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

Upstream Petroleum Matters & the Petroleum Industry Bill:Industry Bill:

A Comparative & Critical Analysis of the Official Version & Version IV

Dr. Adeoye AdefuluOdujinrin & Adefulu

Barristers, Solicitors& Notaries Public

Lagos – Abuja – Port‐Harcourt

OutlineOutline

Acreage Control & Licensing

Official version vs. Version IV

Institutional Framework NNPC Ltd Incorporated

Joint Ventures

•Licenses & Leases•PEL•PPL•PML•PPL & PML Award Process

Environmental Management

Relinquishment of existing Licenses & Leases

•R

30/09/2009Odujinrin & Adefuluestd. 1972 2

Official Version vs. Version IVOfficial Version vs. Version IV

PIB b itt d t th N ti l A bl i• PIB was submitted to the National Assembly in December 2008

Gone through 1st and 2nd readings and now at– Gone through 1st and 2nd readings and now at committee stage

• Executive through an Inter‐Agency teamExecutive 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


Institutional FrameworkInstitutional Framework

Official version

Mi iVersion IV

Mi iMinister MinisterNational Petroleum Petroleum

Inspectorate

National Assets

Petroleum

National Petroleum Petroleum

InspectorateDirectorate Inspectorate Management Agency Directorate Inspectorate

Policy Direction

Acreage HolderTechnical Regulator

Costs/commercial Regulator

Policy Direction

Acreage Holder

Technical & Costs/Commercial

Regulator


NNPC Ltd.NNPC Ltd.

Official Version

• NNPC Ltd. to be estd. as a

Version IV

• Retains same provisionslimited liability company

• Ownership vested solely in • Sole vesting of powers in

the FG does not take the the FG

• Shares may be divested to i i f 2

provisions of CAMA into consideration

i i i i iNigerians after 2 years on the NSE

• Divestiture provision is limiting


Incorporated Joint VenturesIncorporated Joint Ventures

Official Version

• Provides for the

Version IV• NOC to appoint majority of

establishment of IJVs as limited liability companies

board members & management staff

• Decision of the board to comply• Shares in each IJV to be held according to the existing participating interests

• Decision of the board to comply with that of shareholders

• Restrictions on transfer of NOC participating interests

• Makes general provisions in relation to the rights and

& other shareholder shares

• Protection against additional tax liabilitiesrelation to the rights and

duties of shareholders and board of directors

liabilities

• Assets may only be transferred to NOC in liquidation


Acreage Control & Licensing: GeneralAcreage Control & Licensing: General

Official Version

• Vests all unallocated

Version IV

• Acreage vested in the acreages in the Directorate Directorate

• Creates a National Grid System for the definition of license and lease areas, relinquishments etceterarelinquishments etcetera


Acreage Control & Licensing: Licenses & Leases

Official Version

• Creates PPL & PML to

Version IV• PEL is also created

replace OPL & OML

• PPLs & PMLs may be • PPLs & PMLs may be granted

with respect to both crude oil and natural gasgranted with respect to

either crude oil or natural gas not both

and natural gas

• Introduces a difference between the qualifications ofgas, not both

• PPLs & PMLs may be granted to:

between the qualifications of an operator and a non‐operator

granted to:– NOC & indigenous oil companies

(60% or more Nigerian h h ldi )

• Licences may be granted to NOC & a winning bidder

shareholding)


Acreage Control & Licensing: PELAcreage Control & Licensing: PEL

Official Version

• No provisions for a PEL

Version IV

• PEL may be awarded by the Minister to a qualified company

• Term not more than 3 years

• Non‐exclusive right to l f ilexplore for oil

• License area may however cover the area of a PPL orcover the area of a PPL or PML


Acreage Control & Licensing: PPLAcreage Control & Licensing: PPL

Offi i l i iArea Official Version Version IV

Land & Shallow Waters Not more than 5 years Not more than 7 years consisting of:1. Initial Period of 3 years2. Renewal Period of 2

years3. Appraisal Period of 2

years

Deep Water Areas & Inland Not more than 10 years Not more than 10 yearsBasin consisting of:

1. Initial Period of 5 years2. Renewal Period of 10

years3. Appraisal Period of 2

years


Acreage Control & Licensing: PPL (Version ddi i l i i )IV Additional Provisions)

• Minimum work commitments– Licensee must drill at least one exploration well to pa specified minimum depth

– Commitment must be supported by internationalCommitment must be supported by international bank guarantee

C i l di & Fi ld D l t• Commercial discovery & Field Development– FDP must be submitted within 120 days of declaration of commercial discovery

– Must be approved by Inspectorate within 90 days pp y p y


Acreage Control & Licensing: PPL li i hRelinquishment

li i h i d iRelinquishment Period Version IV

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 discoveryretention areas

Upon expiration of the PPL All acreage that is not included in PMLs, appraisal areas or significant gas discoveryappraisal areas or significant gas discovery retention areas


Acreage Control & Licensing: PMLAcreage Control & Licensing: PML

Official Version

• PML to be granted to holder

Version IV

• Introduces the DGSOof PPL who has satisfied all conditions and has made

i l di

• PML may only be granted for 20 years and renewed

commercial discovery

• Term is for 20 years and may be renewed for further

for only 10 years

• A PML not in commercial d i fmay be renewed for further

terms of not more than 20 years for each period of

production after 5 years may be revoked

• A PML in which commercialy prenewal

• A PML in which commercial production has stopped for 180 days may be revoked180 days may be revoked


Acreage Control & Licensing: Award Process

Official Version

• Awards of PPLs & PMLs are

Version IV

• Introduces bid parameters:to be made by the Minister on the basis of a bid process

d t d b th

– Signature bonus

– Royalty percentageconducted by the Directorate

– Work commitment

– Work units


Acreage Control & Licensing: Assignments, & i i iMergers & Acquisitions

Official Version

• Assignments, mergers &

Version IV

• Introduces a fee of equal to acquisitions to be approved by the minister

2% of the fair market value of the transaction

• Minister shall approve if certain conditions are met


Environmental ProvisionsEnvironmental Provisions

Official Version

• Requires licensees/lessees

Version IV

• Requires the submission to submit an environmental programme or an

i t l lit

and approval of only an environmental

t lenvironmental quality management programme

• No distinction between

management plan

• No distinction between both as to content and when requiredq

• Content is similar to EIA which is also required in petroleum operations


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

Official Version• Requires states and local

Version IV

• States & Local governments governments to contribute to remediation

• Financial contribution to be made

no longer required to make contributions

Financial contribution to be made by licensees and lessees into a Remediation Fund

Li /L t ll

• Substantially retains provisions on financial contributions by• Licensee/Lessee to annually

assess and increase contributions

• No provisions for a mechanism

contributions by licensee/lessee but subjects the Fund to audit

for reimbursement of contributions • Introduces provisions for

gas flaring penalties


Relinquishment of Existing Licences/Leases ( i )(Version IV)

• 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 areasdiscovery retention areas

• All parcels not selected must be relinquished

• Marginal field operators may apply for PMLs in their areas of operation


RECAPRECAP

Acreage Control & Licensing

Official version vs. Version IV

Institutional Framework NNPC Ltd Incorporated

Joint Ventures

•Licenses & Leases•PEL•PPL•PML•PPL & PML Award Process

Environmental Management

Relinquishment of existing Licenses & Leases

•PSCs & other contracts


Concluding RemarksConcluding Remarks

• Version IV is a significant improvement on the official version

• The existence of 2 government sponsored versions of the same bill creates significantversions of the same bill creates significant challenges for the National Assembly &

k h lStakeholders

• It may be better for the government toIt may be better for the government to withdraw the official version and substitute it with Version IV or a variation thereofwith Version IV or a variation thereof


Thank YouThank You

• All comments and questions may be directed to:

[email protected]


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

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