PIA-2021_Petroleum Administration-Part VII (Up_Mid and Downstream).pdf

Petroleum Industry Act, 2021 2021 No. 6 A 263 214. In the exercise of its powers under this Chapter, the Authority may consider— Considerations for exercise of the Authority’s powers. (a) the relevant economic market ; (b) global trends in the relevant economic market ; (c) the effect on the nu...

Petroleum Industry Act, 2021 2021 No. 6 A 263 214. In the exercise of its powers under this Chapter, the Authority may consider— Considerations for exercise of the Authority’s powers. (a) the relevant economic market ; (b) global trends in the relevant economic market ; (c) the effect on the number of competitors in the market and their respective market shares ; (d) the effect of barriers to entry into the market ; (e) the effect of any activity on the range of services in the market ; (f ) the effect of the conduct on the cost and profit structures in the market ; (g) the ability of any independent licensee or operator to make price or tariff regulating decisions ; and (h) any other matter which the Authority may deem relevant. 215.—(1) Where, in the opinion of the Authority, any act or activity prohibited under this Chapter has been or is likely to be undertaken by any person, the Authority may— (a) serve a notice on the person, specifying the act or activity and its intention to issue a “cease and desist” order ; (b) direct the person to whom the notice is issued to do or not to do, the specified act or activity ; and (c) specify the time frame for compliance with the notice. Power to serve notice, issue “cease and desist” order. (2) Where the person to whom the notice or directive issued under subsection (1) fails to comply, the Authority may issue a “cease and desist” order. (3) The Authority may levy a fine not exceeding 5% of the annual turnover of the company for the preceding year or revoke the licence of any person who fails to comply with a “cease and desist” order or a directive issued under subsection (1). PART VII—COMMON PROVISIONS FOR UPSTREAM, MIDSTREAM AND DOWNSTREAM PETROLEUM OPERATIONS 216.—(1) The Commission and Authority shall consult with stakeholders prior to finalising any regulations or amendments to regulations. (2) The stakeholders to be consulted for any particular regulation shall be lessees, licensees and permit holders that may be impacted by the regulations and such other persons that may be interested in the subject matter of the proposed regulation. Consultation for regulations. A 264 2021 No. 6 Petroleum Industry Act, 2021 (3) The Authority or Commission, as the case may be, may, in finalising any regulation under this section, take into consideration any submission made during the stakeholders’ consultation under subsection (1). (4) Prior to holding the stakeholders’ consultation under subsection (1), the Commission or Authority, as the case may be, shall publish in at least two national newspapers with wide coverage and on its website, notice of— (a) the stakeholders’ consultation ; (b) its invitation to lessees, licensees, permit holders and other stakeholders to participate in the stakeholders’ consultation ; (c) the venue and period during which the stakeholders’ consultation is to be held ; (d) the nature of the matter to which the stakeholders’ consultation relates ; (e) the matters upon which the Commission or Authority, as the case may be, would require submissions ; (f ) the form in which stakeholders are to make submissions on the subject matter of the stakeholders’ consultation ; (g) the period of notice for the commencement of the stakeholders’ consultation, which shall not be less than 21 days ; and (h) the address or addresses to which the submissions may be sent. (5) Notwithstanding the provisions of subsection (1), the Commission or Authority may, in national interest and exigency of the situation, issue a regulation without conducting a stakeholders’ consultation. (6) A regulation made under subsection (5) shall be valid for not more than one year with effect from its commencement date, except it is confirmed following a stakeholders’ consultation conducted in accordance with subsection (3). (7) The Commission or Authority, as the case may be, shall fix a date upon which the confirmed regulation under subsection (6) shall come into effect and cause the notice of that commencement date to be published in at least two national newspapers with wide coverage and on its website. Contravention and enforcement of conditions of leases, licences or permits where it appears. 217.—(1) Where it appears to the Commission or Authority that the holder of a lease, licence or permit is contravening, has contravened or is likely to contravene any of the conditions of the lease, licence or permit, the Commission or Authority, as the case may be, may publish a notice in a manner as it considers appropriate to draw the attention of other persons affected or likely to be affected by the contravention or threatened contravention of the lease, licence or permit— Petroleum Industry Act, 2021 2021 No. 6 (a) specifying the actual or potential contravention ; (b) directing the holder to do or not to do, the things specified ; (c) specifying the remedy and the timeframe for compliance ; and (d) notifying the holder of the lease, licence or permit of its intention to issue an enforcement order. (2) The holder of the lease, licence or permit and any other interested party shall be entitled to make representations against or in support of a notice published under subsection (1) on a date specified in the notice. (3) Where a holder of the lease, licence or permit fails to comply with a notice published under subsection (1), the Commission or Authority, as the case may be, may issue an enforcement order. (4) The Commission or Authority may not issue an enforcement order if the holder of the lease, licence or permit— (a) is able to demonstrate to its satisfaction that it is not contravening or about to contravene a condition of a lease, licence or permit, or (b) has ceased to contravene a condition of the lease, licence or permit: Provided that where the earlier contravention was deliberate, the Commission or Authority, as the case may be, may, at its discretion, impose a penalty as prescribed by regulation. (5) A holder of a lease, licence or permit who fails to comply with the enforcement order under this section, contravenes the provisions of this Act and is liable as follows, the— (a) Commission shall revoke the permit or recommend to the Minister to suspend or revoke the licence or lease ; (b) Authority shall revoke the permit or recommend to the Minister to suspend or revoke the lease, licence ; or (c) Commission or Authority, as the case may be, shall impose any other penalty prescribed by regulations. (6) The penalty issued under subsection (5) may be reviewed in regulation, in order to reflect the effect of inflation or for other justified reasons. (7) The Commission or Authority, as the case may be, may order the sealing up of any premises, including any facility or plant engaged in petroleum operations, where there has been a contravention of this Act or any regulation. (8) Subject to any other provisions in this Act, any dispute between a lessee, licensee or permit holder and the Commission or the Authority shall be settled by the Federal High Court. A 265 Petroleum Industry Act, 2021 A 266 2021 No. 6 Mandatory registration. 218. A person engaged in petroleum operations, which require a lease, licence or permit by the Commission or Authority under this Act, shall register its undertaking with the Commission or Authority, as the case may be and provide information concerning the activities of the undertakings as may be prescribed in regulations. Register of licences, permits and authorisations. 219.—(1) The Commission and Authority shall establish, maintain and make publicly available, a register of leases, licences, permits and authorisations, issued, revoked, suspended, surrendered or withdrawn and any modification or exemption granted in respect of any lease, licence, permit or authorisation under this Act. (2) The officer registering the issuance of any instrument as provided under subsection (1) shall require an acknowledgement of the receipt of a copy of such instrument from the person receiving it in such form as may be prescribed by regulation. (3) A license or permit issued under this Act shall be conspicuously exhibited by a licensee or permit holder in a prominent place on the business premises of the licensee or permit holder. Preparation of leases, licences, permits and authorisations. 220.—(1) A lease, licence, permit or authorisation and any exemption granted under this Act shall be prepared in duplicate, one copy shall be delivered to the holder of the lease, licence, permit or authorisation and the other copy to be retained by the Commission or Authority which shall be bound up in a book of the appropriate series within its register and serially numbered. (2) The register referred to in section 219 of this Act shall also be kept in an electronic format and soft copies of individual leases, licences, permits, authorisations or exemptions shall be forwarded to the holder of a lease, licence, permit or authorisation. (3) The Commission or Authority, as the case may be, shall cause a lease, licence, permit or authorisation to be prepared upon payment of the requisite fees and in the case of leases or licences for upstream petroleum operations the provisions of section 85 shall apply. (4) The officer registering a lease, licence, permit or authorisation or exemption under subsection (1) shall require an acknowledgement of the receipt of the copy of the lease, licence, permit or authorisation or exemption from the person accepting such lease, licence, permit or authorisation or exemption in such form as may be prescribed by regulations. Petroleum Industry Act, 2021 2021 No. 6 A 267 221.—(1) The lease, licence, permit or authorisation or any exemption shall be authenticated under the seal of the Commission or Authority, as the case may be and the validity of the lease, licence, permit or authorisation or any exemption shall commence from the date of its issuance. Effective date and authentication of licences, permits and authorisations. (2) The date of issuance of any lease, licence, permit or authorisation or any exemption shall be inscribed on the lease, licence, permit or authorisation or any exemption. 222.—(1) The Commission or Authority, as the case may be, shall enter in the appropriate register a memorial of any extension, transfer, surrender, revocation, exemption, relinquishment, change of address, change of name or any other matter affecting the status of or any interest in any lease, licence, permit or authorisation registered under this Chapter together with the date of such entry. Register of memorials and interests. (2) The Commission or Authority, as the case may be, shall establish and maintain a register in which particulars of any interest or shares transferred or assigned are recorded by the Commission or Authority and the register shall be updated in relation to any change in the status of such interest or shares transferred or assigned. 223. A lease, licence, permit or authorisation registered under this Chapter shall, subject to the provisions of this Act, be conclusive evidence— Effect of registration. (a) that the rights described in the lease, licence, permit or authorisation are vested in the person named as the holder of the lease, licence, permit or authorisation ; and (b) of the conditions and other provisions to which the holder of the lease, licence, permit or authorisation is subject under this Act. 224.—(1) The registry and the registers required under sections 219, 222 and 223 of this Act shall be readily accessible to the public during the hours and upon the days designated by the Commission or Authority, as the case may be. (2) The Commission and Authority shall maintain an up-to-date electronic form of the registers required under sections 219, 222 and 223 of this Act on its website, which may be accessed for free by any member of the public. (3) A member of the public shall, upon the payment of prescribed fees, be entitled to obtain a certified true copy of any document or record contained in the registers referred to in sections 219, 222 and 223 of this Act. Public access to the registry. Petroleum Industry Act, 2021 A 268 2021 No. 6 Radioactive materials. 225. The storage, application, transportation, and other petroleum operations of radioactive materials and other equipment generating ionizing radiation in all aspects of oil and gas operations shall be in compliance with the Nuclear Safety and Radiation Protection Act and such other legislative provisions as may be applicable. Cap. N142, LFN, 2004. Default approvals. 226.—(1) Any matter which requires the Commission’s or Authority’s approval under this Act or under any regulation, shall be approved or rejected within the time limit specified in this Act or in any regulation issued by the Commission or the Authority. (2) Where no time limit has been specified under this Act or in any applicable regulation, the time limit referred to in subsection (1) shall be 90 days. (3) Where the Commission or Authority rejects an application, they shall, within the stipulated time limit, revert with reasons and any rejected application shall be tracked and accurate record of it kept. (4) Where the Commission or Authority at the expiration of the stipulated time frame refuses to communicate in writing its approval or rejection to the applicant, the application is deemed to have been approved and the default approval shall be recorded in the appropriate register by the Commission or Authority. Disclosure of confidential or other information. 227.—(1) Where a director or employee of the Commission or Authority, in the course of his duties, acquires information relating to the financial affairs of any person or to any commercial secret or where any other person indirectly acquires such or other information required to be kept confidential under the provisions of this Act from any director or employee of the Commission or Authority, he shall not make use of such information for any unauthorised or unofficial purpose nor disclose it to any other person except— (a) for the purpose of legal proceedings under this Act or any other law ; and (b) to the extent that it may be necessary to do so for the purpose of this Act or any other law. (2) A director or employee of the Commission or Authority shall not, for personal gain, make use of any information acquired by him in the course of his duties within a period of five years after the date on which he ceased to be a director or employee. (3) Any person who contravenes subsection (1) commits an offence and is liable on conviction to the forfeiture of any proceeds accruing to him on account of the contravention and to a fine or other sanctions prescribed in regulation. Petroleum Industry Act, 2021 2021 No. 6 228.—(1) A person shall not— A 269 Offences. (a) obstruct or assault any officer of the Commission or Authority or any person authorised by the Commission or Authority in the exercise of the powers conferred on the Commission or Authority under this Act ; (b) refuse any officer of the Commission or Authority or any person authorised by the Commission or Authority, as the case may be, access to any premises, facilities or retail outlets or refuse to submit to a search of any premises, facilities or retail outlets by any authorised officer or agent of the Commission or Authority ; or (c) fail to comply with any lawful demand, notice or order of an officer or authorised person of the Commission or Authority in the execution of the officer’s duties under this Act. (2) A person shall not— (a) engage in any petroleum operations without a valid lease, licence or permit where such lease, licence or permit is required under this Act ; (b) unlawfully remove, destroy or damage any facility used for petroleum operations ; (c) furnish a statement or incomplete information calculated to mislead or wilfully delay or obstruct the Commission or Authority and its officers in the exercise of their duties ; (d) obstruct or fail to cooperate with the Commission or Authority in its investigation of any suspected crime or corrupt practice ; (e) act in breach of any relevant network code, where applicable to such person or in violation of this Act in relation to the allocation of available capacity, access and payment of tariffs in respect of the use of any facility or infrastructure ; or (f ) use or permit its facility, infrastructure or equipment to be used for or in relation to the Commission or Authority of any offence. 229.—(1) A person who violates the provisions of section 228 of this Act commits an offence and is liable on conviction to a fine prescribed in regulations. (2) Where an offence has been committed under section 228 (2) (b) of this Act, the person who committed the offence shall discontinue the operations of the affected infrastructure, facility or equipment until any damage, alteration, malfunction or loss has been rectified and all safety issues have been resolved. (3) The Commission or Authority, as the case may be, may by regulation, where necessary, review the amount of the penalty stipulated in subsection (1) to reflect the effect of inflation or for other justified reasons. Penalties. A 270 Refusal to furnish, return or supply information. Power to issue administrative penalties. 2021 No. 6 Petroleum Industry Act, 2021 230. A person who— (a) fails or refuses to furnish, return or supply information to the Commission or Authority or any other lawful authority at the time and in the manner prescribed, (b) furnishes a false or incomplete return, (c) supplies false or incomplete information, (d) wilfully delays or obstructs the Commission or Authority, its officers and agents, police officers and other law enforcement officers in the exercise of the powers or duties conferred or imposed on the Commission or Authority under this Act, or (e) conceals, fails or refuses, without reasonable cause, to supply information required by the Commission or Authority or any duly empowered lawful authority at the time and in the manner prescribed or when required to do so, commits an offence and on conviction by a court of competent jurisdiction is liable to a term of imprisonment and applicable fine as may be prescribed in regulation and with respect to paragraphs (a), (b) and (c), where such offence is repetitive or continues after having been so informed in writing by the Commission or Authority as the case may be. 231.—(1) The Commission or Authority, as the case may be, may assess a penalty in the prescribed amount against any person for prescribed contraventions of this Act, regulations or an order made under this Act. (2) Prior to assessing a penalty, the Commission or Authority, as the case may be, shall provide notice to the person— (a) setting out the facts and circumstances that make the person liable to a penalty ; (b) specifying the amount of the penalty that is considered appropriate in the circumstances ; and (c) informing the person of the person’s right to make representations to the Authority or Commission, as the case may be. (3) A person to whom notice is sent under subsection (2) may make representations to the Commission or Authority, as the case may be, in respect of whether or not a penalty should be assessed and the amount of the penalty. (4) Representations under subsection (3) shall be made within 30 days after the person received the notice under subsection (2). (5) After considering any representations made under subsection (3), the Authority or Commission, as the case may be, may— Petroleum Industry Act, 2021 2021 No. 6 A 271 (a) assess a penalty and set a date by which the penalty is to be paid in full ; or (b) determine that no penalty should be assessed. (6) The Authority or Commission, as the case may be, shall serve a copy of its decision under subsection (5) on the person who made the representations. 232.—(1) The decommissioning and abandonment of petroleum wells, installations, structures, utilities, plants and pipelines for petroleum operations on land and offshore shall be conducted in accordance with— (a) good international petroleum industry practice ; and (b) guidelines issued by the Commission or Authority, as the case may be, provided that the guidelines shall meet the standards prescribed by the international maritime organisation on offshore petroleum installations and structures. (2) A decommissioning and abandonment shall not take place without the written approval of the Commission or Authority, as the case may be. (3) The Commission or Authority, as the case may be, shall by written notice, require a lessee, licensee or permit holder to commence the decommissioning and abandonment of a well, installation, structure, utility and pipeline, where such decommissioning and abandonment is required under good international petroleum industry practices or the guidelines. (4) In production sharing contracts or any other contractual arrangement under section 85 of this Act responsibilities and liabilities relating to decommissioning and abandonment as specified in this section and section 233 of this Act shall apply to the licensee or lessee as contractor. (5) A licensee or lessee may by written notice inform the Commission or Authority, as the case may be, of its intention to decommission or abandon. (6) Upon a notice in subsection (5), the lessee or licensee, shall prior to any decommissioning and abandonment, submit to the Commission or Authority, as the case may be, a programme setting out— (a) estimate of the cost of the proposed measures ; (b) details of measures proposed to be taken in connection with the shutdown of operations and decommissioning and abandonment of disused installations, structures or other assets used in petroleum operations as the case may be ; (c) clear descriptions of the methods to be employed to undertake the work programme, which shall be in line with good international petroleum industry practices and environmental development ; Abandonment, decommissioning and disposal. A 272 2021 No. 6 Petroleum Industry Act, 2021 (d) steps to be taken to ensure maintenance and safeguard, where any installation, structure or pipeline remained disused and in position or are to be partly removed with respect to deep and ultra-deep water environment and where the installation, structure or pipeline is partly removed, the licensee or lessee shall remain liable for any residual liability arising from the installation, structure or pipeline not removed ; and (e) assessment of the environmental and social impact of the decommissioning and abandonment measures. (7) Installations and structures on land shall be completely removed and the environment restored to its original condition, except for buried transportation pipelines and gathering lines. (8) Except for the abandonment of wells, upon the submission of a decommissioning and abandonment programme by the licensee or lessee to the Commission or Authority, as the case may be, consultations shall be made with interested parties and other relevant public authorities and bodies. (9) The programme referred to in subsection (6) shall not be approved unless relevant environmental, technical and commercial regulations or standards are complied with. (10) Prior to the approval of an application or programme for decommissioning and abandonment, the Commission or Authority, as the case may be, shall ensure that— (a) considerations and recommendations are taken in the light of individual circumstances ; (b) the potential for reuse of a transportation pipeline together with other existing facility in connection with further hydrocarbon developments is considered before decommissioning ; (c) all feasible decommissioning options have been considered and a comparative assessment made ; (d) any removal or partial removal of an installation, structure or transportation pipeline is to be performed in a manner that guarantees sustainable environmental development ; and (e) any recommendation to leave an installation, structure or gathering line in place is made with regard to its likely deterioration and to the present, possible and future effects on the environment and in the case of offshore installations and structures, consistent with the applicable good international petroleum industry practices. Petroleum Industry Act, 2021 2021 No. 6 A 273 (11) The Commission or Authority, as the case may be, shall enforce compliance by any holder of a current licence or lease or a holder of an expired licence or lease who was responsible for the applicable decommissioning and abandonment plan with respect to a licence or lease that has expired, to carry out its remaining or unfulfilled decommissioning and abandonment obligations under this Act. (12) In archiving and maintaining the database of installations, structures and assets set out in subsection (14) the Commission or Authority, as the case may be, shall prescribe the manner and method in which the data shall be submitted by operators. (13) The Commission or Authority, as the case may be, may recall a licensee or lessee responsible for a decommissioning and abandonment programme with respect to a licence or lease that has expired or is surrendered or a licensee or lessee that has transferred or divested its interest or equity, to carry out an obligation under this Act, provided however that, where a new company has assumed all respective obligations, with the approval of the Commission or Authority, upon the transfer or divestiture, the licensee or lessee shall have no further responsibilities. (14) The Commission or Authority, as the case may be, shall ensure that a list of the installations, structures and pipelines on land and offshore in Nigeria used for petroleum operations and their current status is compiled and made available or accessible to the public annually. 233.—(1) Each lessee and licensee shall set up, maintain and manage a decommissioning and abandonment fund held by a financial institution that is not an affiliate of the lessee or licensee, in the form of an escrow account accessible by the Commission or the Authority, as the case may be, under the provisions of the escrow agreement and where funds have been accrued prior to the effective date, such funds shall form part of the decommissioning and abandonment fund established under this Act. (2) The decommissioning and abandonment fund shall exclusively be used to pay for decommissioning and abandonment costs. (3) Where a lessee or a licensee fails to comply with the decommissioning and abandonment plan, the decommissioning and abandonment fund shall be accessed by the Commission or Authority, as the case may be, to pay for the performance by a third party of such lessee’s or licensee’s obligations under section 232 of this Act, after the licensee or lessee has been informed of the non-compliance and given a reasonable period to rectify the non-compliance. Decommissioning and abandonment fund. A 274 2021 No. 6 Petroleum Industry Act, 2021 (4) The amounts to be contributed to the decommissioning and abandonment fund shall be based on the following— (a) with respect to upstream petroleum operations, on the decommissioning and abandonment plan approved by the Commission in the field development plan required by section 79 (2) of this Act and where— (i) no decommissioning and abandonment plan exists, and (ii) a field is in development or producing, the lessee shall submit a decommissioning and abandonment plan based on the criteria established in section 232 (6) of this Act within one year of the effective date, which when approved by the Commission, shall form the basis of the computation of the amount to be contributed by the lessee ; and (b) with respect to midstream petroleum operations, on the decommissioning and abandonment plan submitted under section 111 (3) of this Act and where no such plan exists, the licensee shall submit a decommissioning and abandonment plan to the Authority based on the criteria established in section 232 (6) of this Act within one year of the effective date, which once approved by the Authority shall form the basis of the computation of the amount to be contributed by the licensee. (5) The decommissioning and abandonment plan shall establish the yearly amount to be contributed to the respective decommissioning and abandonment fund and the yearly amount shall be based on a reasonable estimate by the licensee or lessee of the applicable decommissioning and abandonment costs, projected forward on a nominal basis and divided by the estimated life of the facilities and the reasonable cost estimate shall be approved by the Commission or Authority, as the case may be. (6) The estimated life of the facilities referred to in subsection (5) shall be based on the— (a) estimated life of the field, in case of facilities used for upstream petroleum operations ; and (b) period of time for which the safe operations of the facilities were designed, in case of facilities used for midstream petroleum operations. (7) The estimated yearly contribution under subsection (5) shall be reviewed every 10 years following the first submission. (8) A decommissioning and abandonment fund shall be funded by the applicable licensee or lessee based on the yearly amount established in subsection (5) and as provided in a regulation. Petroleum Industry Act, 2021 2021 No. 6 A 275 (9) A licensee or lessee shall— (a) inform the Commission or Authority, as the case may be, of the establishment of its decommissioning and abandonment fund not more than three months from the date of commencement of production for upstream petroleum operations or the commissioning of the facilities for midstream petroleum operations ; and (b) furnish the Commission or Authority, as the case may be, on an annual basis with statements of accounts with respect to its decommissioning and abandonment fund with a copy to be provided to the Service. (10) Where the licensee or lessee is a party to a farm out agreement with one or more third parties, a decommissioning and abandonment plan funded in whole or in part by the applicable third parties shall be provided for in the applicable farm out agreement. (11) From the effective date, contributions to the decommissioning and abandonment fund shall be eligible for cost recovery and shall be tax deductible, provided that decommissioning and abandonment costs disbursed from the decommissioning and abandonment fund shall not be eligible for cost recovery or deductible for tax purposes. (12) Where there is excess in the decommissioning and abandonment fund after the decommissioning and abandonment has been carried out and approved by the Commission or Authority, as the case may be, the excess shall be considered income for production sharing or tax purposes and the amount after the withholding of profit oil and any tax shall be returned to the licensee or lessee. CHAPTER 3—HOST COMMUNITIES DEVELOPMENT 234.—(1) The objectives of this Chapter are to— (a) foster sustainable prosperity within host communities ; (b) provide direct social and economic benefits from petroleum operations to host communities ; (c) enhance peaceful and harmonious co-existence between licensees or lessees and host communities ; and (d) create a framework to support the development of host communities. (2) The Commission and Authority may make regulations with respect to this Chapter on areas within their competence and jurisdiction as specified in this Act. Objectives and regulations.