Upstream Petroleum Matters & the Petroleum Industry Bill:Industry Bill:
A Comparative & Critical Analysis of the Official Version & Version IV
Dr. Adeoye AdefuluOdujinrin & Adefulu
Barristers, Solicitors& Notaries Public
Lagos – Abuja – Port‐Harcourt
OutlineOutline
Acreage Control & Licensing
Official version vs. Version IV
Institutional Framework NNPC Ltd Incorporated
Joint Ventures
•Licenses & Leases•PEL•PPL•PML•PPL & PML Award Process
Environmental Management
Relinquishment of existing Licenses & Leases
•R
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Official Version vs. Version IVOfficial Version vs. Version IV
PIB b itt d t th N ti l A bl i• PIB was submitted to the National Assembly in December 2008
Gone through 1st and 2nd readings and now at– Gone through 1st and 2nd readings and now at committee stage
• Executive through an Inter‐Agency teamExecutive through an Inter Agency team continued work on the PIB which has now come up with version IV
• Version IV submitted to National Assembly as a “memorandum”
• Version IV substantially different from official version
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Institutional FrameworkInstitutional Framework
Official version
Mi iVersion IV
Mi iMinister MinisterNational Petroleum Petroleum
Inspectorate
National Assets
Petroleum
National Petroleum Petroleum
InspectorateDirectorate Inspectorate Management Agency Directorate Inspectorate
Policy Direction
Acreage HolderTechnical Regulator
Costs/commercial Regulator
Policy Direction
Acreage Holder
Technical & Costs/Commercial
Regulator
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NNPC Ltd.NNPC Ltd.
Official Version
• NNPC Ltd. to be estd. as a
Version IV
• Retains same provisionslimited liability company
• Ownership vested solely in • Sole vesting of powers in
the FG does not take the the FG
• Shares may be divested to i i f 2
provisions of CAMA into consideration
i i i i iNigerians after 2 years on the NSE
• Divestiture provision is limiting
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Incorporated Joint VenturesIncorporated Joint Ventures
Official Version
• Provides for the
Version IV• NOC to appoint majority of
establishment of IJVs as limited liability companies
board members & management staff
• Decision of the board to comply• Shares in each IJV to be held according to the existing participating interests
• Decision of the board to comply with that of shareholders
• Restrictions on transfer of NOC participating interests
• Makes general provisions in relation to the rights and
& other shareholder shares
• Protection against additional tax liabilitiesrelation to the rights and
duties of shareholders and board of directors
liabilities
• Assets may only be transferred to NOC in liquidation
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Acreage Control & Licensing: GeneralAcreage Control & Licensing: General
Official Version
• Vests all unallocated
Version IV
• Acreage vested in the acreages in the Directorate Directorate
• Creates a National Grid System for the definition of license and lease areas, relinquishments etceterarelinquishments etcetera
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Acreage Control & Licensing: Licenses & Leases
Official Version
• Creates PPL & PML to
Version IV• PEL is also created
replace OPL & OML
• PPLs & PMLs may be • PPLs & PMLs may be granted
with respect to both crude oil and natural gasgranted with respect to
either crude oil or natural gas not both
and natural gas
• Introduces a difference between the qualifications ofgas, not both
• PPLs & PMLs may be granted to:
between the qualifications of an operator and a non‐operator
granted to:– NOC & indigenous oil companies
(60% or more Nigerian h h ldi )
• Licences may be granted to NOC & a winning bidder
shareholding)
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Acreage Control & Licensing: PELAcreage Control & Licensing: PEL
Official Version
• No provisions for a PEL
Version IV
• PEL may be awarded by the Minister to a qualified company
• Term not more than 3 years
• Non‐exclusive right to l f ilexplore for oil
• License area may however cover the area of a PPL orcover the area of a PPL or PML
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Acreage Control & Licensing: PPLAcreage Control & Licensing: PPL
Offi i l i iArea Official Version Version IV
Land & Shallow Waters Not more than 5 years Not more than 7 years consisting of:1. Initial Period of 3 years2. Renewal Period of 2
years3. Appraisal Period of 2
years
Deep Water Areas & Inland Not more than 10 years Not more than 10 yearsBasin consisting of:
1. Initial Period of 5 years2. Renewal Period of 10
years3. Appraisal Period of 2
years
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Acreage Control & Licensing: PPL (Version ddi i l i i )IV Additional Provisions)
• Minimum work commitments– Licensee must drill at least one exploration well to pa specified minimum depth
– Commitment must be supported by internationalCommitment must be supported by international bank guarantee
C i l di & Fi ld D l t• Commercial discovery & Field Development– FDP must be submitted within 120 days of declaration of commercial discovery
– Must be approved by Inspectorate within 90 days pp y p y
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Acreage Control & Licensing: PPL li i hRelinquishment
li i h i d iRelinquishment Period Version IV
Upon expiry of initial exploration period 50% of original license area
Upon the expiry of the renewal period All parcels that are not part of PMLs, appraisal areas or significant gas discoveryretention areas
Upon expiration of the PPL All acreage that is not included in PMLs, appraisal areas or significant gas discoveryappraisal areas or significant gas discovery retention areas
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Acreage Control & Licensing: PMLAcreage Control & Licensing: PML
Official Version
• PML to be granted to holder
Version IV
• Introduces the DGSOof PPL who has satisfied all conditions and has made
i l di
• PML may only be granted for 20 years and renewed
commercial discovery
• Term is for 20 years and may be renewed for further
for only 10 years
• A PML not in commercial d i fmay be renewed for further
terms of not more than 20 years for each period of
production after 5 years may be revoked
• A PML in which commercialy prenewal
• A PML in which commercial production has stopped for 180 days may be revoked180 days may be revoked
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Acreage Control & Licensing: Award Process
Official Version
• Awards of PPLs & PMLs are
Version IV
• Introduces bid parameters:to be made by the Minister on the basis of a bid process
d t d b th
– Signature bonus
– Royalty percentageconducted by the Directorate
– Work commitment
– Work units
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Acreage Control & Licensing: Assignments, & i i iMergers & Acquisitions
Official Version
• Assignments, mergers &
Version IV
• Introduces a fee of equal to acquisitions to be approved by the minister
2% of the fair market value of the transaction
• Minister shall approve if certain conditions are met
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Environmental ProvisionsEnvironmental Provisions
Official Version
• Requires licensees/lessees
Version IV
• Requires the submission to submit an environmental programme or an
i t l lit
and approval of only an environmental
t lenvironmental quality management programme
• No distinction between
management plan
• No distinction between both as to content and when requiredq
• Content is similar to EIA which is also required in petroleum operations
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Environmental Provisions (contd.)Environmental Provisions (contd.)
Official Version• Requires states and local
Version IV
• States & Local governments governments to contribute to remediation
• Financial contribution to be made
no longer required to make contributions
Financial contribution to be made by licensees and lessees into a Remediation Fund
Li /L t ll
• Substantially retains provisions on financial contributions by• Licensee/Lessee to annually
assess and increase contributions
• No provisions for a mechanism
contributions by licensee/lessee but subjects the Fund to audit
for reimbursement of contributions • Introduces provisions for
gas flaring penalties
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Relinquishment of Existing Licences/Leases ( i )(Version IV)
• Mandatory relinquishment of acreage:
– 1 year after the commencement of the Act; or
– Ten years after initial OPL was granted
• Existing licensees/lessees must select areas to be• Existing licensees/lessees must select areas to be proposed for conversion into PMLs or significant gas discovery retention areasdiscovery retention areas
• All parcels not selected must be relinquished
• Marginal field operators may apply for PMLs in their areas of operation
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RECAPRECAP
Acreage Control & Licensing
Official version vs. Version IV
Institutional Framework NNPC Ltd Incorporated
Joint Ventures
•Licenses & Leases•PEL•PPL•PML•PPL & PML Award Process
Environmental Management
Relinquishment of existing Licenses & Leases
•PSCs & other contracts
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Concluding RemarksConcluding Remarks
• Version IV is a significant improvement on the official version
• The existence of 2 government sponsored versions of the same bill creates significantversions of the same bill creates significant challenges for the National Assembly &
k h lStakeholders
• It may be better for the government toIt may be better for the government to withdraw the official version and substitute it with Version IV or a variation thereofwith Version IV or a variation thereof
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Thank YouThank You
• All comments and questions may be directed to:
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