements may constitute barriers to

entry into the market for new players;

(d)  to determine whether there is any anti-competitive activity being carried

on, in which case the Agency will be required to exercise its powers

under this Act to prevent the continuance of such activity;

(e)  to determine any pre-conditions and any transitional arrangements

required for any services to be offered competitively.

(2)  To enable the Agency to discharge its responsibilities under sub-section (1)of

this section and in particular, to determine whether there is, or may be, an

abuse of market power, the Agency shall have power to:

(a)  require and compel the disclosure of information from licensees; and 138

(b)  undertake inquiries and investigations.

(3)   Where, in the opinion of the Agency there has been an abuse or a threatened

abuse of market power, the Agency may serve a notice on such company or

person specifying the abuse or threatened abuse, and of its intention to issue

a cease and desist order.

(4)  The Agency shall publish a notice –

(a)  specifying the actual or threatened contravention;

(b)  directing the company or person to whom the notice is issued to, or not

to do, such things as it may specify;

(c)  specifying the remedy and the timescale for compliance; and

(d)  notifying the company or person to whom the notice is issued of its

intention to issue a cease and desist order or to levy a fine not

exceeding N50,000,000.00 provided that such fine shall not exceed

10% of the annual turnover of the company or person for the preceding

year.

(5)  The Agency shall publish the notice in the form and manner specified in the

prescribed regulations and shall invite the company or person to whom the

notice is issued and any other interested parties to make representations

against or in support of the notice by a specified date.

(6)  Where the company or person to whom the notice is issued fails to comply

with a notice served pursuant to subsection (1) of this section, the Agency

may issue a cease and desist order.

(7)  Failure to comply with an order issued under subsection (6) of this section

shall be an offence punishable by a fine not exceeding N50,000,000.00 and

the revocation of the relevant licence where that company or person is a

licensee.

(8)  A cease and desist order may not be issued nor a fine imposed if:

(a)  the company or person to whom the notice is issued is able to

demonstrate to the satisfaction of the Agency that it has not abused or

is not threatening to abuse its market power; or

(b)   the  company or person to whom the notice is issued has ceased to

abuse or has ceased from the threat to abuse its market power.

(9)  Where a person has ceased to abuse or has ceased from the threat to abuse

its market power, and it is found that such threat or threat of abuse was 139

deliberate, the Agency may impose an appropriate penalty which shall be

prescribed in regulations issued pursuant to this Act.

265.    Offences and penalties

(1)  A person shall not –

(a)  cause damage to any infrastructure, plant or equipment belonging to a

downstream products or gas licensee, including fittings, meters,

apparatus or equipment;

(b)  alter the operation of any meter, equipment or apparatus including

those used for measuring the quantity or quality of petroleum products

or gas supplied;

(c)  prevent any meter, equipment or apparatus including items used for

measuring or registering the quantity of petroleum products or gas

supplied from functioning accurately or properly such as or registering

the quantity of petroleum products or gas supplied; or

(d)  otherwise destroy, interfere with or remove the meters, equipment or

apparatus of a licensee without the permission of the licensee.

(2) Any person convicted for intentionally committing any of the offences listed in

subsection (1) of this section shall be liable to—

(a)  pay a penalty not exceeding N100,000,000.00; and

(b)  reimburse the licensee for any petroleum products or gas illegally taken

and for any damage to the licensee’s equipment, provided that—

(i)  where the person is unable to pay the penalty or to reimburse

the licensee, the person or, in the case of a company, every

officer responsible for the management of the company shall be

liable to imprisonment for a period of not less than two years and

not more than five years unless, the officer proves to the strictest

standard that   all reasonable precautions were taken and due

diligence exercised to prevent the commission of the offence;

and

(ii)  the Agency may, as necessary, adjust the amount of the penalty

stipulated in subsection (a) of this section by regulations issued

pursuant to this Act, to reflect current rates of inflation.

(3)  A person convicted for negligently committing any of the offences listed in

subsection (2) of this section shall be liable to:

(a)  pay a penalty not exceeding N2,000,000.00; and 140

(b)  reimburse the licensee for any gas illegally taken and for any damage

to the licensee’s equipment, provided that:

(i)  where such person is unable to pay the penalty or to reimburse

the licensee, the person or, in the case of a company, every

officer responsible for the management of the company, shall be

liable to imprisonment for a period of not less than six months

and not more than two years unless, having regard to the nature

of the person or officers functions in that capacity and to all

circumstances, the officer proves that all reasonable precautions

were taken and  due diligence was exercised to prevent the

commission of the offence; and

(ii)  the Agency may, from time to time adjust the amount of the

penalty stipulated in subsection (a) of this section by regulations

issued pursuant to this Act, to reflect current rates of inflation.

(4) Where an offence has been committed under subsection (1) of his section, the

supplier may, discontinue the supply of gas until any damage, alteration,

malfunction or loss has been rectified and all safety issues resolved.

266.    Prohibition on the wrongful use of equipment

A licensee shall not use or permit its pipeline, equipment or other facilities to be used

in, for, or in relation to, the commission of any criminal or civil offence, and each

licensee shall:

(a)  upon a written request from the Agency or any other lawful or duly

empowered Agency, assist the Agency or such lawful authority, in preventing

the commission or attempted commission of any criminal offence under this

Act or any other laws in force in the Federal Republic of Nigeria, including but

not limited to those affecting the public revenue and the preservation of

national security;

(b)  not be liable for any act or for any omission done in good faith, in respect of

any act or omission arising from the performance of a duty or obligation

imposed by the Agency or other lawful authority.

267.    Penalty not prescribed

(1)  Where no specific penalty is prescribed for any offence under this Part, a

person who contravenes any of the provisions of this Part or any regulations

issued pursuant to this Part commits of an offence and liable on conviction –

(a)  as a first offender, to:

(i)  a fine not exceeding N2,000,000.00 or to such other amount as

may be prescribed in regulations issued pursuant to this Part;  141

(ii)  imprisonment for a period not exceeding two years; or

(iii)  both fine and imprisonment.

(b)  for subsequent convictions, to:

(i)  a fine not exceeding N10,000,000.00 or such other amount as

may be prescribed in regulations issued pursuant to this Part;

(ii)  imprisonment for a period not exceeding five years; or

(iii)  to both fine and imprisonment.

(2)  The Agency may, where necessary, adjust the amount of the penalty

stipulated in subsection (1) of this section through regulations, to reflect

current rates of inflation.

268.    Penalty for refusal to furnish return or supply information

(1)   Any person who:

(a)  fails or refuses to furnish a return or to supply information to the

Agency or any other duly empowered lawful authority at the time and in

the manner prescribed;

(b)  who furnishes a false or incomplete return;

(c)  supplies false or incomplete information; or

(d)  wilfully delays or obstructs the Agency, its officers, an inspector or

police officer in the exercise of the powers or duties conferred or

imposed on the Agency under this Act; or

(e)  conceals, fails or refuses, without reasonable cause, to supply

information required by the Agency or any duly empowered lawful

authority at the time and in the manner prescribed or when required to

do so,

commits an offence and  liable to a fine not exceeding N20,000,000.00 or to

imprisonment for a period not exceeding one year or to both fine and

imprisonment

(3) The Minister may, adjust the amount of the penalty, fines or other impositions

stipulated in this Act by regulations, to reflect current rates of inflation every five

years.

142

C: DOMESTIC GAS SUPPLY OBLIGATION

269.    Domestic gas market management

(1) The Inspectorate and Agency shall regulate the gas sector, in accordance

with the National Master Plan for Gas (“National Gas Master Plan”) this Act

and policies of the Government from time to time.

(2)  The National Gas Master Plan referred to in subsection (1) of this section shall

be the plan updated by the Minister from time to time for the sustainable

development and utilization of the natural gas resources ofNigeria.

(3)  The Agency shall at the beginning of each calendar year:

announce the update of the gas demand requirement (“Domestic Gas

Demand Requirement”) which shall be the aggregate of the quantity of gas

required to meet the gas demand for the strategic sectors, as determined by

Government from time to time,  within the domestic economy for a specific

period of time, not exceeding twenty years;

(4) The Inspectorate shall allocate the Domestic Gas Demand Requirement to

every petroleum mining lessee by means of a domestic gas supply obligation

(“Domestic Gas Supply Obligation”), which for each lessee will be a function

of gas production and proven gas reserves;

(5)  The Agency shall require the Domestic Gas Aggregator to establish an

aggregate price for gas (“Aggregate Gas Price”) for only the volume of the

Domestic Gas Demand Requirement, which shall be based on the weighted

average of the purchase prices and supplied volumes of the purchased gas,

and shall be used by the Domestic Gas Aggregator as a basis for gas supply

to the domestic market.

(6)  The Agency may mediate on all issues of conflict between purchasers and

suppliers.

(7)  Any person dissatisfied with any determination made by the Agency in

connection with subsection (6) of this section may seek re-dress at the

Federal High Court.

270.    Gas Management model

(1)   The Inspectorate and the Agency shall:

(a)     implement a gas management model, through which the demand and

supply of gas for utilization within Nigeria shall be monitored; 143

(b)     ensure transparency of dealings between gas suppliers and purchasers

with respect to the volumes of gas being marketed under its

jurisdiction;

(c)     monitor gas sales purchase agreements to ensure that they are in

conformity with the national gas pricing policy and regulations.

(2)  The gas management model pursuant to subsection (1) of this section shall

be a supply and demand model to analyze pipeline quality gas availability

from the petroleum mining leases and to compare the volume with the

demand of gas by the strategic sectors and other domestic projects, as

determined by the Government.

(3)   The Inspectorate and the Agency shall have the power to:

(a)   ensure that the domestic gas demand requirement is being met,

through the implementation of the Domestic Gas Supply Obligation;

(b)  ensure a balanced growth of domestic gas projects, through the

availability of adequate volume of gas to the strategic sectors;

271.    Franchise areas for gas processing facilities

The Inspectorate shall take such measures as appropriate to create franchise areas

for gas processing facilities in Nigeria to support the National Gas Master Plan.

272.    Penalties for non-compliance with the Domestic Gas Supply

Obligation

(1)  Any supplier who does not comply with the Domestic Gas Supply Obligation

as specified by the Agency shall:

(a)  pay a penalty as may be prescribed by regulations.

(b)  not supply gas to any export project for the period that the supplier is

not complying with the Domestic Gas Supply Obligations, unless it can

demonstrate to the satisfaction of the Agency that –

(i)   the non-compliance is caused by force-majeure; or

(ii)  has made reasonable commercial endeavours to make gas

available.

(2)  Where the supplier continues to fail to comply with the Domestic Gas Supply

Obligations for a period in excess of three months, the gas export licence of

such supplier may be revoked.  144

273.    Gas export

(1)  Any export of gas shall require a gas export licence issued by the Agency for

a certain volume of natural gas for a specified period of time.

(2)  Any company intending to export gas, shall submit an application for a gas

export licence pursuant to such guidelines as the Agency may determine from

time to time.

(3)  Export licences may be refused by the Agency,  where the Agency has

determined that the exports of gas from Nigeria are not in the national interest

due to insufficiency of available proved gas reserves to supply to long term

domestic market, provided that the Agency shall not interfere with contracted

gas export capacity being undertaken under an export licence.

(4)  Where the domestic gas market in Nigeria and export markets reach a level of

maturity that is reflective of fully competitive conditions, the Agency  may

recommend to the Minister on the process and activities aimed at deregulating

the unwinding regulated gas market.

274.    General gas market provisions

Nothing in this Part shall limit any purchaser or supplier to enter into any gas sales

and purchase agreement for the domestic market under such terms and conditions

as they may freely decide,  for volumes that are in excess of the Domestic Gas

Supply Obligation.

 

D:  GAS FLARING (PROHIBITION AND PUNISHMENT)

275.    General terms

Natural gas shall not be flared or vented after a date (‘the flare-out date’) to be

prescribed by the Minister in regulations made pursuant to this Part, in any oil and

gas production operation, block or field, onshore or offshore, or gas facility such as,

processing or treatment plant, with the exception of permits granted under

subsection (1) of section 277 of this Act.

276.    Gas flaring plan

(1)  The oil and gas operators with flared gas resources shall within six months of

the commencement of this Act categorize all of their flared gas resources

(daily flare quantity, reserve, location, composition) and submit this data along

with gas utilization plans to the Inspectorate for the gas they intend to utilize

before the flare out date as stated in section 275 of this Act. 145

(2)  The Inspectorate shall approve the categorization within sixty days of receipt

of the plan and shall post all approved plans, data of planned natural gas

resource and unplanned natural gas resources on the Inspectorate’s website

for public consumption.

277.    Prohibition of flaring

(1)  A person shall not direct, permit or otherwise aid, empower or authorize any

company engaged in petroleum operations to flare or vent gas with the

exception of such permits granted under this section.

(2)  The Minister may grant a permit of not more than one hundred days, or such

longer period as may be  approved by the Minister, to flare or vent gas in

cases of start-up, equipment failure, shut down, safety flaring or due to

inability of Gas customer to off-take-Gas.

(3)  Any licensee or lessee who flares or vents gas without the permission of the

Minister in the circumstances mentioned in subsection (2)(b) of this section

shall be liable to pay a fine which shall not be less than the value of the gas

flared.

278.    Gas utilization plan

(a)  A licence or lease for the production of oil and gas whether onshore, offshore

or deepwater shall not be granted to any applicant unless the application for

such a licence or lease is accompanied by a comprehensive programme

acceptable to the Minister, for the utilization or reinjection of natural gas.

(b)  No licence or lease for the production of oil and gas in Nigeria shall  be

granted to any applicant unless the Minister is satisfied with the applicant’s

gas utilization programme.

(c)  The utilization programme referred to in this section, shall be in consonance

with the National Gas Master Plan, Domestic Gas Supply Obligation, and

national policies as may be made in respect of the gas sector from time to

time by the Government.

279.    Gas flaring measurement

(1)  The volumes of gas flared from any facility engaged in petroleum operations

shall be measured using the metering equipment specified from time to time

by the Inspectorate.

(2)  Within three months from the effective date, each licensee or lessee shall

install the metering equipment specified in regulation on every facility in its

operations from which gas is flared or vented.146

280.    Gas flare reports

(1)  After the flare-out date, any person, group of persons or community may

lodge a documented report of gas flaring or venting with the nearest office of

the Inspectorate.

(2)  The Inspectorate shall appoint an officer to receive and record reports of gas

flaring or venting.

(3)  An officer appointed pursuant to subsection (2) of this section who receives a

report of gas flaring or venting shall within forty-eight hours of receipt of such

report, inspect the facility where gas is allegedly being flared, verify the

authenticity of the report to determine the cause of the gas flaring, the date

when the gas flaring commenced and the volumes of gas flared or vented

from the facility each day.

(4)  The officer shall submit a report of the verification exercise to the Inspectorate

within seven days of his visit to the facility from which gas is being flared or

vented.

(5)  Where the Inspectorate determines that the report of gas flaring is authentic

and that the flared gas does not fall within any of the exceptions specified in

section 277 of this Act,  it may at  its discretion, impose the fine specified in

subsection (3) of section 277 in respect of the volumes of gas flared or vented

from that facility or issue a shut down order mandating the shut-down of the

facility in question or both.

(6)  On receipt of a shut down order, the operator of the facility shall comply with

the order within forty-eight hours from the time of receipt of the shut down

order.

281.    Gas flaring offences and penalties

Any licensee or lessee who flares gas after the flare-out date contrary to

section 275, commits an offence under this Act, and shall be liable on

conviction to pay a fine which shall not be less than the value of gas flared or

vented pursuant to subsection (3) of section 277;

Provided that –

(i)  the penalty for currently flared gas, without a permit pursuant to

subsection (1) of section 277 of this Act or certificate pursuant

subsection (2) of section  283, shall be the aggregate gas price until

after the flare-out date as prescribed by the Minister when the new

penalty regime shall commence;

(ii)  in the case of third party utilization, penalties will only be imposed at

the end of the approved project schedule or the flare-out date 147

whichever is later; and

(iii)  for flares accessed through third party contractors, penalties will be

imposed on third party accessing companies which have signed

contracts for the gas, and not on the licensee of the field from which the

gas is being accessed.

(b)  The penalty payable on the volume of gas flared by any person from the

Effective Date, and for each day the flare or vent continues shall also be made

public by the Inspectorate and the licensee separately and independently

within a maximum of 60 days of the offence.

(2)(a) It shall be an offence to fail, refuse or neglect to forward or lodge a gas flare

report or to falsify any report under section 257 of this Act to the Inspectorate

for appropriate action.

(b)  A person who commits an offence under paragraph (a) of this subsection is

liable on conviction to three months imprisonment or an option of fine of not

less than the value of fifty per cent of the volume of gas flared or vented.

282.    Power to make regulations

(1)   The Minister may immediately after the Effective Date, on the advice of the

Inspectorate make regulations to prescribe:

(a)  the manner in which any order, directive, or application in accordance

with the provisions of this Act shall be made and the form to be used.

(b)  the procedure for making a gas flare report, recording and filing of

report, publication of shut down order;

(c)  the terms and conditions for reviewing where the Minister deems fit in

the national interest, without jeopardizing the health, safety and the

environment of any affected community, a shut down order for the

purpose of re-opening a field, group of fields or facility shut down

pursuant to the provisions of this Act.

(d)  generally for carrying into effect the purposes and provisions of this

Act.

(2)    (a)  The Inspectorate shall ensure that gas flared or vented is documented with

information on the site (including the  longitude, latitude, local

government area and ward, daily volume and gas reserves) within

ninety  days of the Effective Date.

(b)  The field operators responsible for each of these flares or vents shall

put together project designs for gas utilization or reinjection.  148

(c)  project plans are to be submitted to the Minister within 90 days of the

Effective Date.

(d)   The plans, pursuant to paragraph (c) of this subsection, shall be

deemed to have been acceptable and approved if the Minister does not

respond in the negative to any plan formally submitted by the operators

within sixty days of submitting the plans to the Minister’s office.

(3)   (a)    The Inspectorate shall maintain a gas source database where all

unplanned flares or vents are to be posted and made public.

(b)   any unplanned gas shall be considered free for third party bids.

(4)      (a)     The Agency shall be responsible for developing and publishing

guidelines for evaluating project process and where the facility

milestone target is not met, the project sponsor may be liable to delay

penalties or forfeit its gas concession.

(b)  The delay penalty shall be the equivalent of the prevailing fine as

contained in paragraph (a) of subsection (1) of section 281 of this Act

with a 20 per cent surcharge.

(c)  Where such delays are beyond the reasonable control of the project

sponsor, the Minister may on the recommendations of the Agency

provide for regulations to accommodate such delays.

283.    Special considerations

The certificates issued under section 3(2) of the Associated Gas Re-Injection

Act, prior to the Effective Date shall continue to have effect until they lapse.

 

PART VI

INDIGENOUS PETROLEUM COMPANIES

 

284.    General terms

(1) This Part applies to:

(a)  oil prospecting licences and oil mining leases held, whether at or before the

Effective Date, by indigenous petroleum companies; and

(b)  to petroleum operations undertaken pursuant to such licences and leases. 149

285.    Non-participation by the Federal Government

Participation by the Federal Government in accordance with the provisions of this Act

or any law in force shall not be applicable to petroleum operations carried  out by

indigenous petroleum companies whose aggregate production from petroleum

operations is not more than twenty-five thousand barrels per day of crude oil or its

natural gas equivalent.

286.    Production by indigenous petroleum companies

An indigenous petroleum company whose aggregate production of crude oil and gas

is not more than twenty-five thousand barrels per day or its natural gas equivalent

may be allowed to produce up to the technical allowable output set for the licence or

lease, by the Inspectorate.

287.    Regulations and Guidelines for indigenous petroleum companies

The Minister shall, in consultation with the Inspectorate, issue regulations or

guidelines prescribing clearly defined targets and programmes for continuously

increasing the level of indigenous participation in the Nigerian petroleum industry and

to generally give effect to the provisions of this Act which regulations or guidelines

shall include:

(a)  targets for indigenous petroleum reserves; and

(b)  production personnel content and measurable parameters for determining the

level of indigenous participation.

288.    Review of participation of indigenous petroleum companies

Pursuant to section  287 of this Act, the Minister shall not later than three months

after the Effective Date and thereafter at intervals of two years, undertake a general

review of the set targets, parameters and programmes for continuous increase in the

level of indigenous participation in the Nigerian petroleum industry and set such new

targets, parameters and programmes as shall be necessary to give full effect to the

provisions of this Act.

PART VII

HEALTH, SAFETY AND ENVIRONMENT

289.     Responsibility over the environment

(1)  Without prejudice to the overall responsibility of the Federal Ministry of

Environment for the environment of Nigeria, the Inspectorate and the Agency 150

shall have responsibility in their respective areas over all aspects of health,

safety and environmental matters in respect of the petroleum industry.

(2)  The Inspectorate and Agency in their respective areas shall at all times ensure

the enforcement of other environmental laws, regulations, guidelines and

directives issued by the Federal Ministry of Environment and other relevant

Government agencies.

(3)  For the avoidance of doubt the Inspectorate and Agency in their respective

areas shall, in consultation with the Ministry of Environment, make regulations

and issue directives specifically relating to environmental aspects of the

petroleum industry.

290.   Compliance with health regulations

Every company engaged in activities requiring a licence, lease or permit in the

upstream and downstream sectors of the petroleum industry in Nigeria, shall comply

with all environmental health and safety laws, regulations, guidelines or directives as

may be issued by the Federal Ministry of Environment, the Minister, the  Inspectorate

or the Agency, as the case may be.

291.   Conduct of operations

Every company engaged in activities requiring a licence, lease or permit in the

upstream and downstream petroleum industry in Nigeria shall conduct its operations

in accordance with internationally acceptable principles of sustainable development

which includes the necessity to ensure that the constitutional rights of present and

future generations to a healthy environment is protected.

292.   Obligations of licensee, lessee and contractors

Every company engaged in activities requiring a licence, lease or permit in the

upstream and downstream sectors of the petroleum industry shall:

(a)  support a precautionary approach to environmental challenges;

(b)  encourage the development and use of environmentally friendly technologies

for exploration and development in Nigeria.

(c)  comply with the relevant requirements of environmental guidelines and

standards approved for the petroleum industry in Nigeria.

293.   Duty to restore the environment

(1) Any person engaged in activities requiring a licence, lease or permit in the

upstream and downstream petroleum industry shall: 151

(a)  manage all environmental impacts in accordance with the licensee or

lessee’s environmental management plan or programme, as approved

by the Agency.

(b)  as far as it is reasonably practicable, rehabilitate the environment

affected by exploration and production operations, whenever

environmental impacts occur as a result of licensees and lessees

operations:

(i)  to its natural or pre-existing state before the operations or

activities as a result of which the environmental impact occurred;

or

(ii)  to a state that is in conformity with generally accepted principles

of sustainable development;

(2)  Subject to subsection (1) of this section, the licensee or lessee shall not be

liable for, or under an obligation, to rehabilitate where the act adversely

affecting the environment has occurred as a result of sabotage of petroleum

facilities, which also includes tampering with the integrity of any petroleum

pipeline and storage systems.

(3)  Where there is a dispute as to the cause of an act that has resulted in harm to

the environment, the licensee, lessee or any affected person or persons shall

refer the matter to the Agency for a determination and the determination of the

Agency shall be final.

(4)  Where the act referred to in subsection (3) of this section is found to have

occurred as a result of sabotage, costs of restoration and remediation shall be

borne by the local government and the State governments within which the

act occurred.

294.   Development programmes

From the Effective Date, the  Agency shall undertake an annual comprehensive

review of the impact of development programmes and practices by petroleum

companies in all sectors of the industry since the inception of the petroleum industry

in order to identify potential areas of conflict or areas that may lead to possible unrest

in the areas of operation.

295.   Utilisation of good oil field practices

Every licensee, lessee and contractor engaged in petroleum operations in the

petroleum industry shall utilise good oil field practices in the course of their

operations within the country. 152

296.   Compensation

(1)  The holder of a petroleum exploration licence, petroleum prospecting licence

or petroleum mining lease shall, in addition to any liability for compensation to

which the holder may be subject under any other provision of this Act, be

liable to pay fair and adequate compensation for the disturbance of  the

surface of the land or any other rights to any person who owns or is in lawful

occupation of the licensed or leased lands, in accordance with written

guidelines issued by the Agency.

(2)  The rates of compensation contained in the guidelines referred to in

subsection (1) of this section shall be arrived at through a consultative

process and the Agency shall update the guidelines issued annually to reflect

rates of inflation and any other relevant factors.

297.   Publications

Every year, all licensees, lessees and contractors and service companies in the

upstream petroleum industry shall publish the criteria used for the location of

community development projects and other social investment initiatives within their

respective areas of operation.

298.   Penalties and sanctions

Any person or company who violates the provisions of this Part is liable to sanctions,

including payment of fines as prescribed by the Inspectorate and the Agency in

consultation with the Minister.

 

PART VIII

PROVISIONS ON TAXATION IN THE PETROLEUM INDUSTRY

A.  NIGERIAN HYDROCARBON TAX

 

299.    Imposition of the Nigerian hydrocarbon tax

(1) There shall be levied upon the profits of each accounting period of any

company engaged in  upstream petroleum operations during that period, a tax

to be known as the Nigerian Hydrocarbon Tax (”the tax”) which shall be

charged assessed and payable in accordance with the provisions of this Part.

(2) The due administration of this Part relating to the assessment and collection

of the tax referred to in subsection (1) of this section shall be under the

supervision and management of the Service. 153

(3) The Service may do all such acts as are necessary and expedient for the

assessment and collection of the tax and shall account for all amounts

collected.

300  Power and duties of the Service in the administration of the tax

(1)  In the exercise of the powers and duties conferred upon the Service under this

Part, the Service shall be subject to the authority, direction, and control of the

Minister and any written direction, order or instruction given by the Minister

after consultation with the Chairman of the Service shall be carried out by the

Service.

(2)  The Minister shall not give any direction, order or instruction in respect of any

particular company which would have the effect of requiring the Service to

raise an additional assessment upon such company or to increase or

decrease any assessment made or to be made or any penalty imposed or to

be imposed upon or any relief given or to be given to or to defer the collection

of any tax, penalty or judgment debt due by such company, or which would

have the effect of altering the normal course of any proceedings, whether civil

or criminal, relating either to the recovery of any tax or penalty or to any

offence relating to the tax.

(3) every claim, objection, appeal, representation or the like made by any person

under any provision of this Part or of any subsidiary legislation made

thereunder shall be  made in accordance with this Part;

(4)  In any claim or matter or upon any objection or appeal under this Part, any

act, matter or thing done by or with the authority of the Service, in pursuance

of any provisions of this Part shall not be subject to challenge on the ground

that such act, matter or thing was not or was not proved to be  done in

accordance with any direction, order or instruction given by the Minister.

(5) For the purpose of this Part, reference to the Minister, where the context so

admits in this Part refers to the Minister responsible for matters relating to

Finance.

301.    Signification and execution of powers and duties

(1) Anything required to be done by the Service, in relation to the powers or

duties specified in the Third Schedule to this Act, may be signified under the

hand of the Chairman of the Service or any other duly authorised officer of the

Service.

(2) Any authorisation given by the Service under this Part shall be signified under

the hand of the Chairman of the Service unless such authority is published in

the Gazette. 154

(3) Subject to subsection (1) of this section, any notice or other document to be

given under this Part shall be valid if –

(a) it is signed by the Chairman of the Service or by any person authorised

by him; or

(b) such notice or document is printed and the official name of the Service

is duly printed or stamped thereon.

(4) Every notice, authorisation or other document purporting to be a notice,

authorisation or other document duly given and signified, notified or bearing

the official name of the Service, in accordance with the provisions of this

section, shall be deemed to be so given and signified, notified or otherwise

without further proof, until the contrary is shown.

302.    Confidentiality requirements

(1) Every person having any official duty or being employed in the administration

of this Part shall treat and deal with all documents, information, returns,

assessment lists and copies of such lists relating to the income, chargeable

profits and related items of any company, as secret and confidential.

(2) A person appointed under or employed to carry out functions under this Part

shall  not  be required to produce in any court, any return, document or

assessment, or to divulge or communicate to any court any matter or thing

coming under his notice in the performance of his duties under this Part

except as may be necessary for the purpose of carrying into effect the

provisions of this Part, or in order to institute a prosecution, or in the course of

a prosecution for any offence committed in relation to the provisions of this

Part.

(3) Where under any law in force in any territory outside Nigeria provision is made

for the allowance of relief from income tax and similar tax in respect of the

payment of income tax and similar tax in Nigeria or for the exemption  of

income from income tax and similar taxes in respect of income subject to

income tax and similar taxes in Nigeria, the obligation as to secrecy imposed

by this section shall not prevent the disclosure to the authorised officers of the

government in that territory of such facts as may be necessary to enable the

proper relief or exemption to be given in cases where relief or exemption is

claimed from  income tax and similar taxes in Nigeria or from income tax and

similar taxes in that territory.

(4)    For the purposes of subsection (3) of this section, tax (as defined in this Part)

shall be regarded as a tax similar to an income tax.

(5) Notwithstanding anything contained in this section, the Service may permit the

Auditor-General of the Federation or any officer duly authorised in that behalf

to have access to any records or documents as may be necessary for the 155

performance of his official duties, and the Auditor-General of the Federation or

any such officer shall be deemed to be a person employed in carrying out the

provisions of this Part.

303.    Rules and Forms

(1) The Minister may, from time to time, make rules generally for the carrying out

of the provisions of this Part.

(2) The Service may, from time to time, specify the form of returns, claims,

statements and notices required for the purpose of this Part.

304.    Ascertainment of  profits,  adjusted  profits,  assessable  profits and

chargeable profits.

(1)  Subject to any express provisions of this Part, in relation to any accounting

period, the profits of that period of a company shall be taken to be  the

aggregate of:

(a)  the proceeds of sale of all chargeable oil, chargeable gas chargeable

condensate or  bitumen sold by the company in that period; and

(b)  the value of all chargeable oil, chargeable gas chargeable condensate

or bitumen disposed of by the  company in that period.

(c) all income of the company of that period incidental to and arising from

any one or more of its upstream petroleum operations.

(2)  For the purposes of subsection (1) (b) of this section, the value of any

chargeable oil, chargeable gas, chargeable condensate or bitumen disposed

of shall be taken to be the aggregate of:

(a)   the value of that oil,  gas, condensate or bitumen as determined at the

measurement point in accordance with the provisions of any enactment

applicable thereto;

(b)  any cost of extraction of that oil, gas, condensate or bitumen deducted

in determining its value as referred to in paragraph (a) of this

subsection; and

(c)  any cost incurred by the company in the transportation and storage of

that oil,  gas, condensate or bitumen between the field of production

and the place of its disposal.

(3)  The adjusted profit of an accounting period shall be the profits of that period

after the deductions allowed by subsection (1) of section 305 of this Act and

any adjustments to be made in accordance with the provisions of section 307

of this Act. 156

(4)  The assessable profit of an accounting period shall be the adjusted profit of

that period after any deduction allowed by section 312 of this Act.

(5)  The chargeable profits of an accounting period shall be the assessable profits

of that period after the deduction allowed by section 312 of this Act.

305.    Deductions Allowed

(1) In computing the adjusted profit of any company  for any accounting period

from its upstream petroleum operations, there shall be deducted all outgoings

and expenses wholly, exclusively, necessarily and reasonably incurred by

such company, during that period for the purpose of those operations,

including but without otherwise expanding or limiting, the generality of the

foregoing:

(a)  rents incurred by the company for that period in respect of land or

buildings occupied under a petroleum prospecting license or a

petroleum mining lease for disturbance of surface rights or any other

like disturbances;

(b)    all non-productive rents, the liability for which was incurred by the

company during that period;

(c)  all royalties, the liability for which was incurred by the company during

that period in respect of natural gas sold and actually delivered to any

customer or disposed of in any other commercial manner;

(d)  all royalties, the liability for which was incurred by the company during

that period in respect of crude oil or condensate won in Nigeria;

(e) all royalties, the liability for which was incurred by the company during

that period in respect of bitumen won in Nigeria;

(f)  all sums the liability for which was incurred by the company to the

Government during that period by way of customs or excise duty or

other like charges levied in respect of machinery, equipment and goods

used in the company’s upstream petroleum operations;

(g)  sums incurred by way of interest upon any money borrowed by such

company, where the Service is satisfied that the interest was payable

on capital employed in carrying on its upstream petroleum operations

except interest incurred in upstream petroleum operations under a

Production Sharing Contract

(h)  any expense incurred for repair of premises, plant, machinery, or

fixtures employed for the purpose of carrying on upstream petroleum

operations or for the renewal, repair or alteration of any implement,

utensils or articles so employed; 157

(i)   debts directly  owed to the company and proved to the satisfaction of

the  Service to have become bad or doubtful in the accounting period

for which the adjusted profit is being ascertained, notwithstanding that

such bad or doubtful debts were due and payable prior to the

commencement of that period:

Provided that-

(i)  the deduction to be made in respect of a doubtful debt shall not

exceed that portion of the debt which is proved to have become

doubtful during that accounting period, nor in respect of any

particular debt shall it include any amount deducted under the

provisions of this paragraph in determining the adjusted profit of

a previous accounting period;

(ii)   all sums recovered by the company during that accounting

period on account of amounts previously deducted in respect of

bad or doubtful debts shall, for the purposes of subsection (1)(c)

of section 304 of this Act, be treated as income of that company

of that period; and

(iii)  it is proved to the satisfaction of the Service that the debts in

respect of which a deduction is claimed were either-

(aa)  included as a profit from the carrying on of  upstream

petroleum operations in the accounting period in which

they were incurred; or

(ab)  advances made in the normal course of carrying on

upstream petroleum operations not being advances on

account of any item falling within the provisions of section

306 of this Act;

(ac)  All sums set aside, in a fund by the company as

decommissioning and abandonment expenditure, under

the terms determined by the Inspectorate, provided that:

(i)  any company that has claimed deduction on any

amount set aside for decommissioning and

abandonment shall not claim further deduction

upon incurring the decommissioning and

abandonment expenditure except on amount

incurred in excess of the money set aside for that

purpose;

(ii)  any amount in excess of that expended for the

decommissioning and abandonment shall be

treated as taxable income.  158

(j)  any expenditure (tangible or intangible) directly incurred in connection

with the drilling of an exploration well and the next two appraisal wells

in the same field whether the wells are productive or not;

(k)  any other expenditure, including intangible and tangible costs directly

incurred in connection with the drilling and appraisal of development

wells, but excluding an expenditure which is qualifying expenditure for

the purpose of the Fourth Schedule to this Act, and any expense or

deduction in respect of a liability incurred which is deductible under any

other provision of this section;

(l)  where a deduction may be given under this section in respect of any

expenditure, that expenditure shall not be treated as qualifying drilling

expenditure for the purpose of the Fourth Schedule.

(m)   any contribution to a pension, provident or other society, scheme or

fund  in line with the provisions of the Pensions Reform Act:

Provided that any sum received by or the value of any benefit obtained

by such company, from any approved pension, provident or other

society, scheme, or fund, in any accounting period of that company

shall, for the purposes of subsection (1)(c) of section 304 of this Act, be

treated as income of that company of that accounting period;

(n)  all sums, the liability of which was incurred by the company during that

period to the Federal Government, or to any State or Local

Government Council in Nigeria by way of duty, customs and excise

duties, stamp duties,  education tax, taxes (other than the tax imposed

by this Act) or any other rate, fee or other like charges;

(o)  such other deductions as may be prescribed by any rule made under

this Act.

(p) contributions made to the Petroleum Host  Communities Fund in

accordance with the provisions of this Act.

(2)   Where a deduction has been allowed  for a company under this section in

respect of any liability of the company and such liability or any part thereof is

waived or released, the amount of the deduction or the part thereof

corresponding to such part of the liability shall, for the purposes of subsection

(1)(c) of section 304 of this Act, be treated as income of the company for its

accounting period in which such waiver or release was made or given.

306.    Deductions Not Allowed

Subject to the express provisions of this Act, for the purpose of ascertaining the

adjusted profit of any company of any accounting period from its upstream petroleum

operations, no deduction shall be allowed in respect of –  159

(a)  any disbursement or expenses not being wholly and exclusively laid out or

expended, or any liability not being a liability wholly or exclusively incurred, for

the purpose of those operations;

(b)  any capital withdrawn or any sum employed or intended to be employed as

capital;

(c)  any capital employed in improvement as distinct from repairs;

(d)  any sum recoverable under any insurance or contract of indemnity;

(e)  rent or cost of repair to any premises or part of any premises not incurred for

the purpose of those operations;

(f)  any amount incurred in respect of any income tax, profit tax, or similar tax

whether charged within Nigeria or elsewhere except tax imposed in

accordance with the Education Tax Act;

(g)  the depreciation of any premises, buildings, structures, work of a permanent

nature, plant, machinery or fixtures;

(h)   any payment to any  provident, savings, widows, orphans or other society,

scheme or fund except such payments are allowed under subsection (1)(m) of

section 305 of this Act;

(i) any customs duty on goods (including articles or any other thing) imported by

the company –

(i)  for resale or for personal consumption of employees of the company, or

(ii)  where goods of the same quality to those so imported are produced in

Nigeria and are  available, at the time the imported goods were ordered

by the company for sale to the public at prices less or equivalent to the

cost to  the company of the imported goods.

(j)  any expenditure for the purchase of information relating to the existence and

extent of petroleum deposits.

(k)  any expenditure for the purpose of paying a penalty or fee relating to:

(a) gas flaring; and

(b)  domestic gas supply obligations;

(l)   any signature bonuses, production bonuses or other bonuses due on a lease

or on the renewal of a lease;

(m)  all general, administrative and overhead expenses incurred outside Nigeria in

excess of one percent of the total annual capital expenditure;  160

(n)  twenty percent of any expense, other than pursuant to paragraph (m),

incurred outside Nigeria, except where such expenditure relates to the

procurement of goods or services or goods and services which are not

available domestically in the required quantity and quality and subject to the

approval of the Nigerian Content Development and Monitoring Board;

(o)  any legal and arbitration costs related to cases against the Service or the

Government,  unless specifically awarded to the company during the legal or

arbitration process;

(p)   costs incurred prior to the establishment of the company in Nigeria;

(q)   any cost resulting from any arrangement or event that arises from fraud or

wilful misconduct or negligence on the part of the company;

(r)   insurance costs where such costs are earned by the company or an affiliate of

the company; and

(t)   costs or fees incurred in obtaining and maintenance of a performance bond

under a Production Sharing Contract.

307.    Exclusion of Certain Profits

Where a company engaged in upstream petroleum operations undertakes  the

transportation of chargeable oil, chargeable gas, chargeable condensate or bitumen

by ocean going oil-tankers pipeline, or other vessels operated by or on behalf of the

company from Nigeria to another territory then such adjustments shall be made in

computing an adjusted profit or a loss as shall have the effect of excluding therefrom

any profit or loss attributable to such transportation.

308.    Artificial Transactions, etc.

(1). Where the Service is of the opinion that any disposition is not in fact given

effect to or that any transaction which reduces or would reduce the amount of

any tax payable is artificial or fictitious, the Service may disregard any such

disposition and direct that such adjustments shall be made as respects liability

to tax as the Service considers appropriate in accordance with its transfer

pricing rules so as to counteract the reduction of liability to tax effected, or

reduction which would otherwise be effected, by the transaction and the

companies concerned shall be assessed accordingly.

(2) In this Section, the expression “disposition” includes any trust, grant,

covenant, agreement or arrangement.

(3) For the purpose of this section, transactions deemed to be artificial or

fictitious, include;161

(a)  transactionsbetween persons one of whom has control over the other;

or

(b)  transactions between persons both of whom are controlled by some

other person which, in the opinion of the Service, have not been made

on the terms which might fairly have been expected to have been made

by independent persons engaged in the same or similar activities

dealing with one another at arm’s length.

(4)  Nothing in this section shall prevent the decision of the Service in the exercise

of any discretion given to the Service by this section from being questioned in

an appeal against an assessment as provided under this Part  and on the

hearing of any such appeal, the appropriate courtmay confirm or vary any

such decision including any directions made under this section.

309.    Assessable profits and losses

(1)  Subject to the provisions of this section, the assessable profits of any

company for any accounting period shall be the amount of the adjusted profit

of that period after the deduction of the amount of any loss incurred by that

company during any previous accounting period.

(2) A deduction under subsection (1) of this section shall be made so far as

possible from the amount, if any, of the adjusted profit of the first accounting

period after that in which the loss was incurred, and, so far as it cannot be so

made, then from the amount of the adjusted profit of the next succeeding

accounting period and so on.

(3)  Within five months after the end of any accounting period of a company, or

within such further time as the Service may permit in writing in any instance,

the company may elect in writing that a deduction or any part thereof to be

made under this section shall be deferred to and be made in the succeeding

accounting period, and may so elect from time to time in any succeeding

accounting period.

310.    Trade or business sold or transferred to Nigerian company

(1)  Without prejudice to section  320 of this Act, where a trade or business of

upstream petroleum operations carried on in Nigeria by a company

incorporated under any law in force in Nigeria is sold or transferred to a

Nigerian company for the purposes of better organisation of  that trade or

business or the transfer of its management to Nigeria and any asset employed

in that trade or business is so sold or transferred, then, if the Service is

satisfied that one of those companies has control over the other or that both

companies are controlled by some other person or are members of a

recognised group of companies, the provisions set out in subsection (2) of this

section shall have effect. 162

(2)  Where subsection (1) of this section applies, the Service may in its discretion-

(a)   if, on or before the date on which the trade or business is so sold or

transferred, the first sale of or bulk disposal of chargeable oil,

chargeable gas, chargeable condensate or bitumen  by or on behalf of

the company selling or transferring the trade or business has occurred,

but the first sale of or bulk disposal of chargeable oil,  chargeable gas,

chargeable condensate or bitumen by or on behalf of the Nigerian

company acquiring that trade or business has not occurred –

(i)  direct that the first accounting period of the Nigerian company

shall be the period of twelve months commencing on the date on

which the sale or transfer of the trade or business takes place,

or commencing on such date within the calendar month in which

the sale or transfer takes place as may be selected by the

Nigerian company with the approval of the Service, and

(ii)   for the purposes of subparagraph (i) of this , an accounting

period as respects the Nigerian company shall be a period of

twelve months commencing on the date on which the sale or

transfer of the trade or business to the Nigeria company takes

place or commencing on such date within the calendar month in

which the sale or transfer takes place as may be selected by the

Nigerian company with the approval of the Service, and the

definition of “accounting period” in section 2(a) of this section

shall be construed accordingly, but without prejudice to the

continued application in respect of the Nigerian company of the

provisions of paragraphs (b), (c) and (d) of that definition;

(b)   direct that for the purposes of the Fourth Schedule an asset sold or

transferred to the Nigerian company by the company selling or

transferring the trade or business shall be deemed to have been sold

for an amount equal to the residue of the qualifying expenditure on the

asset on the day following the day on which the sale or transfer thereof

occurred; and

(c)   direct that the Nigerian company acquiring the asset so sold or

transferred shall not be entitled to any initial allowance in respect of

that asset, and shall be deemed to have received all allowances given

to the company selling or transferring the trade or business in respect

of the asset under the Fourth Schedule and any allowances deemed to

have been received by that company under the provisions of this

section provided that the Service in its discretion-

(i)   may require the company selling or transferring the trade or

business, or the Nigerian company acquiring that trade or

business, to guarantee or give security, to the satisfaction of the 163

Service, for payment in full of all tax due or to become due from

the company selling or transferring the trade or business, and

(ii)  may impose such conditions as it  deems fit on either of the

companies earlier mentioned or on both of them, and in the

event of failure by that company or as the case may be, those

companies to carry out or fulfill the guarantee or conditions, the

Service may revoke the direction and may make all such

additional assessments or repayment of tax as may be

necessary to give effect to the revocation.

(3)   In this section –

(a)   “Nigerian company” means any company the control and management

of whose activities are exercised in Nigeria; and

(b)   references to a trade or business shall include references to any part of

the trade or business.

311.     Call for returns and information relating to certain assets

For the purpose of section 310 of this Act, the  Service may by notice require any

person, including a company to which any assets are sold or transferred, to complete

and deliver to the  Service any returns specified in the notice or any such information

as the  Service may require about the assets and it shall be the duty of that person to

comply with the requirements of any such notice within the period specified in the

notice, not being a period of less than twenty-one days from the service of the notice.

312.    Chargeable profits and allowances

(1) The chargeable profits of any company for any accounting period shall be the

amount of the assessable profits of that period after the deduction of any

amount to be allowed in accordance with the provisions of this section.

(2)  There shall be computed the aggregate amount of all allowances due to the

company under the provisions of the Fourth and Fifth Schedules to this Act for

the accounting period.

(3)  The amount to be allowed as a deduction under subsection (1) of this section

in respect of the said allowances shall be the aggregate amount computed

under subsection (2) of this section.

(4) Where the total amount of the allowances computed under subsection 2 of

this section cannot be deducted under  subsection (1) of this section owing to

insufficiency of or no assessable profits of the accounting period,  such total

amount or the part thereof which has not been so deducted as the case may

be, shall be added to the aggregate amount to be computed under subsection

(2) of this section for the following accounting period of the company, and 164

thereafter shall be deemed to be an allowance due to the company, under the

provisions of the Fourth and Fifth  Schedules to this Act for that following

accounting period.

313.    Assessable Tax

(1)   The assessable tax for any accounting period of a company shall be a

percentage of the chargeable profits for that period aggregated separately as

follows:

(a) 50% for onshore and shallow water areas

(b)  25% for bitumen, frontier acreages and deep water areas:

(2)  Where a company carries on upstream petroleum operations in a

geographical area or areas that are subject to more than one tax rate as

provided under subsection (1) of this section, tax at the appropriate rates shall

be levied on the proportionate parts of the chargeable profits arising from

those operations.

314.    Chargeable Tax

(1) A company engaged in upstream petroleum operations which executed a

Production Sharing Contract with  NNPC. a shall  be entitled  to  a  general

production allowance as applicable in the Fifth Schedule to this Act..

315.  Additional Chargeable Tax Payable in Certain Circumstances

(1)  If, for any accounting period of a company, the amount of the chargeable tax

for that period, calculated in accordance with the provisions of this Act other

than this section, is less than the amount mentioned in subsection (2) of this

section, the company shall be liable to pay an additional amount of

chargeable tax for that period equal to the difference between the two

amounts.

(2)  The amount referred to in subsection (1) of this section is for any accounting

period of a company, the amount which the chargeable tax for that period,

calculated in accordance with the provisions of this Act, would come to if, in

the case of crude oil exported from Nigeria by the company, the reference in

paragraph (a) of subsection (1) of section 304 of this Act to the proceeds of

sale thereof were a reference to the amount obtained by multiplying the

number of barrels of that crude oil by the relevant sum per barrel.

(3)   For the purposes of subsection (2) of this section the relevant

sum per barrel of crude oil, or condensate exported by a company

is the selling price of the company.  165

(4)  The whole of any additional chargeable tax payable by a company by virtue of

this section for any accounting period shall be payable concurrently with the

final instalment of the chargeable tax payable for that period apart from this

section, and shall be assessed and be paid by the company accordingly under

the provisions of this Act.

(5) Every relevant sum per barrel established as mentioned earlier shall bear a

fair and reasonable relationship:

(a)  to the established official selling price of Nigerian crude oil of

comparable quality and gravity, if any; or

(b)  if there are no such established official selling  price for such Nigerian

crude oil, to the official selling price at main international trading export

centres for crude oil of comparable quality and gravity, due regard

being had in either case to freight differentials and all other relevant

factors.

(6)  References in this section to crude oil include references to condensate.

(7)  Where any crude oil which in relation to a particular company is chargeable oil

is exported from Nigeria otherwise than by that company, that crude oil shall,

for the purposes of this section, be deemed to be exported from Nigeria by

that company.

316.    Partnership

(1) Any person (other than a company) who engages in upstream petroleum

operations  either on his own account or jointly with any other person or in

partnership with any other person with a view to sharing profits arising from

those operations commits an offence under this Act.

(2) Where the person referred to in subsection (1) of this section has benefitted

from any profits on upstream crude oil operations, such person shall be

subject to tax under this Act on such profits and shall pay a penalty as

provided for under section 343 of this Act.

(3) Where two or more companies are engaged in upstream petroleum

operations either in partnership, in a joint venture or in concert under any

scheme or arrangement, the Service may with the approval of the Minister,

make rules for the ascertainment of the tax to be charged and assessed upon

each company so engaged.

(4) Any such rules may make provisions consistent with this  Part with respect to

apportionment of any profits, outgoings, expenses, liabilities, deductions,

qualifying expenditure and the tax chargeable upon each company, or may

provide for the computation of any tax as if the partnership, joint adventure,

scheme or arrangement were carried on by one company and apportion that 166

tax between the companies concerned or may accept some other basis of

ascertaining the tax chargeable upon each of the companies which may be

put forward by those companies and such rules may contain provisions which

have regard to any circumstances whereby such operations are partly carried

on for any companies by an operating company whose expenses are

reimbursed by those companies.

(5) Rules made under this section may be of general application for the purposes

of this section and this Part or of particular application to a specified

partnership, joint adventure, scheme or arrangement.

(6) Rules made under this section may be amended or replaced from time to

time.

(7)  The effect of any such rules shall not impose a greater burden of tax upon any

company so engaged in any partnership, joint venture, scheme or

arrangement than would have been imposed upon that company under this

Part if all things enjoyed, done or suffered by such partnership, joint venture,

scheme or arrangement had been enjoyed, done or suffered by that company

in the proportion in which it enjoys, does or suffers those things under or by

virtue of that partnership, joint venture, scheme or arrangement.

317.    Company to file  tax returns

Notwithstanding anything to the contrary  in this Part , every company, including a

contractor in a Production Sharing Contract arrangement, shall be responsible for

reporting its own upstream petroleum operations profits, outgoings, expenses, and

for paying the tax chargeable on its upstream petroleum operations.

318.    Manager of companies etc, to be answerable

The manager or any principal officer in Nigeria of every company which is or has

been engaged in  upstream petroleum operations shall be answerable for doing all

such acts as are required to be done by virtue of this Act for the assessment and

charge to tax of such company and for payment of such tax.

319.    Winding up of companies

(1) Where a company is being wound up or where in respect of a company a

receiver has been appointed by any Court, by the holders of any debentures

issued by the company or otherwise, the company may be assessed and

charged to tax in the name of the liquidator of the company, the receiver or

any agent in Nigeria of the liquidator or receiver and may be so assessed and

charged to tax for any accounting period whether before, during or after the

date of the appointment of the liquidator or receiver. 167

(2)  Any such liquidator, receiver or agent shall be answerable for doing all such

acts as are required to be done by virtue of this Act for the assessment and

charge to tax of such company and for payment of such tax.

(3)  The liquidator or receiver shall not distribute any assets of the company to the

shareholders or debenture holders of the company unless he  liquidator has

made provision for the payment in full of any tax which may be found payable

by the company or by such liquidator, receiver or agent on behalf of the

company.

320.    Avoidance by Transfer

Where a company which is or was engaged in upstream petroleum operations

transfers a substantial part of its assets to any person without having paid any tax,

assessed or chargeable upon the company, for any accounting period ending prior to

such transfer and in the opinion of the  Service, a reason for such transfer by the

company was to avoid payment of  the tax, then, that tax as charged upon the

company may be sued for and recovered from that person in a manner similar to a

suit for any other tax under section 340 of this Act.

321.    Indemnification of representative

Every person answerable under this Act for the payment of tax on behalf of a

company may retain out of any money in or coming to his hands or within his de

facto control on behalf of such company so much of such monies as shall be

sufficient to pay such tax, and shall be indemnified against any person whatsoever

for all payments made by him in accordance with the provisions of this Act.

322.    Preparation and delivery of accounts and particulars

(1)  Every company which is or has been engaged in upstream petroleum

operations shall for each accounting period of the company, make up

accounts of its profits or losses, arising from those operations, of that period

and shall prepare the following particulars –

(a)  a computation of its adjusted profit or loss and of its assessable profits

of that period with its completed self assessment form.

(b)  in connection with the Fourth Schedule to this Act, a schedule showing-

(i)  the residual value at the end of that period in respect of its

assets;

(ii)  all qualifying petroleum expenditure incurred by it in that period;

(iii)  the values of any of its assets (estimated by references to the

provisions of that Schedule) disposed of in that period; and168

(iv)  the allowances due to it under that Schedule for that period.

(c)  in connection with the Fifth Schedule to this Act, a schedule showing its

total production allowances from all its upstream petroleum operations;

(d)  a computation of its chargeable profits of that period;

(e)  a statement of all amounts repaid, refunded, waived or released to it,

during that period; and

(f)  a computation of its tax for that period.

(2)  Every company which is or has been engaged in upstream petroleum

operations shall, with respect to any accounting period of the company, within

five months after the expiration of that period or within five months after the

date of publication of this Act in the Gazette upon enactment (whichever is

later) deliver to the  Service a copy of its accounts (bearing an auditor’s

certificate) of that period, made up in accordance with the provisions of

subsection (1) of this section, and copies of the particulars referred to in that

subsection relating to that period, and such copies of those accounts and

each copy of those particulars (not being estimates) shall contain a

declaration which shall be signed by a duly authorised officer of the company

or by its liquidator, receiver or the agent of such liquidator or receiver, that the

same is true and complete and where such copies are estimates each copy

shall contain a declaration, similarly signed, that such estimate was made to

the best of the ability of the person signing the same.

(3)  Notwithstanding the other provisions of this section, every company which is

yet to commence bulk sale or disposal of chargeable oil chargeable natural

gas, of this Act shall file with the Service its audited accounts and returns:

(a)  in the case of a newly incorporated company, within eighteen months

from the date of its incorporation;

(b)  in the case of any other company, within six months after any period

ending on 31

st

December of the following year provided that where

there is an interval between 31st December of the preceding year and

the date on which such company commences the bulk sale or disposal

of chargeable oil chargeable gas, chargeable condensate or bitumen

the interval shall be deemed to form part of the preceding period.

323.    Request for further information

The Service may give notice in writing to any company which is or has been

engaged in upstream petroleum operations when and as often as the Service may

deem necessary, requiring it to furnish within such reasonable time as may be

specified by such notice, fuller or further information as to any of the matters either 169

referred to in section 322 of this Act or as to any other matters which the Service

may consider necessary for the purposes of this Act.

324.    Power to call for returns, books, etc

(1)  For the purpose of obtaining full information in respect of any company’s

upstream petroleum operations, the Service may give notice to such company

requiring it within the time limited by such notice, which time shall not be less

than twenty-one days from the date of service of such notice, to complete and

deliver to the Service any information called for in such notice and in addition

or alternatively requiring an authorised representative of such company or its

liquidator, receiver or the agent of such liquidator or receiver, to attend before

the Service or its authorised representative on such date or dates as may be

specified in such notice and to produce for examination, books, documents,

accounts and particulars which the Service may deem necessary.

(2)   Where a company assessable to tax under the provisions of this Act fails or

refuses to keep books or accounts which, in the opinion of the Service are

adequate for the purpose of ascertaining the tax, the Service may by notice in

writing require it to keep such records, books and accounts as the Service

considers to be adequate in such form and in such language as the Service

may in the said notice direct and, subject to the provisions of subsections (3)

and (4) of this section, the company shall keep records, books and accounts

as directed.

(3)  An appeal shall lie from any direction of the Service made under this section

to the High Court.

(4)  On hearing such appeal, the Court may confirm or modify such direction and

any such decision shall be final.

325.    Returns of estimated tax

(1)  Not later than two months after the commencement of each accounting

period, a company engaged in upstream petroleum operations shall submit to

the Service a return, the form of which the Service may prescribe, of its

estimated tax for such accounting period.

(2) If, at any time during any such accounting period the company having made a

return as provided for in subsection (1) of this section is aware that the

estimate in such return requires revision, then it shall submit a further return

containing its revised estimated tax for such period.

(3) Where the further returns provided for under subsection (2) of this section is

not made, the Service shall impose interest at the prevailing LIBOR plus two

percentage points for the differential of the revised tax over the estimated tax

paid by the company. 170

(4) Every return made by a company engaged in upstream petroleum operations

in fulfilment of the provisions of this section shall be subject to review and

validation by the Service.

(5) Where a company does not provide the estimates pursuant to subsection (1)

of this section, the Service shall have the right to determine such estimates on

the best of judgement basis and impose same on the company.

326.    Extension of period for making returns

Where it is shown by any company to the satisfaction of the Service that for good

reasons the company is not able to comply with the provisions of section 322  of

this Act within the time limited by that section or any notice given to it under section

323 or 324 of this Act within the time limited by any such notice, the Service may

grant in writing such extension of that time as the Service may consider necessary.

327.    Self assessment of tax payable

(1)  Every company liable to file tax returns as provided under section 322 of this

Act shall file self-assessment returns, within the specified period, showing the

tax payable by the company for the accounting period.

(2)  Where a company has delivered accounts and particulars, including the self

assessment returns for any accounting period of the company, the Service

may –

(a)  accept the same; or

(b)  refuse to accept the same and proceed as provided in subsection (3) of

this section upon any failure as therein mentioned.

(3)  Where, for any accounting period of a company, the company has failed to

deliver accounts and particulars provided for in section 322 of this Act within

the time limited by that section or has failed to comply with any  notice given

to it under the provisions of sections 323 or 324 of this Act within the time

specified in such notice or within any extended time provided for in section

324 of this Act and the Service is of the opinion that such company is liable to

pay tax, the Service may estimate the amount of the tax to be paid by such

company for that accounting period and make an assessment accordingly, but

such assessment shall not affect any liability otherwise incurred by such

company by reason of its failure or neglect to deliver such accounts and

particulars or to comply with such notices; and nothing in this subsection shall

affect the right of the Service to make any, additional assessment under the

provisions of section 328 of this Act. 171

328.    Additional Assessments

(1)  If the Service discovers or is of the opinion at any time that, with respect to

any company liable to tax, that tax has not been charged and assessed upon

the company or has been charged and assessed upon the company at a less

amount than that which ought to have been charged and assessed for any

accounting period of the company, the Service may within six years after the

expiration of that accounting period and as often as may be necessary,

assess such company with tax for that accounting period at such amount or

additional amount as in the opinion of the Service ought to have been charged

and assessed, and may make any consequential revision of the tax charged

or to be charged for any subsequent accounting period of the company.

(2)  Where a revision under subsection (1) of this section results in a greater

amount of tax to be charged than has been charged or would otherwise be

charged, an additional assessment, or an assessment for any such

subsequent accounting period shall be made accordingly, and the provisions

of this Act as to notice of assessment, objection, appeal and other

proceedings under this Act shall apply to any such assessment or additional

assessment and to the tax charged thereunder.

(3).  For the purpose of computing under subsection (1) of this section the amount

or the additional amount of tax for any accounting period of a company which

ought to have been charged, all relevant facts consistent which subsection (3)

of section 335of this Act shall be taken into account even though not known

when any previous assessment or additional assessment on the company for

that accounting period was being made or could have been made.

(4)  Notwithstanding the other provisions of this section, where any form of fraud,

wilful default or neglect has been committed by or on behalf of any company

in connection with any tax imposed under this Act, the Service may, at any

time and as often as may be necessary, assess the company on such amount

as may be necessary for the purpose of recovering any loss of tax attributable

to the fraud, wilful default or neglect.

329.    Making of assessments, etc.

(1)     Assessments of tax shall be made in such form and in such manner as the

Service shall authorise and shall contain the names and addresses of the

companies assessed to tax or of the persons in whose names such

companies (with the names of  the companies) have been assessed to tax,

and in the case of each company for each of its accounting periods, the

particular accounting period and the amount of the chargeable profits of and

assessable tax and chargeable tax for that period.

(2)    When any assessment requires to be amended or revised, a form of amended

or revised assessment shall be made in a manner similar to that in which the 172

original of that assessment was made under subsection (1) of this section but

showing the amended or revised amount of the chargeable profits, assessable

tax and chargeable tax.

(3)    A copy of each assessment, and of each amended or revised assessment

shall be filed in a list which shall constitute the Assessment List for the

purpose of this Act.

330.    Notices of assessment, etc.

(1)  The Service shall cause to be served personally on or sent by registered post

to each person who is liable to this tax but fails to file self-assessment returns,

a notice of assessment stating its accounting period and the amount of its

chargeable profits, assessable tax and chargeable tax charged and assessed

upon the company, the place at which payment of the tax should be made,

and informing such company of its rights under subsection (2) of this section.

(2)  If any person in whose name an assessment was made in accordance with

the provisions of this Part disputes the assessment, that person may apply to

the Service, by notice of objection in writing, to review and revise the

assessment so made on him and such application shall be made within

twenty-one days from the date of service of the notice of such assessment

and shall state the amount of chargeable profits of the company of the

accounting period in respect of which the assessment is made and the

amount of the assessable tax and the tax which such person claims should be

stated on the notice of assessment.

(3)  The Service, upon being satisfied that owing to absence from Nigeria,

sickness or other reasonable cause, the person in whose name the

assessment was made was prevented from making the application within

such  a  period of twenty-one days shall, extend the period as may be

reasonable in the circumstances.

(4)  After receipt of a notice of objection referred to in subsection (2) of this

section, the  Service may within such time and  at such place as the Service

shall specify, require the person giving the notice of objection to furnish such

particulars as the Service may deem necessary, and may by notice within

such time and at such place as the Service shall specify, require any person

to give evidence orally or in writing in respect of any matter necessary for the

ascertainment of the tax payable, and the Service may require such evidence

if given orally, to be given on oath or if given in writing, to be given by affidavit.

(5)  In the event of any person assessed who had objected to an assessment

made upon him agreeing with the Service as to the amount of tax liable to be

assessed, the assessment shall be amended accordingly, and  the  notice of

the tax payable shall be served upon such person. 173

(6)  If an applicant for revision under the provisions of subsection (2) of this

section fails to agree with the  Service on the amount of the tax, the  Service

shall give such applicant notice of refusal to amend the assessment as

desired by such applicant, and may revise the assessment to such amount as

the Service may determine and give such applicant notice of the revised

assessment of the tax payable together with notice of refusal to amend the

revised assessment and, wherever required, any reference in this Act to an

assessment or to an additional assessment shall be treated as a reference to

an assessment or to an additional assessment as revised under the

provisions of this subsection.

331.    Errors and defects in assessment and notice

(1) No assessment, warrant or other proceeding purporting to be made in

accordance with the provisions of this Act shall be quashed, or deemed to be

void or voidable, for want of form, or be affected by reason of a mistake,

defect or omission therein, if the same is in substance and effect in conformity

with or according to the intent and meaning of this Act or any Act amending

the same, and if the company assessed or intended to be assessed or

affected thereby is designated therein according to common intent and

understanding.

(2) An assessment shall not be impeached or affected-

(a) by reason of a mistake therein as to-

(i)  the name of a company liable or of a person in whose name a

company is assessed; or

(ii)  the amount of the tax;

(b) by reason of any variance between the assessment and the notice

thereof, if in cases of assessment, the notice is duly served on the

company intended to be assessed or on the person in whose name the

assessment was to be made on a company, and such notice contains,

in substance and effect, the particulars on which the assessment is

made.

332.    Income tax computation

(1)  Notwithstanding anything to the contrary in any law, all income tax

computations made under this Part shall be made in the currency in which the

transaction was effected.

(2)   Notwithstanding anything to the contrary in any law, any assessment made

under section Error! Reference source not found. of this Act shall be made in the

currency in which the computation giving rise to the assessment was made. 174

G.      COURT PROCEEDINGS

333.  Redress against Assessment

Any person (being a company or, a person in whose name a company is assessed)

aggrieved by an assessment made upon him, or who has failed to agree with the

Service as referred to in section 330(6) of this Act, may seek redress against such

assessment from the Federal High Court within thirty days after the date of the

Service upon such person or company of the notice of the refusal of the Service to

amend the assessment as desired, provided that not withstanding the lapse of such

period of thirty days, by not more than a further period of sixty days, such person or

company may seek redress against such assessment from the Federal High Court if

good cause is shown to the satisfaction of the Federal High Court why redress

against such assessment was not sought within thirty days.

334.  Suits at the Federal High Court

Notwithstanding the provisions of section 333, any person or company aggrieved   by

or dissatisfied with any tax imposed upon it by the Service or with any other  action of

the Service or who has any complaint, objection, claim, set off,  representation or other

grievance arising from the provision of this Part whether  against the Service or any

other taxable person or government agency may seek  redress in respect thereof at

the Federal High Court.

333.    Assessment to be final and conclusive

(1) Where no valid objection or appeal has been lodged within the time provided

under sections 330,  and 331 of this Act, as the case may be, against an

assessment as regards the amount of the tax assessed, or where the amount

of the tax has been agreed to under subsection (5) of section 330 of this Act,

or where the amount of the tax has been determined on objection or revision

under subsection (6) of section 330 of this Act, or on appeal, the assessment

made, agreed to, revised or determined on appeal, as the case may be, shall

be final and conclusive for all purposes of this Act as regards the amount of

the tax, and if the full amount of the tax in respect of any such final and

conclusive assessment is not paid within the appropriate period or periods

prescribed in this Act, the provisions contained in this Act relating to the

recovery of tax, and to any penalty under section 343 shall apply.

You may also like...

Leave a Reply