PIA-2021_Petroleum Administration-Part II (Upstream Petroleum Operations) PDF

A 176 2021 No. 6 Petroleum Industry Act, 2021 (e) encourage and facilitate both local and foreign investment in the petroleum industry ; (f ) promote transparency and accountability in the administration of petroleum resources in Nigeria ; (g) develop, where appropriate, competitive markets for t...

A 176 2021 No. 6 Petroleum Industry Act, 2021 (e) encourage and facilitate both local and foreign investment in the petroleum industry ; (f ) promote transparency and accountability in the administration of petroleum resources in Nigeria ; (g) develop, where appropriate, competitive markets for the sale and distribution of petroleum and petroleum products ; (h) promote safe and affordable access to petroleum and petroleum products in Nigeria ; (i) promote the processing of petroleum within Nigeria and the development of fuel and chemical industry and other related value-added products and activities ; (j) create a conducive business environment for operations in the petroleum industry ; (k) promote the liberalisation of the downstream petroleum industry ; (l) establish an orderly, fair and competitive commercial environment within the petroleum industry ; and (m) ensure that petroleum operations are conducted in a manner that protects the health and safety of persons, property and the environment. (2) The provisions of Chapter 2 of this Act shall apply to— (a) activities within or associated with petroleum operations and the petroleum industry ; and (b) persons conducting such activities. Management of petroleum resources. 67. The administration and management of petroleum resources and their derivatives shall be conducted in accordance with this Act and the principles of good governance, transparency and sustainable development of Nigeria. PART II—ADMINISTRATION OF UPSTREAM PETROLEUM OPERATIONS AND ENVIRONMENT Administration of acreage and vesting of data. 68.—(1) Title to any data and its interpretation relating to upstream petroleum operations are vested in the Government of the Federation of Nigeria and shall be administered by the Commission. (2) The Commission shall administer any acreage for upstream petroleum operations in Nigeria. (3) Where a significant petroleum discovery is made in a frontier basin, the Minister may, on the recommendation of the Commission, reclassify all or part of the basin from frontier acreages to a general onshore area and the fiscal terms applicable to onshore under this Act shall apply to— Petroleum Industry Act, 2021 2021 No. 6 A 177 (a) new licences and leases in the basin after reclassification; and (b) any existing lease upon renewal, provided that it shall not be applied to licences and leases existing at the moment of reclassification. 69.—(1) The Commission shall, after consultation with the SurveyorGeneral of the Federation, adopt a national grid system for acreage management. National grid system. (2) The grid system referred to under subsection (1) shall be based on the UTM system or any other projection system in use by the office of the Surveyor-General of the Federation. (3) The Commission shall establish a system for numbering of parcels, which shall allow for subdivision and aggregation of the parcels. (4) The basic unit of the grid system shall be a parcel of one square kilometer, subject to adjustment of the zones and national boundary. (5) The Commission may further subdivide parcels into equal units of one hectare or such sub-units as the Commission may deem appropriate. (6) The national grid system referred to under subsection (1) shall be used for the administration of upstream petroleum operations, including— (a) the definition of licence and lease areas ; (b) relinquishments ; (c) bid procedures ; (d) identification of well locations ; (e) petroleum conservation measures ; and (f) other regulatory and acreage management procedures. (7) Any current boundary of a licence or lease, which does not conform to the new national grid system shall remain unaltered and be apportioned in parcels. 70.—(1) There shall be the following licences and leases under this Act related to upstream petroleum operations— (a) petroleum exploration licence, which may be granted to qualified applicants to carry out petroleum exploration operations on a non-exclusive basis ; (b) petroleum prospecting licence, which may be granted to qualified applicants to— (i) drill exploration and appraisal wells and do corresponding test production on an exclusive basis, and (ii) carry out petroleum exploration operations on a non-exclusive basis ; and Licences and leases. A 178 2021 No. 6 Petroleum Industry Act, 2021 (c) petroleum mining lease, which may be granted to qualified applicants to— (i) win, work, carry away and dispose of 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. Act No 3, 2020. (2) A licence or lease may be granted under this Act only to a company incorporated and validly existing in Nigeria under the Companies and Allied Matters Act. Petroleum exploration licence. 71.—(1) The Commission shall be responsible for granting of petroleum exploration licences. (2) The holder of a petroleum exploration licence shall have non-exclusive right to carry out petroleum exploration operations within the area provided for in the licence. (3) A petroleum exploration licence shall be for three years and may be renewable for additional period of three years subject to fulfilment of prescribed conditions, but shall not include any right to win, extract, work, store, carry away, transport, export or otherwise treat petroleum discovered in or under the licence area. (4) A petroleum exploration licence may cover an area that includes petroleum prospecting licences or petroleum mining leases, provided that the holders of such licences or leases, shall have no obligation to purchase the results of any survey conducted under the petroleum exploration licence. (5) A petroleum exploration licence granted in respect of frontier acreages may include a provision permitting the licensee to select, based on the result of his exploration work and be granted one or more petroleum prospecting licences prior to the termination of the licence containing the fiscal provisions stipulated in Chapter 4 of this Act. (6) The Commission shall have sole right and title over 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 unreasonably withheld. (7) A licensee is entitled to a fee from a third party for data use licence granted under subsection (6) and shall remit to the Commission any agreed portion of the fee due to the Commission. Petroleum Industry Act, 2021 2021 No. 6 A 179 (8) Exploration activities conducted pursuant to a petroleum exploration licence shall be monitored and administered by the Commission in accordance with regulations made under this Act. (9) The Commission shall have sole right and title over all 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. (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. (1) The holder of a petroleum prospecting licence shall, subject to the fulfilment of obligations imposed by this Act, have— (a) exclusive right to drill exploration and appraisal wells and nonexclusive right to carry out petroleum exploration operations within the area provided for in the licence ; and (b) right to carry away and dispose of crude oil or natural gas won or extracted during the drilling of exploration or appraisal wells as a result of production tests, subject to the fulfilment of obligations imposed by this Act. (2) A holder of the petroleum prospecting licence shall not be granted an extension except as prescribed under sections 78 (4), (9) and 79 (6) of this Act. (3) Where a holder of a petroleum prospecting licence fails to fulfil any term or condition of the licence, it shall not, except as provided in the licence, give the Minister a right of claim against the licensee or be deemed a breach of the licence, if the failure arises from force majeure. (4) Where there is any delay by a licensee in the fulfilment of any term or condition of a petroleum prospecting licence caused by force majeure, the period of such force majeure shall be added to the period fixed for the fulfilment of the applicable term or condition, provided that such period shall not exceed three years in total after which, the licence may be terminated by the Commission or the licensee. (5) The Minister may grant a petroleum prospecting licence to a qualified applicant recommended by the Commission and shall not grant such licence to any other person and where the Minister does not grant the licence, the Minister shall inform the Commission in writing for the rationale of the decision. Petroleum prospecting licence. A 180 2021 No. 6 Petroleum Industry Act, 2021 (6) Notwithstanding the provisions of this section, a petroleum prospecting licence may also be granted under section 93 of this Act. Bidding process. 73.—(1) Subject to the provisions of sections 71 (5), 74 (3), 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. (2) The Commission may periodically publish a licensing round plan. (3) Subject to section 71 (5) and other provisions of this Act, the Minister may, on the recommendation of the Commission, grant a petroleum prospecting licence or petroleum mining lease to a winning bidder in accordance 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 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. Award process. 74.—(1) The grant of a petroleum prospecting licence or a petroleum mining lease on a previously appraised area of a petroleum prospecting licence or a surrendered, relinquished or revoked petroleum mining lease in, under or upon the territory of Nigeria, shall be by an open, transparent, competitive and non-discriminatory bidding process conducted by the Commission under section 73 (1) of this Act. (2) The winning bidder shall be determined on the basis of the following bid parameters— (a) a single bid parameter, which shall be based on any one of the following parameters— (i) a signature bonus to be paid in full prior to the granting of the licence or lease by or on behalf of the winning bidder, (ii) a royalty interest, (iii) a profit split or profit oil split, (iv) a work programme commitment during the initial exploration period, or (v) any other parameter as may be defined specific to a bid round ; and Petroleum Industry Act, 2021 2021 No. 6 A 181 (b) a combination of the bid parameters specified in paragraph (a) of this subsection, based on a points system assessable by the bidder in such a manner that the bidder with the highest aggregate number of points shall be the winning bidder. (3) Notwithstanding the bidding parameters prescribed in subsection (2), where there is a bilateral or multi-lateral agreement between Nigeria and another country, the Government may, for strategic purpose and in return for substantive benefits to the nation, direct the Commission to negotiate and award a petroleum prospecting licence or petroleum mining lease to a qualified investor identified in the agreement or treaty. (4) A signature bonus payable in respect of any licence or lease awarded under subsection (3) shall be based on a transparent method for evaluating the acreage. (5) The Commission shall call for bids in accordance with 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 section, it shall prescribe in a regulation or guideline the minimum pre-qualification criteria of prospective bidders in terms of technical and financial requirements and previous experience. (7) The bids received based on the bid parameters prescribed in subsection (2) through an open, transparent and competitive bidding process, shall include an electronic bidding process, open to public and conducted in the presence of representatives of the Nigerian Extractive Industry Transparency Initiative, the Federal Ministry of Finance and the Federal Ministry of Petroleum Resources. 75. The licensing round guidelines shall be accompanied with the model licence for the petroleum prospecting licence or model lease for the petroleum mining lease for the bid round and shall include the— (a) licence or lease acreages, the term and minimum work obligations ; (b) requirements to be fulfilled by the bidders and the pre-qualification criteria, as the case may be ; (c) bid parameter ; (d) list of documents required and criteria for the evaluation of technical capacity, financial competence and legal status of interested parties ; and (e) details and cost for the acquisition of relevant data and studies. Licensing round guidelines. A 182 Model licence and model lease. 2021 No. 6 Petroleum Industry Act, 2021 76. The model licence or model lease for each bid round shall reflect the conditions of the licensing round guidelines for the bid round and shall in all circumstances include the following clauses— (a) description of the acreage ; (b) term of the licence or lease ; (c) minimum work programme and minimum level of investment ; (d) details of guarantees to be provided by the licensee or lessee regarding the performance of its licence or lease obligations ; (e) details of obligations regarding relinquishment, decommissioning and abandonment ; (f ) rules for the resolution of disputes including arbitration, mediation, conciliation or expert determination ; (g) applicable sanctions in the event of failure by the licensee or lessee to comply with the terms and conditions of the licence or lease ; and (h) such other clauses as the Commission may deem necessary. Duration and area of petroleum prospecting licence. 77.—(1) A petroleum prospecting licence for onshore and shallow water acreages shall be for a duration of not more than six years, comprising of an initial exploration period of three years and an optional extension period of three years. (2) A petroleum prospecting licence for deep offshore and frontier acreages shall be for a duration of not more than 10 years, comprising of an initial exploration period of five years and an optional extension period of five years. (3) The area provided for in a petroleum prospecting licence shall not exceed— (a) 350 square kilometres for any onshore or shallow water acreages ; (b) 1,000 square kilometres for any deep offshore acreages ; and (c) 1, 500 square kilometres for any frontier acreages. Work commitment, commercial discovery and significant gas discovery. 78.—(1) A petroleum prospecting licence shall contain a requirement that the licensee commit to a work programme and such other terms and conditions as the Commission shall determine. (2) A licensee shall, during the initial exploration period and the optional extension period provided for in a petroleum prospecting licence, commit to drill at least one exploration well to a minimum depth specified in the licence for each period, except for frontier acreages, where the work program during the initial exploration period may only consist of geophysical work. Petroleum Industry Act, 2021 2021 No. 6 (3) Where a licensee makes a discovery during the initial exploration period or the optional extension period provided for in the applicable petroleum prospecting licence, the licensee shall inform the Commission within 180 days of the discovery if he considers that the discovery merits appraisal or is of no interest to him. (4) Where a licensee considers that a discovery merits appraisal, the licensee shall submit to the Commission within one year for approval— (a) a commitment to an appraisal programme of not more than three years with a scope and nature permitting the licensee to declare a commercial discovery, where the result of the appraisal is positive ; and (b) the appraisal area, not larger than the outer boundary of the discovery, as determined by the licensee and a zone of not more than two kilometres surrounding the outer boundary, provided that the appraisal area does not extend beyond the area provided for in the applicable petroleum prospecting licence. (5) The Commission shall act on the approval request for the appraisal programme within 60 days after its submission and a licensee shall, upon the approval of the appraisal programme and appraisal area by the Commission, promptly carry out the committed appraisal programme. (6) Where the Commission fails to act on the appraisal programme referred to under subsection (5) within 60 days, the appraisal shall be deemed approved. (7) The provision of section 88 (3) of this Act shall apply to any appraisal area under subsections (5) and (6). (8) The licensee shall, upon the completion of the appraisal program— (a) declare a commercial discovery ; (b) declare a significant gas discovery or a significant crude oil discovery ; or (c) inform the Commission that the discovery is of no interest to the licensee. (9) Where a significant gas discovery or significant crude oil discovery has been declared, the licensee shall be entitled to retain the area of such significant gas discovery or 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. A 183 A 184 2021 No. 6 Petroleum Industry Act, 2021 (10) The retention area of a significant gas discovery or significant crude oil discovery shall continue to subsist pursuant to a petroleum prospecting licence until the expiration of the period under subsection (9) or declaration of a commercial discovery by the licensee. (11) The Commission shall approve an area of a significant gas discovery or significant crude oil discovery which shall not be larger than the outer boundary of the discovery declared by the licensee, including a zone of not more than two kilometres surrounding the outer boundary, provided that such area shall not extend beyond the area described in the applicable petroleum prospecting licence. (12) The provision of section 88 (3) of this Act shall apply to any retention area. (13) Where, upon the expiry of the retention period determined under subsection (9), the licensee has not declared a commercial discovery, the area declared under subsection (9) shall be immediately relinquished by the licensee. (14) Upon the relinquishment of the retention area with the latest expiry date referred to in subsection (13), the applicable petroleum prospecting licence shall expire. (15) Where a licensee declares a discovery of no interest under subsection (3) or (8), the Commission may require the relinquishment of the parcels that cover the structure of such discovery. (16) A commitment by a licensee under this section shall be supported by a bank guarantee, letter of credit or performance bond issued by a bank acceptable to the Commission for an amount determined by the Commission. (17) The licensee shall in each calendar year present an annual work program and status report as prescribed by regulations for approval by the Commission and such program shall as a minimum, contain the committed work. Commercial discovery and field development plan. 79.—(1) Where a licensee under a petroleum prospecting licence declares a commercial discovery under section 78 (8) (a) of this Act, the licensee shall within two years of the declaration, submit to the Commission a field development plan with regard to the commercial discovery together with a commitment to carry out the work described in the field development plan. (2) The Commission shall evaluate the technical and commercial terms of the field development plan and shall only approve the field development plan where— (a) it meets the technical standards required for petroleum operations based on good international petroleum industry practices ; Petroleum Industry Act, 2021 2021 No. 6 (b) the location of the measurement point, measurement processes and equipment are acceptable to the Commission ; (c) it results in the maximum economic recovery of crude oil, natural gas and condensates from the applicable reservoirs ; (d) it meets the health, safety and environmental standards, as determined by the Commission ; (e) it provides for the efficient and commercial use of facilities for midstream petroleum operations ; (f ) it does not involve excessive capital or operating expenditures ; (g) it includes an approved Nigerian content plan pursuant to the Nigerian Oil and Gas Industry Content Development Act ; (h) it includes an environmental management plan in a form that complies with section 102 of this Act ; (i) it includes a decommissioning and abandonment plan and a decommissioning and abandonment fund that complies with sections 232 and 233 of this Act ; (j) it provides for the elimination of routine natural gas flaring ; (k) it does not relate to upstream petroleum operations that are in conflict with domestic gas delivery obligation ; (l) 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 ; (m) it complies with the obligations to host communities under Chapter 3 of this Act ; and (n) it includes a development period sufficient to construct any required infrastructure and the development of the field. (3) Where the development of a commercial discovery requires construction of facilities for midstream petroleum operations in a manner integrated with the upstream petroleum operations, a licensee may submit the development plan as a single integrated project, which may be reviewed by the Commission. (4) Where a single integrated project is submitted, the Commission shall review and implement the project based on its regulatory responsibilities. A 185 Act No 2, 2010. A 186 2021 No. 6 Petroleum Industry Act, 2021 (5) Where a licensee does not submit a field development plan and work commitment within the period set forth in subsection (1), the area containing the commercial discovery shall be relinquished. (6) Where the licensee has submitted a field development plan for the field, the licence shall continue until the process for the grant of a lease has been completed or the Commission has decided not to grant the lease. (7) Where the licensee establishes and secures approval for an appraisal area or declares a commercial discovery, a petroleum prospecting licence shall, where required, be extended until the— (a) grant of the petroleum mining lease ; or (b) decline of the approval for the appraisal area or commercial discovery. (8) Notwithstanding the provisions of section 78 (10) of this Act, the holder of the retention area shall within two years after declaring a commercial discovery, submit to the Commission a field development plan that complies with the requirements in subsection (2). (9) The Commission shall give its final decision to approve or disapprove a field development plan within 180 days after the submission of the field development plan in compliance with the requirements in subsection (2) and a lease shall be granted upon the approval of the field development plan. (10) Where the Commission fails to respond to the field development plan within 180 days, the plan shall be deemed approved. (11) A commitment by a licensee under this section shall be supported by a bank guarantee, letter of credit or performance bond issued by a bank acceptable to the Commission for an amount determined by the Commission. (12) Upon approval of a field development plan, no material modification shall be made except in accordance with the approval provisions set out in subsection (2) and the submission and approval of an amended field development plan. (13) Upon the granting of one or more petroleum mining leases, the annual work program and status report referred to under section 78 (17) of this Act shall include the program and report for each lease. (14) A field development plan may be submitted in phases, with the detailed provisions under subsection (2) relating to the first phase and the possible subsequent phases described on a high level basis, with approval being sought only for the first phase and amended field development plan needs to be presented for each following phase where the lessee is willing to commit to such following phase. Petroleum Industry Act, 2021 2021 No. 6 A 187 80.—(1) A licensee or lessee shall promptly notify the Commission of Unitisation. any petroleum reservoir which extends beyond the boundaries of its licence or lease area. (2) The Commission may, for the purpose of ensuring optimum recovery of petroleum from a petroleum reservoir, require all petroleum operations relating to commercial discovery to be carried out by a 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 under subsection (1) direct the applicable licensee or lessee to enter into a unit agreement to develop the petroleum reservoir as a unit, within a period of time to be determined by the Commission, which shall not be less than two years. (4) The unit agreement referred to in subsection (3) shall be approved by the Commission and shall— (a) be based on terms agreed by the parties and in a form that conforms with good international petroleum industry practices ; and (b) contain terms and conditions as may be required by a regulation issued by the Commission under subsection (9). (5) A unit agreement shall, in addition to the requirements of subsections (3) and (4)— (a) be based on reliable technical, operational and economic considerations ; (b) set out the proposed operator of the applicable unit ; and (c) set out technical information regarding the petroleum reservoir subject to unitisation, including structure mapping, net pay and such other engineering and geophysical information as may be required by a regulation issued by the Commission under subsection (9). (6) Where the applicable licensees or lessees are unable to reach agreement within the time limit imposed by the Commission under subsection (3), the Commission may, in compliance with subsections (4) and (5), require 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 A 188 2021 No. 6 Petroleum Industry Act, 2021 and which shall be binding on the licensees or lessees after approval by the Commission and 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 and the remuneration of the Consultant shall be paid by the licensees or lessees. (7) Where a petroleum reservoir extends beyond the boundaries of the licence or lease into an adjacent area which is not covered by a licence or lease, the Commission may— (a) extend the boundaries of the licence or lease to include the entire petroleum reservoir within such licence or lease, provided that the licensee or lessee submits to the Commission a field development plan that includes the additional adjacent area acceptable to the Commission ; or (b) conduct a bid round for the adjacent area in accordance with the licensing round guidelines and the provisions of this Act. (8) Where a petroleum reservoir unitised under this section is able to continue in production after the expiration of one or more licences or leases relating to the petroleum reservoir, the Commission may grant an extension of the licences and leases in the unitised field. (9) The Commission may from time to time issue regulations in relation to unitisation. Petroleum mining leases. 81.—(1) A petroleum mining lease shall be granted for each 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. (2) A petroleum mining lease shall be granted under sections 70 (2) and 74 of this Act, where a prospective lease area contains petroleum field with suspended wells or continuing commercial production, where the corresponding petroleum mining lease has been revoked or has expired. (3) A petroleum mining lease granted under subsection (2) may include an appraisal phase and the development and production of the field may include a work program requirement to enhance ongoing production. (4) A licensee shall subject to subsection (7), propose that a separate petroleum mining lease be granted for each commercial discovery to which a petroleum prospecting licence relates prior to the expiration of the applicable petroleum prospecting licence. Petroleum Industry Act, 2021 2021 No. 6 (5) Notwithstanding any grant of a petroleum mining lease under subsection (4), the applicable petroleum prospecting licence shall continue for the remaining area to which that licence relates for the duration provided for in that licence. (6) The area to which a petroleum mining lease relates and derived from a petroleum prospecting licence shall be proposed by the licensee, based on an independent engineering report, which shall not be binding on the Commission. (7) The Commission shall approve the proposed area, which shall contain every parcel within the outer boundary of the field based on oil-water contacts, spill point, intersection of planned development wells with the reservoirs or other reservoir limits, including a zone surrounding the boundary consisting of all 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 lease is derived ; (b) in areas relinquished by the licensee ; or (c) in an existing petroleum mining lease. (8) The Commission may approve modification of an area of a petroleum mining lease to include further parcels as are appropriate, based on the criteria prescribed under subsections (6) and (7), where during the period provided for in a petroleum prospecting licence, the outer boundary of the commercial discovery changes due to further— (a) drilling or other exploration activities ; or (b) petroleum discoveries in deeper or shallower formations. (9) Where two or more petroleum mining leases derived from the same petroleum prospecting licence constitute a single field based on an interpretation by the Commission of geological or petroleum engineering data showing that the field is a single field, the leases shall be considered as a single lease, notwithstanding that their boundaries do not join with another lease, provided the granting date of the single lease shall be the date of the first lease that was granted. (10) A petroleum mining lease shall not consist of an area that is less than one parcel or where a parcel has been subdivided under section 69 (5) of this Act, less than one subdivision of such parcel. (11) Notwithstanding the provisions of this section, a petroleum mining lease may also be granted under sections 74 (3) and 93 of this Act. A 189 A 190 2021 No. 6 Petroleum Industry Act, 2021 (12) Where a lessee makes a separate commercial discovery underneath the area of a petroleum mining lease in shallower or deeper formations, the lessee may present a development plan for such discovery and upon approval of such plan the lessee shall be granted a separate lease for such commercial discovery. Exclusive right to conduct operations. 82.—(1) A lessee under a petroleum mining lease shall have the exclusive right to carry out the development and production of the petroleum with respect to the formations under the lease area as defined in the lease. (2) A lessee under a petroleum mining lease shall have the exclusive right to drill exploration and appraisal wells in the lease area and the nonexclusive right to carry out petroleum exploration operations. (3) A petroleum mining lease for conducting upstream petroleum operations shall only be granted on the basis of a commitment from the applicable lessee to— (a) develop and produce the commercial discovery of crude oil or natural gas in the area to which the lease relates in accordance with the applicable field development plan ; or (b) restart or continue petroleum production in the area to which such lease relates. (4) The Commission shall, during the term of a petroleum mining lease,— (a) verify the implementation of the work commitments by the applicable lessee and its compliance with the applicable field development plan; (b) monitor capital and operating costs incurred by the applicable lessee ; and (c) ensure that upstream petroleum operations at all times are carried out to conform with the standards required by this Act and by regulation made under this Act. Confidentiality. 83.—(1) A licensee or lessee shall for each petroleum prospecting licence or petroleum mining lease provide a yearly summary of royalties, fees, taxes, profit oil shares and other payments to Government within six months after each calendar year to the Commission and the Minister of Finance through the Accountant-General of the Federation and in case of joint ventures, where an operator makes payments to Government, the operator shall provide the required information and where individual holders of the licence or lease make such payment, the individual holders shall be responsible for providing the information and where consolidation applies on a consolidated basis. Petroleum Industry Act, 2021 2021 No. 6 (2) The Commission shall define the required detail and classification of the summary under subsection (1) 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 any amendment or side letter with NNPC shall— (a) not be confidential ; (b) be published on the website of the Commission within one year after the effective date ; and (c) be provided to the Commission by a contractor of NNPC, licensee or lessee within one year after the effective date. (4) A contractor, licensee or lessee who does not or partially provides the Commission with the required information referred to in subsection (3), within the stipulated time contravenes the provisions of this Act and is liable to an administrative penalty of the sum of US $10,000 for every day the default subsists. (5) The text of any new licence, lease or contract or amendment to it shall not be confidential and shall be published by the Commission immediately following the granting or signing of such texts. (6) A licensee or lessee who obtained geological, geophysical, geochemical and other technical petroleum data during upstream petroleum operations as determined by the Commission shall immediately provide the data to the National Data Repository of the Commission. (7) The data referred to in subsection (6) shall not be confidential, except for— (a) trade secrets and proprietary information and other information as approved by the Commission ; (b) the earlier of a period of five years or the period until the relinquishment date of the licence area under section 88 (1) and (2), with respect to exploration data including exploration and appraisal wells and geophysical surveys ; (c) 10 years for specific surveys carried out under section 71(6) of this Act ; 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. A 191 A 192 2021 No. 6 Petroleum Industry Act, 2021 (8) Data in the National Data Repository of the Commission shall be accessible to any interested person under such terms as may be 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. Power to enter into contracts. 84.—(1) Unless otherwise prohibited by this Act or regulation under this Act, where the Minister grants a licence or lease, a licensee or lessee may enter into a contract with a third party for the exploration, prospecting, production or development of crude oil or natural gas or both. (2) The power to enter into contracts under subsection (1) shall not confer on any licensee or lessee the right to assign an interest in any licence or lease, except in accordance with the provisions of this Act. Model contracts. 85.—(1) The Commission shall develop a model licence and model lease, which may contain an obligation to comply with fiscal obligations and other provisions related to fees, rents, royalties for such contract attached to or incorporated in the model licence or model lease. (2) The model licence and model lease referred to under subsection (1) 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 (e) any contract being a variation of the contracts under paragraphs (a), (b) (c) or (d) or a contract which, at the time, is an internationally recognised form of contract for the exploration and production of petroleum. (3) A licence or lease described under subsection (1) shall not be granted by the Minister unless the appropriate model contract is attached to the licence or lease as a guide on the relevant fiscal obligations. Petroleum Industry Act, 2021 2021 No. 6 A 193 (4) A contract as provided for under section 85 (2) (d) of this Act shall include a carried interest provision, whereby— (a) the Government through the NNPC Limited has the right to participate up to 60% in the contract or identified as a bid parameter ; (b) the right to participate shall be from any time upon the granting of the licence or lease ; (c) the contract shall stipulate that Government shall refund fully its proportionate share of the unrecovered proven costs from the date of its participation and such refunded cost shall relate to development and production and shall not include bonuses and penalties, interest, premium or markups on cost ; (d) the contract shall not require any upfront payment by the Government ; (e) the nature, the validity and quantum of the unrecovered costs to be refunded shall be determined or verified by an agreed expert determination procedure ; (f ) the refund obligation under this subsection may be in the form of cash or kind from future share of production or entitlements from the effective participation date ; and (g) the terms, conditions and financial details of any right of participation by the government under this subsection shall be contained in the model contract prepared by the commission in consultation with NNPC Limited. 86.—(1) A petroleum mining lease granted under section 81 of this Act shall be for a maximum period of 20 years, which term shall include the development period prescribed under subsection (4). (2) Where a petroleum mining lease does not initiate regular commercial production within the stipulated development period prescribed under subsection (4), the Commission shall recommend to the Minister to revoke the lease or license at the end of the stipulated development period, unless the lessee or licensee can provide to the Commission a valid reason that in the Commission’s opinion is substantial, in which case the Commission shall recommend to the Minister to extend the development period accordingly. (3) Where a petroleum mining lease is revoked under subsection (2), the applicable acreage shall vest in the Government and be controlled and administered by the Commission, which may be subject to a new petroleum mining lease granted in accordance with section 81 of this Act. (4) The development period for a petroleum mining lease granted under section 81 of this Act shall be the period established in the field development Duration and renewal of leases and licences. A 194 2021 No. 6 Petroleum Industry Act, 2021 plan under section 79 (2) (n) of this Act and where development period is not stipulated, the development period shall be— (a) five years for an onshore lease ; and (b) seven years for a lease in shallow water or deep offshore or a lease in a frontier acreage. (5) Acreage in respect of an expired or revoked petroleum mining lease under this Act shall be subject to a new bidding process under section 73 of this Act where there is still commercial production possible, unless the term of the petroleum mining lease is extended under this Act. (6) A petroleum mining lease which continues to produce in paying quantities may be renewed by the Commission in accordance with section 87 of this Act for one or more successive additional terms, of not more than 20 years each, provided that— (a) the field continues to produce in paying quantities ; and (b) all rents, royalties, taxes and other applicable fiscal obligations stipulated under this Act shall continue, subject to section 87 of this Act. (7) A petroleum mining lease which ceases to produce in paying quantities for a period of not less than 180 days may, except for force majeure or any other reason acceptable to the Commission, be revoked by the Commission. (8) A lessee of a petroleum mining lease who intends to suspend production for more than 180 days and to resume production at a later date, shall submit to the Commission a specific shut-in plan and a commitment to restart production in accordance with the shut-in plan. Conditions for renewal of petroleum mining leases. 87.—(1) A lessee of a petroleum mining lease may, not less than 12 months before the expiration of the lease, apply in writing to the Commission for a renewal, of leased area or any part of it. (2) A petroleum mining lease shall be renewed by the Commission where it is satisfied that the lessee— (a) has fulfilled its obligations relating to the development of the lease area ; (b) has fully met all payments requirement under this Act or any other enactment in respect of royalties, rents, taxes and fees relating to the petroleum mining lease ; (c) is not in default of any obligation or condition relating to the lease ; and (d) has discharged all operational obligations in compliance with applicable rules and regulations. Petroleum Industry Act, 2021 2021 No. 6 A 195 (3) The renewal referred to under subsection (2) shall be on terms and conditions determined by the Commission and the lessee shall pay a renewal bonus of an amount specified by the Commission based on the percentage of the market value on the renewal date prescribed in the regulation made under this Act. (4) The Commission may, in public interest, change, impose or add new lease conditions, which shall be published in the Federal Government Gazette. 88.—(1) Prior to the expiration of the initial exploration period of three years or of the optional extension period of three years under section 77 (1) of this Act, a licensee shall relinquish every area that is not an appraisal area, retention area or lease area based on parcels or sub-parcel under section 69 of this Act. (2) Prior to the expiration of the initial exploration period of five years or of the optional extension period of five years under section 77 (2) of this Act, a licensee shall relinquish every area that is not an appraisal area, retention area or lease area on parcel or sub-parcel under section 69 of this Act. (3) Every appraisal area or retention area shall be retained as provided for under this Act and where one or more declarations of a commercial discovery have been made, the 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 voluntarily relinquish parcels and sub-parcels under section 69 of this Act, provided that the – (a) licensee has complied with the obligation in the petroleum prospecting licence ; and (b) shape of a relinquished block shall be approved by the Commission to maintain acreage of shape that is viable for award in a future licensing round. (5) After 10 years of the commencement of a petroleum mining lease— (a) the applicable lessee shall relinquish all parcels which do not fall within the boundary of a producing field under this Act ; and (b) any formation deeper than the deepest producing formation shall be relinquished, and the deep rights shall vest in the Government. (6) Upon the expiration of any significant gas discovery retention period in respect of a petroleum prospecting licence, every area relating to the significant gas discovery retention area shall be relinquished, unless the applicable licensee has declared a commercial discovery in such significant gas discovery retention area. Relinquishment. A 196 2021 No. 6 Petroleum Industry Act, 2021 (7) An area or zone relinquished under this section, shall be vested in the Government and administered by the Commission and the relinquishments shall be in a north-south, east-west direction and defined in a rectangular or square shaped compact unit. (8) Any rent paid in respect of an area or zone that is relinquished under this section shall not be refundable and such relinquishment shall be without prejudice to any obligation or liability imposed by or incurred under the applicable licence or lease. (9) Where the deep rights have been relinquished and subsequently granted to a third party under subsection (5) (b), the Commission shall ensure that the licensees or lessees of the overlapping petroleum rights shall enter into a cooperation protocol based on good international petroleum industry practices, dealing with matters such as non-interference measures, location of wells, construction of gathering lines, unauthorised production from reservoirs, notice of dangerous operations, joint emergency response, joint use of certain facilities and pipelines, land and water rights and such other matters as the Commission deems required for optimal petroleum operations pursuant to regulations. Surrender of licence or lease. 89.—(1) Notwithstanding the provisions of this Act on relinquishment, a holder of a petroleum prospecting licence, petroleum exploration licence or petroleum mining lease may surrender part or the whole of the licenced or leased area, provided that the licensee or lessee has— (a) complied with obligations imposed by or incurred under the applicable licence or lease ; and (b) given three months’ notice in writing to the Commission prior to the surrender. (2) Any rent or fee paid prior to a surrender under subsection (1) shall not be refundable and the licence or lease surrendered shall be without prejudice to any obligation or liability imposed by or incurred under the applicable licence or lease. Rights of way relating to upstream petroleum operations. 90. Subject to applicable law, terms and conditions prescribed by the Commission, a holder of a petroleum prospecting licence, petroleum exploration licence or petroleum mining lease is entitled with the approval of the Commission to rights of way for the laying, operation and maintenance of gathering lines, telephone lines, power lines and other similar lines through or across the areas the holder may require. Petroleum Industry Act, 2021 2021 No. 6 A 197 91.—(1) Subject to subsection (2), the Commission may preserve in accordance with applicable law, a right of way, easement or other right over an area to which a petroleum prospecting licence, a petroleum exploration licence or a petroleum mining lease, which the Commission considers necessary for the laying, operation and maintenance of pipelines, telephone lines and power lines and any right of way or other right reserved shall continue for the benefit of any person to whom the Commission may subsequently grant the same. Rights of way reserved for the Commission. (2) Where a holder of a petroleum prospecting licence, petroleum exploration licence or petroleum mining lease is of the opinion that a reservation made by the Commission under subsection (1) affects the health, safety or environment of a person, the licensee or lessee may object to the reservation in writing and the Commission shall reconsider the reservation in light of the objection. (3) The holder of a petroleum prospecting licence, a petroleum exploration licence or a petroleum mining lease shall— (a) be entitled to enter and remain on the land that is the subject of the licence or lease and do such things that are not prohibited by applicable law or under the licence or lease ; and (b) comply with applicable law relating to town or country planning or regulating the construction, alteration, repair or demolition of buildings, or providing for similar matters, which relates to the carrying out of operations authorised by the licence or lease. 92.—(1) A holder of an existing oil prospecting licence or oil mining lease may enter into a voluntary conversion contract under this Act. (2) A licensee or lessee under a conversion contract shall benefit from the fiscal provisions under Chapter 4 of this Act, where the licensee or lessee complies with the provisions of this Act. (3) The conversion contract shall contain a termination clause of all outstanding arbitration and court cases related to the respective oil prospecting licence or oil mining lease and— (a) any stability provisions or guarantees provided 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 and 12 of the Petroleum Profit Tax Act shall not apply. Voluntary conversion of an oil prospecting licence to a petroleum prospecting licence or oil mining lease to petroleum mining lease. Cap. P13, LFN, 2004. A 198 2021 No. 6 Petroleum Industry Act, 2021 (4) A conversion contract shall be concluded at a date (“conversion date”) which is the earlier of— (a) 18 months from the effective date ; and (b) the expiration date of the oil mining lease or date of conversion of the oil prospecting licence to an oil mining lease. (5) Prior to the conversion date, the terms applicable to the oil prospecting licence or oil mining lease prior to the effective date shall continue to apply. (6) Where a holder of an existing oil prospecting licence or oil mining lease does not enter into a conversion contract prior to the conversion date, the terms and conditions applicable to the oil prospecting licence or oil mining lease prior to the effective date of this Act shall continue to apply to the oil prospecting licence or oil mining lease, subject to sections 124 (2), 125 (6), 174 (6), 303 (1) and 311 (2) (b) of this Act. (7) Where an oil prospecting licence is converted, the term of years included in such licence shall apply to the converted petroleum prospecting licence. Relinquishment upon renewal or conversion of an oil mining lease. 93. (1) A holder of oil mining lease, including oil mining lease that is subject to production sharing contract, shall at the renewal date applicable to the oil mining lease or at the conversion date, designate each area and zone of the oil mining lease as areas and zones— (a) which, in the opinion of the holder, merit appraisal and for which the holder of the oil mining lease is prepared to present an appraisal program under section 78 of this Act ; (b) in respect of which the holder is prepared to make a declaration of a commercial discovery under section 78 of this Act and submit a field development plan to the Commission under section 79 of this Act ; (c) in respect of which the holder is prepared to make a declaration of a significant gas discovery or a significant crude oil discovery under section 78 of this Act and submit an application for approval of a retention area ; (d) in respect of which development of a field is underway based on prior approvals after having declared the discovery commercial or if no such declaration was made after having made a final investment decision to develop the field ; and (e) in respect of which regular commercial production is occurring. (2) Where the total acreage selected under subsection (1) is less than 40% of the area to which the applicable oil mining lease applies, the holder may select additional areas covered by the oil mining lease for conversion to a petroleum prospecting licence in such a manner that the total of all areas selected Petroleum Industry Act, 2021 2021 No. 6 shall not be more than 40% of the oil mining lease area and where the total acreage selected under subsection (1) is more than 40%, the holder shall be entitled to keep such larger area, consisting solely of the selected areas. (3) Any selected area under subsection (2) shall be based on parcels. (4) Areas and zones subject to an oil mining lease and not selected by the holder under subsections (1) and (2) shall be relinquished by the holder. (5) The relinquishment date for the purpose of subsection (4) shall be the renewal date or where the holder of the oil mining lease decides to convert under section 92 (1) of this Act, the conversion date. (6) Subject to section 94 of this Act on the applicable relinquishment date, the Commission shall convert the applicable oil mining lease in respect of each area and zone— (a) designated by a holder under subsection (1) (a), (b), (c) or (2) into a petroleum prospecting licence in accordance with section 78 of this Act, with fiscal terms as applicable under section 267 (b) and other terms of Chapter 4 of this Act for new acreage and with the relinquishment date being the effective date for such petroleum prospecting licence ; and (b) selected under subsection (1) (d) and (e), into petroleum mining leases, with fiscal terms as applicable under section 267 (a) and other terms of Chapter 4 of this Act to the lease, provided that, for— (i) production sharing contracts for the determination of the profit oil sliding scale based on cumulative production, the total production from all petroleum mining leases shall be applicable, and (ii) royalty purpose, the production of each petroleum mining lease shall be the basis. (7) Where a licensee of an oil prospecting licence, including any oil prospecting licence that is subject to a production sharing contract, voluntarily opts to convert its licence to a petroleum prospecting licence under section 92 of this Act, it shall select as provided in subsection (1) the areas and zones indicated in this subsection upon the conversion date and the Commission shall convert the applicable oil prospecting licence of the areas and zones— (a) designated by a holder under section 93 (1) (a), (b) and (c) of this Act as areas to be continued under the petroleum prospecting licence under this Act, with fiscal terms as applicable under section 267 (b) and other terms under Chapter 4 of this Act for new acreage ; (b) selected under section 93 (1) (d) and (e) of this Act shall be converted into petroleum mining leases with fiscal terms as applicable under section 267 (a) and other terms of Chapter 4 of this Act, applicable to these leases, provided that— A 199 A 200 2021 No. 6 Petroleum Industry Act, 2021 (i) with respect to production sharing contracts for the determination of the profit oil sliding scale based on cumulative production, the total production from all petroleum mining leases shall be applicable, and (ii) for royalty purposes, the production of each petroleum mining lease shall be the basis ; and (c) the remaining area shall continue as exploration area under the petroleum prospecting licence, with fiscal terms as applicable under Chapter 4 of this Act for new acreage. (8) With respect to existing oil mining leases where NNPC held vested rights to natural gas prior to the effective date of the Act, under a conversion pursuant to subsection (6) (a) and (b), NNPC Limited shall retain these rights and where NNPC Limited relinquishes such rights, the conversion contract under section 92 (1) of this Act, shall include a consideration to NNPC Limited for the market value of the rights relinquished. Marginal field. 94.—(1) A producing marginal field shall be allowed to continue to operate under the original royalty rates and farm out agreements, but shall convert to a petroleum mining lease under this Act, with terms applicable under sections 267 (b), 302, and other provisions under the Act within 18 months from the effective date. (2) A discovery declared as a marginal field prior to 1st January, 2021 and is not producing shall be converted to petroleum prospecting licence and shall benefit from the terms for new acreage under Chapter 4 of this Act. (3) Where the discovery has been transferred to Government, the Commission is entitled to offer the petroleum prospecting licence in a bid round under section 74 of this Act. (4) Within three years of the effective date, any marginal field that has not been transferred to Government, shall be subject to the following process and the holder of the oil mining lease— (a) present a field development plan for the marginal field ; (b) with the consent of the Commission and on terms and conditions as the Commission may approve under re