Upstream Petroleum Matters And The Petroleum Industry Bill A Presentation At The Lbs Roundtable

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
•Licenses & Leases
•PEL Relinquishment
Official version Institutional Incorporated •PPL Environmental of existing
NNPC Ltd •PML Management
vs. Version IV Framework Joint Ventures Licenses &
•PPL & PML Leases
Award Process
•R

Odujinrin & Adefuluestd. 1972
30/09/2009 2

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 through 1st and 2nd readings and now at
Gone through 1 and 2 readings and now at
committee stage
• Executive through an Inter‐Agency team
Executive through an Inter Agency 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 3

Institutional Framework
Institutional Framework

Official version Version IV

Minister
Mi i Minister
Mi i
National
National
National
Petroleum
Assets Petroleum
Petroleum
Inspectorate
Petroleum Petroleum
Directorate Management Inspectorate
Agency Directorate

Policy Direction Technical &
Policy Direction Technical Costs/commercial
Acreage Holder Regulator Regulator Costs/Commercial
Acreage Holder Regulator

30/09/2009 4

NNPC Ltd.
NNPC Ltd.

Official Version Version IV
• NNPC Ltd. to be estd. as a • Retains same provisions
limited liability company • Sole vesting of powers in
• Ownership vested solely in the FG does not take the
the FG provisions of CAMA into
• Shares may be divested to consideration
Nigerians after 2 years on
i i f 2 • Divestiture provision is
i i ii i
the NSE limiting

30/09/2009 5

Incorporated Joint Ventures
Incorporated Joint Ventures

• Provides for the • NOC to appoint majority of
establishment of IJVs as board members & management
limited liability companies staff
• Decision of the board to comply
Decision of the board to comply
• Shares in each IJV to be held with that of shareholders
according to the existing
• Restrictions on transfer of NOC
participating interests
participating interests & other shareholder shares
• Makes general provisions in • Protection against additional tax
relation to the rights and
relation to the rights and liabilities
duties of shareholders and • Assets may only be transferred
board of directors to NOC in liquidation

30/09/2009 6

Acreage Control & Licensing: General
Acreage Control & Licensing: General

• Vests all unallocated • Acreage vested in the
acreages in the Directorate Directorate
• Creates a National Grid
System for the definition of
license and lease areas,
relinquishments etcetera
relinquishments etcetera

30/09/2009 7

Acreage Control & Licensing: Licenses &
Leases
• Creates PPL & PML to • PEL is also created
replace OPL & OML • PPLs & PMLs may be granted
• PPLs & PMLs may be with respect to both crude oil
granted with respect to and natural gas
and natural gas
either crude oil or natural • Introduces a difference
gas, not both
gas not both between the qualifications of
between the qualifications of
an operator and a non‐
• PPLs & PMLs may be operator
granted to:
granted to:
• Licences may be granted to
– NOC & indigenous oil companies
(60% or more Nigerian
NOC & a winning bidder
shareholding)
h h ldi )
30/09/2009 8

Acreage Control & Licensing: PEL
Acreage Control & Licensing: PEL

• No provisions for a PEL • 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

30/09/2009 9

Acreage Control & Licensing: PPL
Area Official Version
Offi i l 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 Not more than 10 years
Basin consisting of:
1. Initial Period of 5 years
2. Renewal Period of 10
years
3. Appraisal Period of 2
years

30/09/2009 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
• C
Commercial discovery & Field Development
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 11

Relinquishment
li ih
Relinquishment Period
li ih 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,
retention areas

30/09/2009 12

Acreage Control & Licensing: PML
Acreage Control & Licensing: PML

• PML to be granted to holder • Introduces the DGSO
of PPL who has satisfied all • PML may only be granted
conditions and has made for 20 years and renewed
commercial discovery
i l di for only 10 years
• Term is for 20 years and • A PML not in commercial
may be renewed for further
may be renewed for further production after 5 years
d i f
terms of not more than 20 may be revoked
y
years for each period of
p • A PML in which commercial
A PML in which commercial
renewal production has stopped for
180 days may be revoked
180 days may be revoked
30/09/2009 13

Acreage Control & Licensing: Award
Process
• 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

30/09/2009 14

Acreage Control & Licensing: Assignments,
Mergers & Acquisitions
& iii
• Assignments, mergers & • Introduces a fee of equal to
acquisitions to be approved 2% of the fair market value
by the minister of the transaction
• Minister shall approve if
certain conditions are met

30/09/2009 15

Environmental Provisions
Environmental Provisions

• Requires licensees/lessees • Requires the submission
to submit an environmental and approval of only an
programme or an environmental
environmental quality
i t l lit management plan
t l
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 16

Environmental Provisions (contd.)
Environmental Provisions (contd.)

• Requires states and local • States & Local governments
governments to contribute to no longer required to make
remediation
contributions
• Financial contribution to be made
Financial contribution to be made
by licensees and lessees into a • Substantially retains
Remediation Fund provisions on financial
• Li
Licensee/Lessee to annually
/L t ll contributions by
contributions by
assess and increase contributions licensee/lessee but subjects
• No provisions for a mechanism the Fund to audit
for reimbursement of
contributions • Introduces provisions for
gas flaring penalties
30/09/2009 17

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 18

RECAP

Acreage Control
& Licensing
•Licenses & Leases
•PEL Relinquishment
Official version Institutional Incorporated •PPL Environmental of existing
NNPC Ltd •PML Management
vs. Version IV Framework Joint Ventures Licenses &
•PPL & PML Leases
Award Process
•PSCs & other
contracts

30/09/2009 19

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 20

Thank You
Thank You

• All comments and questions may be directed
to:

adeoye.adefulu@odujinrinadefulu.com

30/09/2009 21

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