Upstream Petroleum Matters & the Petroleum Industry Bill: A Comparative & Critical Analysis of the Official Version & Version IV Dr. Adeoye Adefulu Odujinrin & Adefulu Barristers, Solicitors & Notaries Public Lagos – Abuja – Port‐Harcourt
Outline
Acreage Control & Licensing
Official version vs. Version IV
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Institutional Framework
NNPC Ltd
Incorporated Joint Ventures
•Licenses & Leases •PEL •PPL •PML •PPL & PML Award Process •R
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Environmental Management
Relinquishment of existing Licenses & Leases
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Official Version vs. Version IV Official Version vs. Version IV • PIB PIB was submitted to the National Assembly in b itt d t th N ti lA bl i December 2008 – Gone Gone through 1 through 1st and 2 and 2nd readings and now at readings and now at committee stage
• Executive Executive through an Inter through an Inter‐Agency Agency team team continued work on the PIB which has now come up with version IV • Version IV submitted to National Assembly as a “memorandum” • Version IV substantially different from official version 30/09/2009
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Institutional Framework Institutional Framework Official version
Version IV
Mi i Minister National Petroleum Directorate
Policy Direction Acreage Holder
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Mi i Minister
Petroleum Inspectorate
National Assets Petroleum Management Agency
Technical Regulator
Costs/commercial Regulator
National Petroleum Directorate Policy Direction Acreage Holder
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Petroleum Inspectorate Technical & Costs/Commercial Regulator
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NNPC Ltd. NNPC Ltd. Official Version • NNPC Ltd. to be estd. as a limited liability company • Ownership vested solely in the FG • Shares may be divested to Nigerians after 2 years on i i f 2 the NSE
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Version IV • Retains same provisions • Sole vesting of powers in the FG does not take the provisions of CAMA into consideration • Divestiture provision is i i ii i limiting
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Incorporated Joint Ventures Incorporated Joint Ventures Official Version • Provides for the establishment of IJVs as limited liability companies • Shares in each IJV to be held according to the existing participating interests participating interests • Makes general provisions in relation to the rights and relation to the rights and duties of shareholders and board of directors 30/09/2009
Version IV • NOC to appoint majority of board members & management staff • Decision of the board to comply Decision of the board to comply with that of shareholders • Restrictions on transfer of NOC & other shareholder shares • Protection against additional tax liabilities • Assets may only be transferred to NOC in liquidation
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Acreage Control & Licensing: General Acreage Control & Licensing: General Official Version • Vests all unallocated acreages in the Directorate
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Version IV • Acreage vested in the Directorate • Creates a National Grid System for the definition of license and lease areas, relinquishments etcetera relinquishments etcetera
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Acreage Control & Licensing: Licenses & Leases Official Version • Creates PPL & PML to replace OPL & OML • PPLs & PMLs may be granted with respect to either crude oil or natural gas not both gas, not both • PPLs & PMLs may be granted to: granted to: – NOC & indigenous oil companies (60% or more Nigerian shareholding) h h ldi ) 30/09/2009
Version IV • PEL is also created • PPLs & PMLs may be granted with respect to both crude oil and natural gas and natural gas • Introduces a difference between the qualifications of between the qualifications of an operator and a non‐ operator • Licences may be granted to NOC & a winning bidder
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Acreage Control & Licensing: PEL Acreage Control & Licensing: PEL Official Version • No provisions for a PEL
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Version IV • PEL may be awarded by the Minister to a qualified company • Term not more than 3 years • Non‐exclusive right to explore for oil l f il • License area may however cover the area of a PPL or cover the area of a PPL or PML Odujinrin & Adefuluestd. 1972
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Acreage Control & Licensing: PPL Acreage Control & Licensing: PPL Area
Offi i l Official Version i
Version IV i
Land & Shallow Waters
Not more than 5 years
Not more than 7 years consisting of: 1. Initial Period of 3 years 2. Renewal Period of 2 years 3. Appraisal Period of 2 years
Deep Water Areas & Inland Not more than 10 years Basin
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Not more than 10 years consisting of: 1. Initial Period of 5 years 2. Renewal Period of 10 years 3. Appraisal Period of 2 years 10
Acreage Control & Licensing: PPL (Version IV Additional Provisions) ddi i l ii ) • Minimum work commitments – Licensee must drill at least one exploration well to p a specified minimum depth – Commitment must be supported by international Commitment must be supported by international bank guarantee
• Commercial discovery & Field Development C i l di & Fi ld D l t – FDP must be submitted within 120 days of declaration of commercial discovery – Must be approved by Inspectorate within 90 days pp y p y 30/09/2009
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Acreage Control & Licensing: PPL Relinquishment li ih Relinquishment li ih Period i d
Version IV i
Upon expiry of initial exploration period
50% of original license area
Upon the expiry of the renewal period
All parcels that are not part of PMLs, appraisal areas or significant gas discovery retention areas
Upon expiration of the PPL
All acreage that is not included in PMLs, appraisal areas or significant gas discovery appraisal areas or significant gas discovery retention areas
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Acreage Control & Licensing: PML Acreage Control & Licensing: PML Official Version • PML to be granted to holder of PPL who has satisfied all conditions and has made commercial discovery i l di • Term is for 20 years and may be renewed for further may be renewed for further terms of not more than 20 yyears for each period of p renewal
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Version IV • Introduces the DGSO • PML may only be granted for 20 years and renewed for only 10 years • A PML not in commercial production after 5 years d i f may be revoked • A PML in which commercial A PML in which commercial production has stopped for 180 days may be revoked 180 days may be revoked
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Acreage Control & Licensing: Award Process Official Version Version IV • Awards of PPLs & PMLs are • Introduces bid parameters: to be made by the Minister – Signature bonus on the basis of a bid process – Royalty percentage conducted by the d t d b th – Work commitment Directorate – Work units
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Acreage Control & Licensing: Assignments, Mergers & Acquisitions & iii Official Version • Assignments, mergers & acquisitions to be approved by the minister • Minister shall approve if certain conditions are met
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Version IV • Introduces a fee of equal to 2% of the fair market value of the transaction
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Environmental Provisions Environmental Provisions Official Version • Requires licensees/lessees to submit an environmental programme or an environmental quality i t l lit management programme • No distinction between No distinction between both as to content and when required q • Content is similar to EIA which is also required in petroleum operations 30/09/2009
Version IV • Requires the submission and approval of only an environmental management plan t l
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Environmental Provisions (contd.) Environmental Provisions (contd.) Official Version
Version IV • Requires states and local • States & Local governments governments to contribute to no longer required to make remediation contributions • Financial Financial contribution to be made contribution to be made • Substantially retains by licensees and lessees into a provisions on financial Remediation Fund contributions by contributions by • Licensee/Lessee to annually Li /L t ll assess and increase contributions licensee/lessee but subjects • No provisions for a mechanism the Fund to audit for reimbursement of • Introduces provisions for contributions gas flaring penalties 30/09/2009
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Relinquishment of Existing Licences/Leases ( (Version IV) i ) • Mandatory relinquishment of acreage: – 1 year after the commencement of the Act; or – Ten years after initial OPL was granted • Existing licensees/lessees must select areas to be Existing licensees/lessees must select areas to be proposed for conversion into PMLs or significant gas discovery retention areas discovery retention areas • All parcels not selected must be relinquished • Marginal field operators may apply for PMLs in their areas of operation 30/09/2009
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RECAP
Acreage Control & Licensing
Official version vs. Version IV
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Institutional Framework
NNPC Ltd
Incorporated Joint Ventures
•Licenses & Leases •PEL •PPL •PML •PPL & PML Award Process •PSCs & other contracts
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Environmental Management
Relinquishment of existing Licenses & Leases
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Concluding Remarks Concluding Remarks • Version IV is a significant improvement on the official version • The existence of 2 government sponsored versions of the same bill creates significant versions of the same bill creates significant challenges for the National Assembly & Stakeholders k h l • It may be better for the government to It may be better for the government to withdraw the official version and substitute it with Version IV or a variation thereof with Version IV or a variation thereof 30/09/2009
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Thank You Thank You • All comments and questions may be directed to:
[email protected]
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