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Pib Report Draft 2021 A Committee Report
Pib Report Draft 2021 A Committee Report
LEGAL, GOVERNANCE, REGULATORY AND FISCAL FRAMEWORK FOR THE NIGERIAN PETROLEUM INDUSTRY, THE DEVELOPMENT OF HOST
COMMUNITIES AND FOR RELATED MATTERS, 2021 (HB. 1061)
1. Vesting of The property and ownership of petroleum within Nigeria The property and ownership of petroleum
petroleum and its territorial waters, continental shelf and Exclusivewithin Nigeria and its territorial waters,
Economic Zone is vested in the Government of the continental shelf and exclusive economic zone
Federation of Nigeria. is vested in the Government of the Federation
of Nigeria.
2. Objectives The objectives of this Chapter are to - Retained
(a) create efficient and effective governing Retained
institutions, with clear and separate roles for the
petroleum industry.
(b) establish a framework for the creation of a Retained
commercially oriented and profit-driven national
petroleum company;
(c) promote transparency, good governance and (c) promote transparency, good governance
accountability in the administration of the and accountability in the administration of the
petroleum resources of Nigeria; and petroleum resources of Nigeria;
(d) foster a business environment conducive for (d) foster a business environment conducive for
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petroleum operations. petroleum operations; and
(g) upon the recommendation of the Commission, (3)(1)(g) upon the recommendation of the
grant Petroleum Prospecting Licences and Commission, grant petroleum prospecting
Petroleum Mining Leases through the processes licences and petroleum mining leases through
established in this Bill; the processes established in this Bill;
(h) upon the recommendation of the Commission (3)(1)(h) upon the recommendation of the
and pursuant to the provisions of this Bill and the Commission and pursuant to the provisions of
Regulations, revoke and assign interests in this Bill and the regulations, revoke and assign
Petroleum Prospecting Licences and Petroleum interests in petroleum prospecting licences and
Mining Leases; petroleum mining leases;
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(i) delegate in writing to the Chief Executive of the
Commission or Authority any power conferred
on the Minister by or under this Bill;
(j) upon the recommendation of the Commission or (3)(1)(j) upon the recommendation of the
Authority approve the fees for services rendered Commission or Authority approve the fees for
by the Commission or Authority in Regulations; services rendered by the Commission or
Authority in regulations;
(k) upon the recommendation of the Commission or Retained
the Authority, direct in writing the suspension of
petroleum operations in any area –
i. until arrangements to prevent danger to life Retained
or property have been made to his
satisfaction, or
ii. where in his opinion, a contravention of this (3)(1)(k)(ii). where in his opinion, a
Act or any Regulation made under this Bill has contravention of this Act or any regulation
occurred or is likely to occur. made under this Bill has occurred or is likely to
occur.
(4) The Minister may give general policy directives to the (3)(4) The Minister shall give general policy
commission on matters concerning upstream directives to the Commission on matters
petroleum operations and to the authority on concerning upstream petroleum operations
matters relating to midstream and downstream and to the Authority on matters relating to
3
petroleum operations in line with the provisions of midstream and downstream petroleum
this Act and the Commission and the Authority shall operations as well as matters related to co-
comply with such directives. operation among the two entities in line with
the provisions of this Bill and the Commission
and the Authority shall comply with such
directives.
(5) The Minister shall cause the general policy directives Retained
issued pursuant to sub-section (4) of this section to be
published in the Gazette.
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(c) ensure that upstream petroleum operations are Retained
carried out in a manner to minimise waste and
achieve optimal government revenues;
(d) promote healthy, safe, efficient and effective Retained
conduct of upstream petroleum operations in an
environmentally acceptable and sustainable
manner;
(e) ensure efficient, safe, effective and sustainable Retained
infrastructural development of upstream
petroleum operations;
(f) determine, administer and ensure the Retained
implementation and maintenance of technical
standards, codes, practices and specifications
applicable to upstream petroleum operations
pursuant to good international petroleum
industry practices;
(g) implement government policies for upstream 6(g) implement government policies for
petroleum operations as directed by the minister upstream petroleum operations as directed by
of petroleum and in accordance with this act; the Minister of Petroleum in accordance with
the provisions of this Bill;
(aa) perform such other function as may be 7(bb) perform such other function as may be
necessary to give effect to the provisions of this necessary to give effect to the provisions of this
Act. Act.
(2) Where data acquired and interpreted under a 9(2) Where data acquired and interpreted
Petroleum Exploration Licence is, in the judgment under a petroleum exploration licence, in the
of the Commission, requires testing and drilling of judgment of the Commission, require testing
identifiable prospects and leads, and no and drilling of identifiable prospects and leads,
11
commercial entity has publicly expressed an and no commercial entity has publicly
intention of testing or drilling such prospects, the expressed an intention of testing or drilling such
Commission may engage the services of a prospects, the Commission shall in line with the
competent person to drill or test such prospect and provisions of subsection 64(k) request the
leads on a service fee basis. services of NNPC Limited to drill or test such
prospect and leads on a service fee basis to be
charged to the Frontier Exploration Fund
pursuant to this Act.
(4) The Frontier Exploration Fund shall be 10% of rents 9(4) The Frontier Exploration Fund shall be 10%
on petroleum prospecting licences and petroleum of rents on petroleum prospecting licences and
mining leases. 10% rent on petroleum mining leases; and 30%
of NNPC Limited’s profit oil and profit gas as in
the production sharing, profit sharing and Risk
service contracts. The fund shall be applied to
all Basins and undertaken, simultaneously.
(5) The Commission shall manage the Frontier 9(5) NNPC Limited shall transfer the 30% of
Exploration Fund in accordance with regulations made profit oil and profit gas to the frontier
under this Act. exploration fund escrow account dedicated for
the development of frontier acreages only
ii. enactments with respect to the upstream 10(a)(ii) regulations, policies or guidelines
petroleum industry made prior to the coming formerly administered by the Department of
into force of this Act and any Regulations made Petroleum Resources or the Petroleum
pursuant to powers given under them; and Inspectorate, with respect to upstream
petroleum operations;
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iii. regulations, policies or guidelines 10(a)(iii) enactments with respect to the
formerly administered by the upstream petroleum industry made prior to the
department of petroleum resources or coming into force of this Act and any
the petroleum inspectorate, with regulations made pursuant to powers given
respect to upstream petroleum under them; and
operations;
(b) seal up any premises, pursuant to section 217 of Retained
this Act, including any facility or plant engaged
in upstream petroleum operations, where there
has been a contravention of this Act or any
regulations made under this Act.
(c) issue guidelines on the generation, use, storage 10(c) ensure compliance with the Nuclear
and transportation of radioactive sources and Safety and Radiation Protection Act (No. 19 of
materials, in respect of upstream petroleum 1995), CAP N142, Laws of the federation of
operations in consultation with the Nigerian Nigeria, 2004 and such other legislative
Nuclear Regulatory Authority; provisions as may be applicable in upstream
petroleum operations.
(g) with the approval of the Minister, renew and 10(g) recommend to the Minister the
suspend licences and leases in accordance with revocation or suspension of licences or leases in
provisions of this Act; accordance with the provisions of this Act and
approve renewal of leases;
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(h) within the jurisdiction of the Commission, have Retained
access to –
(i) areas or rights of way regarding licences,
leases or any related offices or buildings
where information or data are available for
inspection under this Act; and
(ii) all installations to which this Act applies,
including plants and stations of every
description, for the purpose of inspecting
the operations conducted therein and
enforcing the provisions of this Act and any
regulations made under it.
(j) subject to section 3(1)(j) of this Act, make 10(j) Renew licenses and leases subject to the
regulations pertaining to operations, provisions of this Act;
monitoring, lease management and any other
matter in respect of upstream petroleum
operations as the Commission may deem
necessary after due stakeholder consultation
pursuant to section 216 of this Act, including
regulations related to dispute resolution; and
(4) A person appointed pursuant to sub-section (2) (a) 11(4) A person appointed pursuant to sub-
and (b) of this section shall have at least 15 years post- section (2) (a) and (b) of this section shall have
qualification experience in petroleum or other relevant at least 15 years post-qualification cognate
sector of the economy and shall hold office for a period experience in petroleum or other relevant
of 5 years and may be re-appointed for a further term of sector of the economy and shall hold office for
5 years, on such terms and conditions as may be a period of 5 years and may be re-appointed for
specified in the letter of appointment. a further term of 5 years, on such terms and
conditions as may be specified in the letter of
appointment.
15
(5) Subject to subsection (0) of this section and section 11(5) Subject to subsection (4) of this section
18(7) of this Act, a commissioner shall hold office for 5 and section 18(7) of this Act, a commissioner
years and may be re-appointed for a further term of 5 shall hold office for 5 years and may be re-
years. appointed for a further term of 5 years.
(8) The proceedings of the Board of the Commission and 11(8) The proceedings of the Board of the
other ancillary matters shall be as prescribed by Commission and other ancillary matters shall
Regulation made under this Act. be as prescribed by regulation made under this
Act.
12. Functions of The Board of the Commission shall - Retained
the Board of the (a) be responsible for the formulation of policy,
Commission supervision and giving strategic direction to the
Commission;
(b) provide general guidance for the carrying out of Retained
the functions of the Commission;
(c) review and approve the business, strategic and Retained
operating plans of the Commission;
(d) consider and approve the annual budget of the Retained
Commission before submission to the National
Assembly for appropriation;
(e) approve the management accounts and audited Retained
accounts of the Commission and consider the
management letter from the external auditors;
(f) determine the terms and conditions of service of Retained
16
employees of the Commission;
(g) recommend remuneration, allowances, benefits Retained
and pensions of employees of the Commission in
consultation with the National Salaries, Incomes
and Wages Commission, having regard to the –
(i) specialised nature of work to be performed
by the Commission;
(ii) need to ensure the financial self-sufficiency
of the Commission; and
(iii) remuneration and allowances paid in the
private sector in upstream petroleum
operations to individuals with equivalent
responsibilities, expertise and skills;
(h) structure the Commission into such number of Retained
departments as it deems fit for the effective
discharge of the functions of the Commission;
and
(i) carry out such other functions as may be Retained
necessary for the efficient and effective
administration of the Commission under this Act.
13. (1) Commissioners shall be paid from the funds of the Retained
Remuneration Commission such remuneration and allowances as
and allowances applicable.
of the Board of
the Commission (2) The Commission shall comply with the policy and Retained
guidelines of the National Salaries, Incomes and Wages
Commission regarding remunerations.
14. Suspension or A member of the Board of the Commission may be Retained
removal of suspended or removed from office by the President,
members of the where the member -
Board of the (a) is found to –
Commission
(i) be unqualified for appointment under section Retained
11 of this Act,
(ii) have been unqualified subsequent to his Retained
17
appointment, or
(iii) be in breach of conflict of interest 14(a)(iii) be in breach of conflict of interest
provisions in the Companies and Allied provisions in the Companies and Allied Matters
Matters Act or any Regulation regarding Act or any regulation regarding conflicts of
conflicts of interest passed pursuant to this interest passed pursuant to this Act;
Act;
(b) ceases to be an employee of the ministry or Retained
agency he represents on the Board of the
Commission;
(c) has demonstrated an inability to effectively Retained
perform the duties of his office;
(d) has been absent from the meeting of the Board Retained
of the Commission for 3 consecutive times
without the consent of the Chairman or in the
case of the Chairman, without the consent of the
President, except where good reason is shown
for the absence;
(e) is found guilty of serious misconduct by a Court Retained
or Tribunal of competent jurisdiction; or
(f) has, under the law in force in any country - Retained
(i) been adjudged or declared bankrupt or
insolvent and has not been discharged,
(ii) made an assignment to or arrangement or
composition with his creditors which has not
been rescinded or set aside, or
(iii) been declared to be of unsound mind.
16. Vacancy on A vacancy on the Board of the Commission shall occur, Retained
the Board of the where a commissioner -
Commission (a) dies;
(b) is removed from office in accordance with
18
section 14 of this Act;
(c) resigns from office;
(d) completes his tenure of office; or
(e) is incapacitated.
17. Filling of A vacancy on the Board of the Commission shall be filled Retained
vacancy on the by the appointment of another person in accordance
Board of the with section 11 of this Act.
Commission
18. Commission (1)The Commission Chief Executive is the accounting Retained
Chief Executive officer and shall be responsible for the day-to-day
and Executive running of the affairs of the Commission.
Commissioners
(2) There shall be 6 executive commissioners for the Retained
Commission with each responsible for one of the
following -
(7) The President may, not later than 14 days prior to the 18(7) The President may, not later than 90 days
expiration of the tenure of the Commission Chief prior to the expiration of the tenure of the
Executive or an Executive Commissioner, re-appoint the Commission Chief Executive or an executive
Commission Chief Executive or Executive Commissioner commissioner, re-appoint the Commission
or appoint another qualified person. Chief Executive or executive commissioner or
appoint another qualified person.
(b) fees charged by the Commission for services 24(2)(b) fees charged by the Commission for
rendered to licensees, lessees permit holders services rendered to licensees, lessees, permit
and other authorisations issued by the holders and other authorisations issued by the
Commission; Commission;
(c) money derived from revenue collection in 24(2)(c) Cost of Collection by the Commission.
accordance with government policy;
(5) At the end of each financial year, any money that Retained
accrued to the Commission Fund pursuant to
subsection (2) of this section, which have not been
utilised for the purposes provided under subsection (3)
of this section, shall be paid into the Consolidated
Revenue Fund.
(7) Nothing in subsection (6) of this section or under this 24(7) Nothing in subsection (6) of this section or
25
Act shall be construed as authorising the Commission under this Act shall be construed as authorising
Chief Executive, Commissioners, officer or employee of the Commission Chief Executive,
the Commission to accept any grant for their personal commissioners, officer or employee of the
use. Commission to accept any grant for their
personal use.
(10) The Commission shall, not later than the 31st of Retained
March of each year –
(a) submit to the Minister a summary of its annual
report and audited financial accounts; and
(b) publish the annual report and audited financial
accounts on its website.
26
25. Notice to the A Government agency exercising any power or function 25(1) Any Government ministry, department or
Commission or taking any action, which may have direct impact on agency exercising any power or function or
upstream petroleum operations shall notify the taking any action, which may have direct impact
Commission prior to – on upstream petroleum operations shall
consult with the Commission prior to –
(a) issuing any Regulation, guideline, Enforcement 25(1)(a) issuing any regulation, guideline,
Order or directive; enforcement order or directive;
29. Indemnity of (1) There is established the Nigerian Midstream and Retained
officers of the Downstream Petroleum Regulatory Authority (the
Commission “Authority”), which shall be a body corporate with
perpetual succession and a common seal.
(2) The Authority shall have the power to acquire, hold Retained
and dispose of property, sue and be sued in its own
30
name.
(c) determine appropriate tariff methodology for - 32(c) determine appropriate tariff
methodologies, including for –
32
(i) processing of natural gas, Retained
(ii) transportation and transmission of natural Retained
gas,
(iii) transportation of crude oil, and Retained
(iv) bulk storage of crude oil and natural gas; Retained
(d) setting cost benchmarks for midstream and Retained
downstream petroleum operations;
(e) provide pricing and tariff frameworks for natural 32(e) provide pricing and tariff frameworks for
gas in midstream and downstream gas operations natural gas in midstream and downstream gas
and petroleum products based on the fair market operations;
value of the applicable petroleum products;
(f) advise the Government, government agencies and Retained
other stakeholders on commercial matters
relating to tariff and pricing frameworks;
(g) develop open access rules applicable to Retained
petroleum liquids and natural gas transportation
pipelines, terminal facilities and bulk storage
facilities;
(h) regulate the bulk storage, distribution, marketing Retained
and transportation pipelines of petroleum
products;
(i) grant, issue, modify, extend, renew, review, Retained
suspend, cancel, reissue or terminate licences,
permits and authorisations for midstream and
downstream petroleum operations;
(j) monitor and enforce compliance with the terms Retained
and conditions of licences, permits and
authorisations issued by the Authority;
(k) keep public registers of – Retained
(i) licences, permits and other
authorisations issued by the
Authority, and
(ii) renewals, assignments,
amendments, suspensions or
33
revocations thereof;
(l) set, define and enforce approved standards and Retained
regulations for design, construction, fabrication,
operation and maintenance of plants,
installations and facilities used or to be used in
midstream and downstream petroleum
operations;
(m) carry out enquiries, tests, audits or Retained
investigations and take other steps to monitor
the midstream and downstream petroleum
operations;
(n) ensure security of supply, development of the Retained
markets and competition in the markets for
natural gas and petroleum products;
(o) ensure third party access to facilities under gas Retained
processing licences, transportation pipelines and
transportation networks and midstream bulk
storage facilities, where such facilities are
operated for the own account of the owner;
(p) develop rules for trading in wholesale gas Retained
supplies to gas distributors;
(q) establish customer protection measures in Retained
accordance with the provisions of this Act;
(r) publish decisions, directions or determinations Retained
of the Authority that have implications for
customers and industry participants, together
with the reasons for such decisions, directions or
determinations which, in the opinion of the
Authority, should be published;
(s) promote the interests of customers with regard Retained
to midstream and downstream petroleum
operations;
(t) promote the principles of economic Retained
development of infrastructure with regard to
midstream and downstream petroleum
34
operations;
(u) promote competition and private sector Retained
participation in midstream and downstream
petroleum operations;
(v) determine the domestic gas demand Retained
requirement and the crude oil required for the
domestic crude oil supply obligation and ensure
that economic and strategic domestic demands
are met;
(w) regulate the supply, distribution, marketing and Retained
retail of petroleum products;
(x) administer and monitor strategic stocks of Retained
petroleum products;
(y) monitor the application of petroleum product Retained
prices, pricing formulae and frameworks;
(z) monitor market behaviour with respect to Retained
midstream and downstream petroleum
operations;
(aa) identify, investigate and prevent abuse of Retained
dominant positions and restrictive business
practice with regard to midstream and
downstream petroleum operations;
(bb) establish, monitor, regulate and enforce Retained
technical, health, environmental and safety
measures relating to midstream and
downstream petroleum operations;
(cc) develop, specify and monitor technical and Retained
safety standards for wholesale marketing,
processing plant, retail marketing and bunkering
of petroleum products;
(dd) ensure the accuracy of metering pumps and 32(dd) ensure the accuracy of metering pumps
related measurement facilities in midstream and
and related measurement facilities in
downstream petroleum operations; midstream and downstream petroleum
operations, pursuant to applicable laws;
(ee) define and enforce approved standards and Retained
35
guidelines for the design, procurement,
construction, operation and maintenance of
plants, installations and facilities in the
midstream and downstream petroleum
operations;
(ff) establish laboratories to provide data storage Retained
and testing, quality assurance and certification
of crude oil, natural gas and petroleum products
and regulate the activities of third party
laboratories used in midstream and downstream
petroleum operations;
(gg) keep and classify records, data and reports as Retained
may be prescribed in regulations or guidelines;
(hh) ensure the promotion of safe and development Retained
of midstream and downstream petroleum
operations;
(ii) issue certificates of quality and quantity to Retained
exporters of crude oil, LNG and petroleum
products;
(jj) implement and enforce compliance with laws, Retained
regulations and policies relating to midstream
and downstream petroleum operations;
(kk) establish parameters and codes of conduct for Retained
operators in the midstream and downstream
petroleum operations;
(ll) monitor the financial viability of operators with Retained
respect to midstream and downstream
petroleum operations;
(mm) develop, maintain and publish a database Retained
of midstream and downstream petroleum
operations;
(nn) monitor and ensure that the quality of Retained
petroleum products sold in Nigeria conform to
defined specifications;
(oo) establish, monitor and ensure compliance with Retained
36
the standards for the processing of petroleum
products in Nigeria;
(pp) request information and documents relating to Retained
licenced activities, including pricing information
and macro-economic data from any licensee or
permit holder in midstream and downstream
petroleum operations;
(qq) publish or direct licensees, lessees and permit Retained
holders to publish, in the interest of the public,
information relating to midstream and
downstream petroleum operations in
accordance with applicable law or regulation;
(rr) determine the domestic base price and the Retained
prices applicable to wholesale customers of the
strategic sectors and gas distributors; and
(ss) perform such other function as may be Retained
necessary to give effect to the provisions of this
Act.
[NEW INSERTION] 32(tt) Ensure and monitor
performance parameters of industry players
and the quality of service provided by servicing
companies in the midstream and downstream
petroleum industry; and
(4) A person appointed pursuant to subsection (2) (a) 34(4) A person appointed pursuant to
and (b) of this section shall have at least 15 years post- subsection (2) (a) and (b) of this section shall
qualification experience in Petroleum or other have at least 15 years post-qualification
relevant sector of the economy and shall hold office experience in petroleum or other relevant
for a period of 5 years and may be re-appointed for a sector of the economy and shall hold office for
further term of 5 years, on such terms and conditions a period of 5 years and may be re-appointed for
as may be specified in the letter of appointment. a further term of 5 years, on such terms and
conditions as may be specified in the letter of
appointment
40
(5) Subject to subsection (4) of this section and section Retained
41(3) of this Act, a member of the Board of the
Authority shall hold office for 5 years and may be re-
appointed for a further term of 5 years.
(7) The Board of the Authority may authorise in writing 34(7) The Board of the Authority may authorise
any executive director, committee of the Board of the in writing any executive director, committee of
Authority, the Authority Chief Executive or any other the Board of the Authority, the Authority Chief
officer or employee of the Authority, to exercise any Executive or any other officer or employee of
power or carry out any duty or function of the the Authority, to exercise any power or carry
Authority under this Act or Regulation made under out any duty or function of the Authority under
this Act. this Act or regulation made under this Act.
41
35. Functions of The Board of the Authority shall - Retained
the Board of the (a) be responsible for the formulation of policy,
Authority supervision and giving strategic direction to the
Authority;
(b) provide general guidance for the carrying out
of the functions of the Authority;
(c) review and approve the business, strategic and
operating plans of the Authority;
(d) consider and approve the annual budget of the
Authority before submission to the National
Assembly for appropriation;
(e) approve the management accounts and
audited accounts of the Authority and consider
the management letter from the external
auditors;
(f) determine the terms and conditions of service
of employees of the Authority;
(g) recommend remuneration, allowances,
benefits and pensions of employees of the
Authority in consultation with the National
Salaries, Incomes and Wages Commission,
having regard to the -
(i) specialised nature of work to be
performed by the Authority,
(ii) need to ensure the financial self-
sufficiency of the Authority, and
(iii) remuneration and allowances paid in the
private sector in upstream petroleum
operations to individuals with equivalent
responsibilities, expertise and skills;
(h) structure the Authority into such number of
departments as it deems fit for the effective
discharge of the functions of the Authority; and
(i) carry out such other functions as may be
necessary for the efficient and effective
42
administration of the Authority under this Act.
36. Executive Directors of the Authority shall be paid from Executive directors of the Authority shall be
Remuneration the funds of the Commission such remuneration and paid from the funds of the Commission such
and allowances allowances as applicable. remuneration and allowances as applicable.
of members of The Authority shall comply with the policy and The Authority shall comply with the policy and
the Board of the guidelines of the National Salaries, Incomes and Wages guidelines of the National Salaries, Incomes and
Authority Commission regarding remunerations. Wages Commission regarding remunerations.
37. Suspension or A member of the Board of the Authority may be Retained
removal of a suspended or removed from office by the President
member of the where the member-
Board of the (a) is found to –
Authority (i) be unqualified for appointment under
section 34 of this Act,
(ii) have been unqualified subsequent to his
appointment,
(iii) be in breach of conflict of interest
provisions in the Companies and Allied
Matters Act or any regulation regarding
conflicts of interest passed pursuant to this
Act;
(b) ceases to be an employee of the ministry or
agency he represents on the Board of the
Authority;
(c) has demonstrated an inability to effectively
perform the duties of his office;
(d) has been absent from the meeting of the Board
of the Authority for 3 consecutive times without
the consent of the Chairman or in the case of the
Chairman, without the consent of the President,
except where good reason is shown for the
absence;
(e) is found guilty of serious misconduct by a Court
or Tribunal of competent jurisdiction; or
(f) has, under the law in force in any country -
(i) been adjudged or declared bankrupt or
43
insolvent and has not been discharged,
(ii) made an assignment to or arrangement or
composition with his creditors which has
not been rescinded or set aside, or
(iii) been declared to be of unsound mind.
44
(a) Processing Systems and Plants; 41(2)(a) Hydrocarbon processing plants,
Installations and Transportation infrastructure.
(b) Transportation and Distribution Infrastructure; 41(2)(b) Distribution Systems, Storage and
Retailing Infrastructure
(c) Health, Safety, Environment and Community; Retained
(d) Economic Regulations and Strategic Planning; Retained
(e) Corporate Services and Administration; Retained
(f) Finance and Accounts; and Retained
(g) Midstream Gas Infrastructure Fund. Retained
(5) An Executive Director shall be appointed on such 41 (5) An executive director shall be appointed
terms and conditions as may be set out in the letter on such terms and conditions as may be set out
of appointment, except as otherwise provided for in in the letter of appointment, except as
this Act. otherwise provided for in this Act.
(7) The President may, not later than 14 days prior to the 41(7) The President may, not later than 90 days
expiration of the tenure of the Authority Chief prior to the expiration of the tenure of the
45
Executive or an Executive Director, re-appoint the Authority Chief Executive or an executive
Authority Chief Executive or Executive Director or director, re-appoint the Authority Chief
appoint another qualified person. Executive or executive director or appoint
another qualified person.
46
the appointment taking effect; or
(e) has, under the laws in force in any country- Retained
i. been adjudged or declared bankrupt or
insolvent and has not been discharged,
ii. made an assignment to or arrangement or
composition with his creditors, which has
not been rescinded or set aside,
iii. been declared to be of unsound mind,
iv. been convicted of any criminal offence by a
court of competent jurisdiction except for
traffic offences, or
v. been disqualified or
vi. suspended from practising his profession by
the order of a competent authority.
42. Employees of The Board of the Authority shall determine the number Retained
the Authority of persons that shall be employees of the Authority.
43. Terms and (1) The employees of the Authority shall be subject to Retained
conditions of terms and conditions set out by the Board of the
service in the Authority.
Authority
(2) The terms and conditions of service referred to in Retained
subsection (1) of this section may provide for –
(a) the appointment, promotion, dismissal and
discipline of employees;
(b) appeals by employees against dismissal or other
disciplinary measures; and
(c) the grant of pensions, gratuities and other
retirement benefits to employees.
47
(5) Employment by the Authority shall be subject to the Retained
provisions of the Pensions Reform Act and officers
and employees of the Authority shall be entitled to
pension and other retirement benefits as prescribed
under the Pensions Reform Act.
(4) At the end of each financial year, any money that Retained
accrued to the Authority Fund pursuant to subsection (2)
of this section, which have not been utilised for the
purposes provided under subsection (3) of this section
of this section, shall be paid into the Consolidated
Revenue Fund.
(7) (9) The Authority shall, not later than the 31st of March Retained
of each year –
(a) submit to the Minister a summary of its annual
report and audited financial accounts; and
(b) publish the annual report and audited financial
accounts on its website.
(b) conduct surveillance on crude oil and natural gas 49(1)(b) conduct surveillance on petroleum
installations, premises and vessels where it liquids and natural gas installations, premises
believes that illegal midstream or downstream and vessels where it believes that illegal
petroleum operations are going on; midstream or downstream petroleum
operations are going on;
(c) enter any midstream or downstream wellsite, 49(1)(c)(i) at which petroleum liquids oil or
52
plant, facility or place – natural gas is refined, processed, stored,
(i) at which crude oil or natural gas is handled or treated, or
refined, processed, handled or treated,
or
(ii) that is used in connection with any 49(1)(c)(ii) that is used in connection with any
midstream or downstream wellsite, midstream or downstream wellsite, plant,
plant, facility or place where crude oil or facility or place where petroleum liquids or
natural gas is refined, processed, handled natural gas are refined, processed, stored,
or treated; handled or treated;
56
(b) be responsible for project management and the
day-to-day running of the affairs of the
Midstream Gas Infrastructure Fund.
d. any other sum, freely donated or accruing to the 52(7)(e) any other sum, freely donated or
Midstream Gas Infrastructure Fund for accruing to the Midstream Gas Infrastructure
development of infrastructure in midstream gas Fund for development of infrastructure in
operations; midstream gas operations;
(9) The levy under subsection (6) (a) of this section 52(9) The levy under subsection 52(7)(a) of this
shall become due within 21 days of the sale of section shall become due within 21 days of the
petroleum products in Nigeria and natural gas sale of petroleum products and natural gas sold
produced and sold, and the Minister shall, after in Nigeria, and the Authority shall, after
consultation with the Council, make regulations for consultation with the Council, make regulations
– for –
(4) The Ministry of Finance Incorporated in consultation 53(4) The Ministry of Finance Incorporated and
with the Government, may increase the equity capital the Ministry of Petroleum Incorporated in
of NNPC Limited. consultation with the Government, may
increase the equity capital of NNPC Limited.
(5) Shares held by the Government in NNPC Limited are 53(5) Shares held by the Government in NNPC
not transferable, including by way of sale, assignment, Limited are not transferable including by way of
mortgage or pledge unless approved by the sale, assignment, mortgage, or pledge unless
Government. approved by the Government and endorsed
National Economic Council on behalf of the
Federation.
(6) Notwithstanding any provision to the contrary in the 53(6) Notwithstanding any provision to the
Companies and Allied Matters Act and except by way contrary in the Companies and Allied Matters
of security, any sale or transfer of shares of NNPC Act and except by way of security, any sale or
Limited shall be at a fair market value and subject to transfer of shares of NNPC Limited shall be at a
an open, transparent and competitive bidding fair market value and subject to an open,
process. transparent and competitive bidding process.
Such sale or transfer of the shares of NNPC
Limited shall be on equal proportion basis of
shares held by the Ministry of Finance
Incorporated and the Ministry of Petroleum
Incorporated.
(7) NNPC Limited and any of its subsidiaries shall conduct 53(7) NNPC Limited and any of its subsidiaries
their affairs on a commercial basis without recourse shall conduct their affairs on a commercial basis
to government funds and their memorandum and in a profitable and efficient manner without
articles of association shall state these restrictions. recourse to government funds and their
memorandum and articles of association shall
state these restrictions; NNPC Limited shall
operate as a CAMA entity, declare dividends to
62
its shareholders and retain 20% of profits as
retained earnings to grow its business.
(2) Assets, interests and liabilities of NNPC not 54 (2) Assets, interests and liabilities of NNPC
transferred to NNPC Limited or its subsidiary under not transferred to NNPC Limited or its
subsection (1) of this section, shall remain the assets, subsidiary under subsection (1) of this section,
interests and liabilities of NNPC until they become shall remain the assets, interests and liabilities
extinguished or transferred to the Government. of NNPC until they become extinguished or
transferred to the Government. Six (6) months
following the determination pursuant to 54(1),
the Minister, the Minister of Finance and the
Attorney-General of the Federation shall
develop a framework for the payment of the
liabilities not transferred to NNPC Limited. If
such determination of which assets, interests
and liabilities to be transferred has not been
concluded within the stipulated period of 18
months, all the assets, interests, liabilities of
NNPC will be deemed to have been transferred
to NNPC Limited after 18 months from the
effective date.
63
(3) NNPC shall cease to exist after its remaining assets, Retained
interests and liabilities other than its assets, interests
and liabilities transferred to NNPC Limited or its
subsidiaries under subsection (1) of this section shall
have been extinguished or transferred to the
Government.
(4) The cost of winding down the assets, interests and Retained
liabilities of NNPC shall be borne by the Government.
56. Subsistence (1) Any guarantee granted or issued by the Government 56 Subject to the provisions of paragraph
of guarantee with regard to the transfer of liability of NNPC to NNPC 92(3)(a), any guarantee granted or issued by
Limited under section 54 of this Act shall be enforceable the Government with regard to the transfer of
against the Government as if such liability was a liability liability of NNPC to NNPC Limited under section
of NNPC, provided that such guarantee was effective 54 of this Act shall be enforceable against the
prior to such transfer. Government as if such liability was a liability of
NNPC, provided that such guarantee was
effective prior to such transfer.
57. Transfer of (1) Upon incorporation of NNPC Limited pursuant to (1) Upon incorporation of NNPC Limited
employees and section 53 of this Act, employees of NNPC shall be pursuant to section 53 of this Act, employees of
conditions of deemed to be employees of NNPC Limited on terms and NNPC and its subsidiaries shall be deemed to be
service condition not less favourable than that enjoyed prior to employees of NNPC Limited on terms and
the transfer of service and shall be deemed to be service condition not less favourable than that enjoyed
for employment related entitlements as specified under prior to the transfer of service and shall be
any applicable law. deemed to be service for employment related
entitlements as specified under any applicable
law.
(2) NNPC Limited shall continue to fulfil the statutory (2) NNPC Limited shall continue to fulfil the
obligations of NNPC in relation to the pension scheme of statutory obligations of NNPC in relation to the
employees of NNPC prior to the date of incorporation of pension scheme of employees of NNPC and its
NNPC Limited. subsidiaries prior to the date of incorporation
of NNPC Limited.
58. The Board of There shall be a Board of the NNPC Limited which shall Retained
NNPC limited perform its duties in accordance with the provisions of
this Act, the Companies and Allied Matters Act and the
articles of association of NNPC Limited.
59. Composition (1) Except as set out in this section, the composition of Retained
of the Board of the NNPC Limited Board shall be determined in
NNPC limited accordance with the provisions of the Companies and
Allied Matters Act and its Articles of Association.
67
(2) The Board of NNPC Limited shall be appointed by the Retained
President and composed of the following members -
(e) a representative of the Ministry of Finance, not 59 (2)(e) a representative of the Ministry of
below the rank of a Director; and Finance, not below the rank of a director; and
(f) two non-executive members with at least 15 59 (2)(f) six non-executive members with at
years post-qualification experience in Petroleum least 15 years post-qualification cognate
or any other relevant sector of the economy. experience in petroleum or any other relevant
sector of the economy one from each
geopolitical zone.
(5) The provisions of this section shall apply where NNPC Retained
Limited remains wholly-owned by the Government
and where NNPC Limited is not wholly owned by
Government, the composition of the Board of NNPC
Limited shall be determined by the shareholders of
NNPC Limited in accordance with the provisions of the
68
Companies and Allied Matters Act and the articles of
association of NNPC Limited.
60. Committees (1) The Board of NNPC Limited shall, within 3 months of Retained
of the Board of the incorporation of NNPC Limited, develop formal and
NNPC limited transparent process for the creation of its committees
and nomination of members of the Board to the
committees.
(4) The Board of NNPC Limited shall have committees for Retained
-
(a) ensuring the integrity of financial and non-
financial reporting;
(b) the nomination of Board members and key
executives;
(c) remuneration of members of the Board of
NNPC Limited; and
(d) any other committee as the Board of NNPC
Limited may consider appropriate.
61. Application of (1) Members of the Board of NNPC Limited shall Retained
principle of discharge their responsibilities in accordance with the
corporate highest standards, practices and principles of corporate
governance governance.
70
care in the best interests of NNPC Limited, the
shareholders and the sustainable development
of Nigeria;
(d) apply the highest ethical standards in performing
its duties, taking into account the interests of its
stakeholders and the fiduciary duty of the
directors to NNPC Limited;
(e) make decisions guided by commercial and
technical considerations that represents good
international petroleum industry practices;
(f) determine and report to the shareholders of
NNPC Limited on key performance indicators on
at least annual basis;
(g) review and guide corporate strategy, major plan
of action, risk policy and business plan;
(h) set performance objectives for NNPC Limited,
the Board of NNPC Limited, members of NNPC
Limited’s management and individual business
units and subsidiaries of NNPC Limited;
(i) monitor NNPC Limited’s corporate performance;
(j) oversee major capital expenditures, acquisitions
and divestitures;
(k) monitor the effectiveness of NNPC Limited’s
governance practices and propose and
implement changes;
(l) select, compensate, monitor and replace
management executives and oversee succession
plan;
(m) align key executive and Board of NNPC Limited
remuneration with the longer term interests of
NNPC Limited, its shareholders and
stakeholders;
(n) monitor and address potential conflicts of
interest of management and members of the
Board of NNPC Limited and breach of fiduciary
71
duty by members of the Board of NNPC Limited;
(o) ensure the integrity of NNPC Limited’s
accounting and financial reporting systems,
including audit of NNPC Limited’s accounts by
independent third party;
(p) ensure that appropriate system of control is in
place for risk management, financial and
operational control and compliance with
applicable law and relevant standards;
(q) oversee the process of disclosure and
communications to shareholders and the public;
and
(r) determine the dividend policy of NNPC Limited,
ensure sustained growth and a sound financial
base for NNPC Limited .
73
(a) carry out petroleum operations on a commercial 64(a) carry out petroleum operations on a
basis; commercial basis, comparable to private
companies in Nigeria carrying out similar
activities;
(c) at the request of the Commission carry out test 64(d) carry out test marketing to ascertain the
marketing to ascertain the value of crude oil and value of crude oil and report to the
report to the Commission; Commission;
(d) be vested with the rights to natural gas under 64(e) be vested with the rights to natural gas
production sharing contracts entered into prior to under production sharing contracts entered
the effective date; into prior to and after the effective date of this
Act;
(e) upon the request of the Commission, act as agent 64(f) Carry out the management of production
of the Commission for the management of sharing contracts for a fee, based on the profit
production sharing contracts for a fee, based on oil share or profit gas share in accordance with
74
the profit oil share or profit gas share to the provisions of subsection (c) of this Section.
Government under such contracts between NNPC
Limited and the Commission;
(f) with respect to any joint operating agreement in 64(g) with respect to any joint operating
which NNPC is a party on the effective date agreement in which NNPC is a party on the
assume the working interest held by NNPC effective date assume the working interest held
irrespective of whether such licence or lease is by NNPC irrespective of whether such licence or
converted pursuant to section 92 of this Act; lease is converted pursuant to section 92 of this
Act;
(g) engage in the development of renewable 64(h) engage in the development of renewable
resources in competition with private investors; resources in competition with private investors;
(h) promote the domestic use of natural gas through 64(i) promote the domestic use of natural gas
development and operation of large-scale gas through development and operation of large-
utilization industries; scale gas utilization industries;
(i) maintain the role of NNPC, where companies elect 64(j) maintain the role of NNPC, pursuant to
not to convert pursuant to Section 92 of this Act; Section 54 of this Act;
(j) carry out task requested by the Commission or 64(k) carry out task requested by the
Authority on a fee basis; and Commission or Authority on a fee basis and
generally engage in activities that ensures
National energy security in an, efficient
manner, in the overall interest of the
Federation;
(k) carry out such other tasks as may be determined 64(l) carry out such other tasks as may be
by the Board of NNPC Limited. determined by the Board of NNPC Limited; and
68. (1) Title to any data and its interpretation relating to Retained
Administration of upstream petroleum operations are vested in the
acreage and Government of the Federation of Nigeria and shall be
vesting of data administered by the Commission.
(4) The Commission may issue a permit for the collection 68 (4) Delete
of geological samples for scientific research.
69. National grid (1) The Commission shall, after consultation with the Retained
system Surveyor-General of the Federation, adopt a national
grid system for acreage management.
78
(2) The grid system referred to under subsection (1) of Retained
this section shall be based on the UTM system or any
other projection system in use by the office of the
Surveyor-General of the Federation.
(4) The basic unit of the grid system shall be a parcel of Retained
one square kilometer, subject to adjustment of the
zones and national boundary.
79
70. Licences and (1) There shall be the following Licences and Leases 70 (1) There shall be the following licences and
leases under this Act – leases under this Act related to upstream
petroleum operations –
(a) petroleum exploration licence, which may be 70 (1) (a) petroleum exploration licence, which
granted to qualified applicants to explore may be granted to qualified applicants to carry
petroleum on a speculative and non-exclusive out petroleum exploration operations on a
basis; non-exclusive basis;
(b) petroleum prospecting licence, which may be 70(1)(b) petroleum prospecting licence, which
granted to qualified applicants to carry out may be granted to qualified applicants to-
petroleum exploration operations on an exclusive (i) drill exploration and appraisal wells and
basis; and do corresponding test production on an
exclusive basis; and
(ii) carry out petroleum exploration
operations on a non-exclusive basis; and
(c) petroleum mining lease, which may be granted to 70(1)(c) petroleum mining lease, which may be
qualified applicants to search for, win, work, carry granted to qualified applicants to-
away and dispose of crude oil, condensates and (i) win, work, carry away and dispose of
natural gas. crude oil, condensates and natural gas
on an exclusive basis;
(ii) drill exploration and appraisal wells and
carry out the related test production on
an exclusive basis; and
(iii) carry out petroleum exploration
operations on a non-exclusive basis.
71. Petroleum (1) The Commission shall be responsible for granting of Retained
exploration petroleum exploration licences.
80
licence (2) The holder of a petroleum exploration licence shall Retained
have non-exclusive right to carry out petroleum
exploration operations within the area provided for in
the licence.
(4) A Petroleum Exploration Licence may cover an area 71(4) A petroleum exploration licence may
that includes Petroleum Prospecting Licence or cover an area that includes petroleum
Petroleum Mining Lease, provided that the holders of prospecting licences or petroleum mining
such licences or leases, shall have no obligation to leases, provided that the holders of such
purchase the results of any survey conducted under the licences or leases, shall have no obligation to
petroleum exploration licence. purchase the results of any survey conducted
under the petroleum exploration licence.
(5) A petroleum exploration licence granted in respect 71 (5) A petroleum exploration licence granted
of frontier acreages may include a provision permitting in respect of frontier acreages may include a
the Licensee to select, based on the result of his provision permitting the licensee to select,
exploration work and be granted one or more petroleum based on the result of his exploration work and
prospecting licences prior to the termination of the be granted one or more petroleum prospecting
Licence containing the fiscal provisions stipulated in licences prior to the termination of the licence
Chapter Four of this Act. containing the fiscal provisions stipulated in
Chapter Four of this Act.
(6) The Commission shall have sole right and title over Retained
any acquired raw and interpreted data obtained by a
licensee pursuant to a petroleum exploration licence,
provided that the licensee shall be entitled to grant a
data use licence to a third party subject to a written
authorisation by the Commission, which shall not be
81
unreasonably withheld.
(7) A Licensee is entitled to a fee from a third party for 71 (7) A licensee is entitled to a fee from a third
data use licence granted under subsection (6) of this party for data use licence granted under
section and shall remit to the Commission any agreed subsection (6) of this section and shall remit to
portion of the fee due to the Commission. the Commission any agreed portion of the fee
due to the Commission.
(9) The Commission shall have sole right and title over all Retained
acquired and interpreted data from existing speculative
survey agreements entered into with the Department of
Petroleum Resources on behalf of the Government prior
to the effective date.
[NEW INSERTION] 71(10) the carrying out of
geological, geophysical or geochemical surveys
for scientific or educational purposes in relation
to petroleum do not require a petroleum
exploration licence, where the results of such
surveys are not for sale or commercial gain.
72. Petroleum (1) The holder of a petroleum prospecting licence shall, Retained
prospecting subject to the fulfilment of obligations imposed by this
licence Act, have -
(a) exclusive right to drill exploration wells and non- 72 (1) (a) exclusive right to drill exploration and
exclusive right to carry out petroleum appraisal wells and non-exclusive right to carry
exploration operations within the area provided out petroleum exploration operations within
for in the Licence; and the area provided for in the licence; and
(b) right to carry away and dispose of crude oil or 72(1)(b) right to carry away and dispose of
natural gas won or extracted during the drilling crude oil or natural gas won or extracted during
82
of exploration wells as a result of production the drilling of exploration or appraisal wells as a
tests, result of production tests,
subject to the fulfilment of obligations imposed by Retained
this Act.
(3) Where a holder of a petroleum prospecting licence 72(3) Where a holder of a petroleum
fails to fulfil any term or condition of the licence, it shall prospecting licence fails to fulfil any term or
not, except as provided in the Licence, give the Minister condition of the licence, it shall not, except as
a right of claim against the Licensee or be deemed a provided in the licence, give the Minister a right
breach of the Licence, if the failure arises from force of claim against the licensee or be deemed a
majeure. breach of the licence, if the failure arises from
force majeure.
(4) Where there is any delay by a Licensee in the 72 (4) Where there is any delay by a licensee in
fulfilment of any term or condition of a petroleum the fulfilment of any term or condition of a
prospecting licence caused by force majeure, the period petroleum prospecting licence caused by force
of such force majeure shall be added to the period fixed majeure, the period of such force majeure shall
for the fulfilment of the applicable term or condition, be added to the period fixed for the fulfilment
provided that such period shall not exceed 3 years in of the applicable term or condition, provided
total after which, the licence may be terminated by the that such period shall not exceed 3 years in total
Commission or the licensee. after which, the licence may be terminated by
the Commission or the licensee.
(5) The Minister shall, on the recommendations of the 72(5) The Minister may grant a petroleum
Commission, grant a petroleum prospecting licences to prospecting licence to a qualified applicant
a qualified applicant. recommended by the Commission and shall not
grant such licence to any other person. Where
the Minister does not grant the licence, the
Minister shall inform the Commission in writing
for the rationale of the decision.
83
[NEW INSERTION] 72(6) Notwithstanding the
provisions of this section, a petroleum
prospecting licence may also be granted
pursuant to section 93 of this Act.
73. Bidding (1) Subject to the provisions of sections 71(5), 74(3), Retained
process 81(1) and 93(2) of this Act, petroleum prospecting
licence or petroleum mining lease shall only be granted
–
(a) based on a fair, transparent and competitive
bidding process; and
(b) in compliance with the provisions of this Act,
regulations made under this Act and licensing
round guidelines issued by the Commission for
each licensing round.
(3) Subject to the provisions of this Act, the Minister 73(3) Subject to subsection 71(5) and other
may, on the recommendation of the Commission, grant provisions of this Act, the Minister may, on the
a petroleum prospecting licence or petroleum mining recommendation of the Commission, grant a
lease to a winning bidder in accordance with section 74 petroleum prospecting licence or petroleum
of this Act, provided that the winning bidder has mining lease to a winning bidder in accordance
complied with the requirements of the bid invitation with section 74 of this Act, provided that the
. winning bidder has complied with the
requirements of the bid invitation.
(4) The Minister shall inform the Commission of his Retained
decision within 90 days of the application for licence or
lease and where he fails to inform the Commission
within the stipulated time, the licence or lease shall be
deemed granted.
74. Award (1) The grant of a petroleum prospecting licence or a 74(1) The grant of a petroleum prospecting
process petroleum mining lease on a previously appraised area licence or a petroleum mining lease on a
of a petroleum prospecting licence or a surrendered, previously appraised area of a petroleum
84
relinquished or revoked petroleum mining lease in, prospecting licence or a surrendered,
under or upon the territory of Nigeria, shall be by an relinquished or revoked petroleum mining
open, transparent, competitive and non-discriminatory lease in, under or upon the territory of Nigeria,
bidding process conducted by the Commission pursuant shall be by an open, transparent, competitive
to section 73(3) of this Act. and non-discriminatory bidding process
conducted by the Commission pursuant to
subsection 73(1) of this Act.
85
petroleum prospecting licence or petroleum mining
lease to a qualified investor identified in the agreement
or treaty.
(5) The Commission shall call for bids in accordance with Retained
a procedure published on its website and in at least two
international financial newspapers and two national
newspapers with wide coverage.
(6) Where the Commission calls for bids pursuant to this 74(6) Where the Commission calls for bids
section, it shall prescribe a technical, legal, social, pursuant to this section, it shall prescribe in a
economic and financial requirement, including the regulation or guideline the minimum pre-
minimum experience and capacity for an applicant in a qualification criteria of prospective bidders in
regulation or guideline, and the applicant shall be terms of technical and financial requirements
chosen in accordance with the regulation or guideline. and previous experience.
(4) Where a licensee considers that a discovery merits 78(4) Where a licensee considers that a
appraisal, the Licensee shall submit to the Commission discovery merits appraisal, the licensee shall
within 180 days for approval – submit to the Commission within one year for
approval –
(5) A licensee shall, upon the approval of the appraisal 78(5) The Commission shall act on the approval
programme and appraisal area by the Commission, request for the appraisal programme within 60
promptly carry out the committed appraisal programme days after its submission and a licensee shall,
and the Commission shall act on the appraisal upon the approval of the appraisal programme
and appraisal area by the Commission,
89
programme within 60 days after its submission. promptly carry out the committed appraisal
programme
(7) The provisions of section 88(3) of this Act shall apply Retained
to any appraisal area under subsections (5) and (6) of
this section.
(d) declare a significant gas discovery; or 78(8)(b) declare a significant gas discovery or a
significant crude oil discovery; or
(e) inform the Commission that the discovery is of 78(8)(c) inform the Commission that the
no interest to the licensee. discovery is of no interest to the licensee.
(9) Where a significant gas discovery has been declared, 78(9) Where a significant gas discovery or
the licensee shall be entitled to retain the area of such significant crude oil discovery has been
significant gas discovery for a retention period as may be declared, the licensee shall be entitled to retain
determined by the Commission, which shall not be more the area of such significant gas discovery or
than 10 years from the day the declaration was made. significant crude oil discovery for a retention
period as may be determined by the
Commission, which shall not be more than 10
years from the day the declaration was made
and with the approval of the Commission a
licensee is entitled to drill further appraisal
wells.
90
(10) The retention area of a significant gas discovery 78(10) The retention area of a significant gas
shall continue to subsist pursuant to a petroleum discovery or significant crude oil discovery shall
prospecting licence until the expiration of the period continue to subsist pursuant to a petroleum
under subsection 0 of this section or declaration of a prospecting licence until the expiration of the
commercial discovery by the licensee. period under subsection (9) of this section or
declaration of a commercial discovery by the
licensee.
(11) The Commission shall approve an area of a 78(11) The Commission shall approve an area of
significant gas discovery which shall not be larger than a significant gas discovery or significant crude
the outer boundary of the discovery declared by the oil discovery which shall not be larger than the
licensee, including a zone of not more than 2 kilometres outer boundary of the discovery declared by
surrounding the outer boundary; provided that such the licensee, including a zone of not more than
area shall not extend beyond the area described in the 2 kilometres surrounding the outer boundary;
applicable petroleum prospecting licence. provided that such area shall not extend
beyond the area described in the applicable
petroleum prospecting licence.
(12) The provisions of section 88(3) of this Act shall apply 78 (12) The provisions of section 88(3) of this
to any Retention Area. Act shall apply to any retention area.
(13) Where, upon the expiry of the Retention Period 78(13) Where, upon the expiry of the retention
determined pursuant to subsection (9) of this section, period determined pursuant to subsection (9)
the licensee has not declared a Commercial Discovery, of this section, the licensee has not declared a
the area declared pursuant to subsection (9) of this commercial discovery, the area declared
section shall be immediately relinquished by the pursuant to subsection (9) of this section shall
Licensee. be immediately relinquished by the licensee.
(15) Where a Licensee declare a discovery of no interest 78(15) Where a licensee declare a discovery of
pursuant to subsection (3) or 0 of this section, the no interest pursuant to subsection (3) or (8) of
91
Commission may require the relinquishment of the this section, the Commission may require the
parcels that cover the structure of such discovery. relinquishment of the parcels that cover the
structure of such discovery.
(3) Where the development of a commercial discovery 79(3) Where the development of a commercial
requires construction of facilities for midstream discovery requires construction of facilities for
petroleum operations in a manner integrated with midstream petroleum operations in a manner
the upstream petroleum operations, a licensee may integrated with the upstream petroleum
submit the development plan as a single integrated operations, a licensee may submit the
project, which may be reviewed by the Commission development plan as a single integrated
and the Authority. project, which may be reviewed by the
Commission.
(4) Where a single project is submitted, the Commission 79(4) Where a single integrated project is
and Authority shall – submitted, the Commission shall review and
implement the project based on its regulatory
responsibilities.
(a) review the project based on their Delete
regulatory responsibilities; and
(b) cooperate to review and decide Delete
on the project.
(5) Where a Licensee does not submit a field 79(5) Where a licensee does not submit a field
development plan and work commitment within the development plan and work commitment
period set forth in subsection (1) of this section, the within the period set forth in subsection (1) of
area containing the commercial discovery shall be this section, the area containing the
relinquished. commercial discovery shall be relinquished.
(6) Where the licensee has submitted a field 79(6) Where the licensee has submitted a field
development plan for the field, the licence shall development plan for the field, the licence shall
94
continue until the process for the grant of a Lease has continue until the process for the grant of a
been completed or the Commission has decided not lease has been completed or the Commission
to grant the Lease. has decided not to grant the lease.
(9) The Commission shall give its final decision to 79(9) The Commission shall give its final
approve or disapprove a Field development plan decision to approve or disapprove a field
within 180 days after the submission of the Field development plan within 180 days after the
development plan in compliance with the submission of the field development plan in
requirements in subsection (2) of this section and a compliance with the requirements in
Lease shall be granted upon the approval of the Field subsection (2) of this section and a lease shall
development plan. be granted upon the approval of the field
development plan.
(10) Where the Commission fails to respond to the field Retained
development plan within 180 days, the plan shall be
deemed approved.
(11) A commitment by a Licensee under this section 79(11) A commitment by a licensee under this
shall be supported by a bank guarantee, letter of section shall be supported by a bank guarantee,
credit or performance bond issued by a bank letter of credit or performance bond issued by
95
acceptable to the Commission for an amount a bank acceptable to the Commission for an
determined by the Commission. amount determined by the Commission.
(12) Upon approval of a field development plan, no 79(12) Upon approval of a field development
material modification shall be made except in plan, no material modification shall be made
accordance with the approval provisions set out in except in accordance with the approval
subsection (2) of this section and the submission provisions set out in subsection (2) of this
and approval of an amended Field development section and the submission and approval of an
plan. amended field development plan.
(13) Upon the granting of one or more petroleum 79(13) Upon the granting of one or more
mining leases, the annual work program and status petroleum mining leases, the annual work
report referred to under section 78(17) of this Act program and status report referred to under
shall include the program and report for each Lease. section 78(17) of this Act shall include the
program and report for each lease; and
96
licensee or lessee on the basis of a unitised
development of the applicable commercial
discovery, where -
(a) the petroleum reservoir covered by an area to
which a licence or lease relates extends beyond
the boundaries of such area into an area to
which another licence or lease relates and in
respect of which a different person is the
licensee or lessee; and
(b) at least one licensee or lessee has made a
declaration of a commercial discovery.
(3) The Commission may, upon receipt of a notification 80(3) The Commission may, upon receipt of a
under subsection (1) of this section direct the notification under subsection (1) of this section
applicable Licensee or Lessee to enter into a unit direct the applicable licensee or lessee to enter
agreement to develop the petroleum reservoir as a into a unit agreement to develop the petroleum
unit, within a period of time to be determined by the reservoir as a unit, within a period of time to be
commission, which shall not be less than 2 years. determined by the Commission, which shall not
be less than 2 years.
(6) Where the applicable Licensees or Lessees are unable 80(6) Where the applicable licensees or lessees
to reach agreement within the time limit imposed by are unable to reach agreement within the time
the Commission pursuant to subsection (3) of this limit imposed by the Commission pursuant to
section, the Commission may, in compliance with subsection (3) of this section, the Commission
subsections (4) and (5) of this section, impose a fair may, in compliance with subsections (4) and (5)
and equitable terms and conditions of a unit of this section, require the licensees or lessees
agreement to the licensees or lessees. to jointly appoint a Consultant to develop terms
and conditions that are fair and equitable to
licensees or lessees and Government and which
shall be binding on the licensees or lessees after
approval by the Commission. Where the
applicable licensees or lessees fail to appoint a
Consultant within two months after the
requirement by the Commission, the
Commission shall appoint the respective
Consultant. The remuneration of the
Consultant shall be paid by the licensees or
lessees.
(8) Where a petroleum reservoir unitised pursuant to 80(8) Where a petroleum reservoir unitised
this section is able to continue in production after the pursuant to this section is able to continue in
expiration of one or more licences or leases relating production after the expiration of one or more
to the petroleum reservoir, the Commission may licences or leases relating to the petroleum
grant an extension of the term of the licence or lease. reservoir, the Commission may grant an
extension of the licence(s) and lease(s) in the
unitised field.
(9) The Commission may from time to time issue
regulations in relation to unitisation. Retained
81. Petroleum (1) A petroleum mining lease shall be granted for each Retained
mining leases commercial discovery of crude oil or natural gas or
both, to the licensee of a petroleum prospecting
licence who has -
(a) satisfied the conditions imposed on the licence
or the licensee under this act; and
(b) received approval for the applicable field
development plan from the Commission.
(7) The Commission shall approve the proposed area, 81(7) The Commission shall approve the
which shall contain every parcel within the outer proposed area, which shall contain every parcel
boundary of the field based on oil-water contacts or within the outer boundary of the field based on
other reservoir limits, including a zone surrounding oil-water contacts, spill point, intersection of
the boundary consisting of all parcels that are in planned development wells with the reservoirs
whole or in part within one kilometre of such outer or other reservoir limits, including a zone
boundary; provided that such area shall not contain surrounding the boundary consisting of all
100
parcels – parcels that are in whole or in part within one
kilometre of such outer boundary; provided
that such area shall not contain parcels -
(a) outside the original licence area from which the Retained
lease is derived;
(b) in areas relinquished by the licensee; or Retained
(c) in an existing petroleum mining lease. Retained
101
has been subdivided pursuant to section 69(5) of
this act, less than one subdivision of such parcel.
[NEW INSERTION] 81(11) Notwithstanding the
provisions of this section, a petroleum mining
lease may also be granted pursuant to
subsections 74(3) and 93 of this Act; and
(2) A lessee under a petroleum mining lease shall have 82(2) A lessee under a petroleum mining lease
the right to continue to explore in the lease area. shall have the exclusive right to drill exploration
and appraisal wells in the lease area and the
non-exclusive right to carry out petroleum
exploration operations
(3) A petroleum mining lease for conducting upstream Retained
petroleum operations shall only be granted on the
basis of a commitment from the applicable lessee to
-
(a) develop and produce the commercial discovery 82(3)(a) develop and produce the commercial
of crude oil or natural gas in the area to which discovery of crude oil or natural gas in the area
the lease relates in accordance with the to which the lease relates in accordance with
102
applicable development plan; or the applicable field development plan; or
103
(2) The Commission shall define the required detail and Retained
classification of the summary under subsection (1) of
this section and the summaries shall be non-confidential
and published on the website of the Commission.
(3) The text of any existing contract, Licence or Lease and 83(3) The text of any existing contract, licence
any amendment or side letter with NNPC shall – or lease and any amendment or side letter with
NNPC shall –
104
(7) The data referred to in subsection (6) of this section 83(7) The data referred to in subsection (6) of
shall not be confidential, except for a period of this section shall not be confidential, except for-
confidentiality of exploration data, which shall not
exceed–
(a) 5 years or the period until the relinquishment (a) trade secrets and proprietary information
date of the area, whichever is lower; or and other information as approved by the
(b) such other period as prescribed in the National Commission;
Data Repository Regulations, 2020. (b) the earlier of a period of 5 years or the
period until the relinquishment date of the
licence area pursuant to subsections 88(1)
and 88(2), with respect to exploration data
including exploration and appraisal wells
and geophysical surveys;
(c) 10 years for specific surveys carried out
under subsection 71(6); and
(d) such other information for such periods as
determined in the National Data
Repository Regulations, provided,
however, that information related to
development wells and oil and gas field
production related data shall not be
confidential.
(8) Data in the National Data Repository of the 83(8) Data in the National Data Repository of
Commission shall be accessible to any interested person the Commission shall be accessible to any
under such terms as may be determined by the interested person under such terms as may be
Commission. determined by the Commission, provided,
however, that the respective fees required for
making non-confidential data available shall
not exceed the reasonable cost of copying any
data and a minimal hourly payment for the use
of work stations.
84. Power to (1) Unless prohibited by this Act or regulation under this 84(1) Unless otherwise prohibited by this Act or
enter into Act, where the Commission grants a licence or lease, a regulation under this Act, where the Minister
contracts licensee or lessee may enter into a contract with a third grants a licence or lease, a licensee or lessee
105
party for the exploration, prospecting, production or may enter into a contract with a third party for
development of crude oil or natural gas or both, in the exploration, prospecting, production or
respect of any licence or lease held by the licensee or development of crude oil or natural gas or both.
lessee.
(2) The Commission shall develop a model licence and 84(2) The power to enter into contracts
model lease, which may contain an obligation to comply pursuant to subsection (1) of this section shall
with contractual provisions in a model contract attached not confer on any licensee or lessee the right to
to the licence or lease. assign an interest in any licence or lease, except
in accordance with the provisions of this Act.
(3) The model licence and model lease referred to under Delete
subsection (2) of this section shall comply with the
provisions of this Act and may contain the following
additional contractual provisions -
(a) a production sharing contract for the
exploration, development and production of
petroleum on terms under which the financial
risk-bearing party shall recover costs from a
share of production as established in the
contract from the applicable area;
(b) a profit sharing contract which is a production
sharing contract whereby the profit oil is
provided in cash to Government;
(c) a risk service contract for the exploration,
development and production of petroleum on
terms under which the financial risk-bearing
party shall recover costs by a payment in cash or
in kind from petroleum produced from the
applicable area;
(d) a concession agreement for exploration,
development and production of petroleum,
which may include an incorporated or
unincorporated joint venture with NNPC
Limited; and
106
(e) any contract being a variation of the contracts
pursuant to paragraphs (a), (b) (c) or (d), of this
subsection or a contract which, at the time, is an
internationally recognised form of contract for
the exploration and production of petroleum.
85. Model A licence or lease described under section 84(2) of this 85(1) The Commission shall develop a model
contracts act shall not be granted by the commission unless the licence and model lease, which may contain an
appropriate model contract is attached to the licence or obligation to comply with fiscal obligations and
lease and the licensee or lessee is the contractor. other provisions related to fees, rents, royalties
for such contract attached to or incorporated in
the model licence or model lease.
(4) The development period for a petroleum mining 86(4) The development period for a petroleum
lease granted pursuant to section 81 of this Act shall
mining lease granted pursuant to section 81 of
be the period established in the Field development
this Act shall be the period established in the
plan under section 79(2)(n) of this Act and wherefield development plan under section 79(2)(n)
development period is not stipulated, the of this Act and where development period is
development period shall be - not stipulated, the development period shall be
-
(a) 5 years for an onshore lease; and Retained
(b) 7 years for a Lease in shallow water or deep 86(4)(b) 7 years for a lease in shallow water or
offshore or a lease in a frontier acreage. deep offshore or a lease in a frontier acreage.
(2) A petroleum mining lease shall be renewed by the 87(2) A petroleum mining lease shall be
111
Commission where it is satisfied that the Lessee – renewed by the Commission where it is
satisfied that the lessee –
87(2)(a) has fulfilled its obligations relating to
the development of the lease area;
(3) The renewal referred to under subsection (2) of this 87(3) The renewal referred to under subsection
section shall be on terms and conditions determined (2) of this section shall be on terms and
by the Commission and the Lessee shall pay a conditions determined by the Commission and
renewal bonus of an amount specified by the the lessee shall pay a renewal bonus of an
Commission based on the percentage of the market amount specified by the Commission based on
value on the renewal date prescribed in the the percentage of the market value on the
regulation made under this Act. renewal date prescribed in the regulation made
under this Bill.
(3) Every appraisal area or retention area shall be 88 (3) Every appraisal area or retention area
retained as provided for under this act and the shall be retained as provided for under this Act
petroleum prospecting licence shall be extended and where one or more declarations of a
until the related petroleum mining lease has been commercial discovery have been made, the
granted or denied. petroleum prospecting licence shall be
extended until all related petroleum mining
leases have been granted or denied.
(4) A Licensee of a petroleum prospecting licence may 88 (4) A licensee of a petroleum prospecting
voluntarily relinquish parcels and sub-parcels under licence may voluntarily relinquish parcels and
section 69 of this Act, provided that the – sub-parcels under section 69 of this Act,
provided that the –
Retained
113
field under this Act; and a producing field under this Bill; and
(8) Any rent paid in respect of an area or zone that is 88(8) Any rent paid in respect of an area or zone
relinquished pursuant to this section shall not be that is relinquished pursuant to this section
refundable and such relinquishment shall be without shall not be refundable and such
prejudice to any obligation or liability imposed by or relinquishment shall be without prejudice to
incurred under the applicable Licence or Lease. any obligation or liability imposed by or
incurred under the applicable licence or lease.
(2) Any rent or fee paid prior to a surrender pursuant to 89(2) Any rent or fee paid prior to a surrender
subsection (1) of this section shall not be refundable pursuant to subsection (1) of this section shall
and the licence or lease surrendered shall be without not be refundable and the licence or lease
prejudice to any obligation or liability imposed by or surrendered shall be without prejudice to any
incurred under the applicable Licence or Lease. obligation or liability imposed by or incurred
under the applicable licence or lease.
90. Rights of way Subject to applicable law and terms and conditions 90 Subject to applicable law and terms and
relating to prescribed by the Commission, a holder of a petroleum conditions prescribed by the Commission, a
upstream prospecting licence, petroleum exploration licence or holder of a petroleum prospecting licence,
petroleum petroleum mining lease is entitled with the approval of petroleum exploration licence or petroleum
operations the Commission to a right of way for the laying, mining lease is entitled with the approval of the
operation and maintenance of gathering lines, Commission to rights of way for the laying,
115
telephone lines, power lines and other similar lines operation and maintenance of gathering lines,
through or across the areas the holder may require. telephone lines, power lines and other similar
lines through or across the areas the holder
may require.
91. Rights of way (1) Subject to subsection (2) of this section, the 91(1) Subject to subsection (2) of this section,
reserved for the Commission may reserve in accordance with applicable the Commission may preserve in accordance
Commission law, a right of way, easement or other right over an area with applicable law, a right of way, easement or
to which a petroleum prospecting licence, a petroleum other right over an area to which a petroleum
exploration licence or a petroleum mining lease, which prospecting licence, a petroleum exploration
the Commission considers necessary for the laying, licence or a petroleum mining lease, which the
operation and maintenance of pipelines, telephone lines Commission considers necessary for the laying,
and power lines and any right of way or other right operation and maintenance of pipelines,
reserved shall continue for the benefit of any person to telephone lines and power lines and any right
whom the Commission may subsequently grant the of way or other right reserved shall continue for
same. the benefit of any person to whom the
Commission may subsequently grant the same.
116
(b) comply with applicable law relating to town or 91(3)(b) comply with applicable law relating to
country planning or regulating the construction, town or country planning or regulating the
alteration, repair or demolition of buildings, or construction, alteration, repair or demolition of
providing for similar matters, which relates to buildings, or providing for similar matters,
the carrying out of operations authorised by the which relates to the carrying out of operations
Licence or Lease. authorised by the licence or lease.
92. Voluntary (1) A holder of an existing oil prospecting licence or oil 92(1) A holder of an existing oil prospecting
conversion of an mining lease may enter into a voluntarily conversion licence or oil mining lease may enter into a
oil prospecting contract under this Act. voluntary conversion contract under this Bill.
licence to a
petroleum (2) A licensee or lessee under a conversion contract shall 92(2) A licensee or lessee under a conversion
prospecting benefit from applicable fiscal incentives where the contract shall benefit from the fiscal provisions
licence or oil licensee or lessee complies with the provisions of this under Chapter Four of this Bill, where the
mining lease to Act. licensee or lessee complies with the provisions
petroleum of this Bill.
mining lease
(3) Where a holder of an existing oil prospecting licence 92(3) The conversion contract shall contain a
or oil mining lease who wishes to enter into a voluntarily termination clause of all outstanding
conversion contract under this Act, the conversion arbitration and court cases related to the
contract shall contain a termination clause of all respective oil prospecting licence or oil mining
outstanding arbitration and court cases related to the lease and for the avoidance of doubt –
respective oil prospecting licence or oil mining lease and
for the avoidance of doubt -
(a) any stability provisions or guarantees provided Retained
by NNPC in respect of oil prospecting licences or
oil mining leases to be converted shall be null
and void; and
(b) the incentive provisions contained in sections 11 Retained
and 12 of the Petroleum Profit Tax Act shall not
apply.
(4) A Conversion contract shall be concluded at a date 92(4) A conversion contract shall be concluded
(“Conversion Date”) which is the earlier of - at a date (“conversion date”) which is the
earlier of –
117
(a) 18 months from the effective date; and Retained
(b) the expiration date of the oil mining lease or date Retained
of conversion of the oil prospecting licence to an
oil mining lease.
(6) Where a holder of an existing oil prospecting licence 92(6) Where a holder of an existing oil
or oil mining lease does not enter into a conversion prospecting licence or oil mining lease does not
contract prior to the conversion date, the terms and enter into a conversion contract prior to the
conditions applicable to the oil prospecting licence or oil conversion date, the terms and conditions
mining lease prior to the effective date of this Act shall applicable to the oil prospecting licence or oil
continue to apply to the oil prospecting licence or oil mining lease prior to the effective date of this
mining lease, subject to the provisions of section Bill shall continue to apply to the oil prospecting
311(2)(b) and 303(1) of this Act. licence or oil mining lease, subject to the
provisions of subsections 124(2), 125(6), 174(6)
and 303(1) of this Bill, as well as paragraph
311(2)(b) of this Bill.
93. (1) A holder of oil mining lease, including oil mining lease Retained
Relinquishment that is subject to production sharing contract, shall at
upon renewal or the renewal date applicable to the oil mining lease or at
conversion of an the conversion date, designate each area and zone of
oil mining lease the oil mining lease as areas and zones -
(a) which, in the opinion of the holder, merit Retained
appraisal and for which the holder of the oil
mining lease is prepared to present an appraisal
program pursuant to section 78 of this Act;
(b) in respect of which the holder is prepared to Retained
118
make a declaration of a commercial discovery
pursuant to section 78 of this Act and submit a
field development plan to the Commission
pursuant to section 79 of this Act;
(c) in respect of which the holder is prepared to 93(1)(c) in respect of which the holder is
make a declaration of a significant gas discovery prepared to make a declaration of a significant
pursuant to section 78 of this Act and submit an gas discovery or a significant crude oil discovery
application for approval of a retention area; pursuant to section 78 of this Bill and submit an
application for approval of a retention area;
(2) Where the total acreage selected pursuant to 93(2) Where the total acreage selected
subsection (1) of this section is less than 40% of the area pursuant to subsection (1) of this section is less
to which the applicable oil mining lease applies, the than 40% of the area to which the applicable oil
holder may select additional areas covered by the oil mining lease applies, the holder may select
mining lease for conversion to a petroleum prospecting additional areas covered by the oil mining lease
licence in such a manner that the total of all areas for conversion to a petroleum prospecting
selected shall not be more than 40% of the oil mining licence in such a manner that the total of all
lease area. areas selected shall not be more than 40% of
the oil mining lease area and where the total
acreage selected pursuant to subsection (1) is
more than 40%, the holder shall be entitled to
keep such larger area, consisting solely of the
selected areas;
(4) Areas and zones subject to an oil mining lease and Retained
not selected by the holder pursuant to subsections (1)
and (2) of this section shall be relinquished by the
holder.
(5) The relinquishment date for the purpose of 93(5) The relinquishment date for the purpose
subsection (4) of this section shall be the renewal date of subsection (4) of this section shall be the
or the conversion date. renewal date or where the holder of the oil
mining lease decides to convert pursuant to
subsection 92(1), the conversion date.
(iii) Royalty purposes, the production of each 93(6)(b)(ii) royalty purposes, the production of
petroleum mining lease shall be the basis. each petroleum mining lease shall be the basis.
(7) Where a Licensee of an oil prospecting licence, 93(7) Where a licensee of an oil prospecting
including any oil prospecting licence that is subject to a licence, including any oil prospecting licence
production sharing contract, voluntarily opts to convert that is subject to a production sharing contract,
its Licence to a petroleum prospecting licence pursuant voluntarily opts to convert its licence to a
to Section 92 of this Act, it shall select as provided in petroleum prospecting licence pursuant to
subsection (1) of this section the areas and zones Section 92 of this Act, it shall select as provided
indicated in this subsection upon the conversion date in subsection (1) of this section the areas and
and the Commission shall convert the applicable oil zones indicated in this subsection upon the
prospecting licence of the areas and zones - conversion date and the Commission shall
convert the applicable oil prospecting licence of
the areas and zones -
(b) selected pursuant to subsection (c) and (e) of this 93(7)(b) selected pursuant to subsection
section shall be converted into petroleum 93(1)(d) and 93(1)(e) of this section shall be
mining leases with fiscal terms as applicable converted into petroleum mining leases with
under section 267(1)(a), (b) and (e) of this Act, fiscal terms as applicable under paragraph
applicable to these leases, provided that – 267(a) and other terms of Chapter Four of this
Bill, applicable to these leases, provided that –
(c) the remaining area shall continue as exploration 93(7)(c) the remaining area shall continue as
area under the petroleum prospecting licence. exploration area under the petroleum
prospecting licence, with fiscal terms as
applicable under Chapter Four of this Act for
new acreage.
(4) Within 3 years of the effective date, any discovery of 94(4) Within 3 years of the effective date, any
marginal field that has not been transferred to marginal field that has not been transferred to
Government, shall be subject to the following process Government, shall be subject to the following
and the holder of the oil mining lease – process and the holder of the oil mining lease –
(a) present a development plan for the field; or 94(4)(a) present a field development plan for
the marginal field; or
(5) The consent of the Commission to the farm-out of a 94(5) The consent of the Commission to the
marginal field under subsection (b)(b) of this section farm-out of a marginal field under subsection
shall, amongst others, be subject to the farmee (4)(b) of this section shall, amongst others, be
presenting a field development plan over a period of subject to the farmee presenting a field
time agreed with the Commission and a regulation made development plan over a period of time agreed
under this Act. with the Commission and a regulation made
under this Act.
(6) The failure of the farmee to present a field 94(6) The failure to present a field development
development plan to the Commission within the plan pursuant to paragraph 94(4)(a) or within
prescribed period shall attract a penalty prescribed in the time frame specified under 94(5) shall
the Regulations. require the relinquishment of the marginal
field.
123
(7) A discovery relinquished under subsection (c) of this 94(7) A marginal field relinquished under
section shall be vested in the Government and be subsection 4(c) or (6) of this section shall be
administered by the Commission. vested in the Government and be administered
by the Commission.
Retained
(9) For the purposes of this section -
94(8)(a) “marginal field” means a field or
(a) “marginal field” means a Field or discovery which discovery which has been declared a marginal
has been declared a Marginal Field prior to 1st field prior to 1st January 2021 or which has
January 2020; and been laying fallow without activity for seven
years after its discovery prior to the effective
date; and
Retained
(b) “farm-out” means an agreement between the
holder of a petroleum mining lease or petroleum
prospecting licence and a third party, which
permits the third party to explore, prospect, win,
work and carry away any petroleum
encountered in a licence or lease area during the
validity of the licence or lease.
[NEW INSERTION] 94(9) No new marginal fields
shall be declared under this Act.
95. Assignments, (1) A holder of a petroleum prospecting licence or 95(1) A holder of a petroleum prospecting
mergers, petroleum mining lease shall not assign, novate or licence or petroleum mining lease shall not
transfers and transfer his licence or lease or any right, power or assign, novate or transfer his licence or lease or
acquisitions interest without prior written consent of the any right, power or interest or a shareholder of
Minister. an incorporated joint venture shall not sell or
transfer its shares without prior written
consent of the Minister.
124
(3) For the purpose of subsection (1) of this section, a 95(3) For the purpose of subsection (1) of this
change of control in the holder of a Licence or lease section, a change of control in the holder of a
under subsection (1) of this section shall be deemed licence or lease under subsection (1) of this
to be an assignment. section shall be deemed to be an assignment.
(4) A licensee or lessee wishing to assign, novate or 95(4) A licensee or lessee wishing to assign,
otherwise transfer its interest pursuant to subsection novate or otherwise transfer its interest or a
(1) of this section, shall make an application for shareholder of an incorporated joint venture
approval of the transfer of a licence or lease to the wishing to sell or transfer its shares pursuant to
Commission in the format prescribed by the subsection (1) of this section, shall make an
Commission, and be accompanied with any other application for approval of the transfer to the
information that may be pursuant to any regulations Commission in the format prescribed by the
published by the Commission hereunder Commission, and be accompanied with any
other information that may be pursuant to any
regulations published by the Commission
hereunder.
(6) The Commission shall within 60 days of the receipt, 95(6) The Commission shall within 60 days of
act on the application of the licensee or lessee. the receipt, act on the application of the
licensee or lessee pursuant to subsection (4) of
this section and on the request for consent
pursuant to subsection (5) of this section. The
consent of the Commission with respect to
subsection (5) shall not be unreasonably
withheld.
(7) Where no response on the application has been
125
received within 60 working days from the receipt of 95(7) Within 60 days of the receipt of the
the recommendation of the Commission, the consent recommendation of the Commission pursuant
of the Minister under subsection (1) of this section to subsection (4), the Minister shall consider
shall be deemed to have been granted. same for approval, such approval not to be
unreasonably withheld. Where the Minister
rejects the recommendation of the
Commission, the Minister shall provide the
reason for such rejection. Where no response
on the application has been received within 60
working days from the receipt of the
recommendation of the Commission, the
consent of the Minister under subsection (1) of
this section shall be deemed to have been
granted.
(8) Where the consent of the Minister is granted in
respect of the application for a transfer, the Retained
Commission shall promptly record the transfer in the
appropriate register.
127
(15) A holder of a petroleum exploration licence shall
not assign, novate or transfer his licence or lease or 95(15) A holder of a petroleum exploration
any right, power or interest without prior written licence shall not assign, novate or transfer his
consent of the Commission. licence or any right, power or interest without
prior written consent of the Commission.
96. Grounds for (1) Upon receipt of the written recommendation of the 96(1) Upon receipt of the written
revocation of Commission for revocation, the Minister may revoke recommendation of the Commission for
licence or lease a petroleum prospecting licence, petroleum revocation, the Minister may revoke a
exploration licence or petroleum mining lease, where petroleum prospecting licence or petroleum
the applicable licensee or lessee – mining lease, where the applicable licensee or
lessee –
129
(2) Subsection (j)(j) of this section shall apply to a former
public official or member of Government only where
(96)(2) Subsection (1)(j) of this section shall
the applicable interest was acquired while the public
apply to a former public official or member of
official was in office or was a member of the Government only where the applicable interest
Government. was acquired while the public official was in
office or was a member of the Government.
97. Notice of (1) Prior to the revocation of a petroleum prospecting 97(1) Prior to the revocation of a petroleum
default prior to licence or Petroleum Mining Lease by the Minister prospecting licence or petroleum mining lease
revocation pursuant to section 96 of this Act, the Commission by the Minister pursuant to section 96 of this
shall – Act, the Commission shall –
(a) serve a notice of default on the applicable Retained
licensee or lessee stating the grounds upon
which the Commission may recommend a
revocation of the licence or lease to the Minister;
and
(b) provide the licensee or lessee with a remediation Retained
period of not less than 60 days within which to
remedy the default.
(6) A revocation decision shall be published in the 97(6) A revocation decision shall be published
gazette and the Commission shall amend relevant in the Gazette and the Commission shall amend
registers maintained by it to reflect the revocation. relevant registers maintained by it to reflect the
revocation.
98. (1) Within 30 days of the revocation of a petroleum 98(1) Within 30 days of the revocation of a
Administration of mining lease or any partial interest in the lease which petroleum mining lease or participating or
a revoked is producing in paying quantities, the Minister shall, shareholder interest in a petroleum mining
producing lease on the recommendation of the Commission, appoint lease which is producing, the Minister may, on
an interim operator to ensure petroleum operations the recommendation of the Commission,
continue from the areas and zones subject to the appoint an interim operator to ensure
petroleum mining lease based on good international petroleum operations continue from the areas
oil field practices. and zones subject to the petroleum mining
lease based on good international petroleum
industry practices.
(3) During the tenure of an interim operator, the 98(3) During the tenure of an interim operator,
Commission may conduct a fair, transparent and the Commission may conduct a fair,
competitive bidding process for the grant of one or transparent and competitive bidding process
more petroleum mining leases in respect of the areas for the grant of a new petroleum mining lease
and zones subject to the revoked petroleum mining to replace the revoked petroleum mining lease.
lease or any partial interest in the petroleum mining
lease.
99. Power of (1) Where two or more persons are holders of a Retained
revocation of petroleum prospecting licence or petroleum mining
participating or lease and one or more of the grounds for revocation
shareholders set forth in section 96 of this Act applies to not all of
interest the holders, the Minister –
(a) may, in accordance with section 96 of this Act,
revoke the participating or shareholders interest
of the holder or holders to which the grounds
apply; and
(b) shall not revoke the interests of the other holder
or holders to which the grounds do not apply.
(d) comply with any other obligation under the 99(6)(b) comply with any other obligation
licence or lease in a manner that may result in under the licence or lease in a manner that may
the revocation of the licence or Lease pursuant result in the revocation of the licence or lease
to section 96 of this Act. pursuant to section 96 of this Bill.
133
100. Fees 100. Fees, royalties, rents and other payments
to Government
(2) Where royalties, fees, rents, production or profit 100(2) Where royalties, fees, rents, production
shares or other required payment to Government or profit shares or other required payment to
due under this section remains unpaid for a period of Government due under this section remains
30 days after the date when it becomes due for unpaid for a period of 30 days after the date
payment, it shall be considered as a debt to the when it becomes due for payment, it shall be
Commission with interest accruing at a daily rate to considered as a debt to the Commission with
be provided for in a regulation issued by the interest accruing at a prevailing Central Bank of
Commission. Nigeria (CBN) rate to be provided for in a
regulation issued by the Commission.
(3) The Commission may, after the 30 days period Retained
referred to under subsection (2) of this section and
until the debt is repaid, together with accrued and
unpaid interest -
(a) enter into and upon any land, property or Retained
premises owned, possessed or occupied by the
holder of the licence or lease;
(b) seize, distrain and sell any petroleum, 100(3)(b) seize, distrain and sell any petroleum,
petroleum products, engines, machinery, tools, petroleum products, engines, machinery, tools,
implements or other effects belonging to the implements or other effects belonging to the
holder of the Licence or Lease, and the costs holder of the licence or lease, and the costs
incurred by the Commission in connection with incurred by the Commission in connection with
the seizure, distress and sale shall be added to the seizure, distress and sale shall be added to
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the debt; and the debt; and
(c) out of money arising from the sale of any item Retained
referred to in subsection (b) of this section, pay
off the debt and any surplus shall be paid by the
Commission to the holder of the licence or
lease.
101. Damage to (1) A licensee or lessee shall not enter upon, occupy or Retained
protected and exercise any of the rights or powers conferred by its
venerated licence or lease in relation to any -
objects (a) area held to be sacred, the question as to
whether the area is sacred or not shall be
decided by the customary court of the area,
where necessary;
(b) part of the following relevant areas, except it
obtains a written permission from and subject to
conditions as may be imposed by the
Commission, any part -
(i) set apart for, used or appropriated or
dedicated to public purposes;
(ii) occupied for the purposes of the
government of the Federation or a State;
(iii) situate within a township, town, village,
market, burial ground or cemetery;
(iv) which is the site of or is within 50 yards of
any building, installation, water reservoir,
dam, public road or tramway or which is
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appropriated for or situate within 100
metres of any railway; or
(v) of the land under cultivation;
(d) dispute under sub-paragraph 0 of this subsection 101(1)(d) dispute under paragraph (c) of this
as to who is in lawful occupation or the owner of subsection as to who is in lawful occupation or
any land or as to the amount of any compensation the owner of any land or as to the amount of
payable, the Licensee or Lessee, pending the any compensation payable, the Licensee or
determination of the dispute, shall deposit with Lessee, pending the determination of the
the Federal High Court with jurisdiction over the dispute, shall deposit with the Federal High
matter such sum as shall be determined by the Court with jurisdiction over the matter such
Federal High Court to be reasonable sum as shall be determined by the Federal High
compensation payable to the rightful owner or Court to be reasonable compensation payable
occupier of the land. to the rightful owner or occupier of the land,
having due regard to the existing regulatory
framework.
(2) A person shall not, in the course of petroleum Retained
operations -
(a) injure or destroy any tree or object which is - Retained
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(i) of commercial value, or
(ii) the object of veneration to the people 101(2)(a)(ii) the object of veneration to the
resident within the Licence or Lease area; people resident within the licence or lease area;
(c) disturb or damage the surface of the land or any 100(2)(c) disturb or damage the surface of the
other rights to any person who owns or is in land or any other rights to any person who
lawful occupation of the surface area covered by owns or is in lawful occupation of the surface
the Licence or Lease. area covered by the licence or lease.
(4) The amount of compensation payable under 101(4) The amount of compensation payable
subsection (2) of this section shall be determined by under paragraph (1)(c)(ii) and subsection (3) of
the Commission and prescribed by regulation made this section shall be determined by the
under this Act. Commission and prescribed by regulation made
under this Bill.
(b) 6 months after the grant of the applicable 102((1)(b) 6 months after the grant of the
applicable licence or lease,
137
Licence or Lease,
(2) The environmental management plan under 102(2) The environmental management plan
subsection (1) of this section shall be in accordance under subsection (1) of this section shall be in
with the regulations made under this Act. accordance with the extant Acts.
(2) A fine due under this section shall be paid in the same Retained
manner and be subject to the same procedure for the
payment of royalties to the Government by
companies engaged in the production of petroleum.
140
(3) A fine paid pursuant to this section shall not be Retained
eligible for cost recovery or be tax deductible.
[NEW INSERTION] 104(4) moneys received
from gas flaring penalties by the Commission
pursuant to this subsection, shall be
transferred to the Midstream Gas
Infrastructure Fund for investment in
Midstream Gas Infrastructure within the Host
Communities of the Settlor on which the
penalties are levied.
105. Prohibition A licensee or lessee shall pay a penalty prescribed 105(1) A licensee or lessee shall pay a penalty
of flaring or pursuant to the flare gas (prevention of waste and prescribed pursuant to the Flare Gas
venting of natural pollution) regulations. (Prevention of Waste and Pollution)
gas Regulations.
(2) The Commission may issue regulations or guidelines 109(2) The Commission may issue regulations
on the mechanism for the imposition of a domestic or guidelines on the mechanism for the
crude oil supply obligation on lessees of upstream imposition of a domestic crude oil supply
petroleum operations, where in its opinion, the obligation on lessees of upstream petroleum
domestic market results in shortages or inadequate operations, including applicable penalties.
supplies of crude oil and condensates for holders of
crude oil refining licences.
(3) The Authority shall, upon request by the 109(3) The Authority shall supply the
Commission, promptly supply to the Commission the Commission on a regular basis the crude oil
crude oil requirements of refineries in operation. requirements of refineries in operation and
where shortages or inadequate supply
conditions occur report such conditions to the
Commission.
(4) The Commission shall ensure that the domestic crude Retained
oil supply obligation contains the following -
(a) crude oil may only be sold to holders of crude oil Retained
refining licences, whose refineries are in
operation;
(b) the supply of crude oil shall be commercially Retained
negotiated between the lessee and the crude oil
142
refining licensee, having regard to the prevailing
international market price for similar grades of
crude oil; and
(c) holders of crude oil refining licences shall 109(4)(c) holders of crude oil refining licences
provide payment guarantees as required by the shall provide payment guarantees as required
applicable lessee and payment for crude oil by the applicable lessee and payment for crude
purchased pursuant to obligations shall be in US
oil purchased pursuant to obligations shall be in
dollars. US dollars or Naira, as may be agreed between
the lessees or suppliers and the licensee of the
refining licence.
110. Domestic (1) Subject to subsection (2) of this section, the 110(1) Subject to subsections (2) and (4) of this
gas delivery Commission shall, by a Regulation or guideline made section, the Commission shall, by a regulation
obligations under this Act, – or guideline made under this Act, –
(a) prescribe and allocate the domestic gas delivery 110(1)(a) prescribe and allocate the domestic
obligation on a lessee before 1st March of each gas delivery obligation among all lessees before
year based on the domestic gas demand 1st March of each year based on the domestic
requirements determined or updated pursuant gas demand requirements determined or
to section 173 of this Act; and updated pursuant to section 173 of this Act;
and
(b) ensure compliance by every Lessee with a 110(1)(b) ensure compliance by every lessee of
domestic gas delivery obligation. the domestic gas delivery obligation.
(2) A lessee may, on a voluntary basis, conclude 110(2) A lessee may, on a voluntary basis,
contracts with wholesale customers of the strategic conclude contracts with wholesale customers
sectors or with wholesale gas suppliers supplying the of the strategic sectors or with wholesale gas
sectors for delivery of marketable natural gas to the suppliers supplying the strategic sectors for
customers or suppliers and notify the Commission of delivery of marketable natural gas on a free
the contracts, provided that where the volume of the market basis to these customers or suppliers
contract is equal to or higher than the domestic gas and notify the Commission of the contracts and
delivery obligation for the lessee, the lessee shall – where the volume of the contracts is equal to
or higher than the domestic gas delivery
obligation for the lessee, the lessee shall –
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(a) be deemed to have fulfilled its Retained
domestic gas delivery obligation;
(b) not be a producer client of the gas Retained
aggregator; and
(c) inform the gas aggregator. Retained
(3) A lessee who has complied with its domestic gas Retained
delivery obligation or may wish to supply wholesale
customers who are not part of the strategic sectors
may deliver further supplies of marketable natural
gas to the domestic market on a willing seller and
willing buyer basis.
(4) A wholesale gas supplier may, on a voluntary basis Retained
and following the procedure stipulated under
subsection (2) of this section –
(a) enter into a contract with a lessee Retained
or wholesale customer of the
strategic sectors for the delivery
of marketable natural gas to the
customers; and
(b) inform the Commission of the 110(4)(b) inform the Commission and Authority
contracts. of the contracts.
(9) The penalty amount of US$ 3.50 per MMBtu referred Retained
to under subsection (8) of this section may be
adjusted as the Commission may prescribe in a
regulation made under this Act.
(14) A Lessee who does not comply with the domestic Retained
gas delivery obligation as directed by the
Commission shall –
(a) in addition to the penalties provided under 110(14)(a) in addition to the penalties provided
subsection (8) of this section, not be entitled to under subsection (8) of this section, not be
supply natural gas to any midstream gas export entitled to supply natural gas to any new
operations; and midstream gas export operations, provided
that this provision shall not apply to gas sales
agreements already entered into; and
(b) where the lessee is supplying natural gas to 110(14)(b) where the lessee is supplying natural
midstream gas export operations, the gas to midstream gas export operations, the
Commission may impose other sanctions as are Commission may impose other sanctions as are
prescribed in the Regulation made under this prescribed in a regulation made under this Bill.
146
Act.
(15) An approval for the supply of natural gas for export Retained
projects shall, from the effective date, be subject to
prior compliance by the lessee with its domestic gas
delivery obligation.
(2) The Authority shall only grant a licence for midstream Retained
or downstream petroleum operations, where -
(a) it meets the technical standards required for
petroleum operations based on good
international petroleum industry practices;
(b) the location and size of the area occupied by the
facilities or right of way is acceptable to the
Authority;
(c) it meets the health, safety and environmental
standards, as determined by the Authority; and
(d) it provides for the efficient and economic use of
facilities and pipelines.
147
(3) The Authority shall only grant a licence for midstream Retained
petroleum operations where -
(a) it does not involve excessive capital or operating
expenditures;
(b) it includes an acceptable environmental
management plan pursuant to section 102 of
this Act;
(c) it includes a decommissioning and abandonment
plan and a decommissioning and abandonment
fund that complies with sections 232 and 233 of
this Act;
(d) it provides for the elimination of routine natural
gas flaring;
(e) it does not relate to midstream petroleum
operations that would conflict with a licence
already granted; and
(f) it includes –
(i) a detailed programme for the recruitment
and training of Nigerians in all phases of
petroleum operations handled directly by the
licensee or through agents and contractors of
the licensee; and
(ii) provision for scholarship schemes,
internships, continuous professional
development and other training
requirements;
(5) The Authority may furnish an applicant for the grant, Retained
renewal or extension of a licence or permit, with non-
confidential information as may necessary to
facilitate the filing of the application.
149
(10) The Authority shall consider any representation 111(10) The Authority shall consider any
made by an applicant for a licence or permit on the representation made by an applicant for a
refusal of an application. licence or permit on the refusal of an
application, where such representation
involves new information not previously
considered.
(3) Upon the grant or renewal of a Licence, the Authority 112(3) Upon the grant or renewal of a licence,
shall publish notification of the grant or renewal in the Authority shall publish notification of the
the form and manner prescribed by regulation under grant or renewal in the form and manner
this Act. prescribed by regulation under this Act.
113. Licensing (1) The Authority shall make regulations and guidelines 113(1) The Authority shall make regulations
regulations for the grant or renewal of licence under Chapter and guidelines for the grant or renewal of
licence for midstream and downstream
150
Two. petroleum operations.
(3) The Authority shall ensure third party access to 113(3) The Authority shall ensure third party
facilities and pipelines for midstream and access to facilities and pipelines for midstream
downstream petroleum operations. and downstream petroleum operations where
such facilities and pipelines are operated for
the own account of the licensee and shall
ensure open access where the facilities and
pipelines are operated by the licensee on an
open access basis.
(4) The Authority shall encourage third party investment Retained
in facilities and pipelines for midstream and
downstream petroleum operations.
(3) A licence or permit of the same class granted by the 114(3) A licence or permit of the same class
Authority, shall contain similar conditions granted by the Authority, shall contain similar
152
representing standard conditions for that class and conditions representing standard conditions for
any difference in the conditions in the licence or that class and any difference in the conditions
permit shall only be for good reasons, which shall be in the licence or permit shall only be for good
published in the gazette. reasons, which shall be published in the
Gazette.
115. (1) A Licence or Permit shall be issued subject to 115(1) A licence or permit shall be issued
Compensation compliance by the applicant with the provisions of subject to compliance by the applicant with the
for acquisition of the Land Use Act Cap L5 Laws of the Federation of provisions of the Land Use Act Cap L5 Laws of
land Nigeria 2004 in respect of compensation for the Federation of Nigeria 2004 in respect of
acquisition of land for midstream and downstream compensation for acquisition of land for
petroleum operations. midstream and downstream petroleum
operations.
(2) The Governor of a State of which land is required for
carrying out operations or activities subject to a
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licence or permit may issue a certificate of occupancy
pursuant to the Land Use Act in respect of the land
and in accordance with existing state law.
116. General A holder of a licence or permit shall not discriminate 116 A holder of a licence or permit shall not
non- against customers, classes of customers or their related discriminate against customers, classes of
discrimination undertakings in respect of access, Tariffs, prices, customers or their related undertakings in
provisions conditions or standards of service, except for justifiable
respect of access, tariffs, prices, conditions or
and identifiable differences regarding matters such as standards of service, except for justifiable and
quantity, transmission distance, length of contract, loadidentifiable differences regarding matters such
profile, interruptible supply or other distinguishing as quantity, transmission distance, length of
features approved by the Authority. contract, load profile, interruptible supply or
other distinguishing features approved by the
Authority.
117. Assignment (1) A holder of a licence or permit shall not, without the 117(1) A holder of a licence or permit shall not,
or transfer of prior written consent of the Authority, assign or without the prior written consent of the
licence or permit transfer its Licence or Permit or any right or Authority, assign or transfer its licence or
obligation arising from the licence or permit. permit or any right or obligation arising from
the licence or permit.
(c) consider the same issues as if the party to 117(3)(c) consider the same issues as if the
whom the Licence or Permit is being assigned party to whom the licence or permit is being
or transferred is applying for a new Licence; assigned or transferred is applying for a new
154
and licence or new permit; and
155
additional conditions to a licence or permit unless it
gives the holder –
119. Surrender of (1) The holder of a licence or permit may, upon an Retained
licence or permit application in the form, manner and meeting any
conditions prescribed by the Authority in a regulation
made under this Act surrender the licence or permit,
where -
(a) the licenced or permitted activity is no longer
required;
(b) the licenced or permitted activity is not
economically justifiable;
(c) another qualified person is willing and able to
assume the rights and obligations of the holder
of the licence or permit in accordance with the
requirements and objectives of this Act; and
(d) applicable, the holder of the licence or permit
has complied with the requirements of the law
in respect of relinquishment, decommissioning
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and abandonment of installations and
reclamation of land.
(g) the holder has acquired the licence or permit 120(1)(g) the holder has acquired the licence or
based on false representation or contrary to permit based on false representation or
corrupt practices and money laundering Laws; contrary to corrupt practices and money
laundering laws;
159
(a) liabilities which the holder may have incurred, or
(b) claim, which the Authority, the Government or
any third party may make against the holder of
licence or permit.
(6) A revocation decision shall be published in the 121(6) A revocation decision shall be published
gazette and the Authority shall amend relevant in the Gazette and the Authority shall amend
registers maintained by it to reflect the revocation. relevant registers maintained by it to reflect the
revocation.
122. Tariff (1) The Authority shall, in exercising its powers of Retained
principles commercial regulations, be guided by the following
principles in designing a pricing framework for
transportation, distribution and processing
petroleum -
(a) tariffs for transportation, distribution and
processing of petroleum shall be on a cost-
reflective basis;
(b) tariffs charged shall permit a reasonable return
for licensees on their investments;
(c) tariffs shall not discriminate between customers
with similar characteristics pursuant to section
116 of this Act; and
(d) tariffs shall be determined in US Dollars or other
foreign currency as applicable with a view to
attracting foreign investment to midstream and
downstream petroleum operations, provided
that payments of the tariffs may be made in the
respective foreign currency or equivalent value
of naira at the open market rate published by the
Central Bank of Nigeria as applicable under the
regulations.
(2) The tariff methodology for tariffs related to new gas Retained
transportation pipelines, gas distribution networks
160
and facilities requiring a gas processing licence shall
include the following -
(a) tariffs shall be determined in US dollars, but
may be paid in naira, where the applicable
exchange rate shall be based on the Securities
and Exchange Commission over the counter
market rate or any successor rate;
(b) the capital costs may be recovered in equal
installments over a period as determined by
the Authority;
(c) the after tax rate of return on equity shall be 122(2)(c) the after tax rate of return on equity
20% on a nominal basis and the rate of return shall be such that it attracts major investment
shall apply during construction; and the rate of return shall apply during
construction;
123. Tariff (1) Tariffs charged by licensees for the use of any facility Retained
methodology or infrastructure licenced by the Authority for use in
midstream and downstream petroleum operations
shall be set according to one or more tariff
methodologies adopted by the Authority for a
particular set of licences, in conformity with the
applicable fiscal regime, provided that the tariff
methodologies shall -
(a) allow an operator to recover reasonable cost
incurred, benchmarked against industry best
practice and a reasonable return on the capital
162
invested in the business;
(b) ensure the efficiency of the business;
(c) ensure the continued improvement of the
quality of services;
(d) avoid discrimination between customers with
similar characteristics, such as similar size or
similar consumption profile pursuant to section
116 of this Act ;
(e) in case of distribution licences, ensure efficient
charges relating to petroleum product or natural
gas supply covering billing, metering and other
services;
(f) avoid economic distortions and ensure a
competitive market for the sale and distribution
of petroleum products and natural gas in Nigeria;
and
(g) avoid cross-subsidies among different categories
of consumers.
(3) Except for the tariff methodology established in 123(3) The Authority shall, prior to establishing
section 122 (2) of this Act, the Authority shall, prior a tariff methodology, initiate and conduct a
to establishing a tariff methodology, initiate and stakeholders’ consultation in the manner
conduct a stakeholders’ consultation in the manner specified in subsection (5) of this section to
specified in subsection (5) of this section to consult consult applicants, operators, consumers,
applicants, operators, consumers, prospective prospective customers, consumers
customers, consumers associations, associations of associations, associations of prospective
prospective customers and any other persons with customers and any other persons with interest
interest in the subject matter of the proposed tariff in the subject matter of the proposed tariff
methodology. methodology.
163
(4) The Authority may, in establishing a Tariff 123(4) The Authority may, in establishing a
methodology, take into consideration the tariff methodology, take into consideration the
submissions of the stakeholders’ consultation submissions of the stakeholders’ consultation
referred to in subsection (3) of this section. referred to in subsection (3) of this section
164
(7) A tariff methodology made pursuant to subsection Retained
(6) of this section shall be valid for 6 months with
effect from its commencement date, except it is
confirmed following a stakeholders’ consultation
conducted in accordance with subsections (4) and
(5) of this section.
(8) The Authority shall fix a date for which the Retained
determined tariff methodology shall come into
effect and shall cause the notice of the
commencement date to be published in at least two
national newspapers with wide coverage and its
website.
(12) A holder of a licence shall not pass the costs of any Retained
fine or penalty incurred under this Act or any other
law to a consumer.
165
124. Approval (1) A licensee subject to tariff Regulation by the 124(1) A licensee subject to tariff regulation by
and publication authority shall – the authority shall –
of charging
structures (a) propose tariffs and tariff methodologies 124(1)(a) propose tariffs for the approval of the
for the approval of the Authority prior to Authority prior to the application of the
the application of the charges; charges;
(2) The Authority shall, within one year after the 124(2) The Authority shall, within 24 months
effective date, review, confirm or modify all after the effective date, review, confirm or
applicable tariffs. modify all applicable tariffs including for
licences pursuant to 125(6) and 174(6).
PART IV
ADMINISTRATION OF MIDSTREAM AND
DOWNSTREAM GAS OPERATIONS
125. Activities (1) Except in accordance with an appropriate Licence 125(1) Except in accordance with an
requiring a issued by the Authority, a person shall not undertake appropriate licence issued by the Authority, a
licence for the following activities with respect to midstream gas person shall not undertake the following
midstream and operations – activities with respect to midstream gas
downstream gas operations –
operations
(a) establish, construct or operate a facility for the Retained
processing of natural gas;
(b) establish, construct or operate a facility for the Retained
storage of natural gas;
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(c) establish, construct or operate a gas Retained
transportation pipeline;
(d) engage in bulk transportation of natural gas by Retained
rail, barge or other means of transportation;
(e) operate a gas transportation network; Retained
(e) impose any combination of the penalties 125(4)(e) impose any combination of the
prescribed under paragraphs (a), (b), (c) and (d) provisions under paragraphs (a), (b), (c) and (d)
of this subsection. of this subsection.
(6) A holder of a subsisting lease, licence or permit who 125(6) A holder of a subsisting lease, licence or
is engaged in activities in midstream or downstream permit who is engaged in activities in
gas operations prior to the effective date shall, within midstream or downstream gas operations prior
24 months from the effective date, apply to the to the effective date shall, within 18 months
Authority and the Authority may issue the from the effective date, apply to the Authority
appropriate licence or permit, where applicable. for and the Authority may issue the appropriate
licence or permit, where applicable.
(7) The provisions of subsection (4) of this section shall 125(7) The provisions of subsection (4) and (5)
not apply to any person who has made an application of this section shall not apply to any person
168
contemplated under subsection (6) of this section pursuant to subsection (6) of this section until
until the Authority has considered the application the Authority has considered the application
given a decision. and given a decision.
(8) Where any person, in applying for a Licence or 125(8) Where any person, in applying for a
Permit, knowingly makes a false or misleading licence or permit, knowingly makes a false or
statement, the Authority may – misleading statement, the Authority may –
126. Special In addition to any matter provided under section 113 of Retained
regulations for this Act, the Authority may issue regulations with
midstream and respect to midstream and downstream gas operations,
downstream gas which shall include –
operations
(a) the operation of gas processing plants, gas 126(a) the establishment and operation of a
transportation pipelines and gas transportation wholesale natural gas market scheme to ensure
networks, gas distribution pipelines, natural gas continuity of supply of natural gas to
storage plants, liquefied petroleum gas depots customers, which will apply to the owners and
and liquefied natural gas; operators of gas transportation pipelines,
shippers of natural gas, holders of natural gas
storage and distribution licences and gas
retailers; and
(b) the establishment and operation of a wholesale 126(b) matters ancillary to or consequential on
natural gas market scheme to ensure continuity the activities set out in paragraphs (a) of this
of supply of natural gas to customers, which will section.
apply to the owners and operators of gas
transportation pipelines, shippers of natural gas,
holders of natural gas storage and distribution
licences and retailers; and
128. Surface The authority may for the purpose of efficiency, grant 128 The Authority may for the purpose of
rights reserved rights of way, easements or other rights over any efficiency, preserve in accordance with
for the Authority surface or seabed areas subject to an existing licence or applicable law, rights of way, easements or
relating to permit, which may be necessary for the laying, other rights over any surface or seabed areas
midstream and operation and maintenance of transportation pipelines, subject to an existing licence or permit, which
downstream gas communication lines, power lines and other similar may be necessary for the laying, operation and
operations lines and any right of way or other rights reserved shall maintenance of transportation pipelines,
continue for the benefit of any entity to whom the communication lines, power lines and other
authority may subsequently grant the same licence or similar lines and any right of way or other rights
permit. reserved shall continue for the benefit of any
entity to whom the Authority may
subsequently grant the same for a licence or
permit.
129. Grant of a (1) Subject to sections 111 and 125 of this Act, the 129(1) Subject to sections 111 and 125 of this
gas processing Authority may upon approval of an application and Act, the Authority may upon approval of an
licence payment of prescribed fees, grant and issue a application and payment of prescribed fees,
qualified person a gas processing licence, which shall grant and issue a qualified person a gas
permit the person to install and operate the processing licence, which shall permit the
following facilities, on its own account or on the basis person to install and operate the following
of open access for customers as stipulated in the facilities, on its own account or on the basis of
Licence, – open access for customers as stipulated in the
licence, –
170
(a) gas conditioning plants, to condition natural gas Retained
removing CO2, H2S or other impurities;
(b) gas processing plants, to produce ethane,
propane, butane, other natural gas liquids and
marketable natural gas;
(c) gas to liquids plants;
(d) liquefied natural gas plants;
(e) ethane extraction plants; and
(f) other plants, which in the opinion of the
Authority, require a gas processing licence.
130. General The holder of a gas processing licence shall undertake Retained
duties of the the activities contemplated by the licence in a manner
holder of a gas that complies with the following general obligations -
processing (a) to construct, operate and maintain its gas
licence processing equipment and facilities in an
economical, safe, reliable and environmentally
sustainable manner;
(b) shut down its facilities in emergencies and in order
to carry out maintenance or in accordance with
curtailment directives issued by the Authority;
(c) manage its facilities as a responsible and prudent
operator;
(d) avoid any act or omission that may affect the
compatibility of the processing facility with any
natural gas facility or network that is likely to
prejudice the public interest or the integrity of
network operations;
(e) operate the facilities in a manner that results in
171
output of products with specifications as
determined by the Authority;
(f) to operate its facilities subject to open access
commitments as stipulated in the licence or where
the licence is issued for operations on its own
account, provide third party access in an equitable
manner;
(g) treat all customers in a non-discriminatory
manner pursuant to section 116 of this Act, where
the licence is issued on an open access basis; and
(h) abstain from activities, which in the opinion of the
Authority may prevent, restrict or distort
competition.
131. Conditions A gas processing licence shall, in addition to the Retained
applicable to a conditions that may be imposed by the Authority
gas processing pursuant to section 114 of this Act, be deemed to be
licence granted subject to the condition that -
(a) the holder shall not process natural gas on its own
account, where the licence is issued on an open
access basis;
(b) a lessee, operating on its own account, may own 131 (b) a licensee operating on its own account,
the natural gas in a gas conditioning plant or gas being an affiliate of a lessee, may own, or the
processing plant for the purpose of conditioning affiliate may own, the natural gas in a gas
or processing natural gas from its fields in order to conditioning plant or gas processing plant for
deliver marketable natural gas for domestic or the purpose of conditioning or processing
export purposes, subject to such third party access natural gas from the fields under lease with the
provisions as may be included in the licence; affiliate, subject to such third party access
provisions as may be included in the licence;
(c) a wholesale customer, operating on its own 131(c) a licensee operating on its own account,
account, may own the natural gas in a gas who is also a wholesale customer or a holder of
processing plant, ethane extraction plant or other a gas distributor licence, may own the natural
plant requiring a gas processing licence, where the gas in a gas processing plant, ethane extraction
principal user of the natural gas is the wholesale plant or other plant requiring a gas processing
172
customer, subject to any third party access licence, where the principal user of the natural
provisions as may be included in the licence; gas is the wholesale customer or gas
distributor, subject to any third party access
provisions as may be included in the licence;
(e) the holder shall have due regard to the effect of Retained
its licenced activities on the environment and
comply with the requirements for environmental
protection, management and restoration under
this Act and any law in force; and
(f) the holder shall mark, maintain and secure the Retained
boundaries of its facilities and associated
infrastructure constructed under the terms of its
licence and any law in force.
132. Grant of a (1) Subject to sections 111 and 125 of this Act, the Retained
bulk gas storage Authority may upon approval of an application and
licence payment of prescribed fees, grant and issue a
qualified person a bulk gas storage licence
authorising the holder to undertake the bulk storage
of natural gas either for its own account or on behalf
of customers as stipulated in the licence.
173
133. General The holder of a bulk gas storage licence shall undertake 133 The holder of a bulk gas storage licence
duties of a bulk the activities contemplated by the Licence in a manner shall undertake the activities contemplated by
gas storage that complies with the following general obligations – the licence in a manner that complies with the
licensee following general obligations –
(i) procedure and terms for obtaining third party 133(a)(i) procedure and terms for obtaining
access or throughput services, and third party access or throughput services on an
(ii) method of response to the request for its open access basis, and
services;
(d) grant to third parties the right to use or have 133(d) where the licensee operates for its own
access to capacity within its facilities for the account, grant to third parties the right to use
purpose of ensuring competitive gas supply; or have access to capacity within its facilities for
the purpose of ensuring competitive gas supply;
(f) conduct its licenced activities in a non- 133(f) conduct its licenced activities in a non-
discriminatory manner pursuant to section 116 discriminatory manner pursuant to section 116
of this Act, where the Licence is issued on an of this Act, where the licence is issued on an
174
open access basis; open access basis;
(a) conduct its licenced activities safely and reliably in [NEW INSERTION] 134(a) a licensee operating
compliance with any law in force and prescribed on its own account, being an affiliate of a
health and safety regulations issued pursuant to lessee, may own, or the affiliate may own, the
this or any other Act; natural gas in the bulk storage facilities for the
purpose of storing natural gas from the fields
of the affiliate, subject to such third party
access provisions as may be included in the
licence;
(b) have regard to the effect of its licenced activities [NEW INSERTION] 134(b) a licensee operating
on the environment and comply with the on its own account, who is also a wholesale
requirements for environmental protection, customer or holder of a gas distributor licence,
management, and restoration under this Act and may own the natural gas in the bulk storage
any law in force; and facilities, where the principal user of the natural
gas is the wholesale customer or gas
distributor, subject to any third party access
provisions as may be included in the licence;
(c) mark, maintain and secure the boundaries of its (c) conduct its licenced activities safely and
facilities and associated infrastructure reliably in compliance with any law in force and
constructed under the terms of its licence and any prescribed health and safety regulations issued
175
law in force. pursuant to this or any other Act;
135. Grant of gas (1) Subject to sections 111 and 125 of this Act, the 135(1) Subject to sections 111 and 125 of this
transportation Authority may upon approval of an application and Act, the Authority may upon approval of an
pipeline licence payment of prescribed fees, grant and issue a application and payment of prescribed fees,
qualified person a gas transportation pipeline licence grant and issue a qualified person a gas
with the exclusive right to own, construct, operate transportation pipeline licence with the
and maintain a gas transportation pipeline within a exclusive right to own, construct, operate and
route as defined in the Licence for its own account maintain a gas transportation pipeline within a
with third party access provisions or as common route as defined in the licence for its own
carrier as stipulated in the licence. account with third party access provisions or as
common carrier as stipulated in the licence.
(i) procedure for obtaining and terminating 136(a)(i) procedure for obtaining and
transmission and interconnection services for terminating transmission and interconnection
natural gas for the tariffs established by the services for natural gas, on a third party access
Authority, and or open access basis as determined in the
licence and publish the tariffs established by
the Authority, and
(c) manage supplies and demand and meet on a 136(c) meet on a reasonable endeavours basis
reasonable endeavours basis requests for requests for transportation above contractual
transportation above contractual volumes; volumes;
177
technical and operational rule of practice
concerning the operation of its pipeline;
(g) manage its gas transportation pipeline as a Retained
reasonable and prudent operator;
(h) where the pipeline is operated on a common Retained
carrier basis, ensure development and operation
of terms for access to the gas transportation
pipeline in conjunction with the natural gas
shipping community and where applicable comply
with the relevant network code;
(i) where the pipeline is operated for its own Retained
account, operate its facilities subject to third
party access obligations under this Act and
regulations prescribed by the Authority; and
(j) abstain from activities, which in the opinion of the Retained
Authority may prevent, restrict or distort
competition.
137. Conditions A gas transportation pipeline licence shall, in addition to Retained
applicable to a the conditions that may be imposed by the Authority
gas pursuant to section 114 of this Act, be deemed to be
transportation granted subject to the condition that –
pipeline licence
(a) the holder shall not supply natural gas to Retained
customers on its own account where the licence is
granted on a common carrier basis;
(b) a lessee, operating on its own account, may own 137(b) a licensee operating on its own account,
the Natural Gas in a gas transportation pipeline, who is an affiliate of a lessee, may own, or the
for the purpose of – affiliate may own, the natural gas in a gas
transportation pipeline, for the purpose of –
(i) connecting marketable natural gas produced 137(b)(i) connecting marketable natural gas
in a field to another gas transportation produced in a field under a lease with an
pipeline or gas transportation network, and affiliate to another gas transportation pipeline
or gas transportation network; and
178
(ii) transporting natural gas to a plant for 137(b) (ii) transporting natural gas to a plant for
conditioning or processing natural gas from conditioning or processing natural gas from
its fields in order to deliver marketable fields under lease with an affiliate.
natural gas for domestic or export purposes,
subject to third party access provisions as may
be included in the licence;
(c) subject to third party access provisions as may be 137(c) a licensee operating on its own account,
included in the licence; who is also a wholesale customer or holder of a
gas distributor licence, may own the natural
gas in a gas transportation pipeline, where it is
the principal user of the natural gas, subject to
any third party access provisions as may be
included in the licence;
(d) a wholesale customer, operating on its own 137(d) a licensee operating on its own account,
account, may own the natural gas in a gas who is also a holder of a wholesale gas supply
transportation pipeline, where it is the principal licence, may own the natural gas in a gas
user of the natural gas, subject to any third party transportation pipeline, for the purpose of
access provisions as may be included in the connecting a lessee or wholesale customer to
licence; or from a gas transportation network or gas
transportation pipeline, subject to such third
party access provisions as may be included in
the licence;
(e) a wholesale gas supplier operating on its own 137(e) the holder shall conduct its licenced
account, may own the natural gas in a gas activities safely and reliably in compliance with
transportation pipeline, for the purpose of any law in force and prescribed health and
connecting a lessee or wholesale customer to or safety regulations issued pursuant to this or any
from a gas transportation network or gas other Act;
transportation pipeline, subject to such third party
access provisions as may be included in the
licence;
179
(f) the holder shall conduct its licenced activities 137(f) the holder shall have regard to the effect
safely and reliably in compliance with any law in of its licenced activities on the environment and
force and prescribed health and safety comply with the requirements of
Regulations issued pursuant to this or any other environmental protection, management and
Act; restoration under this Act and any law in force;
(g) the holder shall have regard to the effect of its 137(g) the holder shall mark, maintain and
licenced activities on the environment and comply secure the boundaries of the pipelines and
with the requirements of environmental associated infrastructure constructed under
protection, management and restoration under the terms of its licence and any law in force; and
this Act and any law in force;
(h) the holder shall mark, maintain and secure the 137(h) a pipeline transporting un-processed gas
boundaries of the pipelines and associated to a gas processing plant or gas conditioning
infrastructure constructed under the terms of its plant shall require a gas transportation pipeline
licence and any law in force; and licence and the Commission shall –
(ii) cooperate with the Authority in determining 137(i) the gas transportation pipeline may, with
possible third party access to the pipeline; the approval of the Authority, be in whole or in
and part, a low-pressure pipeline at the request of
the licensee.
(j) the gas transportation pipeline may, with the
approval of the Authority, be in whole or in part, a
low-pressure pipeline at the request of the
licensee.
138. Grant of gas (1) Subject to sections 111 and 125 of this Act, the Retained
transportation Authority may upon approval of an application and
180
network operator payment of prescribed fees, grant and issue a
licence qualified person a gas transportation network
operator licence authorising the conduct of
activities specified in the licence, which shall
include -
(a) conveyance of natural gas through the gas 138(1)(a) conveyance of natural gas through
transportation network; the gas transportation network on an open
access basis;
(b) balancing the inputs and off takes from the Retained
gas transportation network;
(c) providing access to shippers based on the gas Retained
network code pursuant to section 160 of this
Act to the gas transportation network; and
(d) charging for the use of the gas transportation Retained
network based on tariffs established by the
Authority.
(2) The Authority shall grant only one gas transportation Retained
network operator licence within a geographically
defined area to a single network operator, provided
that the Authority may at its discretion, issue licences
to other parties for the operation of isolated or
dedicated gas transportation pipelines and for
connecting to the gas transportation network.
139. General The gas transportation network operator shall exercise Retained
duties of a gas the rights and obligations imposed on it in a manner that
transportation complies with the following general obligations -
network operator (a) establish and make available to the public at its
offices, the -
(i) procedure, terms and conditions for Retained
obtaining and terminating access and
interconnection services to the
transportation network, and
181
(ii) method of response to the request for its
service;
142. Grant of a (1) Subject to sections 111 and 125 of this Act, the Retained
wholesale gas Authority may upon approval of an application and
supply licence payment of prescribed fees, grant and issue a
wholesale gas supply licence to a qualified person.
(2) A lessee producing natural gas is a qualified person 142(2) A company who is a lessee producing
for the purpose of subsection (1) of this section and natural gas is a qualified person for the purpose
shall be entitled to apply for and be issued with a of subsection (1) of this section and shall be
wholesale gas supply licence by the Authority. entitled to apply for and be issued with a
wholesale gas supply licence by the Authority.
(c) enter a premises, in accordance with a metering144(c) enter a premises, in accordance with a
code issued by the Authority, to remove its metering code issued by the Authority, for the
meters for the purpose of reading the meters, purpose of reading the meters, testing and
testing and maintaining metering equipment maintaining metering equipment,
and disconnecting customers. disconnecting customers and to remove the
meters.
145. Conditions (1) In addition to conditions the Authority may impose Retained
applicable to a pursuant to section 114 of this Act, a wholesale gas
wholesale gas supply licence shall be deemed to be granted subject
supply licence to the supplier -
(a) requesting security or applying a credit scoring
methodology approved by the Authority in Retained
deciding whether supply is economical;
185
(b) supplying marketable natural gas to a wholesale Retained
customer with whom the supplier has entered
into a gas purchase and sale agreement and who
in order to connect to a gas transportation
network or gas transportation pipeline is willing
and able to –
(i) pay for the connection, Retained
(ii) construct its own gas transportation Retained
pipeline pursuant to section 137 (c) of this
Act, or
(iii) pay the respective Tariff to the Supplier for 145(b)(iii) pay the respective tariff to the
the gas transportation pipeline owned by supplier for the gas transportation pipeline
the supplier, owned by the supplier,
146. Grant of (1) Subject to sections 111 and 125 of this Act, the Retained
186
retail gas supply Authority may upon approval of an application and
licence payment of prescribed fees, grant and issue a
qualified person a retail gas supply licence
authorising the holder to –
(a) sell or retail marketable natural gas to customers 146 (1)(a) sell or retail compressed or liquefied
based on being a wholesale customer or third marketable natural gas to customers based on
party access to gas distribution systems of gas being a wholesale customer or third party
distributors; and access to gas distribution systems of gas
distributors; and
(2) A lessee producing natural gas is a qualified person 146(2) A company who is a lessee producing
for the purpose of subsection (1) of this section and natural gas is a qualified person for the purpose
shall be entitled to apply for and be issued with a of subsection (1) of this section and shall be
retail gas supply licence by the Authority. entitled to apply for and be issued with a retail
gas supply licence by the Authority.
(3) A retail gas supply licence authorises the gas retailer, Retained
to -
(a) purchase marketable natural gas directly from a Retained
lessee, wholesale gas supplier or third party on a
free market basis; and
(b) sell and deliver natural gas to customers at any 146(3)(b) sell and deliver compressed or
location in Nigeria. liquefied natural gas to customers at any
location in Nigeria on a free market basis.
147. General In addition to conditions the Authority may impose Retained
187
duties of gas pursuant to section 114 of this Act or that may be
retailer prescribed by regulation, a retail gas supply licence shall
be deemed to be granted subject to the duty of the
holder to -
(a) develop and maintain a safe, efficient, reliable
and economical service for the retailing of
marketable natural gas;
(b) carry on its business in a manner that shall
promote competition and avoid monopoly in
the natural gas market in Nigeria;
(c) construct, operate and maintain its gas
compression and liquefaction facilities in a safe,
economical, and reliable manner taking into
account any strategic plans formulated by the
Authority;
(d) shut down its gas compression and liquefaction
facilities in emergencies in order to carry out
maintenance or respond to curtailment
directives issued by the Authority;
(e) conduct its activities in a safe and reliable
standard in compliance with prescribed
environmental, health and safety-related
regulations issued pursuant to this or any other
Act;
(f) publish the prices to be charged and to be paid
by a person to whom the gas retailer sells natural
gas in a manner to ensure adequate publicity
unless the Authority direct otherwise; and
(g) comply with customer protection measures set
out in sections 164, 165 and 166 of this Act.
148. Grant of gas (1) Subject to sections 111 and 125 of this Act or Retained
distribution regulations made under this Act, the Authority may
licence upon approval of an application and payment of
prescribed fees, grant and issue a qualified person gas
188
distribution licence with rights to establish, construct,
and operate a gas distribution system and to distribute
and sell its natural gas without discrimination to
consumers in a local distribution zone.
(5) The rights and duties under a gas distribution licence 148(5) The rights and duties under a gas
shall be exclusive to the gas distributor for the validity distribution licence shall be exclusive to the gas
period of the distribution Licence. distributor for the validity period of the
distribution licence.
(6) A gas distribution licence may include provisions for 148(6) A gas distribution licence may include
providing Third Party access to the gas distribution provisions for providing third party access to
network to a gas retailer or gas distributor on its own the gas distribution network to a gas retailer or
initiative, may permit access to a gas retailer to the gas gas distributor on its own initiative, may permit
distribution network under terms and conditions agreed access to a gas retailer to the gas distribution
to by the parties. network under terms and conditions agreed to
by the parties.
(h) prepare a development plan for connecting 149(h) prepare a distribution development
customers within its local distribution zone for the plan, within one year after the effective date or
consideration of the Authority; and after having been granted the licence, for
connecting customers within its local
distribution zone and any amendments thereto
as a result of economic or social developments
190
in the zone for the consideration and approval
of the Authority; and
150. Rights of Subject to the provisions of this Act, the Authority may, Retained
the gas in order to facilitate the conduct of its licenced activities,
distributor grant the gas distributor the right to –
151. Conditions In addition to conditions the Authority may impose 151 In addition to conditions the Authority may
applicable to a pursuant to section 114 of this Act or that may be impose pursuant to section 114 of this Act or
gas distribution prescribed by regulation, a distribution Licence shall be that may be prescribed by regulation, a
licence deemed to be granted subject to the distributor – distribution licence shall be deemed to be
granted subject to the distributor –
152. A gas distributor shall consult stakeholders on proposed 152 A gas distributor shall consult stakeholders
Arrangements for development projects within its local distribution zone on the proposed distribution development plan
gas distribution and consider all representations received. and any amendments thereto within its local
distribution zone and consider all
representations received.
153. Domestic (1) Subject to sections 111 and 125 of this Act, the Retained
gas aggregation Authority may upon approval of an application and
licence payment of prescribed fees, grant and issue a
qualified person a domestic gas aggregation licence.
(2) The duration of the domestic gas aggregation licence 153(2) The duration of the domestic gas
shall be for a period of 2 years effective from the date aggregation licence shall be for a period of 2
of the grant of the Licence. years effective from the date of the
grant of the licence.
(2) The domestic gas aggregation licence may be 153(3) The domestic gas aggregation licence
renewed by the authority for further period of 2 may be renewed by the Authority for further
years in each instance until the attainment of period of 2 years in each instance until the
liquidity in the domestic gas market, whereupon gas attainment of liquidity in the domestic gas
aggregation shall cease and the domestic gas market pursuant to the criteria of section
aggregation licence shall be terminated by the 167(3), whereupon gas aggregation shall cease
Authority. and the domestic gas aggregation licence shall
be terminated by the Authority.
192
(4) The board of domestic gas aggregator shall
determine the fees for the services of the domestic gas 154(4)The Board of domestic gas aggregator
aggregator and the fees shall be paid by the producer shall determine the fees for the services of the
clients and customer clients in order to ensure self- domestic gas aggregator and the fees shall be
financing of the domestic gas aggregator. paid by the producer clients and customer
clients in order to ensure self-financing of the
domestic gas aggregator.
154. Functions of The domestic gas aggregator shall - Retained
the domestic gas (a) support the implementation of the domestic gas
aggregator delivery obligation;
(b) implement a natural gas management model,
through which the demand and supply of natural
gas for use in the strategic sectors shall be
monitored;
(c) operate a nomination and balancing mechanism
for equitable curtailment of natural gas
deliveries in cooperation with the Authority,
whenever demand and supply expediencies
requires;
(d) ensure transparency of dealing between natural
gas suppliers and wholesale customers of the
strategic sectors;
(e) conduct its operations in a business-like and
transparent manner and shall not engage in any
anti-competitive behaviour and practices;
(f) abstain from activities, which in the opinion of
the Authority may prevent, restrict or distort
competition;
(g) establish an escrow account into which
customer clients shall contribute their payments
for the marketable natural gas received and from
which the domestic gas aggregator shall pay the
producer clients for their supplies of natural gas
pursuant to the provisions of this Act; and
(h) do other things as are necessary or incidental to
193
the carrying out of its functions and duties under
this Act.
155. (1) The domestic gas aggregator shall be a not for profit Retained
Establishment of limited by guarantee company established under the
the aggregator Companies and Allied Matters Act.
(2) For the purposes of section 153 of this Act, a qualified 155(2) The company pursuant to subsection (1)
person shall not be a person who is controlled by shall not be a company who is controlled by
licensees or lessees of upstream petroleum licensees or lessees of upstream petroleum
operations or by wholesale customers or is an operations or by wholesale customers or is an
affiliate of such entities, provided that ownership of affiliate of such entities, provided that
the aggregator may be by a combination of licensees ownership of the company may be by a
or lessees, wholesale customers and other interested combination of licensees or lessees, wholesale
parties, such as licensees of gas transportation customers and other interested parties, such as
pipelines and gas transportation networks. licensees of gas transportation pipelines and
gas transportation networks.
156. Gas The domestic gas aggregator shall issue a gas purchase 156 The domestic gas aggregator shall issue a
purchase orders order to a producer client where a customer client gas purchase order to a producer client where
requires a specific volume of marketable natural gas, a customer client requires a specific volume of
which is included in the domestic gas demand marketable natural gas, which is included in the
requirement pursuant to section 173 of this Act. domestic gas demand requirement pursuant to
section 173 of this Act, provided, however, that
where the producer client and customer client
have entered into a gas purchase and sale
agreement, the domestic gas delivery
obligation shall be dealt with pursuant to such
agreement and such agreement may continue
to use the escrow account mechanism as
provided for under paragraph 154(g). Where
such agreement is concluded pursuant to
subsection 110(2) there shall be no further
involvement of the aggregator.
157. Price The gas purchase order pursuant to section 156 of this 157 The gas purchase order pursuant to section
194
conditions of gas act shall be based on the prices for marketable natural 156 and the escrow mechanism of paragraph
purchase orders gas established by the authority pursuant to section 167 154(g) of this Bill shall be based on the prices
of this act. for marketable natural gas established by the
Authority pursuant to section 167 of this Bill.
158. Wholesale (1) The Authority shall, following consultations with Retained
customers interested stakeholders, issue regulations -
(a) defining the class or classes of customers that shall Retained
constitute eligible wholesale customers under this
Act; and
(2) wholesale customers shall be entitled to secure 158(2) wholesale customers shall be entitled to
marketable natural gas from any wholesale gas supplier secure marketable natural gas or raw gas from
or lessee, subject to section 173 (3) of this Act. any wholesale gas supplier or lessee, subject to
section 173 (3) of this Act.
159. Trading and (1) The Authority shall develop arrangements for the Retained
settlement of safe and efficient trading of wholesale gas, where it
wholesale gas determines that there is need for formal arrangements
for the trading of wholesale gas.
(3) The Authority shall make copies of the gas network Retained
code available to interested parties upon payment of
prescribed fees.
161. Third party 161 Access related to midstream and
access relating to downstream gas operations
midstream and
downstream gas
operations (1) A person shall be permitted access to an open access Retained
gas transportation pipeline or a gas transportation
network for the purpose of having marketable
natural gas transported to points of consumption
subject to compliance with the prescribed terms and
conditions for access stated in the gas network code.
(2) The gas network code shall set out standard terms Retained
and conditions for connection to, interconnection
with access and use of the gas transportation
network.
(4) The Authority may develop special terms for third Retained
196
party access to a gas distribution network.
162. Conditions (1) Where open access applies, open access to the gas Retained
for the provision transportation pipeline or gas transportation network
of open access in shall be -
relation to gas (a) provided on a non-discriminatory basis between Retained
operations system users with similar characteristics
pursuant to section 116 of this Act;
(b) provided in respect of any available capacity, Retained
where the capacity is not subject to a previous
contractual commitment;
(c) provided in accordance with and governed by Retained
the terms and conditions of the network code
approved by the Authority, where applicable;
(d) provided on the condition that the applicant for Retained
access is or becomes a party to and undertakes
to comply with the applicable network code; and
(e) subject to the pricing principles set out in section Retained
170 of this Act.
(c) a supplier and a transportation pipeline owner 162(2)(c) a supplier or wholesale customer and
or transportation network operator. a transportation pipeline owner or
transportation network operator.
197
163. Disputes in 163. Disputes in relation to access
respect of third
party access The Authority may mediate in disputes in respect of Retained
third party access.
164. Customer (1) The Authority may, to protect the interests of Retained
protection customers, issue regulations requiring suppliers, gas
distributors and petroleum product distributors to -
(c) formulate and adhere to standards of 164(1)(c) formulate and adhere to standards of
performance as are, in its opinion, necessary to performance as are, in its opinion, necessary to
ensure the safety, reliability and quality of supply ensure the safety, reliability and quality of
and distribution services to customers and set supply and distribution services to customers
penalties for failure to comply; and set penalties, pursuant to regulations, for
failure to comply;
(a) consult with suppliers gas distributors, petroleum 164(5)(a) consult with suppliers, gas
distributors and interested stakeholders; and distributors, petroleum product distributors
199
and interested stakeholders; and
165. Provision of The Authority shall, at its discretion and at such time or Retained
service to times as it deems appropriate, designate distributors of
customers last resort and suppliers of last resort to provide services
to customers -
(a) where an existing gas distributor for a local
distribution zone, a petroleum product distributor
or a supplier becomes insolvent, is unable to
provide licenced services or has had its licence
suspended or revoked;
(b) where the gas distributor for a local distribution
zone or supplier refuses or fails to fulfil the terms
of its licence to distribute or supply natural gas or
petroleum product to customers; and
(c) in such other circumstances as the Authority may
deem appropriate;
(3) The price control and the corresponding role of the 167(3) The price control and the corresponding
domestic gas aggregator shall not be required, where role of the domestic gas aggregator shall not be
the domestic market for natural gas is largely required, where-
characterized by free market based contracting for (a) the entire domestic gas demand
natural gas between willing buyers and willing sellers requirement pursuant to subsection
and the transactions of the producer clients and 173(2) is covered by contracts pursuant
consumer clients represent less than 20% of the total to 110(2) and 173(3); or
transactions. (b) the domestic market for natural gas is
largely characterized by free market
based contracting for natural gas
between willing buyers and willing
sellers, based on criteria established by
the Authority in consultation with the
stakeholders and at such time the
201
provisions of subsections (4),(5), (6) and
(7) and section 168 shall no longer be
applicable. The criteria pursuant to this
subsection may include that certain
classes of wholesale customers, but not
all, of the strategic sectors will no longer
be subject to price controls as part of an
ongoing process towards full free market
conditions.
(4) The aggregate gas price for a month shall be the price Retained
calculated based on the procedures established by the
domestic gas aggregator on the basis of the prices
determined by the Authority pursuant to subsection (1)
of this section.
(7) Gas distributors and gas retailers shall not be part of 167(7) Gas distributors shall not be part of the
the strategic sectors and shall negotiate the supply and strategic sectors and shall negotiate the supply
pricing of their natural gas directly, provided that the and pricing of their natural gas directly,
applicable price for gas distributors for the marketable provided that the applicable price for gas
natural gas at the marketable gas delivery point shall not distributors for the marketable natural gas at
exceed that of the commercial sector pursuant to the marketable gas delivery point shall not
subsection (6) of this section. exceed that of the commercial sector pursuant
to subsection (6) of this section.
(8) The wholesale customers of the strategic sectors, gas 167(8) Where applicable, wholesale gas
distributors and gas retailers shall pay for the suppliers, the wholesale customers of the
202
transportation cost of the marketable natural gas from strategic sectors and gas distributors shall pay
the marketable natural gas delivery point to their for the transportation cost of the marketable
facilities. natural gas from the marketable natural gas
delivery point to the facilities of the wholesale
customers.
(9) The wholesale customers of the strategic sectors 167 (9) The wholesale gas suppliers, wholesale
shall, for the purpose of transportation, have the option customers of the strategic sectors and gas
to - distributors shall, for the purpose of
transportation, have the option to –
(a) use the gas transportation network applicable to Retained
their geographical areas; or
(3) The ceiling price shall be the domestic base price Retained
203
applicable for any particular year.
(4) The Authority may by regulation adjust or modify the 168(5) The Authority may from time to time by
provisions of this section and add other gas based regulation adjust the price mechanism to add
industries. other gas based industries in line with market
realities.
169. Power to (1) Where the Authority determines that - Retained
regulate and (a) a particular licenced activity is a monopoly
review prices service;
(b) competition has not yet developed in the market
to such an extent as to protect the interests of
customers; or
(c) a particular licensee is a dominant provider,
205
172. Public (1) The Authority shall, by regulation, provide for the Retained
service levy recovery of any additional costs incurred in complying
with the public service obligations through a public
service levy, which may be imposed on customers,
provided that it would, in the opinion of the authority,
be in the wider public interest.
(2) The amount of, and mechanism for the collection and Retained
remittance of, the public service levy imposed on each
customer shall be set out in the regulations
contemplated by subsection (1) of this section.
173. Domestic (1) The Authority shall, prior to the 1st day of March of Retained
Gas Demand each calendar year, determine the domestic gas
Requirement demand requirement and inform the Commission of
this requirement.
206
PART V ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM
PETROLEUM LIQUIDS OPERATIONS
174. Activities (1) Except in accordance with an appropriate licence Retained
requiring a issued by the Authority, a person shall not undertake the
licence for following activities with respect to midstream
midstream and petroleum liquids operations -
downstream (a) establish, construct or operate a terminal or
petroleum liquids other facility for the export or importation of
operations crude oil or petroleum products;
(b) establish, construct or operate a crude oil
refinery;
(c) establish, construct or operate a pipeline for the
bulk transportation of petroleum liquids;
(d) engage in bulk transportation of petroleum
liquids by rail, barge or other means within
Nigeria;
(e) establish, construct or operate a facility for the
bulk storage of petroleum liquids;
(f) establish, construct or operate a petroleum
liquids transportation network;
(g) engage in the bulk sale of petroleum liquids, or
(h) undertake construction or operation of any
facility for the production of lubricants or
petrochemicals based on petroleum products.
(3) The Authority may, by regulation, prescribe 174(3) The Authority may, by regulation,
additional activities to be undertaken only on the prescribe additional activities to be undertaken
basis of a Licence or Permit and shall have power to only on the basis of a licence or permit and shall
issue licences or permits for the activities in have power to issue licences or permits for the
accordance with this Act. activities in accordance with this Act.
(5) Notwithstanding any provision of this Act, a person 174(5) Notwithstanding any provision of this
who engages in any of the activities set out in Bill, a person who engages in any of the
subsection (1), (2) or (3) of this section without a activities set out in subsection (1), (2) or (3) of
Licence or Permit, commits an offence and is liable to this section without a licence or permit,
imprisonment for a term of – commits an offence and is liable to
imprisonment for a term of –
(6) A holder of a subsisting lease, licence or permit who 174(6) A holder of a subsisting lease, licence or
is engaged in activities in midstream or downstream permit who is engaged in activities in
petroleum liquids operations prior to the effective date midstream or downstream petroleum liquids
shall, within 24 months from the effective date, apply to
208
the Authority and the Authority may issue the operations prior to the effective date shall,
appropriate licence or permit, where applicable. within 18 months from the effective date, apply
to the Authority for and the Authority may issue
the appropriate licence or permit, where
applicable.
(7) The provisions of subsection (4) of this section shall 174(7) The provisions of subsection (4) and (5)
not apply to any person who has made an application of this section shall not apply to any person
contemplated under subsection (6) of this section until pursuant to subsection (6) of this section until
the Authority has considered the application given a the Authority has considered the application
decision. and given a decision.
209
petroleum products;
(b) the establishment and operation of a wholesale 175(a) the establishment and operation of a
market, to ensure the continuity of supply of wholesale market, to ensure the continuity of
petroleum products to customers, that will apply supply of petroleum products to customers,
to the owners and operators of crude oil that will apply to the owners and operators of
refineries, transportation pipelines and other crude oil refineries, transportation pipelines
facilities or vessels for the bulk transportation of and other facilities or vessels for the bulk
petroleum liquids, bulk storage facilities for transportation of petroleum liquids, bulk
petroleum liquids and terminals and outlets for storage facilities for petroleum liquids and
retail trading of petroleum products; and terminals and outlets for retail trading of
petroleum products; and
176. Rights of Subject to applicable law and the terms and conditions 176 Subject to applicable law and the terms and
way relating to prescribed by the authority, a licensee or permit holder conditions prescribed by the authority, a
midstream and is entitled to a right of way for the laying, operation and licensee or permit holder is entitled to rights of
downstream maintenance of petroleum liquids transportation way for the laying, operation and maintenance
petroleum liquids pipelines, communication lines, power lines and other of petroleum liquids transportation pipelines,
operations similar lines through or across the areas the licensee or communication lines, power lines and other
permit holder may require for carrying on midstream or similar lines through or across the areas the
downstream petroleum liquids operations under the licensee or permit holder may require for
licence or permit. carrying on midstream or downstream
petroleum liquids operations under the licence
or permit.
177. Surface 177 Surface rights reserves for the Authority for
rights reserved midstream and downstream petroleum liquids
for the authority operations.
for midstream
The Authority may for the purpose of efficiency,
and downstream The Authority may for the purpose of efficiency, grant
preserve rights of way, easements or other
petroleum liquids rights of way, easements or other rights over any surface
operations or seabed areas subject to an existing licence or permit, rights over any surface or seabed areas subject
210
which may be necessary for the laying, operation and to an existing licence or permit, which may be
maintenance of petroleum liquids transportation necessary for the laying, operation and
pipelines, communication lines, power lines and other maintenance of petroleum liquids
similar lines and any right of way or other rights reservedtransportation pipelines, communication lines,
shall continue for the benefit of any entity to whom the power lines and other similar lines and any right
authority may subsequently grant the same licence or of way or other rights reserved shall continue
permit. for the benefit of any entity to whom the
Authority may subsequently grant the same for
a licence or permit.
178. Petroleum (1) The Authority may in consultation with licensees and Retained
liquids other stakeholders with respect to midstream
midstream petroleum liquids operations, develop a network
network code code governing the terms of access into facilities and
infrastructure used in midstream petroleum liquids
operations.
(2) The network code may include the following matters Retained
-
(a) a connection and interconnection policy, Retained
standard terms for connection to a open access
petroleum liquids transportation pipeline or
petroleum liquids transportation network and a
statement of the connection charging
methodology;
(b) a mechanism by which users reserve capacity in Retained
facilities and infrastructure and at any time there
is a greater demand for access than available
capacity, a mechanism for allocating capacity
between users;
(c) the nomination; Retained
(d) requirements for the provision of information to Retained
the petroleum liquids transportation network
operator about the volume, timing and flow-rate
of injections into and withdrawals from the
petroleum liquids transportation network;
211
(e) the structure of charges and the applicable Retained
tariffs charged for using the petroleum liquids
transportation network;
(f) the balancing of crude oil, condensates or Retained
petroleum products being conveyed;
(g) registration arrangements; Retained
(h) metering, allocation and settlement Retained
arrangements;
(i) governance arrangements; and Retained
(j) the maintenance of a register of customers and 178(2)(j) the maintenance of a register of
Suppliers. customers and suppliers.
(3) The petroleum liquids midstream network code shall 178(3) The petroleum liquids midstream
be published on the website of the authority and network code shall be published on the website
physical copies shall be made available to interested of the Authority and physical copies shall be
persons on payment of a prescribed fee. made available to interested persons on
payment of a prescribed fee.
179. Third party Subject to section 162 of this Act, any person licenced 179(1) Subject to section 162 of this Bill, any
access relating to under the provisions of this Act to supply petroleum person licenced under the provisions of this
midstream and liquids shall be permitted third party access to facilities Bill to supply petroleum liquids shall be
downstream and infrastructure used for midstream petroleum permitted third party access to facilities and
petroleum liquids operation by owners, operating on their own account, of infrastructure used for midstream petroleum
operations such facilities and infrastructure – operation by owners, operating on their own
account, of such facilities and infrastructure
-
(a) in the manner prescribed by this act, the 179(1)(a) in the manner prescribed by this Bill,
regulations, codes and other guidelines issued by the regulations, codes and other guidelines
the authority under this act; and issued by the Authority under this Bill; and
(b) determine and publish the amount to be charged as 181 (b) determine and publish the amount to
a levy for the financing of the national strategic stock, be charged as a levy for the financing of the
which shall form part of the retail price of each national strategic stocks, which shall form part
213
petroleum product, such levy to be determined as a of the retail price of each petroleum product,
percentage of the retail price and be deducted on such levy to be determined as a percentage of
wholesale basis; and the retail price and be deducted on wholesale
basis; and
184. General The crude oil refiner shall undertake the activities 184. The crude oil refiner shall undertake the
duties of a crude contemplated by the Licence in a manner that best activities contemplated by the licence in a
214
oil refiner complies with the following general obligations, to – manner that best complies with the following
general obligations, to –
185. Access A crude oil refiner shall have the right of access to Retained
rights facilities, including harbours, jetties, petroleum bulk
storage, transportation facilities and pumping
installations in accordance with the open access or third
party access requirements and the tariff methodology
approved by the Authority.
215
186. Conditions In addition to conditions as may be imposed by the Retained
applicable to a Authority pursuant to section 114 of this Act, a crude oil
crude oil refining
refining licence shall be deemed to be granted subject to
licence the conditions that the holder shall -
(a) conduct its licenced activities safely and reliably in
compliance with any law in force and prescribed
health and safety related regulations, standards
and operating procedures issued pursuant to this
Act;
(b) have regard to the effect of its licenced activities
on the environment and complying with the
requirements for environmental protection,
management and restoration under this Act;
(c) mark, maintain and secure the boundaries of its
facilities and associated infrastructure
constructed under the terms of its licence and any
law in force; and
(d) comply with any conditions precedent or other
conditions as the Authority may prescribe by
regulation.
187. Grant of a (1) Subject to sections 111 and 174 of this Act, the Retained
bulk petroleum Authority may upon approval of an application and
liquids storage payment of prescribed fees, grant and issue a
licence qualified person bulk petroleum liquids storage
licence authorising the holder to undertake the bulk
storage of petroleum liquids whether for its own
account or on behalf of customers as provided for in
the licence.
216
188. General The holder of a bulk petroleum liquids storage licence Retained
duties of a bulk shall undertake the activities contemplated by the
storage licensee licence in a manner that best complies with the
following general obligations, to -
(a) establish and make available to the public at its Retained
offices, the -
(i) procedure for obtaining third party access 188(a)(i) procedure for obtaining third party
and throughput and terminating its services, access or open access, as provided for in the
and licence, and throughput and terminating its
services, and
(a) conduct its licenced activities safely and reliably in (b) conduct its licenced activities safely and
compliance with any law in force and prescribed reliably in compliance with any law in force and
health and safety related regulations issued prescribed health and safety related
pursuant to this Act; regulations issued pursuant to this Bill;
(b) have regard to the effect of its licenced activities(c) have regard to the effect of its licenced
on the environment and complying with the activities on the environment and complying
requirements for environmental protection, with the requirements for environmental
management and restoration under this Act; and protection, management and restoration under
this Bill; and
(c) mark, maintain and secure the boundaries of its (d) mark, maintain and secure the boundaries
facilities and associated infrastructure of its facilities and associated infrastructure
constructed under the terms of its licence and any constructed under the terms of its licence and
law in force. any law in force.
218
190. Grant of (1) Subject to sections 111 and 174 of this Act, the Retained
petroleum liquids Authority may upon approval of an application and
transportation payment of prescribed fees, grant and issue a
pipeline licence qualified person a petroleum liquids transportation
pipeline licence with the exclusive right to own,
construct, operate and maintain a transportation
pipeline for the bulk transportation of petroleum
liquids within a route as defined in the licence for its
own account with third party access provisions or as
common carrier as stipulated in the licence.
(b) a lessee, operating on its own account, may own 192(b) where the holder is a licensee operating
the petroleum liquids in a petroleum liquids on its own account, who is a company which is
transportation pipeline, for the purpose of an affiliate of a company that is a lessee, the
connecting petroleum liquids produced in a field licensee may own, or the affiliate may own, the
to another petroleum liquids transportation petroleum liquids in a petroleum liquids
220
pipeline or petroleum liquids transportation transportation pipeline for the purpose of
network, subject to third party access provisions removing petroleum liquids from the lease(s).
as may be included in the licence;
(c) a crude oil refiner, operating on its own account, 192(c) where the holder is a company who also
may own the petroleum liquids in a petroleum holds a licence to be wholesale petroleum
liquids transportation pipeline for the purpose of liquids supplier, operating on its own account,
transporting petroleum liquids to its refinery or may own the petroleum liquids in a petroleum
from its refinery to petroleum product liquids transportation pipeline, for the purpose
distributors and other wholesale customers, of connecting to a lessee or wholesale customer
subject to third party access provisions as may to or from a petroleum liquids transportation
be included in the licence; network or petroleum liquids transportation
pipeline, subject to third party access
provisions as may be included in the licence;
(d) a petroleum product distributor, operating on its 192(d) where the holder is a company who also
own account, may own the petroleum liquids in holds licence as a petroleum product
a petroleum liquids transportation pipeline, distributor, operating on its own account, may
where the principal user of the transportation own the petroleum liquids in a petroleum
pipeline is the petroleum product distributor, liquids transportation pipeline, where the
subject to third party access provisions as may principal user of the transportation pipeline is
be included in the licence; the petroleum product distributor, subject to
third party access provisions as may be included
in the licence;
(e) a wholesale petroleum liquids supplier, 192(e) where the holder is a company who also
operating on its own account, may own the holds a licence to be wholesale petroleum
petroleum liquids in a petroleum liquids liquids supplier, operating on its own account,
transportation pipeline, for the purpose of may own the petroleum liquids in a petroleum
connecting to a lessee or wholesale customer to liquids transportation pipeline, for the purpose
or from a petroleum liquids transportation of connecting to a lessee or wholesale customer
network or petroleum liquids transportation to or from a petroleum liquids transportation
pipeline, subject to third party access provisions network or petroleum liquids transportation
as may be included in the licence; pipeline, subject to third party access
provisions as may be included in the licence;
221
(f) conduct its licenced activities safely and reliably Retained
in compliance with any law in force and
prescribed health and safety related regulations
issued pursuant to this Act;
(g) have regard to the effect of its licenced activities Retained
on the environment and comply with the
requirements for environmental protection,
management, and restoration under this Act;
and
(h) mark, maintain and secure the boundaries of the Retained
pipelines and associated infrastructure
constructed under the terms of its licence.
(2) The Authority shall grant only one petroleum liquids Retained
222
transportation network operator licence for specified
petroleum liquids within a geographically defined area
to a single network operator, provided that the authority
may, at its discretion, issue licences to other parties for
the operation of isolated or dedicated pipelines.
194. General The petroleum liquids transportation network operator Retained
duties of a shall exercise the rights and obligations imposed on it in
petroleum liquids a manner that best complies with the following general
transportation obligations -
network operator (a) establish and make available to the public at its Retained
offices, the -
(i) procedure, terms and conditions for
obtaining and terminating access and
interconnection services to the
transportation network, and
(ii) method of response to the request for its
service;
(b) operate an efficient and economical Retained
transportation network for the safe and reliable
conveyance of specified petroleum liquids in a
manner that is designed to meet all reasonable
demands for the specified petroleum liquids;
(c) operate a nomination and balancing mechanism Retained
and an equitable curtailment of transportation
whenever technical or operational expediencies
requires;
(d) consult with the Authority and obtain written Retained
permission prior to any modification of technical
and operational rules of practice concerning the
operation of its transportation network;
(e) ensure the development and operation of a Retained
network code and terms for access into the
transportation network in collaboration with the
Authority and shippers and licensees and permit
holders operating essential infrastructure;
223
(f) ensure equitable and transparent access by third 194(f) ensure equitable and transparent open
parties to the transportation network in access, subject to the provisions of section 116,
accordance with the network code; to the transportation network in accordance
with the network code;
195. Powers of a Subject to the provisions of this Act, the Authority may Retained
petroleum liquids grant the following special powers or authority to a
transportation petroleum liquids transportation network operator to
network operator facilitate the conduct of its licenced activities -
(a) the power to request and obtain from Licensees 195(a) the power to request and obtain from
information required to operate the nominations shippers information required to operate the
and balancing mechanism to operate the network nominations and balancing mechanism to
or to facilitate competition; operate the network or to facilitate
competition;
(b) the right to recover, on the basis of an invoice, 195(b) the right to recover, on the basis of an
expenses reasonably incurred in undertaking its invoice, expenses reasonably incurred in
Licenced activities, subject to any conditions undertaking its licenced activities, subject to
imposed by the Authority with respect to the level any conditions imposed by the Authority with
and structure of its charges; and respect to the level and structure of its charges;
and
(2) A lessee producing crude oil or condensates and a 197(2) A company who is a lessee producing
crude oil refiner is a qualified person for the purpose crude oil or condensates or both or is a holder
of subsection (1) of this section and shall be entitled of a crude oil refining licence is a qualified
225
to apply for and be issued with a wholesale person for the purpose of subsection (1) of this
petroleum liquids supply licence by the Authority. section and shall be entitled to apply for and be
issued with a wholesale petroleum liquids
supply licence by the Authority.
199. Rights of a Subject to the provisions of this Act, the Authority may Retained
wholesale grant the following specific powers or authority to the
petroleum liquids holder of a wholesale petroleum liquids supply licence
supplier to facilitate the conduct of its licenced activities, the
right to -
(a) terminate wholesale supply to a customer in the Retained
event of non-payment, following a notice period
as prescribed by regulation;
(b) recover from a customer, on the basis of an Retained
invoice and subject to any conditions imposed by
the Authority on the level and structure of a
licensee’s charges and costs reasonably incurred
in the supply of petroleum liquids, provided that
the sale of petroleum liquids to customers by the
wholesale petroleum liquids supplier shall be
226
subject to the provisions of this Chapter; and
(c) enter a premises, in accordance with a metering 199(c) enter a premises, in accordance with a
code issued by the Authority, to remove its metering code issued by the Authority, for the
meters for the purpose of reading the meters, purpose of reading the meters, testing and
testing and maintaining metering equipment maintaining metering equipment and
and disconnecting customers. disconnecting customers and to remove
meters.
200. Conditions (1) In addition to conditions as may be imposed by the Retained
applicable to a Authority pursuant to section 114 of this Act, a
wholesale wholesale petroleum liquids supply licence shall be
petroleum liquids deemed to be granted subject to the supplier -
supply licence (a) ensuring a reliable and efficient supply of
petroleum liquids to customers on request,
provided that it is economically feasible;
(b) supplying petroleum liquids on request to a
customer who is willing and able to pay for
connection to the transportation network or
transportation pipeline, subject to safety and
network capacity constraints; and
(c) conducting licenced activities safely, reliably and
in an environmentally friendly manner in
compliance with any law in force and any health
and safety related regulations issued by the
authority pursuant to this act or any other Act.
201. Grant of Subject to sections 111 and 174 of this Act, the Authority Retained
licence for may upon approval of an application and payment of
distribution of prescribed fees, grant and issue a qualified person a
petroleum
227
products petroleum product distribution licence.
203. Grant of a (1) Subject to sections 111 and 174 of this Act, the Retained
licence to Authority may upon approval of an application and
construct and payment of prescribed fees, grant and issue a qualified
operate a facility person a petroleum product retail licence authorising
for retail supply the holder to establish, construct and operate a facility
and distribution
228
of petroleum to be employed for retail sale of petroleum products.
products
(2) The Authority shall issue guidelines in respect of the Retained
process for the establishment, construction and
operation of facilities to be employed by petroleum
product retailers for retail sale of petroleum products.
204. Grant of a 204 Grant of a licence to construct and operate
permit to a facility for the production of petrochemicals
construct and
operate a facility
(1) Subject to sections 111 and 174 of this Act, the Retained
for the
production Authority may upon approval of an application and
of payment of prescribed fees, grant and issue a
petrochemicals qualified person a petrochemicals production licence
authorising the holder to establish, construct and
operate a facility for the production of
petrochemicals and sell the petrochemicals
produced.
205. Pricing (1) Subject to the provisions of this Section, wholesale Retained
regime and and retail prices of petroleum products shall be
power to based on unrestricted free market pricing conditions.
regulate
tariffs (2) Where the Authority determines that - 205(2) Where the Authority determines that a
(a) a particular licenced activity is a monopoly service; particular licenced activity is a monopoly
service or a service by an excessively dominant
supplier, the Authority shall have the power to
regulate the tariffs and prices charged by the
respective licensee in respect of the activities in
a manner consistent with the Authority’s duties
under the this Bill and with the pricing
principles set out in section 207 of this Bill.
(b)competition has not yet developed in the market
229
for any petroleum product to an extent as to Delete
protect the interests of customers; or
(c) a particular licensee is a dominant provider of Delete
services,
206. Wholesale (1) The holder of a wholesale petroleum liquids supply Retained
prices for licence and a wholesale customer shall, subject to the
petroleum provisions of this Chapter, negotiate the wholesale
products prices directly between the parties on an arm’s
length basis, provided that the transfer price shall be
transparent and reflect the transfer price between
the parties.
(2) The Authority shall have a power to monitor bulk sale Retained
of petroleum products and may publish market-
based prices in order to ensure that the transactions
are undertaken in a manner that transfer pricing
230
between the supplier and the wholesale customer
are undertaken at a transparent arm’s length basis.
(3) The supplier shall, within 14 days of the 206(3) The supplier shall, within 14 days of the
consummation of a transaction relating to the bulk consummation of a transaction relating to the
sale of petroleum products, provide the authority bulk sale of petroleum products, provide the
with information relating to the transaction Authority with information relating to the
including, where applicable, the cost incurred by the transaction including, where applicable, the
supplier in the production or supply of the product cost incurred by the supplier in the production
and other information relevant to the price at which or supply of the product and other information
the product is sold. relevant to the price at which the product is
sold.
207. Pricing Subject to the provisions of this part, the Authority shall, 207 Where pursuant to subsection 205(2), the
principles in in the exercise of its powers to regulate prices charged Authority regulates the tariffs and prices of a
relation to by Licensees, be guided by the following principles – licensee, the Authority shall allow the seller to
petroleum recover reasonably and prudently incurred
products costs, including a reasonable return on the
capital invested in the business.
211. Power to (1) Subject to the provisions of the Federal Competition Retained
prevent anti- and Consumer Protection Act, the Authority shall
competitive have the responsibility to prevent anti-competitive
behaviour behaviour with respect to midstream and
downstream petroleum operations and may take any
or a combination of the following actions -
(a) monitor and determine whether any conduct by a
licensee or any other person operating or
intending to operate in midstream and
downstream petroleum operations –
(i) has the purpose or effect of substantially
lessening competition in any segment of the
midstream and downstream petroleum
operations,
(ii) may likely result in anti-competitive or
233
discriminatory conduct, including an unlawful
exercise of market power that may prevent
customers from obtaining the benefits of a
properly functioning and competitive market,
(iii) may amount to practices which reflect an
apparent or probable effect of crippling,
excluding or deterring the entry of another
person into midstream and downstream
petroleum operations, or
(iv) may likely be indicative of an abuse of
dominant position in respect of the provision
of any service;
(b)consider how best to prevent or mitigate abuse of Retained
market power in its decisions and determinations
regarding matters including licence applications,
grant of licence, licence terms and conditions and
the regulation of prices for services in competitive
markets; and
(c) where, in the opinion of the Authority there is or Retained
may be, anti-competitive behaviour and in
particular an abuse of market power, the
Authority shall -
(i) issue “cease and desist” orders as may be
required,
(ii) require and compel the disclosure of
information from licensees,
(iii) undertake inquiries and investigations, and
(iv) levy fines prescribed by regulations issued
by the Authority, which shall not exceed 5%
of the annual turnover of the company for
the preceding year.
(2) Licenced activities between a holder of a Licence and 212(2) Licenced activities between a holder of
an affiliate shall be undertaken in a manner that the a licence and an affiliate shall be undertaken in
transfer pricing between both entities is undertaken a manner that the transfer pricing between
on a transparent arm’s length basis and in a manner both entities is undertaken on a transparent
that reflects the pricing principles contained in arm’s length basis and in a manner that reflects
sections 107 and 207 of this Act. the pricing principles contained in sections 170
and 207 of this Act.
(3) A holder of a Licence shall not, without the prior 212(3) A holder of a licence shall not, without
written consent of the Authority, directly or the prior written consent of the Authority,
235
indirectly acquire an interest in, purchase or merge directly or indirectly acquire an interest in,
with another holder of a licence or an affiliate of a purchase or merge with another holder of a
holder of a Licence. licence or an affiliate of a holder of a licence.
214. In the exercise of its powers under this Chapter, the Retained
Considerations Authority may consider -
for exercise of the (a) the relevant economic market; Retained
Authority’s (b) global trends in the relevant economic market; Retained
powers (c) the effect on the number of competitors in the Retained
market and their respective market shares;
(d) the effect on barriers to entry into the market; Retained
(e) the effect of any activity on the range of services Retained
in the market;
(f) the effect of the conduct on the cost and profit Retained
structures in the market;
(g) the ability of any independent licensee or 214(g) the ability of any independent licensee
operator to make price or Tariff regulating or operator to make price or tariff regulating
decisions; and decisions; and
(h) any other matter which the Authority may deem Retained
relevant.
215. Power to (1) Where, in the opinion of the Authority, any act or 215 (1) Where, in the opinion of the Authority,
serve notice, activity prohibited under this Chapter has been or is any act or activity prohibited under this Chapter
issue “cease and likely to be undertaken by any Person, the Authority has been or is likely to be undertaken by any
desist” order, etc. may – person, the Authority may –
(a) serve a notice on the person, specifying the act
or activity and its intention to issue a “cease and Retained
desist” order;
(b) direct the person to whom the notice is issued to Retained
do or not to do, the specified act or activity; and
236
(c) specify the time frame for compliance with the Retained
notice.
(3) The Authority may levy a fine not exceeding 5% of the Retained
annual turnover of the company for the preceding
year or revoke the licence of any person who fails to
comply with a “cease and desist” order or a directive
issued under subsection (1) of this section.
237
publish in at least two national newspapers with wide
coverage and on its website, notice of -
(a) the stakeholders’ consultation;
(b) its invitation to lessees, licensees, permit holders
and other stakeholders to participate in the
stakeholders’ consultation;
(c) the venue and period during which the
stakeholders’ consultation is to be held;
(d) the nature of the matter to which the
stakeholders’ consultation relates;
(e) the matters upon which the Commission or
Authority, as the case may be, would require
submissions;
(f) the form in which stakeholders are to make
submissions on the subject matter of the
stakeholders’ consultation;
(g) the period of notice for the commencement of
the stakeholders’ consultation, which shall not
be less than 21 days; and
(h) the address or addresses to which the
submissions may be sent.
238
(7) The Commission or Authority, as the case may be, Retained
shall fix a date upon which the confirmed regulation
under subsection (6) of this section shall come into
effect and cause the notice of that commencement
date to be published in at least two national
newspapers with wide coverage and on its website.
(2) The holder of the lease, licence or permit and any Retained
other interested party shall be entitled to make
representations against or in support of a notice
published pursuant to subsection (1) of this section
on a date specified in the notice.
(3) Where a holder of the lease, licence or permit fails to Retained
comply with a notice published pursuant to
subsection (1) of this section, the Commission or
Authority, as the case may be, may issue an
239
enforcement order.
(4) The Commission or Authority may not issue an 217(4) The Commission or Authority may not
enforcement order if the holder of the lease, licence issue an enforcement order if the holder of the
or permit – lease, licence or permit –
(5) A holder of a lease, licence or permit who fails to 217(5) A holder of a lease, licence or permit
comply with the enforcement order under this who fails to comply with the enforcement order
section, commits an offence and the Commission or under this section is in contravention of the
Authority may suspend or revoke the lease, licence provisions of this Act and therefore liable, to
or permit of the liable offender or impose any other wit-
penalty prescribed by regulations. (a) the Commission shall revoke the permit or
recommend to the Minister to suspend or
revoke the licence or lease, and
(b) the Authority shall revoke the permit
recommend to the Minister to suspend or
revoke the lease, licence, or
(c) the Commission or Authority, as the case
may be, shall impose any other penalty
prescribed by regulations.
(6) The penalty issued pursuant to subsection (1) (b) of 217(6) The penalty issued pursuant to
this section may be reviewed in regulation, in order subsection (5) of this section may be reviewed
240
to reflect the effect of inflation. in regulation, in order to reflect the effect of
inflation or for other justified reasons.
219. Register of (1) The Commission and Authority shall establish, Retained
licences, permits maintain and make publicly available, a register of
and leases, licences, permits and authorisations, issued,
authorisations revoked, suspended, surrendered or withdrawn and any
modification or exemption granted in respect of any
lease, licence, permit or authorisation pursuant to this
Act.
(2) The register referred to in section 219 of this Act shall Retained
also be kept in an electronic format and soft copies of
individual leases, licences, permits, authorisations or
exemptions shall be forwarded to the holder of a lease,
licence, permit or authorisation.
(3) The Commission or Authority, as the case may be, 220(3) The Commission or Authority, as the
shall cause a licence, permit or authorisation to be case may be, shall cause a lease, licence, permit
prepared upon payment of the requisite fees. or authorisation to be prepared upon payment
of the requisite fees and in the case of leases or
licences for upstream petroleum operations the
provisions of section 85 shall apply.
221. Effective (1) The lease, licence, permit or authorisation or any Retained
date and exemption shall be authenticated under the seal of the
authentication of Commission or Authority, as the case may be and the
licences, permits validity of the lease, licence, permit or authorisation or
and any exemption shall commence from the date of its
authorisations issuance.
243
224. Effect of A lease, licence, permit or authorisation registered 224 renumbered as 223
registration under this Chapter shall, subject to the provisions of this
Act, be conclusive evidence -
(a) that the rights described in the lease, licence,
permit or authorisation are vested in the person
named as the holder of the lease, licence, permit
or authorisation; and
(b) of the conditions and other provisions to which
the holder of the lease, licence, permit or
authorisation is subject under this Act.
225. Public (1) The registry and the registers required pursuant to 225 Renumbered as 224
access to the sections 219, 222 and 223 of this Act shall be readily
registry accessible to the public during the hours and upon the
days designated by the Commission or Authority, as the
case may be.
(2) Where no time limit has been specified under this Act 226(2) Where no time limit has been specified
or in any applicable Regulation, the time limit referred under this Act or in any applicable regulation,
to in subsection 0 of this section shall be 60 days. the time limit referred to in subsection (1) of
this section shall be 90 days.
(3)The Commission or Authority shall reject an 226(3) Where the Commission or Authority
application within the stipulated time limit with reasons rejects an application, they shall, within the
and any rejected application shall be tracked and stipulated time limit, revert with reasons and
accurate record of it kept. any rejected application shall be tracked and
accurate record of it kept.
(4) Default approvals shall be recorded in the 226(4) Where the Commission or Authority at
appropriate register by the Commission or Authority. the expiration of the stipulated time frame
refuses to communicate in writing its approval
or rejection to the applicant, the application is
deemed to have been approved. The default
approval shall be recorded in the appropriate
register by the Commission or Authority.
227. Disclosure of (1)Where a director or employee of the Commission or Retained
confidential or Authority, in the course of his duties, acquires
other information relating to the financial affairs of any
information person or to any commercial secret or where any
other person indirectly acquires such or other
information required to be kept confidential under
the provisions of this Act from any director or
245
employee of the Commission or Authority, he shall
not make use of such information for any
unauthorised or unofficial purpose nor disclose it to
any other person except -
(a) for the purpose of legal proceedings under this Act
or any other law; and
(b) to the extent that it may be necessary to do so for
the purpose of this Act or any other law;
commits an offence and is liable to a fine or a 230 commits an offence and upon conviction by
term of imprisonment as may be prescribed in competent court of jurisdiction is liable to a
regulation. term of imprisonment and applicable fine as
248
may be prescribed in regulation and with
respect to paragraphs (a), (b) and (c) of this
section, where such offence is repetitive or
continues after having been so informed in
writing by the Commission or Authority as the
case may be.
231. Power to (1) The Commission or Authority, as the case may be, Retained
issue may assess a penalty in the prescribed amount
administrative against any person for prescribed contraventions of
penalties this Act, regulations or an order made pursuant to
this Act.
(2) Prior to assessing a penalty, the Commission or Retained
Authority, as the case may be, shall provide notice
to the person -
(a) setting out the facts and circumstances that
makes the person liable to a penalty;
(b) specifying the amount of the penalty that is
considered appropriate in the circumstances;
and
(c) informing the person of the person’s right to
make representations to the Authority or
Commission, as the case may be.
249
(5) After considering any representations made Retained
pursuant to subsection (3) of this section, the Authority
or Commission, as the case may be, may:
(a) assess a penalty and set a date by which the
penalty is to be paid in full; or
(b) determine that no penalty should be assessed.
232. (1) The decommissioning and abandonment of onshore 232(1)The decommissioning and abandonment
Abandonment, and offshore petroleum wells, installations, structures, of petroleum wells, installations, structures,
decommissioning utilities, plants and pipelines for petroleum operations utilities, plants and pipelines for petroleum
and disposal shall be conducted in accordance with – operations on land and offshore shall be
conducted in accordance with –
(4) In production sharing contracts or any other 232(4) In production sharing contracts or any
contractual arrangement pursuant to section 84(2) of other contractual arrangement pursuant to
this Act responsibilities and liabilities relating to section 85 of this Bill responsibilities and
decommissioning and abandonment as specified in liabilities relating to decommissioning and
this section and section 233 of this Act shall apply to abandonment as specified in this section and
the licensee or lessee as contractor. section 233 of this Bill shall apply to the licensee
or lessee as contractor.
(7) Onshore installations and structures shall be 232(7) Installations and structures on land shall
completely removed and the environment restored to be completely removed and the environment
its original condition, except for buried transportation restored to its original condition, except for
pipelines and gathering lines. buried transportation pipelines and gathering
lines.
(10) Prior to the approval of an application or 232(10) Prior to the approval of an application
programme for decommissioning and or programme for decommissioning and
abandonment, he Commission or Authority, as the abandonment, the Commission or Authority, as
case may be, shall ensure that - the case may be, shall ensure that –
252
(a) considerations and recommendations are taken Retained
in the light of individual circumstances;
(b) the potential for reuse of a transportation Retained
pipeline together with other existing facility in
connection with further hydrocarbon
developments is considered before
decommissioning;
(c) all feasible decommissioning options have been Retained
considered and a comparative assessment
made;
(d) any removal or partial removal of an installation, Retained
structure or transportation pipeline is to be
performed in a manner that guarantees
sustainable environmental development; and
(e) any recommendation to leave an installation, Retained
structure or gathering line in place is made with
regard to its likely deterioration and to the
present, possible and future effects on the
environment and in the case of offshore
installations and structures, consistent with the
applicable good international petroleum
industry practices.
(11) The Commission or Authority, as the case may be, 232(11) The Commission or Authority, as the
shall enforce compliance by any holder of a current case may be, shall enforce compliance by any
licence or lease or a holder of an expired Licence or holder of a current licence or lease or a holder
Lease and who was responsible for the applicable of an expired licence or lease and who was
decommissioning and abandonment plan with responsible for the applicable decommissioning
respect to a licence or lease that has expired, to and abandonment plan with respect to a
carry out its remaining or unfulfilled licence or lease that has expired, to carry out its
decommissioning and abandonment obligations remaining or unfulfilled decommissioning and
under this Act. abandonment obligations under this Act.
(13) The Commission or Authority, as the case may be, 232(13) The Commission or Authority, as the
may recall a licensee or lessee responsible for a case may be, may recall a licensee or lessee
decommissioning and abandonment programme responsible for a decommissioning and
with respect to a licence or lease that has expired abandonment programme with respect to a
or is surrendered or a licensee or lessee that has licence or lease that has expired or is
transferred or divested its interest or equity, to surrendered or a licensee or lessee that has
carry out an obligation under this Act. transferred or divested its interest or equity, to
carry out an obligation under this Act, provided,
however, that where a new company has
assumed all respective obligations, with the
approval of the Commission or Authority, upon
the transfer or divestiture, the licensee or
lessee shall have no further responsibilities.
(14) The Commission or Authority, as the case may be, 232(14) The Commission or Authority, as the
shall ensure that a list of the installations, structures and case may be, shall ensure that a list of the
pipelines onshore and offshore Nigeria used for installations, structures and pipelines on land
petroleum operations and their current status is and offshore Nigeria used for petroleum
compiled and made available or accessible to the public operations and their current status is compiled
annually. and made available or accessible to the public
annually.
233. (1) Each lessee and licensee shall set up and maintain a 233(1) Each lessee and licensee shall set up,
Decommissioning decommissioning and abandonment fund, which shall maintain and manage a decommissioning and
and be held by a financial institution that is not an affiliate abandonment fund, which shall be held by a
abandonment of the lessee or licensee. financial institution that is not an affiliate of the
fund lessee or licensee, which shall be in the form of
an escrow account accessible by the
Commission or the Authority, as the case may
be, under the provisions of the escrow
agreement. Where funds have been accrued
254
prior to the effective date, such funds shall form
part of the decommissioning and abandonment
fund established under this Bill.
(2) The decommissioning and abandonment fund shall 233(2)The decommissioning and abandonment
only be used to pay for decommissioning and fund shall exclusively be used to pay for
abandonment costs. decommissioning and abandonment costs.
(3) Where a lessee or a licensee fails to comply with 233(3) Where a lessee or a licensee fails to
the decommissioning and abandonment plan, the comply with the decommissioning and
decommissioning and abandonment fund shall be abandonment plan, the decommissioning and
accessed by the Commission or Authority, as the case abandonment fund shall be accessed by the
may be, to pay for the performance by a third party of Commission or Authority, as the case may be,
such lessee’s or licensee’s obligations pursuant to to pay for the performance by a third party of
section 232 of this Act. such lessee’s or licensee’s obligations pursuant
to section 232 of this Act, after the licensee or
lessee has been informed of the non-
compliance and have been given a reasonable
period to rectify the non-compliance.
Retained
256
(b) period of time for which the safe operations of the
facilities were designed, in case of facilities used
for midstream petroleum operations.
(8) A decommissioning and abandonment fund shall be 233(8) A decommissioning and abandonment
funded by the applicable Licensee or lessee based on fund shall be funded by the applicable licensee
the yearly amount established in subsection (5) of or lessee based on the yearly amount
this section and as provided in regulation. established in subsection (5) of this section and
as provided in regulation.
(b) furnish the Commission or Authority, as the case 233(9)(b) furnish the Commission or Authority,
may be, on an annual basis with statements of as the case may be, on an annual basis with
accounts with respect to its decommissioning and statements of accounts with respect to its
abandonment fund. decommissioning and abandonment fund with
a copy to be provided to the Service.
257
(11) Where the licensee or lessee is party to a production 233(10) Where the licensee or lessee is party to
sharing or farm out agreement pursuant to section 84 a farm out agreement with one or more third
(1) of this Act with one or more third parties, a parties, a decommissioning and abandonment
decommissioning and abandonment plan funded in plan funded in whole or in part by the
whole or in part by the applicable third parties shall be applicable third parties shall be provided for in
provided for in the applicable production sharing or farm the applicable farm out agreement.
out agreement.
(12) From the effective date, contributions to the 233(11) From the effective date, contributions
decommissioning and abandonment Fund shall be to the decommissioning and abandonment
eligible for cost recovery and shall be tax deductible, Fund shall be eligible for cost recovery and shall
provided that decommissioning and abandonment costs be tax deductible, provided that
disbursed from the decommissioning and abandonment decommissioning and abandonment costs
fund shall not be eligible for cost recovery or deductible disbursed from the decommissioning and
for tax purposes. abandonment fund shall not be eligible for cost
recovery or deductible for tax purposes.
(13) Where there is excess in the decommissioning and 233(12) Where there is excess in the
abandonment fund after the decommissioning and decommissioning and abandonment fund after
abandonment has been carried out and approved by the the decommissioning and abandonment has
Commission or the Authority, as the case may be, the been carried out and approved by the
excess shall be considered income for production Commission or the Authority, as the case may
sharing or tax purposes and the amount after the be, the excess shall be considered income for
withholding of profit oil and any tax shall be returned to production sharing or tax purposes and the
the licensee or lessee. amount after the withholding of profit oil and
any tax shall be returned to the licensee or
lessee.
CHAPTER THREE
HOST COMMUNITIES DEVELOPMENT
234. Objectives (1) The objectives of this Chapter are to - Retained
and regulations (a) foster sustainable prosperity within host
communities;
(b) provide direct social and economic benefits from
petroleum operations to host communities;
258
(c) enhance peaceful and harmonious co-existence
between licensees or lessees and host
communities; and
(d) create a framework to support the development
of host communities.
(4) The settlor shall for the purposes of setting up the 235(4) The settlor shall for the purposes of
trust, appoint and authorise a body trustees (the “ setting up the trust in consultation with the
Board of Trustees”), which shall apply to be host community, appoint and authorise a body
registered by the Corporate Affairs Commission as a trustees (the “ Board of Trustees”), which shall
corporate body under the Companies and Allied apply to be registered by the Corporate Affairs
Matters Act in the manner provided under this Commission as a corporate body under the
Chapter. Companies and Allied Matters Act in the
manner provided under this Chapter.
(6) The Commission or the Authority, as the case may be, Retained
shall –
(a) make regulations on the administration, guide Retained
and safeguard the utilisation of the trust fund;
and
260
(b) have the oversight responsibility for ensuring 235(6)(b) have the oversight responsibility for
that the projects proposed by the board of ensuring that the projects proposed by the
trustees are implemented. Board of Trustees are implemented.
(7) The Settlor shall undertake needs assessment that 235(7) The settlor shall undertake needs
the metamorphose into the Community Development assessment that will metamorphose into the
Plan for the purpose of determining the projects to be community development plan for the purpose
undertaken by the Host Communities Development of determining the projects to be undertaken
Trust. by the host communities development trust.
(2) Where part of a licence or lease governed by this Act 237(2) Where the whole or part of a licence or
is surrendered pursuant to the provisions of this Act, lease governed by this Bill is surrendered
the holder or holder nominee will continue to pursuant to the provisions of this Bill, the
discharge its surviving obligations, notwithstanding holder or holder nominee will continue to
that the area that is surrendered may be granted to discharge its surviving obligations,
a new lessee or licensee. notwithstanding that the area that is
surrendered may be granted to a new lessee or
licensee. Where the surviving obligations have
been complied with the holder shall have no
further obligations relating to the part that was
surrendered or the whole of the licence or lease
where the entire licence or lease was
surrendered.
(3) Where any licence or lease governed by this Act is 237(3) Where any licence or lease governed by
revoked, terminated or expired, the holder will this Act is revoked, terminated or expired, the
continue to discharge its surviving obligations, holder will continue to discharge its surviving
notwithstanding that the area revoked, terminated obligations, notwithstanding that the area
or expired may be granted to a new lessee or revoked, terminated or expired may be granted
licensee. to a new lessee or licensee. Where the surviving
obligations have been complied with the holder
shall have no further obligations.
262
238. Failure to Failure by any holder of a licence or lease governed by 238 Unless provided for otherwise in this Bill,
incorporate host this Act to comply with its obligations under this Chapter failure by any holder of a licence or lease
communities may be grounds for revocation of the applicable licence governed by this Bill to comply with its
development or lease. obligations under this Chapter, after having
trust been informed of such failure in writing by the
Commission or the Authority as the case may
be, may be grounds for revocation of the
applicable licence or lease.
239. Objectives of (1) The Constitution of the host communities’ 239(1) The constitution of the host
host development trust shall allow the host communities communities development trust shall allow the
communities development trust to manage and supervise the host communities development trust to
development administration of the annual contribution of the manage and supervise the administration of the
trust Settlor contemplated under this Chapter and any annual contribution of the settlor
other sources of funding. contemplated under this Chapter and any other
sources of funding.
264
(3) Each host community development trust may Retained
receive donations, gifts, grants or honoraria that
are provided to such host community development
trust for the attainment of its objectives.
(2) The settlor shall, in the determination of 242(2) The settlor shall, in consultation with the
membership of the Board of Trustees, include Host Communities determine the membership
persons of high integrity and professional standing, of the Board of Trustees to include persons of
who may not necessarily come from any of the host high integrity and professional standing, who
communities. shall come from the host communities. The
Members of the Board of Trustees shall elect a
Chairman from amongst themselves.
265
(a) the selection process, procedure for meeting,
financial regulations and administrative
procedures of the Board of Trustees
(b) the remuneration, discipline, qualification,
disqualification, suspension and removal of
members of the Board of Trustees; and
(c) other matters other than the above relating to the
operation and activities of the Board of Trustees.
266
(f) determining the allocation of funds to host
communities based on the matrix provided by the
settlor.
244. Allocation of The Board of Trustees shall in each year and pursuant to Retained
funds section 240 of this Act allocate from the host
communities development trust fund, a sum equivalent
-
(a) 75% to the capital fund out of which the
Board of Trustees shall make
disbursements for projects in each of the
host community as may be determined
by the management committee in
furtherance of the objectives set out in
section 234 of this Act, provided that any
sums not utilised in a given financial year
shall be rolled over and utilized in
subsequent year;
(b) 20% to the reserve fund, which sums shall
be invested for the utilisation of the host
community development trust whenever
there is a cessation in the contribution
payable by the settlor; and
(c) to an amount not exceeding 5% to be
utilised solely for administrative cost of
running the trust and special projects,
which shall be entrusted by the Board of
Trustee to the settlor, provided that at
the end of each financial year, the settlor
shall render a full account of the
utilisation of the fund to the Board of
Trustees and where any portion of the
Fund is not utilised in a given year, it shall
be returned to the capital fund.
267
245. Matrix for (1) The settlor shall provide to the Board of Trustees a Retained
distribution of matrix for distribution of the trust fund to the host
trust fund communities.
(2) The Board of Trustees shall manage the interest and Retained
profits accruable from the investment of the reserve
fund and allocate the gain in accordance with section
244 of this Act.
247. Management (1) The constitution of the host communities’ Retained
committee, development trust shall contain provisions requiring
composition, the Board of Trustees to set up a management
powers, etc. committee for the host communities’ development
trust.
(b) executive members, selected by the board of 247(2)(b) executive members, selected by the
trustees, who shall be Nigerians of high integrity Board of Trustees shall be Nigerians of high
and professional standing, who may not integrity and professional standing, and may
necessarily be from any of the host communities not necessarily be members of the host
and the number of executive members shall be communities.
determined by the settlor.
268
(3) A person appointed under paragraphs (a) and (b) of Retained
subsection (2) of this section, shall serve a term of 4
years in the first instance and may be reappointed for
another term of 4 years and no more.
(5) The management committee shall have a secretary, 247(5) The management committee shall have
who shall be appointed by the settlor to keep the books a secretary, who shall be appointed by the
of the committee. Board of Trustees to keep the books of the
committee.
248. Duties The management committee shall be responsible for the Retained
and functions of general administration of the host communities
the management development trust on an ad hoc basis and be responsible
committee for the -
(a) preparation of the budget of the host
communities development trust and submit it to
the Board of Trustees for approval;
(b) development and management of the contracting
process for project award on behalf of the host
communities development trust subject to
approval of the Board;
(c) determination of project award winners and
contractors to execute projects on behalf of the
host communities development trust through a
269
transparent process subject to approval of the
Board;
(d) supervision of projects execution;
(e) nomination of fund managers for appointment by
the Board of Trustees for approval, to manage the
reserve fund;
(f) reporting on the activities of the management
committee, contractors and other service
providers to the Board of Trustees; and
(g) undertaking of any other function and duty that
may be assigned to it by the Board of Trustees to
enhance the performance of the host
communities development trust.
249. Host (1) The constitution of the host communities’ 249(1) The constitution of the host
community development trust shall contain provisions mandating communities development trust shall contain
advisory the management committee to require each host provisions mandating the management
committee, community to set up an advisory committee (“Host committee to set up an advisory committee
composition, etc Community Advisory Committee”). (“host community advisory committee”), which
shall contain at least one member of each host
community.
270
(c) any other matter relating to the operations and
activities of host community advisory
committee.
(3) Decisions of the management committee with 249(3) Decisions of the management
respect to subsection (2) of this section shall be subject committee with respect to subsection (2) of this
to the approval of the Board. section shall be subject to the approval of the
Board of Trustees.
250. Duties The host community advisory committee shall perform Retained
and functions of the following functions -
the host (a) nominate member to represent the host Retained
community communities on the management committee;
advisory (b) articulate community development projects to be Retained
committee transmitted to the management committee;
(c) monitor and report progress of projects being 250(c) monitor and report progress of projects
executed in the community to the management being executed in the community to the
committee; management committee; and
(d) advise the management committee on activities 250(d) advise the management committee on
that may lead to improvement of security of activities that may lead to improvement of
infrastructure and enhancement of peace- security of infrastructure and enhancement of
building within the community and the entire area peace-building within the community and the
of operation; and entire area of operation.
271
251. Host (1) The settlor shall after the grant of any licence or lease 251(1) The settlor shall after the grant of any
community needs issued pursuant to this Act, conduct a needs licence or lease issued pursuant to this Bill,
assessment assessment (“Host Community Needs Assessment”) conduct a needs assessment (“host community
in accordance with this Act and regulations made needs assessment”) in accordance with this Bill
pursuant to this Act. and regulations made pursuant to this Bill.
(c) engaged with each affected host community in 251(3)(c) engaged with each affected host
developing a strategy to address the needs and community in developing a strategy to address
effects identified in the applicable Host the needs and effects identified in the
community needs assessment. applicable host community needs assessment.
(b) determine and specify the projects to (b) determine and specify the projects to
implement the specified initiatives; implement the specified initiatives;
(c) provide a detailed timeline for projects; (c) provide a detailed timeline for projects;
(d) determine and prepare the budget of the (d) determine and prepare the budget of the
host community development plan; host community development plan;
(e) set out the reasons and objectives of each (e) set out the reasons and objectives of
project as supported by the host each project as supported by the host
community needs assessment; community needs assessment;
(f) conform with the Nigerian content (f) conform with the Nigerian content
requirements provided in the Nigerian Oil requirements provided in the Nigerian Oil
and Gas Industry Content Development and Gas Industry Content Development
Act; and Act; and
273
(g) provide for ongoing review and reporting (g) provide for ongoing review and reporting
to the Commission. to the Commission.
274
Commission or Authority, as the case may be, not
later than 31st of May of the particular year.
256. Exemption The funds of the host communities’ development trust Retained
from income tax. created pursuant to this Act shall be exempted from
taxation.
257. Deduction of (1) Any payment made by the settlor pursuant to section Retained
payment for 240(2) of this Act, shall be deductible for the
petroleum host purposes of hydrocarbon tax and companies income
community tax as applicable.
development
(2) Where in any year, an act of vandalism, sabotage or 257(2) Where in any year, an act of vandalism,
other civil unrest occurs that causes damage to sabotage or other civil unrest occurs that
petroleum and designated facilities or disrupts causes damage to petroleum and designated
production activities within the host community, the facilities or disrupts production activities within
community shall forfeit its entitlement to the extent the host community, the community shall
of the cost of repairs of the damage that resulted forfeit its entitlement to the extent of the costs
from the activity with respect to the provisions of this of repairs of the damage that resulted from the
Act within that financial year. activity with respect to the provisions of this Act
within that financial year.
Provided the interruption is not caused by
technical or natural cause.
(3) The basis for computation of the trust fund in any Retained
year shall always exclude the cost of repairs of
damaged facilities attributable to any act of
vandalism, sabotage or other civil unrest.
CHAPTER FOUR
PETROLEUM INDUSTRY FISCAL FRAMEWORK
PART I OBJECTIVES AND ADMINISTRATION
258. Objectives. The objectives of this Chapter are to – 258(1) The objectives of this Chapter are to -
(b) The Commission shall be responsible for the 259(b)(i) royalties, signature bonus, rents, and
determination and collection of - related payments and its enforcement under
(i) rents and royalties and its enforcement under this act;
this act; and
260. Application (1) This part applies to companies engaged in upstream 260(1) This part applies to companies engaged
of this Part. petroleum operations in the onshore, shallow water and in upstream petroleum operations in the
deep offshore; provided that the hydrocarbon tax under onshore and shallow water; provided that the-
this part shall not apply to –
(a) associated and non-associated natural gas; and 260(1)(a) Hydrocarbon tax shall apply to crude
oil as well as field condensates and liquid
natural gas liquids derived from associated gas
and produced in the field upstream of the
measurement points;
(b) condensates and natural gas liquids produced 260(1)(b) Hydrocarbon tax under this part shall
from non-associated gas in fields or gas processing not apply to –
277
plants, provided the related volumes are (i) associated natural gas, including gaseous
determined at the measurement points or at the natural gas liquids produced in the field and
exit of the gas processing plant, regardless of contained in the rich gas, and non-associated
whether the condensates or natural gas liquids natural gas;
are subsequently comingled with crude oil. (ii) condensates and natural gas liquids
produced from non-associated gas in fields or
gas processing plants, provided the related
volumes are determined at the measurement
points or at the exit of the gas processing plant,
regardless of whether the condensates or
natural gas liquids are subsequently comingled
with crude oil; and
(iii) any condensates and natural gas liquids
produced from associated gas at gas processing
or other facilities downstream of the
measurement points.
(3) The costs of production of associated gas, 260(2) The costs of production of associated
upstream of the measurement point shall gas, upstream of the measurement point shall
be allocated to crude oil for the purposes be allocated to crude oil for the purposes of
of calculating hydrocarbon tax, provided calculating hydrocarbon tax, provided that
that costs solely attributable to capital and operating costs for wells solely
production of associated gas shall not be producing associated gas-cap gas shall not be
allocated to crude oil, but may be claimed allocated to crude oil, but shall be claimed
under the Companies Income Tax Act under the Companies Income Tax Act (CITA);
(CITA).
(4) This Part shall not apply to a frontier 260(3) This Part shall not apply to a frontier
acreage until it is reclassified pursuant to acreage until it is reclassified pursuant to the
the provisions of subsection (3) of section provisions of subsection (3) of section 68 of this
68 of this Act. Bill and to deep offshore;
278
(5) For the purpose of determining royalties, 260(4) For the purpose of determining
condensates shall be treated as crude oil and natural gas royalties, condensates shall be treated as crude
liquids as natural gas. oil and natural gas liquids as natural gas.
(6) Upstream petroleum operations shall be subject to 260(5) Upstream petroleum operations shall
CITA. also be subject to CITA.
261. Charge of There shall be levied upon the profits of any company 261 There shall be levied upon the profits of any
hydrocarbon tax. engaged in upstream petroleum operations in relation company engaged in upstream petroleum
to crude oil a tax to be known as hydrocarbon tax, which operations in relation to crude oil a tax to be
shall be charged and assessed upon its profits related to known as hydrocarbon tax, which shall be
such operations and payable during each accounting charged and assessed upon its profits related to
period in accordance with the provisions of this Act, such operations and payable during each
provided that for production sharing contract executed accounting period in accordance with the
prior to the commencement of this Act and converted provisions of this Bill.
pursuant to section 92 of this Act, hydrocarbon tax shall
be charged and assessed separately on the profits from
each and every petroleum mining lease and payable
during each accounting period in accordance with the
provisions of this Act.
262. (1) Subject to the provisions of this Act, in relation to any Retained
Ascertainment of accounting period, the crude oil revenue of a company
crude oil for that period shall be the value of any chargeable oil
revenue, adjusted to the measurement points, based on the -
adjusted profit, (a) proceeds of all chargeable oil sold; and 262(1)(a) proceeds of all chargeable oil sold by
assessable profits the company;
and chargeable
profits. (b) value of all chargeable oil disposed. 262(1)(b) value of all chargeable oil disposed by
the company.
(2) For the purpose of subsection (1) of this section, the Retained
value of any chargeable oil disposed of, shall be
regarded as the aggregate of the value of that crude oil
determined for royalties for all fields in accordance with
the provisions of this Act or any applicable law.
279
(3) The adjusted profits of an accounting period shall be 262(3) Subject to the provisions of subsection
the profits of that period after the deductions allowed 266(2), the adjusted profits of an accounting
by section 263 (1) of this Act. period shall be the profits of that period after
the deductions allowed by section 263 (1) of
this Bill.
(c) operating expenses for upstream petroleum 263(1)(c) expenses directly incurred for repair
operations including expenses directly incurred of plant, machinery or fixtures employed for the
280
for repair of premises, plant, machinery or fixtures purpose of carrying on production activities or
employed for the purpose of carrying on for the renewal, repair or alteration of
production activities or for the renewal, repair or production implement, utensils or articles so
alteration of production implement, utensils or employed;
articles so employed;
281
(f) any amount contributed to a fund, scheme or 263(1)(e) any amount contributed to a fund,
arrangement approved by the Commission for the scheme or arrangement approved by the
purpose of decommissioning and abandonment, Commission for the purpose of
provided that the surplus or residue of the fund decommissioning and abandonment, provided
shall be subject to tax under this Act at the end of that the surplus or residue of the fund shall be
life of the field, where such surplus is returned to subject to tax under this Act at the end of life of
the lessee; the field, where such surplus is returned to the
lessee;
(h) all sums the liability of which was incurred by the 263(1)(f) all sums the liability of which was
company to the Federal Government or any State incurred by the company to the Federal
or Local Government Council by way of duty, Government or any State or Local Government
customs duty, excise duty, stamp duties, taxes, Council by way of levies, stamp duties and fees;
fees or like charges; and
(i) any amount contributed to any fund, scheme or (h) any amount contributed to any fund,
arrangement approved by the Commission scheme or arrangement approved by the
pursuant to the establishment of Host Community Commission pursuant to the establishment of
Development Trusts under Chapter Three of this Host Community Development Trusts under
Act, Environmental Remediation Fund and Niger Chapter Three of this Bill, Environmental
Delta Development Commission and other similar Remediation Fund and Niger Delta
contributions. Development Commission and other similar
contributions.
282
(2) Where a deduction has been allowed to a company 263(2) Where a deduction has been allowed to
under this section in respect of a liability of the company
a company under this section in respect of a
and the liability or part of the liability is waived, released
liability of the company and the liability or part
or recovered, the amount of the deduction or the part of the liability is waived, released or recovered,
of the liability corresponding to the part of the liability
the amount of the deduction corresponding to
shall, for the purpose of section 262(1) of this Act, be
the liability or part thereof shall, for the
treated as income of the company of its accounting purpose of section 262(1) of this Bill, be treated
period, in which such waiver or release was made or as income of the company of its accounting
given. period, in which such waiver or release was
made or given.
264. Deductions Subject to the express provisions of this Act, for the Retained
not allowed.
purpose of ascertaining the adjusted profit of a company
in the accounting period from its upstream petroleum
operations applicable to crude oil, no deduction shall be
allowed in respect of –
(a) disbursements or expenses not being money Retained
wholly, reasonably, exclusively and necessarily
incurred for the purpose of those operations;
(b) expenditure for the purchase of information 264(b) expenditure for the purchase of
relating to the existence and extent of petroleum information relating to the existence and extent
deposits; of petroleum deposits, other than for the
acquisition of geophysical, geological and
geochemical data and information;
(e) head office, costs incurred outside Nigeria or 264(e) Head office or affiliate costs, shared
affiliate cost; costs, research and development costs or any
other like shared indirect production costs;
283
(f) production bonuses, signature bonuses paid for Retained
the acquisition of, or of rights in or over,
petroleum deposits, bonuses or fees paid for
renewing petroleum mining lease or petroleum
prospecting licence or marginal field or fees paid
for assigning rights to another party;
(g) tax inputted into a contract or an agreement on a Retained
net tax basis and paid by a company on behalf of
the vendor or contractor;
(h) capital withdrawn or sum employed or intended Retained
to be employed as capital;
(i) capital employed in improvements as distinct Retained
from repairs;
(j) sum recoverable under an insurance or contract of Retained
indemnity, except an amount that is not
recovered under the scheme;
(k) rent of or cost of repairs to any premises or part Retained
of premises not incurred for the purpose of those
operations;
(l) amounts incurred in respect of tertiary education Retained
tax, companies income tax, any income tax, profits
tax or other similar taxes, whether charged within
Nigeria or elsewhere;
(m) the depreciation of any premises, buildings, Retained
structures, works of a permanent nature, plant,
machinery or fixtures;
(n) payment to provident, savings widows’ and 264(n) payment to provident, savings widows’
orphans’ or other society, scheme or fund, except and orphans’ or other society, scheme or fund;
such payments as are allowed under section
263(1)(e) of this Act;
[NEW INSERTION] 264(o) any contribution to a
pension, provident or other society, scheme or
fund for production staff which may be
approved, with or without retrospective effect,
284
by the National Pension Commission subject to
such general conditions or particular conditions
in the case of the society, scheme or fund as the
Service may prescribe, provided that any sum
received by or the value of any benefit obtained
by the company, from any approved pension,
provident or other society, scheme or fund, in
the accounting period of that company shall,
for the purpose of section 262(1) of this Bill, be
treated as income of the company for that
accounting period;
(o) costs pursuant to paragraph 2(2)(c) of the Sixth 264(q) costs pursuant to paragraph 2(2)(c) of
Schedule to this Act. the Sixth Schedule to this Bill.
265. Assessable (1) The assessable profits for each company or Retained
Profits and petroleum mining lease for any accounting period shall
Losses. 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.
[NEW INSERTION] 265(2) the assessable profit
shall be determined separately for each of the
two classes of chargeable tax identified in
paragraphs 267(a) and 267(b).
(2) A deduction under subsection (1) of this section shall (3) A deduction under subsection (1) of this
be made so far as possible from the amount, if any, of section shall be made so far as possible from
the adjusted profit of the first accounting period after the amount, if any, of the adjusted profit of the
that in which the loss was incurred, and, so far as it first accounting period after that in which the
cannot be so made, then from the amount of the loss was incurred, and, so far as it cannot be so
adjusted profit of the next succeeding accounting period made, then from the amount of the adjusted
and so on until such loss is fully deducted. profit of the next succeeding accounting period
and so on until such loss is fully deducted.
285
[NEW INSERTION] 265(4) Within 5 months after
the end of any accounting period of a company,
or within such further time as the Service may
permit in writing, the company may elect in
writing that a deduction or any part to be made
under this section shall be deferred to and be
made in the succeeding accounting period, and
may so elect in any succeeding accounting
period.
266. Chargeable (1) The chargeable profits of any company for any Retained
profits and accounting period shall be the amount of the assessable
allowances. profits of that period after the deduction of any amount
to be allowed in accordance with the provisions of this
section, namely -
(a) the aggregate amount of capital allowances due
to the company under the provisions of the Fifth
Schedule to this Act for the accounting period;
(b) the aggregate amount of all production
allowances due to the company under the
provisions of the Sixth Schedule to this Act for the
accounting period; and
(c) in the case of acquisition costs of petroleum 266(1)(c) in the case of acquisition costs of
rights, the value of the rights and the value of the petroleum rights, the value of the rights and the
assets acquired shall be reported separately to the value of the assets acquired shall be reported
Service, provided that the value of the rights shall separately to the Service, provided that the
be eligible for annual allowance of 10% per annum value of the rights shall be eligible for annual
and the value of the assets shall be depreciated allowance of 20% per annum and the value of
based on the applicable depreciation rates for the the assets shall be depreciated based on the
respective assets, and there shall be a retention of applicable depreciation rates for the respective
1% in the last year until the asset is disposed of. assets, and there shall be a retention of 1% in
the last year until the asset is disposed of.
286
(2) In determining the chargeable profit, the total cost Retained
shall not exceed the cost-price ratio as determined in the
Sixth Schedule.
[NEW INSERTION] 266(3) the chargeable profits
and allowances shall be determined separately
for the two classes of assessable profits under
section 267(a) and (b).
PART III
ASCERTAINMENT OF CHARGEABLE TAX
267. Chargeable The chargeable tax for any accounting period of a Retained
Tax company shall be a percentage of the chargeable profit
for that period aggregated and it shall be –
(a) 42.5% of the profit from crude oil for onshore 267(a) 30% of the profit from crude oil for
areas for petroleum mining Leases selected petroleum mining leases selected pursuant to
pursuant to sections 93(6)(b) and 93(7)(b) of this sections 93(6)(b) and 93(7)(b) of this Bill with
Act; respect to onshore and shallow water areas;
and
(b) 37.5% of the profit from crude oil for shallow 267(b) 15% of profit from crude oil for onshore
water areas for petroleum mining leases selected and shallow water and for petroleum
pursuant to sections 93(6)(b) and 93(7)(b) of this prospecting licences selected pursuant to
Act; sections 93(6)(a) and 93(7)(a) of this Bill.
(c) 22.5% of profit from crude oil for onshore areas Delete
for new licences and leases granted after the
commencement of this Act and for marginal fields
in onshore areas;
(d) 20.0% of profit from crude oil for shallow water Delete
areas for new licences and leases granted after the
commencement of this Act and for marginal fields
in shallow water areas;
(e) 5% of the profit from crude oil from deep Delete
offshore areas for petroleum mining leases
287
selected pursuant to sections 93(6)(b) and
93(7)(b) of this Act; and
(3) For the purpose of subsection (2) of this section the 268(3) For the purpose of subsection (2), the
relevant sum per barrel of crude oil or condensate by Commission shall establish the fiscal oil price at
a company is the fiscal oil price applicable to that each measurement point on an export parity
crude oil as may be advised by the Commission. basis pursuant to paragraphs 8(1) and 8(2) of
the Seventh Schedule. The total value of the
chargeable oil for a company shall be the sum
288
of the multiplications of volume and fiscal oil
price at all measurement points as established
by the Commission.
(4) The whole of any additional chargeable tax for crude Retained
oil and associated gas 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.
(5) Every fiscal oil price per barrel established shall bear 268(5) where there is no fiscal oil price
a fair and reasonable relationship - established for a crude oil stream, the
Commission shall establish fiscal oil price for
such stream and every fiscal oil price per barrel
established shall bear a fair and reasonable
relationship –
269. Artificial (1) Where the Service is of the opinion that any 269(1) Where the Service is of the opinion that
transactions, etc. disposition is not given effect to or that any transaction any disposition is not given effect to or that any
which reduces or would reduce the amount of any tax transaction which reduces or would reduce the
payable is artificial or fictitious, the Service may amount of any tax payable is artificial or
disregard any such disposition or direct that such fictitious, the Service may disregard any such
disposition or direct that such adjustments shall
adjustments shall be made with respect to the
be made with respect to the companies’ liability
Companies’ liability to tax as the Service considers to tax as the Service considers appropriate to
appropriate to counteract the reduction of liability to counteract the reduction of liability to tax
tax effected or reduction which would otherwise be effected or reduction which would otherwise
effected, by the transaction and the companies be effected, by the transaction and the
concerned shall be assessed accordingly. companies concerned shall be assessed
(2) In subsection (1) of this section, the expression accordingly.
"disposition" includes any trust, grant, covenant, Retained
agreement or arrangement.
291
[NEW INSERTION] 270 Where a company has
not yet commenced the production and sale or
disposal of chargeable oil, all costs incurred
wholly, reasonably, exclusively and necessarily
for the purpose of coming into upstream
petroleum operations, subject to sections 263
and 264 of this Bill, shall upon commencement
of production and sale or disposal of chargeable
oil be deemed to have incurred a qualifying pre-
production capital expenditure which shall be
amortized in line with paragraph 5 and 17 of the
Fifth schedule of this Bill.
271. Trade or (1) Without prejudice to section 275 of this Act, where a Retained
business sold or trade or business of upstream petroleum operations
transferred carried on in Nigeria by a company is sold or
transferred to another company for the purposes of
better organization of that trade or business or the
transfer of its management and any asset employed
in that trade or business is 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 recognized group of companies and have been
so for a consecutive period of at least 3 years prior to
the date of reorganization, the provisions set out in
subsection (2) of this section shall have effect.
(b) for the purpose of the Fifth Schedule to this Act, Retained
the asset sold or transferred to the company
acquiring that trade or business 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 occurred; and
(c) the company acquiring the asset so sold or 271(2)(c) the company acquiring the asset so
transferred shall be deemed to have received all sold or transferred shall be deemed to have
allowances given to the company selling or received all allowances given to the company
transferring the trade or business in respect of the selling or transferring the trade or business in
asset under the Fifth Schedule to this Act and any respect of the asset under the Fifth Schedule to
this Bill and any allowances deemed to have
allowances deemed to have been received by that
been received by that company under the
company under the provisions of this paragraph,
provisions of the Fifth Schedule, provided that
provided that the Service in its discretion may – the Service in its discretion may –
(5) Where a trade or business of petroleum operations 271(5) Where a trade or business of petroleum
carried on in Nigeria by a company incorporated operations carried on in Nigeria by a company
under any law in force in Nigeria is sold or transferred incorporated under any law in force in Nigeria
to another company and any asset employed in that is sold or transferred to another company and
trade or business is so sold or transferred, and the any asset employed in that trade or business is
so sold or transferred, and the Service is
Service is satisfied that the companies are not
satisfied that the companies are not connected
connected and that none has control over the other
and that none has control over the other or
or both are not controlled by another company, the both are not controlled by another company,
– the-
(a) acquisition cost of the rights and assets or the cost (a) transaction shall be dealt with pursuant
to section 266(1)(c); and
294
incurred by the acquiring party shall not be eligible
as qualifying capital expenditure under the Fifth
Schedule to this Act for the purpose of the
Hydrocarbon Tax but shall be eligible for qualifying
capital expenditure under the companies Income
Tax at an annual allowance rate of 10% per
annum; and
(b) accounting period of the new trade or business (b) accounting period of the new trade or
shall be as provided in subsection (2) of this business shall be as provided for in
section. subsection (2) of this section.
(6) For the purpose of subsection (2) (a) of this section, Retained
the accounting period of the company acquiring that
trade or business shall commence on the date on
which the sale or transfer of the trade or business to
the company takes place or on such date within the
calendar month in which the sale or transfer takes
place as may be elected by the company with the
approval of the Service and end on 31st December of
that same year and the definition of “Accounting
Period” under this Act shall be construed accordingly.
(7) A merger, take-over, transfer or restructuring of the 271(7) A merger, take-over, transfer or
trade or business carried on by a company shall not restructuring of the trade or business carried on
take place without the approval and having obtained by a company shall not take place without the
direction of the Service to any tax that may be due approval and having obtained direction of the
and payable under the Capital Gains Tax Act. Service on any tax that may be due and payable.
295
272. (1) A company engaged in upstream petroleum Retained
Consolidation of operations across terrains shall be allowed to
costs and taxes consolidate costs for the purpose of companies
income tax.
(4) A company that is a contractor in a contract pursuant 272(4) A company that is a contractor in a
to section 84(2) of this Act shall be allowed to contract pursuant to section 85 of this Bill shall
consolidate its Losses and revenues across petroleum be allowed to consolidate its Losses and
prospecting licences and petroleum mining leases revenues across petroleum prospecting
granted after the commencement of this Act, for the licences and petroleum mining leases granted
after the commencement of this Bill, for the
purposes of subsections (1) and (2) of this section
purposes of subsections (1) and (2) of this
with respect to the various tax classes under section
section with respect to the two tax classes
267 of this Act. under section 267 of this Bill.
296
PART V
PERSONS CHARGEABLE
273. (1) Any person, other than a company, who engages in Retained
Partnerships, etc. 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 the profits arising from the operations,
commits an offence.
297
equity interest of the parties and it shall be binding
on the parties.
(a) with respect to apportionment of any Profits, 273(6)(a) with respect to apportionment of any
outgoings, expenses, liabilities, deductions, profits, outgoings, expenses, liabilities,
qualifying expenditure and tax chargeable upon deductions, qualifying expenditure and tax
each company; chargeable upon each company;
(d) which have regard to any circumstances whereby 273(6)(d) which have regard to any
the operations are partly carried on for any circumstances whereby the operations are
company by an operating Company whose partly carried on for any company by an
operating company whose expenses are
298
expenses are reimbursed by those Companies. reimbursed by those companies.
(7) Regulations made under this section may be of 273(7) Regulations made under this section
general application for the purpose of this Section may be of general application for the purpose
and this Part or for a class of arrangement or for a of this section and this Part or for a class of
particular application to a specific partnership, joint arrangement or for a particular application to a
specific partnership, joint venture, scheme or
venture, scheme or arrangement.
arrangement.
(8) The effect of any regulation made under this section 273(8) The effect of any regulation made under
shall not impose a greater burden of tax upon any this section shall not impose a greater burden
company so engaged in any partnership, joint of tax upon any company so engaged in any
venture, scheme or arrangement than would have partnership, joint venture, scheme or
been imposed upon that company under this Part. if arrangement than would have been imposed
all things enjoyed, done or suffered by such upon that company under this Part, if all things
enjoyed, done or suffered by such partnership,
partnership, joint venture, scheme or arrangement
joint venture, scheme or arrangement had
had been enjoyed, done or suffered by that company been enjoyed, done or suffered by that
in the proportion in which it enjoys, does or suffers company in the proportion in which it enjoys,
those things under or by virtue of that partnership, does or suffers those things under or by virtue
joint venture, scheme or arrangement. of that partnership, joint venture, scheme or
arrangement.
299
(2) Any liquidator, receiver or agent under subsection Retained
(1) of this section shall be answerable for doing the acts
required to be done by virtue of this Act for the
assessment and charge to tax of the company and for
payment of such tax.
276. Every person answerable under this Act for the payment Retained
Indemnification of companies income tax or hydrocarbon tax on behalf
of representative of a company may retain out of any money in or coming
to his hands or within his control on behalf of such
company so much as shall be sufficient to pay the tax
and shall be indemnified against any person for
payments made by him in accordance with the
provisions of this Act.
300
PART VI
APPLICABILITY, ACCOUNTS AND PARTICULARS
277. (1) Every company engaged in upstream petroleum 277(1) Every company engaged in upstream
Preparati operations related to crude oil shall for each petroleum operations related to crude oil shall
on and delivery of accounting period of the company make up accounts for each accounting period of the company
accounts and of its profits or losses and prepare the following make up accounts of its profits or losses and
particulars particulars for the purpose of determining prepare the following particulars for the
purpose of determining hydrocarbon tax –
hydrocarbon Tax –
301
(e) a computation of its actual chargeable profits of 277(1)(e) a computation of its actual
that period; chargeable profits for that period for the two
classes of chargeable profits identified in
paragraphs 267(a) and 267(b);
302
liquidator, receiver or the agent of the liquidator
or receiver, that the same is true and complete;
and
(b) estimates, contain a declaration, similarly signed,
that the estimate was made to the best of the
ability of the person signing same.
(b) within 5 months after any period ending on 31st 277(3)(b) within 5 months after any period
December of the following year, in the case of any ending on 31st December, in the case of any
other company, provided that where there is an other company, provided that where there is an
interval between 31st December of the preceding interval between 31st December of the
year and the date on which the company preceding year and the date on which the
company commences the bulk sale or disposal
commences the bulk sale or disposal of
of chargeable oil, natural gas or condensate,
chargeable oil, natural gas or condensate, the the interval shall be deemed to form part of the
interval shall be deemed to form part of the preceding period.
preceding period.
303
(c) other sum as may be prescribed by the Minister of
Finance by Order published in the gazette.
278. Power of The Service may give notice in writing to any company Retained
the Service to engaged in upstream petroleum operations related to
request further crude oil as the Service may deem necessary requiring
information the company to furnish further information, within
reasonable time as may be specified, in relation to any
matter referred to in section 277 of this Act or any other
matter which the Service may consider necessary for the
purposes of this Act.
279. Power to (1) For the purpose of obtaining full information in Retained
call for returns, respect of any company's upstream petroleum
books, etc. operations related to crude oil, the Service may give
notice to a company requiring it within a period not less
than 21 days from the date of service of the 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 the date or dates as may be specified
in the notice and to produce for examination any books,
documents, accounts and particulars which the Service
may deem necessary.
304
be adequate in a form and in a language as the Service
may direct and the company shall the keep records,
books and accounts as directed.
(3) An appeal shall lie from any direction of the Service Retained
made under this section to the Tax Appeal Tribunal.
280. Returns of (1) Not later than 2 months after the commencement of Retained
estimated tax each accounting period of any company engaged in
upstream petroleum operations related to crude oil, the
company shall submit to the Service an estimated return
of its profits or losses for that accounting period for the
purpose of hydrocarbon tax, which shall include -
(a) computations of its estimated adjusted profit or
loss and of its estimated assessable profits of that
period;
(b) in connection with the Fifth Schedule to this Act,
a schedule showing –
(i) the estimated residues at the end of that
period in respect of its assets,
(ii) all estimated 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,
to be disposed of in that period, and
(iv) the allowances due to it under that schedule
for that period;
305
basis;
(d) a computation of its estimated chargeable profits
of that period; and
(e) a computation of its estimated tax for that
period.
308
(2) Where a revision under subsection (1) of this section Retained
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 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.
309
(a) names and addresses of the companies assessed
to tax or of the persons in whose names any
companies have been assessed to tax, provided
that the names of the represented companies are
indicated; and
(b) particular accounting period and the amount of
the chargeable profits and chargeable tax for that
period, in the case of each company for each of its
accounting periods.
(b) tax and the tax which such person claims should 285(2)(b) the tax which such person claims
be stated on the notice of assessment. should be stated on the notice of assessment.
(3) The Service, upon being satisfied that due to absence Retained
from Nigeria, sickness or other reasonable cause, the
person in whose name the assessment was made
was prevented from making the application within
such period of 30 days, shall extend the period as
may be reasonable in the circumstances.
(5) In the event of any person assessed who has objected Retained
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
notice of the tax payable shall be served upon the
person.
312
mistake, defect or omission, if the -
(a) substance and effect of the assessment is in
conformity with the provisions of this Act; and
(b) company assessed or intended to be assessed or
affected is designated according to common
intent and understanding.
(b) any assessment made under section 284 of this 287(b) any assessment made under section 284
Act shall be in the currency in which the of this Bill shall be in United States dollars.
computation giving rise to the assessment was
made.
313
PART VII
APPEALS
288. Appeals Any Company or tax payer, who does not agree with an Retained
to Tax Appeal assessment made pursuant to section 285(6) of this Act,
Tribunal may appeal against the assessment to the Tax Appeal
Tribunal established under the provisions of section 59
of the Federal Inland Revenue Service (Establishment)
Act.
289. Assessment (1) Where – Retained
to be final and
conclusive (a) no valid objection or appeal has been lodged Retained
within the time limited by section 285 of this Act
or the rules of the relevant tribunal or court, as the
case may be, against an assessment as regards the
amount of the hydrocarbon tax assessed;
(b) the amount of the tax has been agreed to under Retained
section 285(5) of this Act; or
(c) the amount of the tax has been determined on
objection or revision under section 285(6) of this
Act or on appeal,
(2) Where the full amount of the tax in respect of the 289(4) Nothing in section 285 of this Bill or in
final and conclusive assessment under subsection (1) of this Chapter shall prevent the Service from
this section is not paid within the appropriate period or making any assessment or additional
periods prescribed in this Act, the provisions relating to assessment to hydrocarbon tax for any
the recovery of tax and to any penalty under section 292 accounting period which does not involve re-
opening any issue on the same facts which has
314
of this Act, shall apply to the collection and recovery, been determined for that accounting period,
subject only to the set-off of the amount of any tax under section 285(5) and (6) of this Bill by
repayable under any claim, made under any provision of agreement or otherwise or on appeal.
this Act, which has been agreed to by the Service or
determined on an appeal against a refusal to admit any
such claim.
291. Time (1) Subject to the provisions of section 290 of this Act, 291(1) Subject to the provisions of section 280
within which hydrocarbon tax for any accounting period shall be of this Bill, hydrocarbon tax for any accounting
315
payment is to be payable in equal monthly instalments together with a period shall be payable in equal monthly
made final instalment as provided in subsection (4) of this instalments together with a final instalment as
section. provided in subsection (4) of this section.
(2) The first monthly payment shall be due and payable Retained
not later than the third month of the accounting
period and shall be in an amount equal to one-
twelfth or where the accounting period is less than a
year, in an amount equal to equal monthly
proportion, of the amount of tax estimated to be
chargeable for such accounting period in accordance
with section 280 (1) of this Act.
316
subsections (2) and (3) of this section.
(2) Any person who without lawful justification or excuse 292(2) Any person who without lawful
317
fails to pay Hydrocarbon Tax within the period of one justification or excuse fails to pay hydrocarbon
month prescribed in subsection (1) (c) of this section, tax within the period of one month prescribed
commits an offence under this Act and the provisions of in subsection (1) (c) of this section, commits an
subsections 1(a) to (c) of this section shall apply. offence under this Bill and the provisions of
subsections 1(a) to (c) of this section shall apply.
(3) The Service may, for any good cause shown, remit the Retained
whole or any part of the additional 10% penalty and
interest on the tax due under subsection (1) of this
section.
293. Collection of (1) Where payment of hydrocarbon tax in whole or in Retained
tax after part has been held in abeyance pending the result of a
determination of notice of objection or of appeal, the tax outstanding
objection or
under the assessment as determined on such objection
appeal.
or appeal, as the case may be, shall be payable within
one month from the date of service on the company
assessed or on the person in whose name the company
is assessed, of the notification of the tax payable by the
Service or the Tribunal.
(3) A relief shall not be given under this section in respect Retained
of an error or mistake as to the basis on which the
liability of the applicant ought to have been
computed where the accounts, particulars or
information was in fact made or given on the basis or
in accordance with the practice of the Service
generally prevailing at the time when the accounts,
particulars or information was made or given.
319
(4) In determining any application under this section, the Retained
Service shall have regard to all the relevant
circumstances of the case and in particular shall
consider whether the granting of relief would result
in the exclusion from charge to tax of any part of the
chargeable profits of the applicant and for this
purpose, the Service may take into consideration the
liability of the applicant and assessments made upon
him in respect of other years.
296. Repayment (1) Except as otherwise expressly provided in this Act, a Retained
of tax. claim for the repayment of any hydrocarbon tax
overpaid shall not be allowed unless it is made in
writing within 6 years next after the end of the
accounting period to which it relates.
(3) Any tax claimed based on this Section, which is proven Retained
not to be due, shall attract a penalty at the prevailing
LIBOR or any other successor rate plus 10% from the
date the payment or set-off was made up to the date
the refund is made by the applicant.
PART IX
OFFENCES AND PENALTIES
297. Penalty (1) A person who fails to comply with the provisions of Retained
for defaults. this Chapter or any regulation made under this Act
for which no other penalty is specifically provided,
shall be liable to an administrative penalty of
N10,000,000, and where the default continues
320
beyond a period stipulated by this Act or regulation,
the person shall be liable to a further administrative
penalty of N2,000,000 or such other sum as may by
order be prescribed by the Minister of Finance, for
each day the default continues.
(2) Notwithstanding the provisions of subsection (1) of Notwithstanding the provisions of subsection
this section, a person who is found guilty of an (1) of this section, a person who is found guilty
offence under this Chapter or in a regulation made of an offence under this Chapter or in a
under this Act for which no other penalty is regulation made under this Bill for which no
specifically provided, shall, upon conviction, be liable other penalty is specifically provided, shall,
to a fine of N10,000,000 or other sum as may be upon conviction, be liable to a fine of
prescribed by the Minister of Finance by an order and N20,000,000 or other sum as may be prescribed
where the offence continues beyond a period by the Minister of Finance by an order and
stipulated by this Act or regulation, the person shall where the offence continues beyond a period
be liable to an additional fine of N2,000,000 or such stipulated by this Act or regulation, the person
other sum as may by order be prescribed by the shall be liable to an additional fine of
Minister of Finance, for each day the default N2,000,000 or such other sum as may by order
continues or to imprisonment for 6 months. be prescribed by the Minister of Finance, for
each day the default continues or to
imprisonment for 6 months.
322
given any false or misleading information in relation
to any matter or thing affecting his liability to
hydrocarbon tax commits an offence and upon
conviction is liable to a fine of N15,000,000 or 1% of
the amount of tax which has been undercharged in
consequence of such incorrect account, schedule,
statement or information, or would have been so
undercharged if the account, schedule, statement or
information had been accepted as correct and shall
still be liable for the appropriate tax which would
have been charged.
(3) The Service may compound any offence under this Retained
Act by accepting a sum of money not exceeding the
maximum fine specified for the offence and shall
issue an official receipt for any money so received.
323
(ii) to keep or prepare any false accounts or
particulars affecting tax, or
(iii) unlawfully refuses or neglects to pay tax;
324
employed in connection with the assessment and
collection of the hydrocarbon tax who -
(2) Income Tax applicable to a Company engaged in 302(2) For the purpose of determining the
upstream, midstream and downstream petroleum value of chargeable crude oil, or chargeable gas,
operations shall be determined separately for- in relation to any accounting period, the crude
oil and gas revenue of a company for that
period shall be the value of any chargeable oil
or chargeable gas adjusted to the measurement
points, based on the-
(a) upstream petroleum operations, provided that 302(2)(a) Proceeds of all chargeable oil or gas
such operations can be consolidated with sold by the company; and
wholesale gas and wholesale petroleum liquids
supply operations as defined under this Act;
(b) midstream petroleum operations; and 302(2)(b) Value of all chargeable oil or gas
disposed by the company.
(3) Subject to subsection (2)(a) of this section, a person 302(3)(a)Subject to the provisions of
intending to be involved in more than one stream subsections 142(2) and 197(2), a person
shall register and use a separate company for each intending to be involved in more than one
stream of petroleum operations under this Act. stream, that is upstream, midstream or
downstream petroleum operations shall
register and use a separate company for each
stream of petroleum operations under this Bill
provided that for companies with petroleum
mining leases selected pursuant to sections
93(6)(b) and 93(7)(b) of this Bill no stamp duties
and capital gains tax shall be levied by
Government on such segregation.
326
[NEW INSERTION] 302(3)(b) For strategic
projects in the upstream petroleum operations
that seeks to produce oil and or natural gas to
be processed or refined to finished petroleum
products, and supplied in wholesale solely to
the domestic market, such projects shall have
the option to be established as an integrated
strategic project (ISP), whereby the capital
investment in the associated midstream
petroleum operations as defined under this Bill,
can be consolidated with the upstream
petroleum operations for purposes of tax.
Where an Integrated Strategic Project option is
elected, the following provisions shall apply-
(i) Armlength transfer prices shall be
established to fiscalize the hydrocarbons
transferred from the upstream petroleum
operations to the midstream petroleum
operations.
(ii) Capital investment in the midstream
petroleum operations consolidated with
upstream petroleum operations cannot
be represented for capital allowances
when fiscalizing the income from
midstream petroleum operations
(4) In determining the Companies Income Tax, the 302(4) In determining the companies income
hydrocarbon tax under this Act shall not be tax, the hydrocarbon tax under this Bill shall not
deductible. be deductible.
(5) All companies engaged in domestic midstream 302(5) All companies engaged in domestic
petroleum operations, downstream gas operations midstream petroleum operations, downstream
and large-scale gas utilization industries as defined in gas operations and large-scale gas utilization
this Act, shall be entitled to benefit from the industries as defined in this Bill, shall be entitled
327
incentives provided under section 39 of the to benefit from the incentives provided under
Companies Income Tax Act. section 39 of the Companies Income Tax Act.
Investors in gas pipeline will be granted an
additional tax-free period of five years at the
expiration of the tax-free period granted in
section 39 of the Companies Income Tax Act.
(7) Natural gas liquids and liquid petroleum gases 302(7) Natural gas liquids and liquid petroleum
derived from natural gas shall be subject to income gases derived from natural gas shall be subject
tax. to companies income tax.
(8) Acquisition costs of petroleum rights shall be eligible 302(8) Acquisition costs of petroleum rights
for annual allowance at the rate of 10% with a shall be eligible for annual allowance at the rate
retention value of 1% in the last year until the asset of 20% with a retention value of 1% in the last
is disposed. year until the asset is disposed.
(iii) provided that the surplus or residue of such 302 (10)(b)(iii) environmental remediation,
funds shall be subject to tax under this Act;
and
329
relating to natural gas flare;
(c) production bonuses, signature bonuses paid for Retained
the acquisition of, or of rights in or over,
petroleum deposits; signature bonuses or fees
paid for renewing petroleum mining lease or
petroleum prospecting licence or fees paid for
assigning rights to another party including for
marginal fields; and
(d) any tax inputted into a contract or an agreement Retained
on a net tax basis and paid by a company on behalf
of the vendor or contractor.
330
(15) The tax due from a company involved in upstream Retained
petroleum operations shall –
(a) in the case of Naira remittances, carry interest at Retained
the prevailing NIBOR plus 10% from the date
when the tax becomes payable until it is paid;
and
(b) in the case of foreign currency remittances, 302(15)(b) in the case of foreign currency
incur interest at the prevailing LIBOR or any remittances, incur interest at the prevailing
successor rate plus 10% from the date when the LIBOR or any successor rate plus 10% from the
tax becomes payable until it is paid, date when the tax becomes payable until it is
paid.
the provisions of this Act relating to collection The provisions of this Act relating to collection
and recovery of tax shall apply to the collection and recovery of tax shall apply to the collection
and recovery of the interest. and recovery of the interest.
PART XI
GENERAL PROVISIONS
303. General (1) The provisions of this Act shall not apply to holders of 303(1) The provisions of this Bill shall not apply
Application of an oil prospecting licence or oil mining lease who do to holders of an oil prospecting licence or oil
this Part and not enter into a conversion contract until the mining lease who do not enter into a
other matters. conversion contract until the termination or
termination or expiration of the respective oil
expiration of the respective oil prospecting
prospecting licence or oil mining lease but any licence or oil mining lease save for the
renewal of an oil mining lease shall be based on this provisions of Section 311 and Schedule 7
Act. Sections 10 and 11 which shall apply to licences
and leases awarded to indigenous Nigerian
companies on a sole risk basis under the
Petroleum Act, 1969 on which the Government
has successfully exercised its back-in rights
prior to the effective date of this Bill but any
renewal of an oil mining lease shall be based on
this Bill.
333
(2) The fiscal provisions of this Act are the base terms Retained
that are applicable and the Commission may under
section 74(2) of this Act conduct a licensing round
whereby the bid parameter is a higher royalty, profit
oil share or other fiscal feature in order to ensure that
the Government receives the full market value for
each block.
304. Regulations, (1) Where matters relate to hydrocarbon tax and Retained
rules and forms. companies income tax, the Minister of Finance may
make regulations for the carrying out of the
provisions of this Act and the Service may make rules
and specify the form of returns, claims, statements
and notices under this Act.
306. Royalty. All production of petroleum, including production tests 306 All production of petroleum, including
shall be subject to Royalties as provided in the Seventh production tests shall be subject to royalties as
Schedule to this Act. provided in the Seventh Schedule to this Act.
CHAPTER FIVE
MISCELLANEOUS PROVISIONS
307. Legal (1) The provisions of the Public Officers Protection Act Retained
proceedings, etc. shall apply in relation to any suit instituted against the
Commission or the Authority, the Commission Chief
Executive or the Authority Chief Executive, any
commissioner or director, officer or employee of the
Commission or the Authority.
335
(2) No action, claim, proceeding or suit shall lie or be Retained
commenced against the Commission or the Authority,
the Commission Chief Executive or Authority Chief
Executive, any commissioner or director or any other
employee or officer of the Commission or the Authority,
for any act done, attempted to be done or omitted to be
done pursuant to this Act or any other law or enactment
or of any public duty or authority in respect of any
alleged neglect or default in the execution of this Act or
any other law or enactment, duty or authority or be
instituted in any court unless it is commenced within 3
months after the accrual of any cause of action in
respect of any such act, neglect or default and provided
such act or omission was not done in good faith.
308. Pre- (1) A suit shall not be commenced against the Retained
Action Notice. Commission or the Authority or any officer of the
Commission or the Authority, before the expiration
of a period of 1 month after a written notice of the
intention to commence the suit has been served on
the Commission or the Authority.
309. Subject to the provisions of the Constitution, upon the 309 Subject to the provisions of the
Consequential coming into force of this Act, where the provisions of any Constitution, upon the coming into force of this
Amendments. other enactment or law are inconsistent with the Bill, where the provisions of any other
provisions of this Act, the provisions of this Act shall enactment or law except the Nigeria Oil and
prevail and the provisions of that other enactment or Gas Industry Content Development Act
law shall, to the extent of that inconsistency, be void in (NOGICD) 2010 are inconsistent with the
relation to matters provided for in this Act. Deemed provisions of this Act, the provisions of this Bill
modified. shall prevail and the provisions of that other
enactment or law shall, to the extent of that
inconsistency, be void in relation to matters
provided for in this Bill.
310. Repeals. (1) From the effective date of this Act the following 310(1) From the effective date of this Bill the
enactments and Regulations are repealed - following enactments and regulations are
repealed –
(j) Deep Offshore and Inland Basin Production 310(1)(j) Upon the completion of the
Sharing Contract Act 2019, as amended. conversion process under section 92, the Deep
Offshore and Inland Basin Production Sharing
Contract Act 2019, as amended, provided the
repeal shall apply from the effective date to
any new acreage granted under this Act;
(3) With respect to the Petroleum Equalisation Fund, as 310(3) With respect to the Petroleum
of the Effective Date – Equalisation Fund, the Authority as of the
Effective Date shall be in charge of –
Retained
338
marketing companies shall cease, except for the
collection of unpaid net surplus revenues earned
prior to the effective date; and
(b) the payment for reimbursements to oil Retained
marketing companies shall cease, except for
possible remaining payment obligations incurred
prior to the effective date.
(4) An amount remaining in the Fund after the 310(4) Where the Petroleum Equalisation Fund
completion of the transactions under paragraphs (a) is insufficient to make the payments pursuant
and (b) of this subsection shall be transferred to the to paragraph (b) of subsection (3), the Authority
Midstream Gas Infrastructure Fund; and may prorate the amounts payable based on the
ratio between the funds remaining and the
outstanding payables, provided that where the
Fund is in a deficit, the proration shall be zero,
and oil marketing companies shall have no
claim as to further outstanding amounts.
(5) Where the Fund is insufficient to make the payments 310(5) Any amount remaining in the Petroleum
pursuant to paragraph (b) of this subsection the Equalisation Fund after the completion of the
Authority may prorate the amounts payable based transactions under paragraphs (a) and (b) of
on the ratio between the Funds remaining and the subsection (3) and under subsection (4) shall be
outstanding payables, provided that where the Fund transferred to the Midstream Gas
is in a deficit, the proration shall be zero, and oil Infrastructure Fund.
marketing companies shall have no claim as to
further outstanding amounts.
(iii) the renegotiated production sharing contracts, 311(2)(a)(iii) the renewed leases renegotiated
shall not feature any investment tax credits and production sharing contracts, shall not feature
shall feature a cost oil limit of not more than any investment tax credits unless such
60% of the total oil production and for the investment tax credits are carried forward as
purpose of determining the profit oil share part of a renegotiation of a production sharing
based on cumulative production, the contract within the period specified in this
340
production from the total production of all section and shall feature a cost oil limit of not
production areas selected under section 93 of more than 60% of the total oil production, a
the Act shall be used; minimum of 55% haircut on disputed amount
and for the purpose of determining the profit
oil share based on cumulative production, the
production from the total production of all
production areas selected under section 93 of
the Act shall be used,
(iv) the contracts and leases shall continue to be 311(2)(a)(iv) the contracts and leases shall
subject to the legislation pursuant to continue to be subject to the legislation
subsection (9) of this section, provided that pursuant to subsection (9) of this section,
such Leases shall be subject to section 93 of this provided that such leases shall be subject to
Act and in this respect the conversion date for section 93 of this Act and in this respect the
the purpose of the interpretation of section 93 conversion date for the purpose of the
of this Act shall be the signing date of such interpretation of section 93 of this Act shall be
renegotiated production sharing contracts; and the signing date of such renegotiated
production sharing contracts, and
(v) upon expiration or terminations, the Leases 311(2)(a)(v) upon expiration or terminations,
and renegotiated production sharing contracts the leases and renegotiated production sharing
can only be renewed on the basis of the contracts can only be renewed on the basis of
provisions of this Act; the provisions of this Act;
(b) with respect to other oil prospecting licences and 311(2)(c) with respect to other oil prospecting
oil mining leases that do not wish to convert licences and oil mining leases that do not wish
pursuant to section 92(6), the provisions of to convert pursuant to section 92(6), the
section 303(2) of this Act and the provisions of provisions of section 303(2) of this Act and the
subsection (9) of this section shall apply and the provisions of subsection (9) this section shall
341
domestic gas price shall be $2.50 per MMBtu apply and the domestic gas price that be the
instead of the prices established in Schedule Three applicable gas prices established prior to the
of this Act. effective date of this Act. For licence and leases
awarded to indigenous Nigerian companies on
a sole risk basis under the Petroleum Act 1969
on which the Government has successfully
exercised its back-in rights prior to the effective
date of this Act, the provision of sections 92(5)
of this Act shall apply save for the royalty which
shall be 0% per field for the period of 5 years
from the date of commencement of the field
production including all relevant accounting
period prior to the effective date. For the
avoidance of doubt, and notwithstanding
section 311(9)(d), any Act, subsidiary legislation
or regulation, guideline, directive and/or order
saved under this Act shall be deemed amended
accordingly.
(c) contractors of NNPC of oil prospecting licences 311(2)(d) contractors of NNPC of oil
and oil mining leases shall be subject to the prospecting licences and oil mining leases shall
provisions of sections 232 and 233 of this Act. be subject to the provisions of sections 232 and
233 of this Act.
342
(4) Any tariff, price, levy, or surcharge which was payable Retained
to the Department of Petroleum Resources,
Petroleum Products Pricing and Regulatory Agency or
Petroleum Equalisation Fund prior to the effective
date shall continue in force until the expiration of the
term of the said tariff, price, levy, or surcharge, or
until alternative provisions are made pursuant to the
provisions of this Act or any regulations made under
it, whichever is earlier.
(5) Any licence, permit or other right granted in respect 311(5) Pending the decision of the Authority
of commercial activities pertaining to midstream pursuant to subsection 125(6) and 174(6), the
petroleum operations or downstream petroleum existing licence, permit or right shall continue in
operations, including refineries, pipelines, storage, force as if it had been issued under the
transportation, distribution and retail under any law provisions of this Act.
in force at the time in Nigeria, shall, in accordance
with the provisions of this Act, apply to the regulatory
institutions for the issuance of the appropriate
licence, and pending the issuance of the said
appropriate licence or permit within 24 months of
the effective date and the existing licence, permit or
right shall continue in force as if it had been issued
under the provisions of this Act.
(6) Any other permit or other right in respect of any 311(6) Any other permit or other right in
sector of the Petroleum Industry to which respect of any sector of the petroleum industry
subsections (2), (3) and (4) of this section does not to which subsections (2), (3) and (4) of this
apply and that has been granted by the Department section does not apply and that has been
of Petroleum Resources, Petroleum Pricing and granted by the Department of Petroleum
Product Regulatory Agency or Petroleum Resources, Petroleum Pricing and Product
Equalisation Fund, as the case may be, and which is Regulatory Agency or Petroleum Equalisation
still in existence on the effective date, shall continue Fund, as the case may be, and which is still in
in force for the remainder of its duration as if it had existence on the effective date, shall continue
been issued under the provisions of this Act. in force for the remainder of its duration as if it
had been issued under the provisions of this
343
Act.
(7) Any tariff, price, levy, or surcharge, which was 311(7) With respect to subsection (4) of this
payable to the Department of Petroleum Resources, section, any payments under Chapter Two of
Petroleum Pricing and Product Regulatory Agency or this Act shall be applicable to the respective
Petroleum Equalisation Fund prior to the effective licensees and holders of permits and rights.
date shall continue in force until the expiration of the
term of the said tariff, price, levy or surcharge or until
alternative provisions are made pursuant to the
provisions of this Act or any regulations, whichever is
earlier, provided that any payments under Chapter
Two of this Act shall be applicable.
(9) Notwithstanding the provisions of section 310 of this 311(9) Notwithstanding the provisions of
Act, the following laws shall be saved until the section 310 of this Act, the following laws shall
termination or expiration of all oil prospecting be saved until the termination or expiration of
licences and oil mining leases pursuant to subsection all oil prospecting licences and oil mining leases
(2)(b) of this section: pursuant to subsection (2)(c) of this section:
(10) Within 24 months from the effective date, existing 311(10) Subject to the provisions of subsections
Lessees and Licence and Permit holders engaged in 125(6) and 174(6), parties of gas sales
activities in midstream or downstream petroleum agreements related to domestic sales or
operations prior to the effective date shall apply exports entered into prior to the effective date
shall be entitled to continue such agreements
and the Authority shall, where applicable, issue the
appropriate licence or permit. unaltered until the termination of such
agreements, provided, however, that such
agreements shall be submitted for review to
the Authority and the Commission and where
so ordered by the Authority or Commission, as
the case may be, amendments shall be made in
such agreements to comply with the Bill.
312. Transfer (1) The Commission shall be vested with all assets, funds, Retained
of assets and resources and other movable and immovable
liability to the properties which immediately before the effective
Commission. date were held by the Petroleum Inspectorate or the
Department of Petroleum Resources.
313. Transfer (1) The Authority shall be vested with all assets, funds, 313(1) The Authority shall be vested with all
of assets and resources and other movable and immovable assets, funds, resources and other movable and
liability to the properties, which immediately before the effective immovable properties, which immediately
Authority. date were held by the Department of Petroleum before the effective date were held by the
Resources, the Petroleum Pricing and Product Petroleum Pricing and Product Regulatory
Regulatory Agency, and the Petroleum Equalisation Agency, the Petroleum Equalisation Fund
Fund (Management Board). (Management Board) and the relevant assets,
funds, resources and other movable and
immovable properties held by Department of
Petroleum Resources, the Petroleum Pricing
and Product Regulatory Agency, and the
Petroleum Equalisation Fund (Management
Board).
(2) The rights, interests, obligations and liabilities of the Retained
Department of Petroleum Resources, the Petroleum
Pricing and Product Regulatory Agency, and the
Petroleum Equalisation Fund (Management Board)
existing immediately before the effective date under
346
any contract or instrument or law or in equity are
hereby assigned to and vested in the Authority.
(3) From the effective date, employees of each of the 314(3) From the effective date, employees in
Department of Petroleum Resources, the Petroleum the relevant divisions of the Department of
Pricing and Product Regulatory Agency, and the Petroleum Resources, the Petroleum Pricing
Petroleum Equalisation Fund (Management Board), and Product Regulatory Agency, and the
shall be employees of the Authority on terms no less Petroleum Equalisation Fund (Management
favourable to those in effect immediately prior to the Board), shall be employees of the Authority on
Effective Date, and all years of service with the terms no less favourable to those in effect
Department of Petroleum Resources, the Petroleum immediately prior to the Effective Date, and all
Pricing and Product Regulatory Agency or the years of service with the Department of
Petroleum Equalisation Fund (Management Board), Petroleum Resources, the Petroleum Pricing
as applicable, shall be deemed to be years of service and Product Regulatory Agency or the
qualifying for employment-related entitlements Petroleum Equalisation Fund (Management
under any applicable law. Board), as applicable, shall be deemed to be
years of service qualifying for employment-
related entitlements under any applicable law.
(4) The Authority shall assume and continue to fulfil all Retained
statutory obligations in respect of pension schemes
to which the Department of Petroleum Resources,
the Petroleum Pricing and Product Regulatory
Agency and the Petroleum Equalisation Fund
(Management Board), as applicable, was obliged in
respect of its employees, prior to the effective date.
348
315. Movement As part of the implementation process of sections 313 Retained
of staff of the and 57 of this Act, the Minister may within 24 months of
institutions. the effective date cause an inter-agency transfer of any
staff of the institutions listed below to the Commission,
the Authority or NNPC Limited based on skills and
competence requirements of the new institutions, if the
skills and competence of the said staff are most suitable
in any of the successor institutions during the
implementation process -
(a) Department of Petroleum Resources; Retained
(b) Nigerian National Petroleum Corporation or any Nigerian National Petroleum Corporation and
of its subsidiaries; any of its subsidiaries;
(c) Petroleum Equalisation Fund;
(d) Petroleum Inspectorate; and
(e) Petroleum Products Pricing and Regulatory
Authority.
316. Transfer of (1) Every settlor shall transfer any existing host 316(1) Every settlor shall transfer any existing
Existing Host community development project or scheme to a host community development project or
Community host community development trust established scheme under its Corporate Social
Development pursuant to the provisions of this Act. Responsibility or Memorandum of
Projects and Host Understanding or any other agreement to a
Community host community development trust established
Development pursuant to the provisions of this Act.
Schemes
(2) Every applicable settlor shall notify the Retained
Commission or Authority, as the case may be, upon
completion of any transfer pursuant to subsection (1)
of this section to any one or more host community
development trusts of any of its existing host
community development projects or schemes.
349
the effective date to any ongoing host community
development project or scheme in accordance with
their terms shall be deemed to constitute a
contribution made by such holder or holder nominee
pursuant to section 240(2) of this Act.
351
318. In this Act unless the context otherwise requires -
Interpretation. “accounting date” means the date on which a company
usually prepares its accounting statement.
352
“advisory committee” has the meaning given to it in Retained
section 230 of this Act.
“affiliate” means the relationship that exists between Retained
two Persons when one controls or is controlled by, an
entity which controls, the other Person, where ‘control’
means the direct or indirect ownership of more than
50% of the voting rights in a company, partnership or
legal entity;
“aggregate gas price” means the gas price determined Retained
pursuant to section 167 (4) of this Act;
[NEW INSERTION] 318 “appraisal well” means a
well that in the opinion of the Commission is
aimed at determining the size, distribution,
characteristics and commerciality of a petroleum
discovery.
“area of operation” means the territory which hosts a 318 “area of operation” means the territory
Lessee’s or licensee’s operational or designated which hosts a lessee’s or licensee’s operational
facilities and any other ancillary facilities related to or designated facilities and any other ancillary
facilities related to upstream and midstream
upstream and midstream petroleum operations;
petroleum operations;
“assessable profit” means Assessable Profit as stated in 318. “assessable profit” means assessable profit
sections 262 and 272 of this Act. as stated in sections 262 of this Act
353
reservoir and emerging from the fluid as
pressure drops.
“authorisation” means approval issued by the Retained
Commission or Authority for an activity in the
petroleum industry;
“Authority” means the “The Nigerian Midstream and Retained
Downstream Petroleum Regulatory Authority” as
provided for in this Act;
“Authority Chief Executive” means the executive Retained
pursuant to section 34(2)(c) of this Act;
“Authority Fund” means the fund established pursuant to Retained
section 47 of this Act;
“barrel” means a barrel of 42 United States gallons. Retained
“board” means the Governing Board of the Commission, "Board" means the Governing Board of the
Authority, NNPC Limited or an Incorporated Joint Commission, Authority, NNPC Limited or an
Venture Company; Incorporated Joint Venture Company
“board of trustees” means the governing board of the "Board of Trustees" means the governing board of
trust established pursuant to section 242 of this Act; the trust established pursuant to section 242 of
this Bill;
“bulk gas storage licence” means a licence granted Retained
pursuant to section 132 of this Act;
“capital fund” means the fund available to the Board of Retained
Trustees of a host community development trust for
community development projects and other matters
on behalf of the holder or holders as provided for in this
Act;
“chargeable oil” means chargeable oil as defined in “Chargeable oil” means crude oil, condensate or
section 262 of this Act natural gas liquids produced upstream of the
measurement point as provided for under
section 260(1)(a) of this Act.
354
“chargeable profit” means chargeable profit as stated in Retained
section 262 of this Act.
“chargeable tax” means chargeable tax as stated in Retained
section 267 of this Act.
“chargeable volume” in relation to a company engaged Retained
in upstream petroleum operations means the
chargeable volume as set out in paragraph 7 of the
Seventh Schedule.
“Chief Executive” means the Commission Chief Executive Retained
or the Authority Chief Executive;
“commercial discovery” means a discovery of crude oil, “Commercial discovery” means a discovery of
natural gas or condensates within a petroleum crude oil, natural gas or condensates within a
prospecting licence which can be economically petroleum prospecting licence or petroleum
mining lease which can be economically
developed in the opinion of the licensee after
developed in the opinion of the licensee or
consideration of all relevant economic factors normally lessee after consideration of all relevant
applied for the evaluation and development of crude economic factors normally applied for the
oil, natural gas or condensate; evaluation and development of crude oil, natural
gas or condensate;
“Commission” means the Nigerian Upstream Petroleum [NEW INSERTION] “Common Carrier” means a
Regulatory Commission established under this Act; transportation pipeline which is operated on an
open access basis
356
seq.), as amended;
(c) the OECD Convention on Combating
Bribery of Foreign Public Officials in
International Business Transactions,
signed in Paris on 17 December 1997,
which entered into force on 15
February 1999, and the Convention’s
Commentaries;
(d) the United Kingdom Bribery Act 2010;
and
(e) any other law of general application
relating to bribery, kickbacks or
corrupt business practices.
“Council” means the Council established pursuant to “Council” means the Council established
section 52(3)| and (4) of this Act. pursuant to section 52(3) and (4) of this Act.
“crude oil” means petroleum, which is in liquid Retained
conditions upon production from a reservoir either in
its natural state or after the extraction of water, sand
or other foreign substance from it, but before any such
oil has been refined or otherwise treated, other than oil
extracted by destructive distillation from coal,
bituminous shales or other stratified deposits.
“crude oil refiner” means the holder of a crude oil refining Retained
licence pursuant to section 183 of this Act;
“customary court” means a customary court established Retained
by the applicable laws of a State of the Federation or
the Federal Capital Territory;
“customer client” means a wholesale customer of the Retained
strategic sector who is a client of the domestic gas
aggregator making use of the escrow account
357
mechanism;
“customer client volume” is the volume of natural gas Retained
that is paid for by a customer client for the benefit of a
specific producer client into the escrow account of the
domestic gas aggregator in any one month.
“customer protection” means the standards, practices Retained
and service protections for customers including, those
relating to pricing, service quality and standards, billing
practices, performance reporting and any regulations
of the Commission and Authority that provide such
protections;
“decommissioning and abandonment” means the “decommissioning and abandonment” means
approved process of cessation of operations of crude the approved process of cessation of operations
oil and natural gas wells, installations, plants and of crude oil and natural gas wells, installations,
plants and structures, including shutting down an
structures, including shutting down an installation’s
installation’s operations and production, total or
operations and production, total or partial removal of
partial removal of installations and structures
installations and structures where applicable, where applicable, chemicals and all such other
chemicals, radioactive and all such other materials materials handling, removal and disposal of
handling, removal and disposal of debris and removed debris and removed items, environmental
items, environmental restoration of the area after restoration of the area after removal of
removal of installations, plants and structures; and installations, plants and structures; and
“decommission” has a corresponding meaning; Retained
“decommissioning and abandonment fund” has the “decommissioning and abandonment fund” has
meaning given to it in section 232 of this Act; the meaning given to it in section 233 of this Act
“decommissioning and abandonment plan” is the plan to "decommissioning and abandonment plan"
be submitted in the Field development plan pursuant is the plan to be submitted in the field
to section 79(2) for upstream petroleum operations development plan pursuant to section 79(2) for
upstream petroleum operations and pursuant to
and pursuant to section 111(3) of this Act for
section 111(3) of this Act for midstream
midstream petroleum operations; petroleum operations;
358
“deep offshore” means any area within the territorial Retained
waters, continental shelf or exclusive economic zone
offshore of Nigeria having a water depth in excess of
200 meters;
“deep rights” are petroleum rights vested in the Retained
Government after relinquishment pursuant to section
88(5) (b) of this Act.
“Department of Petroleum Resources” means the Retained
Department of Petroleum Resources of the Ministry of
Petroleum Resources;
“designated facilities” means petroleum terminals, crude “designated facilities” means petroleum crude
oil and natural gas transportation pipelines, bulk oil and natural gas transportation pipelines, bulk
storage tank farms, refineries, and gas processing storage tank farms, refineries, and gas
processing plants in midstream petroleum
plants in midstream petroleum operations and
operations and petrochemical plants;
petrochemical plants;
“distribution pipeline” means a low-pressure pipeline for Retained
the purpose of conveying natural gas or petroleum
products to customers;
[NEW INSERTION] "disposal" and "disposed of"
means in relation to chargeable oil owned by a
company engaged in petroleum operations - (a)
delivery or export, without sale, of chargeable oil
to an affiliate or other company; and (b)
chargeable oil delivered or transferred, without
sale, to facilities used for midstream operations;
“domestic base price” means the price
determined pursuant the Third Schedule to this
Act;
359
dedicate a specific volume of crude oil towards the
domestic refineries as stipulated in section 109 of this
Act;
“domestic gas aggregator” means a licensee of a “domestic gas aggregation licence” means a
domestic gas aggregation licence; licence granted pursuant to section 153 of this
Act;
“domestic gas delivery obligation” means the obligations “domestic gas delivery obligation” means the
of a Lessee producing natural gas to dedicate and obligations of a lessee producing natural gas to
deliver to a transfer point a specific volume of natural dedicate and deliver to a transfer point a specific
gas towards meeting the domestic gas demand volume of natural gas towards meeting the
requirement, as stipulated in section 110 of this Act; domestic gas demand requirement, as stipulated
in section 110 of this Act;
“downstream gas operations” means all activities Retained
entered into for the purpose of , distribution and supply
of natural gas to retail customers, city gate reception
terminals for natural gas; stations for the distribution,
marketing and retailing of natural gas.
“downstream petroleum products operations” means all Delete
activities entered into for the purpose of distribution
and supply of petroleum products to retail customers,
360
tank farms for distribution of petroleum products; and
stations for the distribution, marketing and retailing of
petroleum products;
“downstream petroleum operations” means “downstream petroleum operations” means the
downstream gas operations and downstream price determined pursuant to subsection 167(1)
petroleum products operations; of this Act;
“effective date” means the date on which this Act comes Retained
into force;
“enforcement order” means an order issued by the Delete
Commission or the Authority;
“exploration well” means a well that in the opinion of the Retained
Commission is aimed at discovering petroleum in a
separate field in which petroleum has not been
previously discovered;
“domestic base price” means the price determined "domestic base price" means the price
pursuant the Third Schedule to this Act; determined pursuant to subsection 167(1) of this
Act;
“Federal High Court” means the Federal High Court Retained
established by section 249 of the Constitution of the
Federal Republic of Nigeria, 1999 (as Altered);
“Federation Account” means the Federation Account Retained
stated in section 162 of the Constitution of the Federal
Republic of Nigeria, 1999 (as Altered);
[NEW INSERTION] "field development plan"
means a field development plan as specified
under subsection 79(2).
361
condition, a combination of both and refers to the
underground productive formations or their vertical
projection to the surface;
“fiscal gas price” means the price in US $/MMBtu “fiscal gas price" means the price established in
determined at the measurement point for natural gas paragraph 8(3) of the Seventh Schedule to this
Act.
pursuant to applicable regulations.
“fiscal oil price” means the price pursuant to applicable "fiscal oil price" means the price established in
regulations for crude oil and condensate in US $/barrel paragraphs 8(1) and (2) of the Seventh Schedule
determined at the measurement point in such a manner to this Act.
that the price is equal to the price for which comparable
crude oil and condensate of similar quality could be sold
on similar terms at similar times by parties under no
compulsion to buy or sell and whereby none of such
parties exerts or is in a position to exert influence on the
other party having regard to all relevant facts.
“Fiscal Responsibility Act” means the Fiscal Responsibility Retained
Act, 2007;
“force majeure” includes delays or inability to perform Retained
any obligations under this Act, (other than a payment
obligation), due to any event beyond the reasonable
control of a person. The event may be, but is not limited
to, any act, event, happening, or occurrence due to
natural causes; and acts or perils of navigation, fire,
hostilities, war (declared or undeclared), blockade,
labour disturbances, strikes, riots, insurrection, civil
commotion, quarantine restrictions, epidemics,
storms, floods, earthquakes, accidents, blowouts or
lightning. An event of force majeure shall not include
changes in the laws of Nigeria or any political
362
subdivision thereof or any acts or orders of
Government, any minister, ministry, department, sub-
division, agency, authority, council, committee, or
other constituent element thereof, or any corporation
owned and/or controlled by any of the foregoing,
where operations are delayed, curtailed or prevented
by force majeure, then the time for carrying out the
obligation and duties thereby affected, and rights and
obligations hereunder, shall be extended for a period
equal to the period thus involved provided that such
period shall not exceed three years in total after which
each party can terminate the respective licence or
lease;
“frontier acreages” means any or all onshore acreages in "frontier acreages" means any or all acreages in
an area defined as a frontier in a regulation issued by an area on land in Nigeria defined as a frontier in
the Commission; a regulation issued by the Commission
“frontier basin” means basins defined as frontier in a "frontier basin" means basins defined as frontier
Regulation issued by the Commission; in a regulation issued by the Commission;
“gas transportation network” means a gas transportation “gas transportation network" means a set of
network pursuant to section 138 of this Act; interconnected gas transportation pipelines in a
particular geographical area;
“gas transportation network operator licence” means a “gas transportation network operator” means
licence to operate a gas transportation network the holder of a gas transportation network
pursuant to section 138 of this Act; operator licence;
“gas transportation pipeline” means a gas transportation “gas transportation pipeline” means a pipeline
pipeline pursuant to section 135 of this Act; for the transportation of natural gas
“gas transportation pipeline licence” means a Licence for "gas transportation pipeline licence" means a
a Gas Transportation Pipeline granted pursuant to licence for a gas transportation pipeline granted
section 135 of this Act; pursuant to section 135 of this Act
“Land Use Act” means the Land Use Act, CAP L5,
Laws of the Federation of Nigeria 2004;
365
feedstock such as gas-to-liquid plants,
petrochemical industries and fertilizer plants; and
(b) mini-LNG plants, power plants and such other
industries as defined in regulations.
“Land Use Act” means the Land Use Act, CAP L5, Laws of
the Federation of Nigeria 2004;
“lease” means a petroleum mining lease; Retained
“lessee” means a holder of a lease; Retained
“LIBOR” means| London Interbank Offered Rate "LIBOR” means London Interbank Offered Rate;
“liquefied natural gas” or “LNG” means natural gas in "liquefied natural gas" or "LNG" means natural
liquid form through condensation at close to gas in liquid form through condensation at close
atmospheric pressure and at a temperature of to atmospheric pressure and at a temperature of
approximately minus 162 degrees celsius. approximately minus 162 degrees Celsius.
368
natural gas; construction and operation of underground
or above ground facilities for the storage of natural gas;
ethane extraction plants; construction and operation of
gas to liquids (“GTL”) plants; construction and operation
of lubricant, petrochemical and fertilizer plants,
construction and operation of liquefied natural gas
(“LNG”) plants, and related LNG terminals as well as
storage and transport of LNG; acquisition, operation or
chartering of LNG tankers for coastal and marine
transportation; purchase and sale, trading, bartering,
aggregating and marketing of natural gas transported by
pipelines, compressed natural gas, liquefied natural gas,
methane, ethane, propane, butane, natural gas Liquids
and liquids from GTL plants with respect to wholesale
customers and gas distributors and related
administration and overhead.
“midstream petroleum liquids operations” means Retained
activities downstream of the measurement point(s) of
petroleum mining leases, whether or not related to the
petroleum mining lease, with respect to the construction
and operation of facilities for upgrading of heavy oil;
construction and operation of lubricant, petrochemical
and fertilizer plants, construction and operation of
petroleum liquids transport pipelines, including the
related pumping stations; acquisition, operation, leasing,
rental or chartering of barges, coastal or ocean-going
tankers, railcars and trucks for the transport of petroleum
liquids; construction, leasing and operation of tank farms
and other storage facilities and export terminals for
petroleum liquids; construction and operation of
369
refineries, purchase and sale, trading, bartering,
marketing of petroleum liquids and related
administration and overhead.
“midstream petroleum operations” means midstream Retained
petroleum liquids operations and midstream gas
operations.
“Minister of Petroleum” or “Minister” means the Retained
Minister of Petroleum Resources or any person
designated by the President as having responsibility for
overseeing the Petroleum Industry;
“Ministry of Environment” means the Federal Ministry in Retained
charge of environmental matters;
“Ministry of Finance” means the Federal Ministry in Retained
charge of finance matters;
370
‘’model lease” means a standard petroleum mining lease ‘’model lease” means a standard petroleum
with terms and conditions adopted for a specific mining lease with terms and conditions adopted
licensing round and may contain contractual provisions for a specific licensing round and may contain
contractual provisions in a model contract
in a model contract attached to the lease;
attached to or incorporated in the model lease;
“model licence” means a standard Petroleum "model licence" means a standard petroleum
prospecting licence with terms and conditions adopted prospecting licence with terms and conditions
for a specific licensing round and may contain adopted for a specific licensing round and may
contain contractual provisions in a model
contractual provisions in a model contract attached to
contract attached to or incorporated in the
the licence; model licence
“Natural Gas Liquids” or “NGL” means hydrocarbons natural gas liquids” or “NGL” means
371
liquefied at the surface in separators, field facilities or in hydrocarbons liquefied at the surface in
gas processing plants, and include but are not limited to, separators, field facilities or in gas processing
ethane, propane, butanes, pentanes, and natural plants, and include but are not limited to,
gasoline. ethane, propane, butanes, pentanes, and natural
gasoline.
372
mark, other than Frontier Acreages; water mark, other than frontier acreages;
373
“Petroleum Equalisation Fund’’ means the fund
established under the Petroleum Equalisation
Fund (Management Board etc.) Act No. 9 of
1975, CAP P11 Laws of the Federation of Nigeria
2004;
“petroleum exploration licence” means a Licence "petroleum exploration licence" '"petroleum
pursuant to section 71 of this Act; exploration licence" or "PEL" means a licence
pursuant to section 71 of this Act;
“petroleum exploration operations” or “PEL” means any "petroleum exploration operations" or "PEL"
geological, geophysical, geochemical and other surveys means any geological, geophysical, geochemical
and any interpretation of data relating thereto, and the and other surveys and any interpretation of data
relating thereto, and the drilling of such shot
drilling of such shot holes, core holes and stratigraphic
holes, core holes and stratigraphic tests, related
tests, related to the exploration for crude oil and natural to the exploration for crude oil and natural gas,
gas, but not including exploration wells; but not including exploration wells or appraisal
wells;
374
natural gas liquids;
“petroleum mining lease” means a Lease pursuant to "petroleum mining lease means a lease pursuant
section 81 of this Act; to section 81 of this Act;
376
“Production sharing contract” means any agreement for Retained
the exploration, development and production of
petroleum on terms under which the financial risk-
bearing party shall recover costs and receives a share of
the profits based on a share of production as established
in the contract from the applicable area.
“Public Procurement Act” means Public Procurement Act Retained
2007;
“public service obligations” means specific obligations Retained
imposed by the Authority on licensees in relation to
security of supply, social service, economic
development, environmental protection or the use of
indigenous materials;
“qualified person” in respect of the issuance of a licence, Retained
lease or permit to any person with respect to upstream,
midstream and downstream petroleum operations is
such a person as is designated by regulation;
“Rent” means the annual charge made in respect of a "rent" means the annual charge made in respect of
Licence or Lease granted under this Act. a licence or lease granted under this Act.
377
“renegotiated production sharing contract” means a Retained
production sharing contract for which court cases or
arbitration cases were outstanding, and was or is being
renegotiated after the effective date of this Act with the
objective of settling the outstanding court cases or
arbitration cases;
“reserve fund” has the meaning given to it in section 244 "reserve fund" is the fund pursuant to 244(b)
of this Act;
“reservoir” means a subsurface rock formation "reservoir" means a subsurface rock formation
containing an individual and separate natural containing an individual and separate natural
accumulation of producible petroleum
accumulation of producible Petroleum characterised by
characterised by a single natural pressure system
a single natural pressure system;
“retail gas supply licence” means a Licence granted "retail gas supply licence" means a licence
pursuant to section 146 of this Act; granted pursuant to section 146 of this Act;
“retention period” means the period not exceeding 10 "retention period" means the period not
years, in the first instance, granted by the Commission to exceeding 10 years granted by the Commission
the holder of a petroleum licence to retain rights to to the holder of a petroleum licence to retain
rights to develop an area over which a significant
develop an area over which a significant gas discovery
gas discovery or significant crude oil discovery
has been made; has been made;
378
“shallow water” means areas in the offshore of Nigeria up Delete
to and including a water depth of 200 meters.
“Service” means the Federal Inland Revenue Service. Retained
“signature bonuses” means payments made with respect "signature bonus" means a payment made to
to the acquisition of petroleum prospecting licences or Government with respect to the grant of a
petroleum prospecting licence or petroleum
petroleum mining leases.
mining lease;
380
(c) commercial sector, consisting of
industries, as may be determined by
the Authority, which use gas as an
energy source;
“standard cubic foot” means, in relation to natural gas, “standard cubic foot” means, in relation to
the quantity of dry ideal natural gas at a temperature of natural gas, the quantity of dry ideal natural gas
sixty (60) degrees Fahrenheit and a pressure of fourteen at a temperature of sixty (60) degrees Fahrenheit
decimal six nine six (14.696) pounds per square inch and a pressure of fourteen decimal six nine six
absolute contained in a volume of one (1) cubic foot. (14.696) pounds per square inch absolute
contained in a volume of one (1) cubic foot.
"strategic sectors" means in relation to marketable
natural gas purchases, wholesale customers of the
following sectors the –
381
“terrain” refers to the area of any PEL, PPL or PML. Retained
“terminal” means a terminal for Petroleum Liquids, "terminal" means a terminal for petroleum
pumping or booster station, or other installation or liquids, pumping or booster station, or other
structure associated with a terminal, including its storage installation or structure associated with a
terminal, including its storage facilities, other
facilities, other than a terminal situated within “a port or than a terminal situated within “a port or any
any approaches thereto” within the meaning of the approaches thereto” within the meaning of the
Nigerian Ports Authority Act; Nigerian Ports Authority Act;
382
transportation pipeline licence;
“upstream petroleum operations” means the winning or "upstream petroleum operations" means the
obtaining of petroleum in Nigeria by or on behalf of a exploration for, appraisal of, development of and
company on its own account for commercial purposes; winning or obtaining of petroleum in Nigeria by
or on behalf of a company on its own account for
petroleum exploration operations; all activities upstream commercial purposes; petroleum exploration
of the measurement points, related to the winning of operations; the drilling of exploration, appraisal
petroleum through wells or mining from petroleum and development wells; all activities upstream of
reservoirs, drilling, fracking, completing, treatment and the measurement points, related to the winning of
petroleum through wells or mining from
operation of wells producing Petroleum; construction
petroleum reservoirs, drilling, fracking,
and operation of gathering lines and manifolds for crude completing, treatment and operation of wells
oil, natural gas and water; construction and operation of producing petroleum; construction and operation
high and low pressure separators; construction and of gathering lines and manifolds for crude oil,
operation of facilities to treat crude oil and natural gas; natural gas and water; construction and operation
of high and low pressure separators; construction
flaring of natural gas; compression and reinjection of and operation of facilities to treat crude oil and
natural gas in reservoirs; construction and operation of natural gas; flaring of natural gas; compression
facilities for the production of electricity or heat from and reinjection of natural gas in reservoirs;
natural gas or other fuels as energy source for the construction and operation of facilities for the
production of electricity or heat from natural gas
winning of petroleum; injection or re-injection of water
or other fuels as energy source for the winning of
into the reservoirs; construction and operation of petroleum; injection or re-injection of water into
pipelines and other facilities for the discharge of water; the reservoirs; construction and operation of
construction and operation of fixed or floating platforms pipelines and other facilities for the discharge of
or other vessels required for the winning of Petroleum; water; construction and operation of fixed or
floating platforms or other vessels required for the
construction and operation of fixed or floating storage winning of petroleum; construction and operation
facilities of crude oil in the licence area; transportation to of fixed or floating storage facilities of crude oil
and from the licence area of personnel, goods and in the licence area; transportation to and from the
equipment; metering of well stream fluids; metering of licence area of personnel, goods and equipment;
metering of well stream fluids; metering of
petroleum at the measurement point(s) prior to
petroleum at the measurement point(s) prior to
transportation; sale and marketing of Crude Oil, natural transportation; sale and marketing of crude oil,
gas or condensates or any of them at the measurement natural gas or condensates or any of them at the
point(s) and such other activities which by regulation are measurement point(s) and such other activities
which by regulation are considered upstream
383
considered upstream petroleum operations; and related petroleum operations; and related administration
administration and overhead; provided, however, that and overhead; provided, however, that where
field facilities or fixed or floating platforms or
where field facilities or fixed or floating platforms or
vessels provide for fully integrated upstream and
vessels provide for fully integrated upstream and midstream petroleum operations, the Commission
midstream petroleum operations, the Commission may may consider the entire operations as upstream
consider the entire operations as upstream Petroleum petroleum operations pursuant to paragraph 8(g)
operations; of this Bill;
384
“wholesale petroleum liquids supplier” means a
holder of a wholesale petroleum liquids supply
licence
“wholesale petroleum liquids supply licence” means a “wholesale petroleum liquids supply licence”
licence for the supply to wholesale customers of means a licence for the supply to wholesale
petroleum liquids pursuant to section 197 of this Act; customers of petroleum liquids pursuant to
section 197 of this Act;
and
“wholesale petroleum liquids supplier” means a holder of Delete
a wholesale petroleum liquids supply licence.
319. Short title This Act may be cited as the Petroleum Industry Bill, 2020. This Act may be cited as the Petroleum Industry
Act, 2021.
First Schedule Retained
[section 3(3)]
Rights of Pre-Emption Retained
1. The Minister shall have the right to require the holder 1 The Minister shall have the right to require the
holder of any licence or lease granted under this
of any Licence or Lease granted under this Act
Act to –
(referred to in this Schedule as "the licensee or
lessee") to –
385
2. The licensee or lessee shall use his best endeavours to Retained
increase so far as possible with his existing facilities,
the supply of petroleum or petroleum products, or
both, for the Federal Government to the extent
required by the Minister.
386
6. The price to be paid for petroleum or petroleum Retained
products taken by the Minister in exercise of the right
of pre-emption shall be -
(a) the reasonable value at the point of Retained
delivery, less discount to be agreed by
both parties; or
(b) where no such agreement has been 6(b) where no such agreement has been entered
entered into prior to the exercise of the into prior to the exercise of the right of pre-
right of pre-emption, a fair price at the emption, a fair price at the port of delivery to be
settled by agreement between the Minister and
port of delivery to be settled by
the licensee or lessee or, in default of agreement,
agreement between the Minister and the
by arbitration.
Licensee or Lessee or, in default of
agreement, by arbitration.
387
9. Reasonable compensation shall be paid to the Retained
licensee or lessee for any loss or damage caused to
him by reason of the exercise by the Minister of the
powers conferred by paragraph 8 of this Schedule.
11. Any arbitration under the First Schedule shall take 11. Any arbitration under the First Schedule shall
place after the Petroleum or Petroleum Products take place after the petroleum or petroleum
have been delivered. products have been delivered.
388
Second Schedule Retained
389
(3) Each incorporated joint venture company Retained
shall be owned by the parties to the applicable
existing joint operating agreement in the same
proportion as their existing participating interests
set forth in such joint operating agreement, or in
such other proportion as the parties thereto shall
mutually agree.
(2) Once incorporated, the following provisions 2(2)(a) prior to any sale of shares in an
shall apply to each Incorporated joint venture incorporated joint venture company by any
company – shareholder, the other shareholders (including
NNPC Limited) shall have the right of first refusal
on such transaction at fair market value and
appropriate ministerial consent.
(1) Each incorporated joint venture company shall 3(1) Each incorporated joint venture company
have a board of directors to be appointed by shall have a Board of directors to be appointed
the shareholders of the incorporated joint by the shareholders of the incorporated joint
venture company. venture company.
(2) The board of directors of each incorporated 3(2) The Board of directors of each incorporated
joint venture company shall be made up of joint venture company shall be made up of
persons: persons-
392
(4) The Board of directors of each incorporated Retained
joint venture company may create
committees and subcommittees.
(2) The shares held directly or indirectly by NNPC 4(2) The shares held directly or indirectly by
Limited in each incorporated joint venture NNPC Limited in each incorporated joint venture
company shall at all times during the life of company shall at all times during the life of each
each incorporated joint venture company incorporated joint venture company remain non-
remain non-transferable either by way of sale, transferable either by way of sale, assignment,
assignment, mortgage or pledge to any other mortgage or pledge to any other entity except as
entity except as approved by the Government approved by the Government and such sale or
and such sale or transfer shall be at fair market transfer shall be at fair market value after an
value after an open, transparent and open, transparent and competitive bidding
competitive bidding process. process in which only companies who qualify
under the provisions of subsection 95(11) of this
Act can participate.
395
(2) Where the direct holders of shares in an 6(2) Where the direct holders of shares in an
incorporated joint venture company do not incorporated joint venture company do not
purchase all crude oil, natural gas, condensates purchase all crude oil, natural gas, condensates
and petroleum products that they are entitled and petroleum products that they are entitled to
to pursuant to subsection (1) of this section, pursuant to subsection (1) of this section, such
such incorporated joint venture company may incorporated joint venture company may sell the
sell the remaining balance to any Person at remaining balance to any person at open market
open market prices and on arm’s length terms. prices and on arm’s length terms.
(3) Any income received by an incorporated joint 6(3) Any income received by an incorporated
venture company as a result of the export of joint venture company as a result of the export
Petroleum may be held in bank accounts abroad of petroleum may be held in bank accounts
and may be used by such incorporated joint abroad and may be used by such incorporated
venture company to pay its obligations outside joint venture company to pay its obligations
Nigeria, subject to any obligations of such outside Nigeria, subject to any obligations of
incorporated joint venture company under this such incorporated joint venture company under
Act and any other applicable enactments. this Act and any other applicable enactments.
(4) The transfer overseas of any funds by an 6(4) The transfer overseas of any funds by an
incorporated joint venture company shall be incorporated joint venture company shall be
subject to the Regulations and policies of the subject to the regulations and policies of the
Central Bank of Nigeria. Central Bank of Nigeria.
(2) Where the cash flow, together with any 9(2) Where the cash flow, together with any
borrowings, of an incorporated joint venture borrowings, of an incorporated joint venture
company is insufficient to finance the work company is insufficient to finance the work
program in respect of any exploration for new program in respect of any exploration for new
prospects, development of new Fields, or any prospects, development of new fields, or any
other investments approved by the Board of other investments approved by the Board of
directors of such incorporated joint venture directors of such incorporated joint venture
company, the shareholders of such company, the shareholders of such incorporated
incorporated joint venture company shall joint venture company shall consult as to the
consult as to the manner in which further manner in which further financing can be raised.
financing can be raised.
[NEW INSERTION] 9(3) With respect to
subsection (2) of this section, the shareholders
may consider among others-
397
(a) permitting any of the shareholders to
contribute equity in exchange for the issuance of
ordinary shares; and
(b) the creation of preferred shares for any
shareholder that wishes to make a financial
contribution to the incorporated joint venture.
399
allocation of Domestic Gas Delivery Obligations
including but not limited to the following-
(a) All available gas at low cost of supply shall
be eligible for designation to the domestic gas
market-
(i) the ranking of gas available for the
domestic gas market shall be determined
by a Tier system based on the cost of
supply;
(ii) The pricing of gas for the domestic
market shall be based on the lowest cost
of supply of gas available in the three Tier
classification of supply sources for the
domestic market; and
(iii) The Commission shall determine the
pricing mechanism to be utilized for gas
supply to the domestic market under the
domestic delivery obligation. Such pricing
may include gas on gas, oil based price
mechanism, equivalent energy
mechanism and bilateral pricing
mechanism or any other such mechanism
that reflects the prevailing market
condition;
(c) All gas cap gas from depleted oil fields shall
be considered as Tier 2 gas and designated for
the domestic gas market;
Pricing formula for gas price for the gas based Industries Retained
The gas price for the gas based industries shall be
determined by the following pricing formula:
CP = NRP * (1 + EPF) <=EPP
Where - CP is the applicable gas price in $/MMbtu Where - CP is the applicable price in $/MMBtu,
NRP is the National Reference Price which is EPP is the domestic base price pursuant to
$1.00/MMbtu subsection 168(3), NRP is the National Reference
Price which is $ 1/MMBtu
401
Polypropylene 1.00 250
(LDPPE/HDPPE)
Low Sulphur 1.00 325
Diesel (GTL)
[NEW INSERTION] Fourth Schedule - The
Authority may by regulation change the formulas
or the values for NRP, CMPP and PRP and
introduce other values for one or more gas based
industries where the circumstances so justify.
Fifth Schedule Retained
[sections 263(1)(d), 271 (2)(b), (2)(c)(5)(a), 277(1)(c) and
280(1)(b)]
Capital Allowances Retained
1. Interpretation Retained
For the purposes of this schedule, unless the Retained
context otherwise requires –
(a) “Concession” includes a petroleum (1)(a) “Concession” includes a petroleum
exploration licence, petroleum prospecting exploration licence, petroleum prospecting
licence, petroleum mining lease, any right, title licence, petroleum mining lease, any right, title
or interest in or to petroleum in the ground and
or interest in or to Petroleum in the ground
any option of acquiring any such right, title or
and any option of acquiring any such right, title
interest;
or interest;
(c) Qualifying expenditure means, subject to the (1)(c) Qualifying expenditure means, subject to
express provisions of this schedule, the express provisions of this schedule,
expenditure incurred for the purpose of expenditure incurred for the purpose of
hydrocarbon tax in an accounting period, hydrocarbon tax in an accounting period, which
which is capital expenditure, refers to as – is capital expenditure, referred to as –
(i) “qualifying plant expenditure” incurred Retained
on plant, machinery and fixtures
directly for upstream petroleum
operations applicable to crude oil for
petroleum mining leases or petroleum
prospecting licence;
(ii) “qualifying pipeline and storage Retained
expenditure” including floating
production systems incurred directly or
gathering pipelines for upstream
petroleum operations applicable to
crude oil for petroleum mining leases
or petroleum prospecting licences;
(iii) “qualifying building expenditure” other Retained
than expenditure, which is included in
403
subparagraphs c(i), c(ii) or c(iv) of this
“Interpretation”, incurred directly on
the construction of buildings,
structures or works of a permanent
nature for upstream petroleum
operations applicable to crude oil for
petroleum mining leases or petroleum
prospecting licences; or
(iv) “qualifying drilling expenditure”, Retained
tangible and intangible, other than
expenditure which is included in
subparagraphs c(i) or c(ii) of this
“Interpretation”, incurred directly in
connection with upstream petroleum
operations for petroleum mining
leases or petroleum prospecting
licence; in view of –
1. searching for or discovering and
testing petroleum deposits, or
winning access, or
2. the construction of any works
or buildings which are likely to
be of little or no value when the
upstream petroleum
operations for which they were
constructed cease to be carried
on, provided that, for the
purposes of these definitions,
qualifying expenditure shall not
include any sum which may be
deducted under the provisions
404
of Section 263 of this Act and
have benefited from capital
allowances prior to the
acquisition of the asset by
another entity.
(d) For the purposes of interpretation of qualifying Retained
expenditure, where expenditure is incurred by a
company before its first accounting period and
such expenditure would have fallen to be
treated as qualifying expenditure (ascertained
without the qualification contained in the
foregoing proviso) if it had been incurred by the
company on the first day of its first accounting
period and that expenditure is incurred in
respect of an asset, -
(a) owned by the company then such
expenditure shall be deemed to be
qualifying expenditure incurred by it on
that day; or
(b) which has been disposed of by the
company before the beginning of its
first accounting period, then any Loss
suffered by the company on the
disposal of such asset shall not be
allowed on commencement of
accounting period. Any profit realized
by the company on such disposal shall
be liable to capital gains tax in the same
period accordingly.
2. Provisions relating to pre-production expenditure Retained
For the purposes of this Schedule, where –
(a) expenditure has been incurred before its first
405
accounting period and the expenditure would
have been treated as a qualifying expenditure
in any of the classes of qualifying expenditures
stated in subparagraphs 1c(i)-(iv) above, then
it shall be so classified and capital allowances
claimed accordingly; and
(b) Where the expenditure before the first
accounting date should have been treated as
allowable deduction in an accounting period,
it shall be so allowed but fully amortized over
a period of five (5) years with a 1% retention
value.
3. Owner and meaning of relevant interest
(1) For the purposes of this Schedule, where an Retained
asset consists of a building, structure or works,
the owner shall be taken to be the owner of
the relevant interest in such building,
structure or works.
(3) Where a Company incurs qualifying building (3)(3) Where a company incurs qualifying
expenditure or qualifying drilling expenditure building expenditure or qualifying drilling
on the construction of a building, structure or expenditure on the construction of a building,
works, the company is entitled to two or more structure or works, the company is entitled to
406
interests therein, and one of those interests is two or more interests therein, and one of those
an interest which is reversionary on all the interests is an interest which is reversionary on
others, that interest shall be the relevant all the others, that interest shall be the relevant
interest for the purposes of this Schedule. interest for the purposes of this Schedule.
5. Annual Allowance
(1) Subject to the provisions of this Schedule,
where in any accounting period, a company Retained
407
owning any asset has incurred in respect of the
asset qualifying expenditure wholly,
reasonably, exclusively and necessarily for the
purposes of upstream petroleum operations
applicable to crude oil carried on by it, there
shall be due to that company as from the
accounting period in which the expenditure
was incurred, an allowance “an annual
allowance” at the appropriate rate percent
specified in the table to this Schedule.
6. Asset to be in use at end of accounting period (6) Subject to the provisions of paragraph (18), an
An annual allowance in respect of qualifying annual allowance in respect of qualifying
expenditure incurred in respect of any asset shall expenditure incurred in respect of any asset shall
only be due to a company for any accounting only be due to a company for any accounting
period if at the end of the accounting period it was period if at the end of the accounting period it
the owner of that asset and costs were incurred was the owner of that asset and the asset was in
for the purposes of the upstream petroleum use for the purposes of the upstream petroleum
operations applicable to crude oil carried on by it. operations applicable to crude oil carried on by
it.
408
7. Balancing allowances
Subject to the provisions of this schedule, where in any Retained
accounting period of a company, the company owning
any asset in respect of which it has incurred qualifying
expenditure wholly and exclusively for the purposes of
upstream petroleum operations applicable to crude oil
carried on by it, disposes of that asset, an allowance “a
balancing allowance” shall be due to that company for
that accounting period of the excess of the residue of
that expenditure, at the date such asset is disposed of,
over the value of that asset at that date, provided that
a balancing allowance shall only be due in respect of
such asset if immediately prior to its disposal it was in
use by such company for the purposes of the upstream
petroleum operations applicable to crude oil for which
such qualifying expenditure was incurred.
8. Balancing charges.
Subject to the provisions of this schedule, where in any Retained
accounting period of a company, the company owning
any asset in respect of which it has incurred qualifying
expenditure wholly and exclusively for the purposes of
upstream petroleum operations applicable to crude oil
carried on by it, disposes of that asset, the excess “a
balancing charge” of the value of that asset, at the date
of its disposal, over the residue of that expenditure at
that date shall, for the purposes of section 262(1)(a) of
this Act, be treated as income of the company of that
accounting period, provided that a balancing charge in
respect of such asset shall only be so treated if
immediately prior to the disposal of that asset it was in
use by such company for the purposes of the upstream
petroleum operations applicable to crude oil for which
the qualifying expenditure was incurred and shall not
409
exceed the total of annual allowances due under the
provisions of this schedule, in respect of such asset.
9. Residue
The residue of qualifying expenditure, in respect of any (9) The residue of a qualifying expenditure, in
asset, at any date, shall be taken to be the total respect of any asset, at any date, shall be taken
qualifying expenditure incurred on or before that date, to be the total qualifying expenditure incurred on
by the owner, in respect of that asset, less the total of or before that date, by the owner, in respect of
any annual allowances due to such owner, in respect of that asset, less the total of any annual allowances
that asset, before that date. due to such owner, in respect of that asset,
before that date.
411
were so sold.
412
disposed of in pursuance of one bargain shall
be deemed to be purchased or disposed of
together, notwithstanding that separate
prices are or purport to be agreed for each of
those assets or that there are or purport to
be separate purchases or disposals of those
assets.
414
computed in accordance with provisions of
sub-paragraph (2) of this paragraph shall be
due or shall be so treated, as the case may be,
as in the opinion of the Service is just and
reasonable having regard to all circumstances
and to the provisions of this Schedule.
415
17. Capital allowance rates
Qualifying expenditure shall be subject to the rates
below: Retained
Qualifying Capital Expenditure 1st Year 2nd Year 3rd Year 4th Year 5th Year
Qualifying Plant Expenditure 20% 20% 20% 20% 19%
Qualifying Pipeline Expenditure 20% 20% 20% 20% 19%
Qualifying Building Expenditure 20% 20% 20% 20% 19%
Qualifying Drilling Expenditure 20% 20% 20% 20% 19%
(a) the costs may be allowed for deduction for 2(2)(a) the costs may be allowed for deduction
the purposes of ascertaining the profits of for the purposes of ascertaining the profits of the
the company for subsequent years of company for subsequent years of assessment
assessment provided that – provided that the total costs to be deducted shall
not exceed the actual costs incurred.
(i) the total costs to be deducted Delete
shall not exceed the actual
costs incurred, and
(ii) in carrying costs forward,
capital allowances shall be Delete
carried forward with priority
over operating costs;
(b) the total costs to be allowed as Retained
deduction in those subsequent years
shall be such an amount that if added
to the sum of the total costs to be
allowed as deduction under
subparagraph (1) of this paragraph
shall not exceed the specified cost
price ratio limit of 65%; and
420
Seventh Schedule Retained
[section 306]
Petroleum Fees, Rents and Royalty Retained
Part I – Fees Retained
Retained
1. Fees payable for licences and leases 1 The Commission shall through regulations
The Commission shall through Regulations publish publish the rates or fees payable in respect of the
the rates or fees payable in respect of the following - following –
(a) application for a petroleum exploration Retained
licences;
(b) application for a renewal of a petroleum Retained
mining lease;
(c) application to assign an interest or sublet a Retained
petroleum exploration licence, petroleum
prospecting licence or petroleum mining
lease;
(d) application to terminate or effect a partial Retained
or full surrender of a petroleum exploration
licence, petroleum prospecting licence or
petroleum mining lease;
(e) application for permit to operate a drilling Retained
rig;
(f) application for grant of field development Retained
plan approval and the related petroleum
mining lease;
(g) application for the approval of the drilling Retained
of a well;
(h) permit to export samples for analysis; Retained
(i) application to withdraw any of the Retained
applications above; and
(j) application for other fees as may be Retained
421
deemed necessary by the Commission.
422
into the Federation Account and verified by the
Commission.
Part III – Royalties
6. All Petroleum production subject to Royalties Retained
All production of petroleum, including production Retained
tests, shall be subject to royalties on a non-
discriminatory basis with respect to all licensee and
lessees and shall be paid into the Federation Account
and verified by the Commission. For royalty purposes
condensates shall be treated as crude oil and natural
gas liquids shall be treated as natural gas.
425
adjustments for quality and transport
costs as appropriate to prices of
comparable crude oils and condensates
sold in the international market, as
determined by the Commission, for which
appropriate information is available and
with the objective to approximate as
reasonably as possible the average fair
market value of the month of the crude oil
and condensates for such month for such
field.
(2) The fiscal oil price for each field shall consider 8(2) The fiscal oil price for each field shall
any quality differentials related to consider any quality differentials related to
international crude oils and condensates and international crude oils and condensates and
shall be an export parity price taking into shall be an export parity price taking into
consideration the transportation costs within consideration the deduction of transportation
costs within Nigeria from the measurement
Nigeria as determined by the Authority to
points as determined by the Authority to export
export terminals.
terminals.
(3) The royalties applicable to natural gas shall be Retained
based on the fiscal gas price determined for
the field at the measurement point under to
applicable regulations or guidelines. This price
shall be determined by the Commission, taking
into consideration submissions by the lessees,
and shall be based on the netback value at the
measurement point based on the composition
of the natural gas in terms of marketable
natural gas, ethane, propane, butane,
pentanes and other natural gas liquids as may
be derived by processing of the natural gas.
426
The net back procedure shall take into
consideration the type of natural gas markets
to which the natural gas from the field is being
sold, such as export markets, domestic
wholesale markets, markets based on the
aggregate gas price or other natural gas pricing
framework as permitted under this Act. The
procedure shall take into consideration
conditioning costs, processing costs and
transportation costs within Nigeria as
determined by the Authority from the
measurement point to the market, where the
sales point is downstream of the
measurement Point. Where natural gas liquids
are produced in the field, the total gross value
of the liquids shall be taken into account in the
determination of the total gross value of the
natural gas for purposes of the fiscal gas price.
(2) The royalty shall be at a rate per centum of the 10(2) The royalty shall be at a rate per centum of
chargeable volume of the crude oil and the chargeable volume of the crude oil and
condensates produced from the field area in condensates produced from the field area in the
the relevant month on terrain basis as follows relevant month on terrain basis as follows-
in -
428
(a) onshore areas 18 per cent (a) onshore areas 15%;
(b) shallow water (up to 200m water (b) shallow water (up to 200m water depth)
depth) 16 per cent 12.5%;
(c) deep offshore (greater than 200m (c) deep offshore (greater than 200m water
water depth) 10 per cent depth) 7.5%; and
(d) frontier basins 7.5 per cent (d) frontier basins 7.5%.
(3) For deep offshore fields with a production 10(3) For deep offshore fields with a production
during a month of not more than 15,000 bopd, during a month of not more than 50,000 bopd,
the royalty rate shall be 7.5%. Production the royalty rate shall be 5%. The share of the
above 15,000 bopd shall be at the royalty rate production above 50,000 bopd shall be at the
royalty rate specified in subparagraph (2) of this
specified in subparagraph (2) of this
paragraph.
paragraph.
(4) Royalties for onshore fields and shallow water Retained
fields, including marginal fields, with crude oil
and condensate production not more than
10,000 bopd during a month shall be at a rate
per centum of the chargeable volume of the
crude oil and condensates produced from the
field area per production day during a month
on tranched basis as follows –
(a) for the first 5,000 bopd 5 per cent Retained
(b) for the next 5,000 bopd 7.5 per cent 10(4)(b) for the next 5,000 bopd, for the share of
production over 5000 bopd 7.5%
Provided that fields with crude oil and Provided that fields with crude oil and
condensate production more than 10,000 condensate production more than 10,000 bopd
bopd during a month shall be charged royalty during a month, the share of the production over
rates specified under subparagraph (2) of 10,000 bopd per month shall be at the royalty
this Paragraph. rates specified under subparagraph (2) of this
paragraph.
429
With respect to paragraphs (3) and (4), With respect to paragraphs (3) and (4), where a
where a single Field covers two or more single field covers two or more petroleum mining
petroleum mining leases, the royalty shall leases, the royalty shall be determined based on
be determined based on the total the total production from the field.
production from the field.
(5) Royalty based on production for natural gas 10(5) Royalty based on production for natural
and natural gas liquids shall be at a rate per gas and natural gas liquids shall be at a rate of 5
per centum of the chargeable volume. Royalty
centum of the chargeable volume in the
rate for natural gas produced and utilized in-
relevant area on Terrain basis as follows in –
country shall be 2.5 percent of the chargeable
volume.
430
condensates at the rates set out below -
(a) Below $ 50 per barrel 0 per cent
(b) At $ 100 per barrel 5 per
cent
(c) Above $ 150 per barrel 10 per cent
(d) Between $ 50 and $ 100 per barrel and
between $ 100 and $ 150 per barrel the
royalty by price shall be determined based on
linear interpolation. (As an example if in 2020
the price is $ 75/bbl, the royalty by price shall
be 2.5%)
(e) The price levels mentioned in (a), (b),(c) and
(d) shall apply to the year 2020. At the
beginning of 2021 and of each succeeding
calendar year these price levels shall be
increased by 2% relative to the values of the
previous year.
(3) There shall be no royalty by price for frontier
acreages.
(4) Royalty derived from “royalty by price” shall be
for the credit of Nigerian Sovereign Investment
Authority.
(3) A model licence related to frontier acreages shall not 14(3) A model licence related to frontier
contain contractual provisions pursuant to Section 84 acreages shall not contain contractual provisions
433
of this Act and shall only contain the minimum pursuant to Section 85 of this Act and shall only
provisions related to fees, rents, royalties under contain the minimum provisions related to fees,
paragraph 10 of this Schedule and companies income rents, royalties under paragraph 10 of this
Schedule and companies income tax stipulated in
tax stipulated in this Act and upon the renewal of any
this Act and upon the renewal of any petroleum
petroleum mining leases, hydrocarbon tax and royalty mining leases, hydrocarbon tax and royalty
based on price under paragraph 11 of this Schedule based on price under paragraph 11 of this
based on onshore conditions shall apply. Schedule based on onshore conditions shall
apply.
(4) For new acreage any production sharing contract shall Retained
have a cost limit of 70% based on total oil production,
and where applicable condensates and natural gas
liquids derived from associated gas, measured at the
measurement point. Furthermore, the minimum
profit oil scale to Government in a production sharing
contract shall be based on cumulative production per
field as follows -
(a) up to and including 50 million barrels – 5%
(b) over 50 million barrels and up to and including
100 million barrels – 10%
(c) over 100 million barrels and up to and
including 350 million barrels – 15%
(d) over 250 million barrels up to and including
750 million barrels – 25%
(e) over 750 million barrels ad up to and including
1500 million barrels – 35%
(f) over 1500 million barrels 45%
(5) There shall be no production sharing for associated 14(5) There may be production sharing for
or non-associated natural gas, to which only the associated or non-associated natural gas, to
which only the rents, royalties and companies
434
rents, royalties and companies income tax applies income tax applies under this Bill. Capital and
under this Act. Capital and operating costs related operating costs related to making associated
to making associated natural gas available at the natural gas available at the measurement
point(s) can be recovered from cost oil.
measurement point(s) can be recovered from cost
oil.
(6) The contractors shall be the licensees or lessees and Retained
shall thereby be entitled to the capital allowances
under the Fifth Schedule.
(7) The profit oil for crude oil under conversion contracts Retained
or for new acreages shall be determined as the total
volume of crude oil, where applicable, condensates
and natural gas liquids derived from associated gas,
less the royalties and less the cost oil as defined in the
model contract.
(8) For production sharing purposes, the adjusted profit 14(8) For production sharing purposes, the
of a company for hydrocarbon tax shall be determined adjusted profit of a company for hydrocarbon tax
pursuant to Section 263(1)(b), which means that shall be determined pursuant to Section
263(1)(b), which means that royalties and the
royalties and the value of profit oil delivered in kind or
value of profit oil delivered in kind or cash from
cash from all fields to the Federation Account shall be all fields to the Federation Account shall be
deductible for the purposes of determining the deductible for the purposes of determining the
adjusted profits. The calculation shall be consolidated adjusted profits. The calculation shall be
as per the six groups under Section 267, subject to the consolidated as per the two classes under
provisions of Section 261 and the capital allowances Section 267 and the capital allowances under the
under the Fifth Schedule shall be applied. Fifth Schedule shall be applied.
435
Eighth Schedule
Creation of the Ministry of Petroleum
Incorporated
437