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