Lawyer Monthly Magazine - February 2019 Edition

FEB 2019 68 Doing Business In... www. lawyer-monthly .com COMMERCIAL LAW Nigerian is one of Africa’s largest producers of Oil and Gas; how has this impacted Nigeria’s legal sector? Unarguably, Nigeria is Africa’s largest producer of Oil and the seventh largest producer worldwide; but unfortunately for the greater part of the last four decades the Oil & Gas sector in Nigeria has been dominated by major International Oil companies with large numbers of expatriate personnel and sundry service providers rendering services in respect of the various Oil & Gas projects in the country. However, with the enactment of the Nigerian Oil & Gas Industry Content Development Act 2010, the panorama has tweaked as the policy thrust of the Act is to domesticate a significant portion of economic derivatives of the Oil and Gas Industry, by encouraging the development and deliberate utilization of Nigerian human and material resources in the sector. Thus, the extant legislative regime has positively impacted the legal sector as specific provisions of the Act require operators to utilize local legal services, inter alia, in their project implementation. Doing Business in Nigeria: What Is the Current Oil & Gas Scene? ---------- Moreover, what should International Clients be aware about, when liaising with your jurisdiction in the Oil and Gas sector? Are there any specific government policies clients should be aware about? The first thing an International Client desirous of investing in the Nigerian Oil & Gas sector should put into advisement, is that although under the Nigeria Investment Promotion Commission Act (1995) which laid out the framework for the country’s investment policy, one hundred percent foreign ownership is permitted in all industries, the Oil & Gas sector is excepted. In this sector, investment is circumscribed to existing Joint Ventures (JV’s) or New Production Sharing Agreements (PSA’s). NIGERIA It is equally noteworthy that the framework regulating the sector in Nigeria is based on a panoply of legislations. The principal legislations include: • Petroleum Act (2004) as amended, which is the key statute regulating the Oil Industry. There are several regulations made thereunder. • Deep offshore and Inland Basin Production Sharing Contracts Act, which sets out the fiscal incentives for Oil Companies that operate in the inland basins and deep offshore areas in Nigeria. • Nigerian Oil and Gas Industry Content Development Act 2010, which sets out the minimum Nigerian content requirements in relation to Shareholding, human and mineral resources etc. for companies operating in Nigeria • Petroleum Profits Tax Act which imposes a tax on profits of companies engaged in upstream oil activities. International clients should also note that as a matter of deliberate government policy, control of Oil and associated resources is vested in the Federal Government of Nigeria. This policy has constitutional and statutory anchorage on the Constitution of the Federal Republic of Nigeria 1999 and the Petroleum Act respectively. To acquire interest in a field, an interested company must first obtain an Oil Exploration licence (OEL) to explore the concession area and at the expiry thereof, the company may go on to apply to have the OEL converted to an Oil Prospecting licence (OPL), to enable it prospect for oil. If the company discovers Oil in commercial quantities and satisfies the conditions prescribed by the Minister of Petroleum Resources, the company may further apply to have its OPL converted to an Oil Mining Lease (OML). An OML will allow the company to produce and dispose of any petroleum discovered. It should be further noted that another medium through which a company can become entitled to certain proprietary rights in Oil and Gas resources is by acquiring the interest of another company which already has these rights subject to the consent of the Minister of Petroleum Resources. ---------- What are the key features which are necessary in leases and licences, which are issued under regulatory regimes? The leases and licences granted under the extant regulatory regimes are for terms of years certain. Typically, the terms for each lease /licence is as follows: • OEL – the grant is for one year but can be renewed for an additional one year period subject to fulfillment of prescribed conditions. • OPL – This can be granted for a period of not more than five years for onshore Joint Ventures and Production Sharing Agreements. The duration of an OPL in the deep offshore and inland basins depends on the location and depth of the concession and can vary from five to ten years. • OML – The term is 25 years. This is also renewable subject