Petroleum Industry Act, 2021 PDF

Petroleum Industry Act, 2021 2021 No. 6 A 167 PART V—THE NIGERIAN NATIONAL PETROLEUM COMPANY LIMITED 53.—(1) The Minister shall within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be cal...

Petroleum Industry Act, 2021 2021 No. 6 A 167 PART V—THE NIGERIAN NATIONAL PETROLEUM COMPANY LIMITED 53.—(1) The Minister shall within six months from the commencement of this Act, cause to be incorporated under the Companies and Allied Matters Act, a limited liability company, which shall be called Nigerian National Petroleum Company Limited (NNPC Limited). Nigerian National Petroleum Company Limited. (2) The Minister shall at the incorporation of NNPC Limited, consult with the Minister of Finance to determine the number and nominal value of the shares to be allotted, which shall form the initial paid-up share capital of NNPC Limited and the Government shall subscribe and pay cash for the shares. Act No 3, 2020. (3) Ownership of all shares in NNPC Limited shall be vested in the Government at incorporation and held by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated in equal portions on behalf of the Federation and the Ministry of Petroleum Incorporated is incorporated under the provisions of the Eighth Schedule to this Act. Eighth Schedule. (4) The Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated in consultation with the Government, may increase the equity capital of NNPC Limited. (5) Shares held by the Government in NNPC Limited are not transferable including by way of sale, assignment, mortgage, or pledge unless approved by the Government and endorsed by the National Economic Council on behalf of the Federation. (6) Notwithstanding any provision to the contrary in the Companies and Allied Matters Act and except by way of security, any sale or transfer of shares of NNPC Limited shall be at a fair market value and subject to an open, transparent and competitive bidding process and the 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 their affairs on a commercial basis in a profitable and efficient manner without recourse to government funds and their memorandum and articles of association shall state these restrictions, and NNPC Limited shall operate as a Companies and Allied Matters Act entity, declare dividends to its shareholders and retain 20% of profits as retained earnings to grow its business. (8) Where NNPC Limited has a participating interest or 100% interest in a lease or licence, NNPC Limited shall pay its share of all fees, rents, royalties, profit oil shares, taxes and other required payments to Government as any company in Nigeria. Act No 3, 2020. Act No 3, 2020. Petroleum Industry Act, 2021 A 168 2021 No. 6 Transfer of assets and liabilities. 54.—(1) The Minister and the Minister of Finance shall within 18 months of the effective date determine the assets, interests and liabilities of NNPC to be transferred to NNPC Limited or its subsidiaries and upon the identification, the Minister shall cause such assets, interests and liabilities to be transferred to NNPC Limited. (2) Assets, interests and liabilities of NNPC not transferred to NNPC Limited or its subsidiary under subsection (1), shall remain the assets, interests and liabilities of NNPC until they become extinguished or transferred to the Government and six months following the determination under section 54 (1) of this Act, the Minister, the Minister of Finance and the AttorneyGeneral of the Federation shall develop a framework for the payment of the liabilities not transferred to NNPC Limited and 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 is deemed to be transferred to NNPC Limited after 18 months from the effective date. (3) NNPC shall cease to exist after its remaining assets, interests and liabilities other than its assets, interests and liabilities transferred to NNPC Limited or its subsidiaries under subsection (1) shall have been extinguished or transferred to the Government. (4) Bonds, hypothecations, securities, deeds, contracts, instruments, documents and working arrangements with regards to assets, interests or liabilities transferred to NNPC Limited or any of its subsidiary under subsection (1) and which remains subsisting before the date of transfer shall, beginning from the date of transfer, be effective and enforceable against or in favour of NNPC Limited. (5) Any pending action or proceeding brought by or against NNPC before the transfer date with regard to assets, interests or liabilities transferred to NNPC Limited under subsection (1) may be enforced or continued by or against NNPC Limited as the successor of NNPC. (6) Notwithstanding the provisions of subsection (5)— (a) an action or proceeding shall not be commenced against NNPC Limited, its subsidiary, director, officer, employee or agent with regard to asset, interest or liability of NNPC Limited, where the time for commencing the action or proceeding would have expired had such asset, interest or liability not been transferred to NNPC Limited or its subsidiaries; and (b) the transfer of asset, interest and liability of NNPC to NNPC Limited under subsection (1) shall not create or be deemed to have created a new cause of action in favour of a— Petroleum Industry Act, 2021 2021 No. 6 (i) creditor of NNPC, or (ii) party to a contract, agreement or arrangement with NNPC that was entered into before the date of transfer. A 169 Second Schedule. (7) For the purpose of this section and the Second Schedule to this Act, “assets, interests and liabilities” means tangible, intangible, real or personal property, rights and obligations, in each case of all types. (8) Subject to any arrangements that NNPC has entered into, any debt to NNPC related to outstanding cash calls under joint venture agreements shall become debt of— (a) NNPC Limited where the assets have been transferred to NNPC Limited under subsection (1) ; and (b) Government where the assets have not been transferred under subsection (2). (9) The initial capitalisation of NNPC Limited shall be not less than its financial requirements to effectively discharge its commercial role and deal with its obligations and liabilities transferred to NNPC Limited. 55.—(1) The Minister shall upon incorporation of NNPC Limited, consult with the Minister of Finance to appoint NNPC Limited as agent of NNPC for the purpose of managing the process of winding down the assets, interests and liabilities of NNPC. (2) Subject to the appointment under subsection (1), the NNPC Limited shall have the power to deal with the applicable assets, interests and liabilities of NNPC and may enter into contract with third parties on such assets, interests and liabilities. (3) Pursuant to the appointment under subsection (1), NNPC shall— (a) not deal with the applicable assets, interests and liabilities; (b) at the request of NNPC Limited execute and deliver any document and do such other acts or things as may be required by NNPC Limited with regard to any asset, interest or liability referred to under subsection (1) ; and (c) pay a nominal fee of US $1 to NNPC Limited as administrative charges on the applicable assets, interests and liabilities to which NNPC Limited has been appointed under subsection (1). (4) The cost of winding down the assets, interests and liabilities of NNPC shall be borne by the Government. Appointment of NNPC Limited as agent of NNPC. A 170 2021 No. 6 Petroleum Industry Act, 2021 (5) A cause of action shall not arise in tort, contract or otherwise between NNPC and NNPC Limited in respect of the applicable assets, interests or liabilities to which NNPC Limited has been appointed as agent under subsection (1). Subsistence of guarantee. 56. Subject to section 92 (3) (a) of this Act, any guarantee granted or issued by the Government with regard to the transfer of liability of NNPC to NNPC Limited under section 54 of this Act shall be enforceable against the Government as if such liability was a liability of NNPC, provided that such guarantee was effective prior to such transfer. Transfer of employees and conditions of service. 57.—(1) Upon incorporation of NNPC Limited under section 53 of this Act, employees of NNPC and its subsidiaries shall be deemed to be employees of NNPC Limited on terms and conditions not less favourable than that enjoyed prior to the transfer of service and shall be deemed to be service for employment related entitlements as specified under any applicable law. (2) NNPC Limited shall continue to fulfil the statutory obligations of NNPC in relation to the pension scheme of employees of NNPC and its subsidiaries prior to the date of incorporation of NNPC Limited. The Board of NNPC Limited. 58. There shall be a Board of the NNPC Limited which shall perform its duties in accordance with this Act, the Companies and Allied Matters Act and the articles of association of NNPC Limited. Act No 3, 2020. Composition of the Board of NNPC Limited. 59.—(1) Except as set out in this section, the composition of the Board of the NNPC Limited shall be determined in accordance with the Companies and Allied Matters Act and its Articles of Association. Act No 3, 2020. (2) The Board of NNPC Limited shall be appointed by the President and composed of— (a) a non-executive chairman ; (b) the Chief Executive of NNPC Limited ; (c) the Chief Financial Officer of NNPC Limited ; (d) a representative of the Ministry of Petroleum, not below the rank of a director ; (e) a representative of the Ministry of Finance, not below the rank of a director ; and (f ) six non-executive members with at least 15 years post-qualification cognate experience in petroleum or any other relevant sector of the economy one from each geopolitical zone. Petroleum Industry Act, 2021 2021 No. 6 A 171 (3) A person to be appointed as the Chief Executive of NNPC Limited shall have extensive managerial, technical and professional knowledge in the petroleum or other relevant industry with at least 15 years’ post-qualification experience. (4) In the absence of the Chairman, the members of the Board of NNPC Limited may appoint a non-executive member of the Board to act as alternate Chairman. (5) The provisions of this section shall apply where NNPC 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 Companies and Allied Matters Act and the articles of association of NNPC Limited. 60.—(1) The Board of NNPC Limited shall, within three months of the incorporation of NNPC Limited, develop formal and transparent process for the creation of its committees and nomination of members of the Board of NNPC Limited to the committees. Act No 3, 2020. Committees of the Board of NNPC Limited. (2) The mandate, composition and procedures of each committee of the Board of NNPC Limited shall be comprehensive and open for inspection by the shareholders of NNPC Limited. (3) The Board of NNPC Limited shall nominate non-executive members of the Board capable of exercising independent judgment to its committees where there is likelihood of conflict of interest. (4) The Board of NNPC Limited shall have committees for— (a) ensuring the integrity of financial and non-financial reporting ; (b) the nomination of Board of NNPC Limited 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.—(1) Members of the Board of NNPC Limited shall discharge their responsibilities in accordance with the highest standards, practices and principles of corporate governance. (2) The Board of NNPC Limited shall, upon request by one or more of shareholders holding not less than 10% of the voting interests in NNPC Limited, provide a comprehensive written explanation of any action or decision taken by the Board of NNPC Limited to its shareholders, provided that the Board of Application of principle of corporate governance. A 172 2021 No. 6 Petroleum Industry Act, 2021 NNPC Limited may withhold the explanation if permitted under a duty of confidentiality NNPC Limited owed to any third party. Annual audit of NNPC Limited. 62.—(1) NNPC Limited shall ensure that an annual audit of NNPC Limited is conducted by an independent, competent, experienced and qualified auditor. (2) The auditor of NNPC Limited shall provide an external and objective assurance to the Board of NNPC Limited and shareholders of NNPC Limited that the financial statements of NNPC Limited fairly represent the financial position and performance of NNPC Limited. (3) Where the auditor of NNPC Limited is unable to provide the assurance required under subsection (2), the Board of NNPC Limited shall immediately convene an extraordinary general meeting of the company to— (a) notify the shareholders of NNPC Limited ; and (b) consider any action that may be necessary in that regard. Responsibilities of the Board of NNPC Limited. Act No 3, 2020. 63.—(1) The Board of NNPC Limited shall, in addition to its responsibilities under the Companies and Allied Matters Act and its articles of association— (a) be responsible for the strategic guidance and determining the business structure of NNPC Limited ; (b) be responsible for the approval of the annual budget of NNPC Limited ; (c) act in good faith and exercise due diligence and 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; Petroleum Industry Act, 2021 2021 No. 6 A 173 (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 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 . (2) The provisions of this section shall be incorporated into the memorandum and articles of association of— (a) NNPC Limited at the time of its incorporation ; and (b) each of the NNPC Limited’s wholly-owned subsidiaries as if references in this section to ‘NNPC Limited’ were references to such wholly-owned subsidiary. (3) A member of the Board of the NNPC Limited shall be suspended or removed from office by the President, where the member— (a) is found to be— (i) unqualified for appointment under section 59 of this Act, (ii) unqualified subsequent to his appointment, or (iii) in breach of conflict of interest provisions in the Companies and Allied Matters Act or any regulation regarding conflicts of interest passed under this Act ; (b) ceases to be an employee of the ministry or agency he represents on the Board of the NNPC Limited ; Act No 3, 2020. A 174 2021 No. 6 Petroleum Industry Act, 2021 (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 NNPC Limited for three 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 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) incapable to discharge the duties of his office as a result of infirmity of body or mind. Objectives of NNPC Limited. Act No. 14, 2007. Act No. 31, 2007. 64. The objectives of NNPC Limited shall include to— (a) carry out petroleum operations on a commercial basis, comparable to private companies in Nigeria carrying out similar activities including exemption to Public Procurement Act, Fiscal Responsibility Act and Treasury Single Account. (b) NNPC Limited to be vested as the concessionaire of all Production Sharing Contracts (PSC), Profit Sharing and Risk Service Contracts as the National oil company on behalf of the Federation in line with its competencies; (c) lift and sell royalty oil and tax oil on behalf of the Commission and the Service respectively for an agreed commercial fee and in the case of profit oil and profit gas payable to the concessionaire, NNPC Limited shall promptly remit the proceeds of the sales of the profit oil and profit gas to the Federation less its 30% for management fee and Frontier Exploration Fund as specified in section 9 (4) of this Act ; (d) carry out test marketing to ascertain the value of crude oil and report to the Commission ; (e) be vested with the rights to natural gas under production sharing contracts entered into prior to and after the effective date of this Act ; (f ) carry out the management of production sharing contracts for a fee, based on the profit oil share or profit gas share in accordance with paragraph (c) ; (g) with respect to any joint operating agreement in which NNPC is a party on the effective date assume the working interest held by NNPC Petroleum Industry Act, 2021 2021 No. 6 A 175 irrespective of whether such licence or lease is converted under section 92 of this Act ; (h) engage in the business of renewables and other energy investments ; (i) promote the domestic use of natural gas through development and operation of large-scale gas utilisation industries ; (j) maintain the role of NNPC, under section 54 of this Act ; (k) carry out task requested by the Commission or Authority on a fee basis and generally engage in activities that ensure national energy security in an efficient manner, in the overall interest of the Federation ; (l) carry out such other tasks as may be determined by the Board of NNPC Limited ; and (m) make NNPC Limited supplier of last resort for security reasons and all associated costs shall be for the account of the Federation. 65.—(1) NNPC Limited and other parties to joint operating agreements in respect of upstream petroleum operations, may on a voluntary basis restructure their joint operating agreement as a joint venture carried out by way of a limited liability company, each referred to as an “incorporated joint venture company” (IJVC), based on the principles established in the Second Schedule to this Act. Establishment of incorporated joint venture companies. Second Schedule. (2) The IJVC referred to in subsection (1) shall not be subject to the provisions of the Fiscal Responsibility Act and the Public Procurement Act. Act No 31, 2007. (3) The proposed IJVC structure shall be an independent entity, having a strong commercial orientation and transparent company operation for the IJVC shareholders, with clear rules for accountability. Act No 14, 2007. CHAPTER 2—ADMINISTRATION PART I—GENERAL ADMINISTRATION 66.—(1) The objectives of Chapter 2 are to— (a) promote the exploration and exploitation of petroleum resources in Nigeria for the benefit of the Nigerian people ; (b) promote the efficient, effective and sustainable development of the petroleum industry ; (c) promote the safe and efficient operation of the transportation and distribution infrastructure for the petroleum industry ; (d) provide the framework for developing third party access arrangements to petroleum infrastructure ; Objectives.