Petroleum Industry Act 2021 - Searchable

Petroleum Industry Act, 2021 2021 No.
6 A 119
Extraordinary
Federal Republic of Nigeria

Official Gazette
No. 142 Lagos — 27th August, 2021 Vol. 108
Government Notice No. 134
The following is published as supplement to this Gazette :
Act No. Short Title Page

6 Petroleum Industry Act, 2021 .. .. .. .. .. .. .. A121-370
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A 120 2021 No. 6 Petroleum Industry Act, 2021
Petroleum Industry Act, 2021 2021 No. 6 A 121
PETROLEUM INDUSTRY ACT, 2021
ARRANGEMENT OF SECTIONS
Section :
CHAPTER 1—GOVERNANCE AND INSTITUTIONS
PART I— VESTING AND OBJECTIVES
1. Vesting of Petroleum.
2. Objectives.
PART II—MINISTER OF PETROLEUM
3. Powers of the Minister.
PART III—THE COMMISSION
4. Establishment of the Nigerian Upstream Regulatory Commission.
5. Application of this Part.
6. Objectives of the Commission.
7. Technical regulatory functions of the Commission.
8. Commercial regulatory functions of the Commission.
9. Functions of the Commission for frontier basins.
10. Powers of the Commission.
11. Governing Board of the Commission.
12. Functions of the Board of the Commission.
13. Remuneration and allowances of the Board of the Commission.
14. Suspension or removal of members of the Board of the Commission.
15. Resignation of a Non-Executive Commissioner.
16. Vacancy on the Board of the Commission.
17. Filling of vacancy on the Board of the Commission.
18. Commission Chief Executive and Executive Commissioners.
19. Employees of the Commission.
20. Terms and conditions of service in the Commission.
21. Remuneration and allowances of employees of the Commission.
22. Statement of estimated income and expenditure of the Commission.
23. Secretary to the Commission.
24. Fund of the Commission.
25. Notice to the Commission.
26. Special powers of the Commission.
27. Special Investigation Unit.
28. Indemnity of officers of the Commission.
PART IV—THE AUTHORITY
29. Establishment of the Nigerian Midstream and Downstream Petroleum
Regulatory Authority.
31. Objectives of the Authority.
32. Functions of the Authority.
33. Regulations by the Authority.
34. Governing Board of the Authority.
35. Functions of the Board of the Authority.
36. Remuneration and allowances of members of the Board of the Authority.
37. Suspension or removal of a member of the Board of the Authority.
38. Resignation of a non-executive member of the Board of the Authority.
39. Vacancy on the Board of the Authority.
40. Filling of vacancy on the Board of the Authority.
41. Authority Chief Executive and Executive Directors of the Authority.
42. Employees of the Authority.
43. Terms and conditions of service in the Authority.
44. Remuneration and allowances of employees of the Authority.
45. Statement of estimated income and expenditure of the Authority.
46. Secretary to the Authority.
47. Fund of the Authority.
48. Notice to the Authority.
49. Special powers of the Authority.
50. Special Investigation Unit.
51. Indemnity of officers of the Authority.
52. The Midstream and Downstream Gas Infrastructure Fund.
PART V—THE NIGERIAN NATIONAL PETROLEUM COMPANY LIMITED
53. Nigerian National Petroleum Company Limited.
54. Transfer of assets and liabilities.
55. Appointment of NNPC Limited as agent of NNPC.
56. Subsistence of guarantee.
57. Transfer of employees and conditions of service.
58. The Board of NNPC Limited.
59. Composition of the Board of NNPC Limited.
60. Committees of the Board of NNPC Limited.
61. Application of principle of corporate governance.
62. Annual audit of NNPC Limited.
63 Responsibilities of the Board of NNPC Limited.
64. Objectives of NNPC Limited.
65. Establishment of incorporated joint venture companies.
CHAPTER 2—ADMINISTRATION
PART I—GENERAL ADMINISTRATION
66. Objectives.
67. Management of petroleum resources.
PART II—ADMINISTRATION OF UPSTREAM PETROLEUM
OPERATIONS AND ENVIRONMENT
68. Administration of acreage and vesting of data.
69. National grid system.
70. Licences and leases.
71. Petroleum exploration licence.
72. Petroleum prospecting licence.
73. Bidding process.
74. Award process.
75. Licensing round guidelines.
76. Model licence and model lease.
77. Duration and area of petroleum prospecting licence.
78. Work commitment, commercial discovery and significant gas discovery.
79. Commercial discovery and field development plan.
80. Unitisation.
81. Petroleum mining leases.
82. Exclusive right to conduct operations.
83. Confidentiality.
84. Power to enter into contracts.
85. Model contracts.
86. Duration and renewal of leases and licences.
87. Conditions for renewal of petroleum mining leases.
88. Relinquishment.
89. Surrender of licence or lease.
90. Rights of way relating to upstream petroleum operations.
91. Rights of way reserved for the Commission.
92. Voluntary conversion of an oil prospecting licence to a petroleum
prospecting licence or oil mining lease to petroleum mining lease.
93. Relinquishment upon renewal or conversion of an oil mining lease.
94. Marginal field.
95. Assignments, mergers, transfers and acquisitions.
96. Grounds for revocation of licence or lease.
97. Notice of default prior to revocation.
98. Administration of a revoked producing lease.
99. Power of revocation of participating or shareholders interest.
100. Fees, royalties, rents and other payments to Government.
101. Damage to protected and venerated objects.
102. Environmental management.
103. Financial contribution for remediation of environmental damage.
104. Gas flaring penalties.
105. Prohibition of flaring or venting of natural gas.
106. Measurement of flared natural gas.
107. Exemption.
108. Natural gas flare elimination plan.
109. Domestic crude oil supply obligations.
110. Domestic gas delivery obligations.
PART III—GENERAL ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM
PETROLEUM OPERATIONS
111. Matters relating to licence applications.
112. Advertisement of licence applications.
113. Licensing regulations.
114. Conditions in licences or permits.
115. Compensation for acquisition of land.
116. General non-discrimination provisions.
117. Assignment or transfer of licence or permit.
118. Suspension and amendment of conditions in a licence or permit.
119. Surrender of licence or permit.
120. Grounds for the revocation of a licence or permit.
121. Notice of default prior to revocation.
122. Tariff principles.
123. Tariff methodology.
124. Approval and publication of charging structures.
PART IV—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM
GAS OPERATIONS
125. Activities requiring a licence for midstream and downstream gas
operations.
126. Special regulations for midstream and downstream gas operations.
127. Rights of way relating to midstream and downstream gas operations.
128. Surface rights reserved for the Authority relating to midstream and
downstream gas operations.
129. Grant of a gas processing licence.
130. General duties of the holder of a gas processing licence.
131. Conditions applicable to a gas processing licence.
132. Grant of a bulk gas storage licence.
133. General duties of a bulk gas storage licensee.
134. Conditions applicable to a bulk gas storage licence.
135. Grant of gas transportation pipeline licence.
136. General duties of a transportation pipeline owner.
137. Conditions applicable to a gas transportation pipeline licence.
138. Grant of gas transportation network operator licence.
139. General duties of a gas transportation network operator.
140. Powers of a transportation network operator.
141. Conditions applicable to a gas transportation network operator licence.
142. Grant of a wholesale gas supply licence.
143. General duties of a wholesale gas supplier.
144. Rights of a wholesale gas supplier.
145. Conditions applicable to a wholesale gas supply licence.
146. Grant of retail gas supply licence.
147. General duties of gas retailer.
148. Grant of gas distribution licence.
149. General duties of a gas distributor.
150. Rights of the gas distributor.
151. Conditions applicable to a gas distribution licence.
152. Arrangements for gas distribution.
153. Domestic gas aggregation licence.
154. Functions of the domestic gas aggregator.
155. Establishment of the aggregator.
156. Gas purchase orders.
157. Price conditions of gas purchase orders.
158. Wholesale customers.
159. Trading and settlement of wholesale gas.
160. Gas network code.
161. Access related to midstream and downstream gas operations.
162. Conditions for the provision of open access in relation to gas operations.
163. Disputes in relation to access.
164. Customer protection.
165. Provision of service to customers.
166. Transfer of customers.
167. Natural gas prices for the strategic sectors and gas distributors.
168. Gas based industries gas price.
169. Power to regulate and review prices.
170. Pricing principles in relation to gas.
171. Public service obligations related to policy issues.
172. Public service levy.
173. Domestic gas demand requirement.
PART V—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM

PETROLEUM LIQUIDS OPERATIONS
174. Activities requiring a licence for midstream and downstream petroleum
liquids operations.
175. Special regulations for midstream and downstream petroleum liquids
operations.
176. Rights of way relating to midstream and downstream petroleum liquids
operations.
177. Surface rights reserves for the Authority for midstream and downstream
petroleum liquids operations.
178. Petroleum liquids midstream network code.
179. Third party access relating to midstream and downstream petroleum
liquids operations.
180. Conditions for the provision of open access in relation to petroleum
liquids operations.
181. National strategic stocks.
182. Operating stock.
183. Grant of a crude oil refining licence.
184. General duties of a crude oil refiner.
185. Access rights.
186. Conditions applicable to a crude oil refining licence.
187. Grant of a bulk petroleum liquids storage licence.
188. General duties of a bulk storage licensee.
189. Conditions applicable to a bulk petroleum liquids storage licence.
190. Grant of petroleum liquids transportation pipeline licence.
191. General duties of a petroleum liquids transportation pipeline owner.
192. Conditions applicable to a petroleum liquids transportation pipeline licence.
193. Grant of a petroleum liquids transportation network operator licence.
194. General duties of a petroleum liquids transportation network operator.
195. Powers of a petroleum liquids transportation network operator.
196. Conditions applicable to a petroleum liquids transportation network
operator licence.
197. Grant of a wholesale petroleum liquids supply licence.
198. General duties of a wholesale petroleum liquids supplier.
199. Rights of a wholesale petroleum liquids supplier.
200. Conditions applicable to a wholesale petroleum liquids supply licence.
201. Grant of licence for distribution of petroleum products.

202. General duties of petroleum product distributor.
203. Grant of a licence to construct and operate a facility for retail supply
and distribution of petroleum products.
204. Grant of a licence to construct and operate a facility for the production
of petrochemicals.
205. Pricing regime and power to regulate tariffs.
206. Wholesale prices for petroleum products.
207. Pricing principles in relation to petroleum products.
208. Publication of prices.
PART VI—OTHER MATTERS RELATED TO MIDSTREAM
AND DOWNSTREAM OPERATIONS
209. Public service obligations.

210. Competition and market regulation.
211. Power to prevent anti-competitive behavior.
212. Separation of certain licenced activities.
213. Non-discrimination among customers.
214. Considerations for exercise of the Authority’s powers.
215. Power to serve notice, issue “cease and desist” order.
PART VII—COMMON PROVISIONS FOR UPSTREAM, MIDSTREAM
AND DOWNSTREAM PETROLEUM OPERATIONS
216. Consultation for regulations.

217. Contravention and enforcement of conditions of leases, licences or
permits where it appears.
218. Mandatory registration.
219. Register of licences, permits and authorisations.
220. Preparation of leases, licences, permits and authorisations.
221. Effective date and authentication of licences, permits and authorisations.
222. Register of memorials and interests.
223. Effect of registration.
224. Public access to the registry.
225. Radioactive materials.
226. Default approvals.
227. Disclosure of confidential or other information.
228. Offences.
229. Penalties.
230. Refusal to furnish, return or supply information.
231. Power to issue administrative penalties.
232. Abandonment, decommissioning and disposal.
233. Decommissioning and abandonment fund.
CHAPTER 3—HOST COMMUNITIES DEVELOPMENT
235. Objectives and regulations.
235. Incorporation of host communities’ development trusts.
236. Timeframe for incorporation of host communities development trust.
237. Transfer of settlor’s interest and obligations subject to host communities
development trust obligation.
238. Failure to incorporate host communities development trust.
239. Objectives of host communities development trust.
240. Sources of funding for petroleum host communities development trust.
241. Matters on which the funds may be utilised.
242. The Board of Trustees, composition and management.
243. Duties and functions of the Board of Trustees.
244. Allocation of funds.
245. Matrix for distribution of trust fund.
246. Engagement of fund managers.
247. Management committee, composition and powers.
248. Duties and functions of the management committee.
249. Host communities advisory committee and composition.
250. Duties and functions of the host communities advisory committee.
251. Host communities needs assessment.
252. Host communities development plan.
253. Financial year of the host communities development trust.
254. Accounts and audit.
255. Mid-year and annual reports.
256. Exemption from income tax.
257. Deduction of payment for petroleum host community development.
CHAPTER 4—PETROLEUM INDUSTRY FISCAL FRAMEWORK

PART I—OBJECTIVES AND ADMINISTRATION
258. Objectives.
259. Administration.
PART II—HYDROCARBON TAX
261. Charge of hydrocarbon tax.
262. Ascertainment of crude oil revenue, adjusted profit, assessable profits
and chargeable profits.
263. Allowable deductions.
264. Deductions not allowed.
265. Assessable profits and losses.
266. Chargeable profits and allowances.
PART III—ASCERTAINMENT OF CHARGEABLE TAX

267. Chargeable tax.
268. Additional chargeable tax payable in certain circumstances.
PART IV—ASCERTAINMENT OF CHARGEABLE PROFITS
AND CONSOLIDATION FOR TAX PURPOSES
269. Artificial transactions.
270. Pre-production cost.
271. Trade or business sold or transferred.
272. Consolidation of costs and taxes.
PART V—PERSONS CHARGEABLE
273. Partnerships.
274. Company wound up.
275. Avoidance by transfer.
276. Indemnification of representative.
PART VI—APPLICABILITY, ACCOUNTS AND PARTICULARS
277. Preparation and delivery of accounts and particulars.
278. Power of the service to request further information.
279. Power to call for returns and books.
280. Returns of estimated tax.
281. Extension of periods for making returns.
282. Assessment of tax payable.
283. Additional assessments.
284. Making of assessments.
285. Notices of assessment.
286. Errors and defects in assessment and notice.
287. Tax computation.
PART VII—APPEALS
288. Appeals to Tax Appeal Tribunal.
289. Assessment to be final and conclusive.
PART VIII—COLLECTION, RECOVERY AND REPAYMENT OF TAX
290. Procedure in cases where objection or appeal is pending.
291. Time within which payment is to be made.
292. Penalty for non-payment of tax and enforcement of payment.
293. Collection of tax after determination of objection or appeal.
294. Suit for tax by the service.
295. Relief in respect of error or mistake.
296. Repayment of tax.
PART IX—OFFENCES AND PENALTIES
297. Penalty for defaults.
298. Penalty for making incorrect accounts.
299. False statements and returns.
300. Penalties for offences by authorised or unauthorised persons.
301. Tax to be payable notwithstanding any proceedings for penalties.
PART X—APPLICATION OF COMPANIES INCOME TAX
TO PETROLEUM OPERATIONS
302. General requirement of companies engaged in petroleum operations to

pay companies income tax.
PART XI—GENERAL PROVISIONS
303. General application of this Part and other matters.
304. Regulations, rules and forms.
305. Fiscal stabilisation.
306. Royalty.
CHAPTER 5—MISCELLANEOUS PROVISIONS
307. Legal proceedings.
308. Pre-action notice.
309. Consequential amendments.
310. Repeals.
311. Saving provisions.
312. Transfer of assets and liability to the Commission.
313. Transfer of assets and liability to the Authority.
314. Transfer of employees and conditions of service.
315. Movement of staff of the institutions.
316. Transfer of existing host communities development projects and host
communities development schemes.
317. Transitional and savings provisions.
318. Interpretation.
319. Citation.
SCHEDULES
PETROLEUM INDUSTRY ACT, 2021
ACT No. 6
AN ACT TO PROVIDE LEGAL, GOVERNANCE, REGULATORY AND FISCAL
FRAMEWORK FOR THE NIGERIAN PETROLEUM INDUSTRY, THE DEVELOPMENT
OF HOST COMMUNITIES ; AND FOR RELATED MATTERS
[16th Day of August, 2021] Commence-

ment.
ENACTED by the National Assembly of the Federal Republic of Nigeria—
CHAPTER 1—GOVERNANCE AND INSTITUTIONS
PART I—OBJECTIVES AND APPLICATION
1. The property and ownership of petroleum within Nigeria and its Vesting of
territorial waters, continental shelf and exclusive economic zone is vested in petroleum.
the Government of the Federation of Nigeria.
2. The objectives of this Chapter are to— Objectives.
(a) create efficient and effective governing institutions, with clear and
separate roles for the petroleum industry ;
(b) establish a framework for the creation of a commercially oriented
and profit-driven national petroleum company ;
(c) promote transparency, good governance and accountability in the
administration of the petroleum resources of Nigeria ;
(d) foster a business environment conducive for petroleum operations ; and
(e) deepen local content practice in Nigeria oil and gas industry.
PART II—MINISTER OF PETROLEUM
3. (1)—The Minister shall— Powers of
the
(a) formulate, monitor and administer government policy in the petroleum
Minister.
industry ;
(b) exercise general supervision over the affairs and operations of the
petroleum industry in accordance with the provisions of this Act ;
(c) report developments in the petroleum industry to the government ;
(d) represent Nigeria at international organisations on petroleum matters ;
(e) promote an enabling environment for investment in the Nigerian
petroleum industry ;
(f ) negotiate treaties or other international agreements on matters
pertaining to petroleum on behalf of the Government ;
(g) upon the recommendation of the Commission, grant petroleum
prospecting licences and petroleum mining leases through the processes
established in this Act;
(h) upon the recommendation of the Commission and pursuant to the
provisions of this Act and the regulations, revoke and assign interests in
petroleum prospecting licences and petroleum mining leases ;
(i) delegate in writing to the Chief Executive of the Commission or
Authority any power conferred on the Minister by or under this Act ;
(j) upon the recommendation of the Commission or Authority approve
the fees for services rendered by the Commission or Authority in
regulations ; and
(k) upon the recommendation of the Commission or the Authority, direct
in writing the suspension of petroleum operations in any area—
(i) until arrangements to prevent danger to life or property have been
made to his satisfaction, or
(ii) where in his opinion, a contravention of this Act or any regulation
made under this Act has occurred or is likely to occur.
(2) The Minister may order a cutback of the levels of crude oil or
condensate production in the context of international oil pricing agreements
supported by Nigeria.
First (3) The Minister shall have rights of pre-emption of petroleum and
Schedule. petroleum products marketed under any licence or lease in the event of a
national emergency under the First Schedule to this Act.
(4) The Minister shall give general policy directives to the Commission
on matters concerning upstream petroleum operations and to the Authority on
matters relating to midstream and downstream petroleum operations as well
as matters related to co-operation among the two entities in line with the
provisions of this Act and the Commission and the Authority shall comply with
such directives.
(5) The Minister shall cause the general policy directives issued under
subsection (4) to be published in the Federal Government Gazette.
PART III—THE COMMISSION

Establishment 4.—(1) There is established the Nigerian Upstream Petroleum Regulatory
of the Commission (in this Act referred to as “the Commission”) which shall be a
Nigerian
Upstream
body corporate with perpetual succession and a common seal.
Petroleum (2) The Commission shall have the power to acquire, hold and dispose of
Regulatory
Commission.
property, sue and be sued in its own name.
(3) The Commission shall be responsible for the technical and commercial
regulation of upstream petroleum operations.
5. The objects and functions of the Commission in this Part are limited Application
to upstream petroleum operations. of this Part.
6. The objectives of the Commission shall be to— Objectives

of the
(a) regulate upstream petroleum operations including technical, operational Commission.
and commercial activities ;
(b) ensure compliance with all applicable laws and regulations governing
upstream petroleum operations ;
(c) ensure that upstream petroleum operations are carried out in a manner
to minimise waste and achieve optimal government revenues ;
(d) promote healthy, safe, efficient and effective conduct of upstream
petroleum operations in an environmentally acceptable and sustainable
manner ;
(e) ensure efficient, safe, effective and sustainable infrastructural
development of upstream petroleum operations ;
(f ) determine, administer and ensure the implementation and maintenance
of technical standards, codes, practices and specifications applicable to
upstream petroleum operations pursuant to good international petroleum
industry practices ;
(g) implement government policies for upstream petroleum operations
as directed by the Minister of Petroleum in accordance with the provisions
of this Act ;
(h) promote an enabling environment for investment in upstream
petroleum operations ;
(i) ensure strict implementation of environmental policies, laws and
regulations for upstream petroleum operations ;
(j) ensure the implementation of national policies for upstream petroleum
operations ; and
(k) implement such other policies and objectives as are consistent with
the provisions of this Act.
7. The technical regulatory functions of the Commission include to— Technical
regulatory
(a) enforce, administer and implement laws, regulations and policies functions of
relating to upstream petroleum operations ; the
(b) ensure compliance with applicable national and international Commission.
petroleum industry policies, standards and practices for upstream
(c) establish, monitor, regulate and enforce health, safety and
environmental measures and standards relating to upstream petroleum
operations including—
(i) management of petroleum reserves and installations, and
(ii) exploration, development and production activities within the onshore,
frontier, shallow water and deep offshore acreages of Nigeria ;
(d) administer, monitor and enforce compliance with the terms and
conditions of leases and licences granted and permits and authorisations
issued to a company in respect of upstream petroleum operations ;
(e) set, define and enforce approved standards and regulations for design,
construction, fabrication, operation and maintenance of plants, installations
and facilities used or to be used in upstream petroleum operations including—
(i) crude oil and natural gas evaluation and management,
(ii) upstream natural gas gathering,
(iii) natural gas treatment, and
(iv) the elimination of natural gas flaring and venting ;
(f ) keep public registers of—
(i) licences and leases granted by the Minister and permits and other
authorisations issued by the Commission,
(ii) beneficial ownership, and
(iii) award, renewal, assignment, amendment, suspension and
revocation ;
(g) carry out enquiries, tests, audits or investigations and take other steps
to monitor the activities of licensees, lessees or permit holders ;
(h) establish and enforce standards relating to upstream petroleum
operations ;
(i) undertake evaluation of national reserves and develop policies for
prudent reservoir management practices ;
(j) maintain a Nigerian petroleum industry data bank comprising of
materials, information and data acquired by, or submitted to, the Commission
in the exercise of its statutory and regulatory functions ;
(k) require lessees, licensees and permit holders to furnish and publish
specified information relating to upstream petroleum operations in this Act
and the National Data Repository Regulation, 2020 ;
(l) supervise and ensure accurate calibration and certification of
equipment used for metering upstream petroleum operations, pursuant to
applicable laws, and issue certificates of quality and quantity for petroleum
produced ;
(m) publish reports and statistics on upstream petroleum operations to
promote the growth of the petroleum industry ;
(n) advise the Minister on fiscal, operational, technical and other matters
to enhance the upstream petroleum operations ;
(o) issue permits and other authorisations as may be necessary under an
upstream licence or lease, including—
(i) seismic operations,
(ii) drilling operations, and
(iii) design, construction and operation of facilities for upstream
(p) establish special laboratories to provide data storage and testing,
quality assurance and certification for upstream petroleum operations ;
(q) perform technical evaluation and assessments regarding submissions
made to the Commission by licensees, lessees or permit holders involved in
(r) keep records, data and reports obtained from upstream petroleum
operations, as may be required under any Act or regulation and give directive
to any person, company or entity in that regard ;
(s) manage and administer data regarding unallocated acreage ;
(t) conduct bidding rounds for the award of petroleum prospecting licences
and petroleum mining leases pursuant to this act and applicable regulations ;
(u) when requested, provide assistance to parties conducting upstream
petroleum operation, where in the sole opinion of the Commission such
assistance is merited ;
(v) approve field development plans for upstream petroleum operations
as well as monitor its execution ;
(w) compute, determine, assess and ensure payment of royalties, rents,
fees, and other charges for upstream petroleum operations as stipulated
under this Act and any regulation ;
(x) establish parameters and codes of conduct for licensees, lessees or
permit holders in the upstream petroleum operations ;
(y) monitor the financial viability of licensees, lessees or permit holders
with respect to upstream petroleum operations ;
(z) develop, maintain and publish a database of upstream petroleum
operations ;
(aa) subject to the confidentiality provisions of section 83 (7) of this Act,
share information and data on the upstream petroleum operations with other
government entities which have functions with respect to the petroleum
sector ;
(bb) perform such other function as may be necessary to give effect to
(cc) ensure and monitor performance of industry players and quality of
the provision of services of servicing companies in the upstream petroleum
industry ;
(dd) conduct studies relating to the economy, efficiency and effectiveness
of the upstream petroleum industry ; and
(ee) issue certificates of quality and quantity to exporters of crude oil,
natural gas and petroleum products from integrated operations and crude oil
export terminals established prior to the effective date and the Commission
shall have the power to monitor and regulate the operations of crude oil export
terminals and the responsibility of weights and measures at the crude oil export
terminals shall cease to exist from the effective date.
Commercial 8. The commercial regulatory functions of the Commission shall
regulatory be to—
functions of
the (a) review and approve the commercial aspects of field development
Commission. plans in the upstream petroleum operations ;
(b) develop cost studies and benchmarks for the evaluation of upstream
petroleum operations taking into account petroleum industry specific issues,
including field size, reservoir depth, location of operations, technology applied,
production methods and petroleum quality ;
(c) allocate petroleum production quotas for the purpose of curtailing
export of petroleum in conjunction with NNPC Limited pursuant to
regulations ; and
(d) where in situ facilities or fixed or floating platforms or vessels provide
for fully integrated upstream and midstream petroleum operations, the
Commission shall consider and the Commission shall be in charge of such
integrated operations and petroleum operations may be considered integrated
where there is a joint use of utilities used exclusively for the upstream and
midstream operations.
Functions of 9.—(1) The functions of the Commission with respect to frontier basins
the shall be to—
Commission
for frontier (a) promote the exploration of the frontier basins of Nigeria ;
basins. (b) develop exploration strategies and portfolio management for the
exploration of unassigned frontier acreages in Nigeria ;
(c) identify opportunities and increase information about the petroleum
resources base within frontier basins in Nigeria ; and
(d) undertake studies, analyse and evaluate unassigned frontier basins in
Nigeria.
(2) Where data acquired and interpreted under a petroleum exploration
licence, in the judgment of the Commission, require testing and drilling of
identifiable prospects and leads, and no commercial entity has publicly
expressed an intention of testing or drilling such prospects, the Commission
shall, in line with section 64 (k) of this Act, request the services of NNPC
Limited to drill or test such prospect and leads on a service fee basis to be
charged to the Frontier Exploration Fund under this Act.
(3) Where commercial discovery is made under subsection (2), NNPC
limited shall have the first right of refusal in the award of the acreage for
subsequent development and other petroleum operations in such frontier
acreages under this Act.
(4) There shall be maintained, for the purpose of this section, a Frontier
Exploration Fund which shall be 30% of NNPC Limited’s profit oil and profit
gas as in the production sharing, profit sharing and risk service contracts.
(5) NNPC Limited shall transfer the 30% of profit oil and profit gas
under subsection (4) to the Frontier Exploration Fund escrow account dedicated
for the development of frontier acreages and utilise the funds to carry out
exploration and development activities in the frontier acreages subject to
appropriation by the National Assembly.
10. The Commission shall have power to— Powers of
the
(a) enforce the provisions of any— Commission.
(i) regulation made with respect to upstream petroleum operations,
(ii) regulations, policies or guidelines formerly administered by the
Department of Petroleum Resources or the Petroleum Inspectorate, with
respect to upstream petroleum operations, and
(iii) enactments with respect to the upstream petroleum industry made
prior to the coming into force of this Act and any regulations made
pursuant to powers given under them ;
(b) seal up any premises, under section 217 of this Act, including any
facility or plant engaged in upstream petroleum operations, where there has
been a contravention of this Act or any regulations made under this Act ;
(c) ensure compliance with the Nuclear Safety and Radiation Protection Cap N142,
Act and such other legislative provisions as may be applicable in upstream LFN, 2004.
(d) set standards to promote the adoption of new technologies for
(e) require lessees, licensees and permit holders to publish specified and
non-proprietary information relating to upstream petroleum operations ;
(f ) issue guidelines in accordance with the provisions of this Act or any
regulation in respect of upstream petroleum operations;
(g) recommend to the Minister the revocation or suspension of licences
or leases in accordance with this Act and approve renewal of leases ;
(h) within the jurisdiction of the Commission, have access to—
(i) areas or rights of way regarding licences, leases or any related
offices or buildings where information or data are available for inspection
under this Act ; and
(ii) all installations to which this Act applies, including plants and stations
of every description, for the purpose of inspecting the operations
conducted therein and enforcing the provisions of this Act and any
regulations made under it ;
(i) impose on a petroleum prospecting licence, petroleum exploration
licence or any petroleum mining lease to which this Act applies, special
terms and conditions consistent with this Act at the grant or renewal of the
licence or lease ;
(j) renew licenses and leases subject to the provisions of this Act ; and
(k) do such other things as are necessary and expedient for the effective
and discharge of any of its functions under this Act.
Governing 11.—(1) There is established a Governing Board (in this Act referred to
Board of the as “the Board of the Commission”) which shall be responsible for the policy
Commission.
and general administration of the Commission.
(2) The Board of the Commission shall consist of—
(a) one non-executive chairman ;
(b) two non-executive commissioners ;
(c) the chief executive of the Commission (in this Act referred to as
“the Commission Chief Executive”) ;
(d) two other executive commissioners who are responsible for finance
and accounts and exploration and acreage management ;
(e) one representative of the Authority not below the rank of Director ;
(f ) one representative of the Ministry not below the rank of
Director ; and
(g) one representative of the Ministry of Finance not below the rank of
Director.
(3) Appointments to the Board of the Commission under subsection
(2) shall be made by the President subject to confirmation by the Senate,
except for the appointments of ex-officio members under subsection (2)
(e), (f ) and (g).
(4) A person appointed under subsection (2) (a) and (b) shall have at
least 15 years post-qualification cognate experience in petroleum or other
relevant sector of the economy and shall hold office for a period of five years
and may be re-appointed for a further term of five years, on such terms and
conditions as may be specified in the letter of appointment.
(5) Subject to subsection (4) of this section and section 18 (7) of this
Act, a commissioner shall hold office for five years and may be re-appointed
for a further term of five years.
(6) A non-executive commissioner shall hold office on part-time basis.
(7) The Board of the Commission may authorise in writing any
commissioner, committee of the Board of the Commission, the Commission
Chief Executive or any other officer or employee of the Commission, to exercise
any power or carry out any duty or function of the Commission under this Act
or regulation made under this Act.
(8) The proceedings of the Board of the Commission and other ancillary
matters shall be as prescribed by regulation made under this Act.
12. The Board of the Commission shall— Functions of
the Board
(a) be responsible for the formulation of policy, supervision and giving of the
strategic direction to the Commission ; Commission.
(b) provide general guidance for the carrying out of the functions of the
Commission ;
(c) review and approve the business, strategic and operating plans of the
Commission ;
(d) consider and approve the annual budget of the Commission before
submission to the National Assembly for appropriation ;
(e) approve the management accounts and audited accounts of the
Commission and consider the management letter from the external auditors ;
(f ) determine the terms and conditions of service of employees of the
Commission ;
(g) recommend remuneration, allowances, benefits and pensions of
employees of the Commission in consultation with the National Salaries,
Incomes and Wages Commission, having regard to the—
(i) specialised nature of work to be performed by the Commission,
(ii) need to ensure the financial self-sufficiency of the
Commission, and
(iii) remuneration and allowances paid in the private sector in upstream
petroleum operations to individuals with equivalent responsibilities,
expertise and skills ;
(h) structure the Commission into such number of departments as it
deems fit for the effective performance of the functions of the
Commission ; and
(i) perform such other functions as may be necessary for the efficient
and effective administration of the Commission under this Act.
Remuneration 13.—(1) Commissioners shall be paid from the funds of the Commission
and such remuneration and allowances as applicable.
allowances
of the Board (2) The Commission shall comply with the policy and guidelines of the
of the National Salaries, Incomes and Wages Commission regarding remunerations.
Commission.
Suspension 14. A member of the Board of the Commission may be suspended or

or removal removed from office by the President, where the member—
of members
of the Board (a) is found to be—
of the
Commission.
(i) unqualified for appointment under section 11 of this Act,
(ii) unqualified subsequent to his appointment, or
Act No 3, (iii) in breach of conflict of interest provisions in the Companies and
2020. Allied Matters Act or any regulation regarding conflicts of interest passed
under this Act ;
(b) ceases to be an employee of the ministry or agency he represents on
the Board of the Commission ;
(c) has demonstrated an inability to effectively discharge the duties of
his office ;
(d) has been absent from the meeting of the Board of the Commission
for three consecutive times without the consent of the Chairman or in the
case of the Chairman, without the consent of the President, except where
good reason is shown for the absence ;
(e) is found guilty of serious misconduct by a court or tribunal of competent
jurisdiction ; or
(f ) has, under the law in force in any country—
(i) been adjudged or declared bankrupt or insolvent and has not been
discharged,
(ii) made an assignment to or arrangement or composition with his
creditors which has not been rescinded or set aside, or
(iii) been declared to be of unsound mind.
Resignation 15. A non-executive commissioner may resign his appointment by giving
of a non- two-month’s written notice to the President.
executive
commissioner.
16. A vacancy on the Board of the Commission shall occur, where a Vacancy on
commissioner— the Board of
the
(a) dies ; Commission.
(b) is removed from office in accordance with section 14 of this Act ;
(c) resigns from office ;
(d) completes his tenure of office ; or
(e) is incapacitated.
17. A vacancy on the Board of the Commission shall be filled by the Filling of
appointment of another person in accordance with section 11 of this Act. vacancy on
the Board of
the
Commission.
18.—(1) The Commission Chief Executive is the accounting officer Commission

and shall be responsible for the administration of the Commission. Chief
Executive
(2) There shall be six executive commissioners for the Commission and
with each responsible for one of the following— Executive
Commissioners.
(a) Exploration and Acreage Management ;
(b) Development and Production ;
(c) Health, Safety, Environment and Community ;
(d) Economic Regulation and Strategic Planning ;
(e) Corporate Services and Administration ; and
(f ) Finance and Accounts.
(3) A person to be appointed as Commission Chief Executive and as an
executive commissioner of the Commission shall have extensive managerial,
technical or professional knowledge of the upstream petroleum operations
with a minimum of 15 years post-qualification cognate experience.
(4) The Commission Chief Executive shall be appointed on such terms
and conditions as may be set out in the letter of appointment, except as
otherwise provided for in this Act.
(5) An Executive Commissioner shall be appointed on such terms and
conditions as may be set out in the letter of appointment, except as otherwise
provided for in this Act.
(6) The Commission Chief Executive shall be appointed for an initial
term of five years and may be re-appointed for a further term of five years,
subject to confirmation by the Senate.
(7) The President may, not later than 90 days prior to the expiration of
the tenure of the Commission Chief Executive or an executive commissioner,
re-appoint the Commission Chief Executive or Executive Commissioner or
appoint another qualified person.
(8) A person shall not be appointed as a Commission Chief Executive or
an Executive Commissioner, where the person—
Act No 3, (a) is likely to be in breach of conflict of interest provisions under the
2020. Companies and Allied Matters Act or regulation made under this Act ;
(b) has a financial interest in any business connected, directly or indirectly
with the petroleum industry ;
(c) is engaged in any activity for remuneration or otherwise connected
(d) is a relative of a person who has an interest or is engaged in any of
the activities under paragraphs (a)-(c), provided that—
(i) such person may be appointed Commission Chief Executive or an
Executive Commissioner if he declares his interest and makes appropriate
arrangements to ensure the avoidance of a conflict of interest,
(ii) the President is satisfied that the interest or activity shall not interfere
with the person’s impartial discharge of his duties as the Commission
Chief Executive or an executive commissioner, or
(iii) the financial interest is terminated prior to the appointment taking
effect ; or
(e) has, under the laws in force in any country—
discharged,
(ii) made an assignment to, or arrangement or composition with his
creditors, which has not been rescinded or set aside,
(iii) been declared to be of unsound mind,
(iv) been convicted of any criminal offence by a court of competent
jurisdiction except for traffic offences, or
(v) been disqualified or suspended from practising his profession by
the order of a competent authority.
Employees 19. The Board of the Commission shall determine the number of persons
of the that shall be employees of the Commission.
Commission.
20.—(1) The employees of the Commission shall be subject to terms Terms and
and conditions of service set out by the Board of the Commission. conditions of
service in the
(2) The terms and conditions of service referred to in subsection (1) Commission.
may provide for—
(a) the appointment, promotion, dismissal and discipline of employees ;
(b) appeals by employees against dismissal or other disciplinary
measures ; and
(c) the grant of pensions, gratuities and other retirement benefits to
employees.
(3) In this section, “appointment” includes secondment, transfer and
contract appointments.
(4) Employees of the Commission shall be “public officers” as defined Cap. C23,
in the Constitution of the Federal Republic of Nigeria. LFN, 2004.
(5) Employment by the Commission shall be subject to the provisions of Act No 4,

the Pension Reform Act and officers and employees of the Commission shall 2014.
be entitled to pension and other retirement benefits as prescribed under the
Pensions Reform Act.
(6) Nothing in subsection (5) shall prevent the Commission from appointing
a person to an office on terms that preclude the grant of pension or other
retirement benefits in respect of that office.
21. The Board of the Commission, in consultation with the National Remuneration
Salaries, Incomes and Wages Commission, shall determine and periodically and
allowances
review the remuneration and allowances payable to the employees of the
of
Commission, having regard to the— employees
(a) specialised nature of work to be performed by the employees of the of the
Commission.
Commission ;
(b) need to ensure the financial self-sufficiency of the Commission ; and
(c) remuneration and allowances paid within the petroleum industry to
individuals with equivalent responsibilities, expertise and skills.
22.—(1) The Commission shall, not later than 30th of September of Statement of
each year or such other date that the Minister responsible for Budget and estimated
income and
National Planning may determine, prepare and present to the National
expenditure
Assembly, a statement of estimated income and expenditure of the Commission of the
for the next financial year. Commission.
(2) Notwithstanding the provisions of this section, the Commission may,
in each financial year, submit to the National Assembly, supplementary or
adjusted statements of estimated income and expenditure of the Commission.
(3) The financial year of the Commission shall be a period of 12 calendar
months commencing on the 1st of January in each year or such other date as
the Minister of Finance may determine.
Secretary to 23.—(1) The Board of the Commission shall appoint a Secretary,
the who shall—
Commission.
(a) be the Legal Adviser to the Commission ;
(b) attend meetings of the Board of the Commission and keep minutes,
corporate records and the common seal of the Commission ; and
(c) carry out such administrative and other secretarial duties as the
Commission Chief Executive and the Board of the Commission may direct.
(2) The Secretary shall be a legal practitioner with a minimum of 10
years post-qualification experience.
Fund of the 24.—(1) The Commission shall maintain a Fund (in this Act referred to
Commission. as “the Commission Fund”) into which money accruing to the Commission
shall be paid and all expenditures of the commission shall be subject to
appropriation by the National Assembly.
(2) The source of the Commission Fund shall be as follows—
(a) money appropriated by the National Assembly for the Commission ;
(b) fees charged by the Commission for services rendered to
licensees, lessees, permit holders and other authorisations issued by
the Commission ;
(c) cost of collection by the Commission ;
(d) income derived from publications made by the Commission and
other related activities, including data sales ;
(e) fees paid to the Commission for using facilities owned or managed
by the Commission ; and
(f ) money accruing to the Commission by way of grants, aids, gifts,
testamentary dispositions, endowments and contributions.
(3) The Commission Fund shall be applied—
(a) to meet approved budgetary obligations of the Commission ;
(b) to meet administrative and operating cost of the Commission ;
(c) to pay salaries, wages, fees or other remuneration or allowances,
pensions and other retirement benefits payable to employees of the
Commission ;
(d) to acquire and maintain any property acquired by or vested in the
Commission ;
(e) for investments, as provided under the Trustee Investments Act or Cap. T22
any other applicable legislation, subject to the approval of Minister responsible LFN, 2004.
for Finance ; and
(f ) in connection with any of the functions of the Commission under this
Act.
(4) The Commission shall ensure that money accruing from royalties
and rents charged under this Act or any subsidiary legislation made under this
Act on royalties and rents are paid into the Federation Account.
(5) At the end of each financial year, any money that accrued to the
Commission Fund under subsection (2), which have not been utilised for the
purposes provided under subsection (3), shall be paid into the Consolidated
Revenue Fund.
(6) The Commission may accept grants of money or property on such
terms and conditions as may be specified by the person or organisation making
the grant, provided that—
(a) the terms and conditions of the grant are consistent with the objectives
and functions of the Commission ; or
(b) no such grant is accepted from any person or organisation regulated
by the Commission.
(7) Nothing in subsection (6) or under this Act shall be construed as
authorising the Commission Chief Executive, commissioners, officer or
employee of the Commission to accept any grant for their personal use.
(8) The Commission shall keep proper accounts of its income and
expenditure for each financial year and cause it to be audited within six months
after the end of each financial year by auditors appointed by the Commission
from a list of auditors approved in accordance with guidelines, supplied by the
Auditor-General for the Federation.
(9) The Commission shall submit to the Minister—
(a) a mid-year report of its operations and finances not later than the
31st of August of each year ;
(b) an annual report of its operations and performance ; and
(c) an audited financial account for the year, not later than 31st of March
of the following year.
(10) The Commission shall, not later than the 31st of March of
each year—
(a) submit to the Minister a summary of its annual report and audited
financial accounts ; and
(b) publish the annual report and audited financial accounts on its website.
(11) The provisions of any enactment relating to the taxation of companies
or trust funds shall not apply to the Commission.
Notice to the 25.—(1) Any Government ministry, department or agency exercising
Commission. any power or function or taking any action, which may have direct impact on
upstream petroleum operations shall consult with the Commission prior to—
(a) issuing any regulation, guideline, enforcement order or directive ;
(b) exercising any such power or function ; or
(c) taking any such action.
(2) The Commission shall review the recommendations of the
Government ministry, department or agency and communicate decision
accordingly and such decision shall be complied with by the relevant
Government ministry, department or agency.
Special 26.—(1) The Commission shall in performing its functions under this
powers of Act have special powers to—
the
Commission. (a) inquire, inspect, examine or investigate any business or activity relating
to upstream petroleum operations under this Act, where it believes that
illegal upstream petroleum operations are going on ;
(b) conduct surveillance on crude oil and natural gas installations, premises
and vessels where it believes that illegal upstream petroleum operations
are going on ;
(c) enter any upstream wellsite, plant, facility or place—
(i) at which crude oil or natural gas is produced, handled or treated, or
(ii) that is used in connection with any upstream wellsite, plant, facility
or place where crude oil or natural gas is produced, handled or treated ;
(d) enter at any reasonable time premises containing any records or
property required to be maintained under this Act or related to the
administration of upstream petroleum operations under this Act for the
purpose of inspecting those records or that property ;
(e) require any person or his agent, representative, partner, director, officer
or employee engaged in upstream petroleum operations to—
(i) answer any question that may be relevant to the inquiry, inspection,
examination or investigation, and
(ii) provide any required information contained in a computer hardware
or software or any other data storage, processing or retrieval device or
system used in connection with the business or activities relating to
upstream petroleum operations under this Act ;
(f ) take any sample or carry out any test or examination as it may
consider necessary in the performance of its functions ;
(g) use any machinery, equipment, appliance or thing as it may consider
necessary in the performance of its functions ;
(h) remove for examination and copy anything that may be relevant to
the inquiry, inspection, examination or investigation, including removing any
computer hardware or software or any other data storage, processing or
retrieval device or system, during which copyright and trade secrets shall
be properly protected ;
(i) in conjunction with the Nigeria Police or other law enforcement
agencies, arrest with a warrant, any person reasonably believed to have
committed an offence under this Act ; and
(j) exercise any other power that may be conferred on it under any law
or regulation.
(2) An entity, person or agent, representative, partner, director,
officer or employee of that entity or person under investigation by the
Commission shall—
(a) grant access to officers of the Commission with regard to any place,
wellsite, plant, facility, upstream machinery, equipment, appliances or things
that may be relevant to the investigation ; and
(b) provide on request, any book, account, record, document, voucher,
information and explanation relating to upstream petroleum operations as
the officers of the Commission may require.
(3) An entity, person or agent, representative, partner, director, officer
or employee of that entity or person who fails to comply with subsection (2)
commits an offence and is liable on conviction to—
(a) a minimum fine of N5,000,000 or a term of five years
imprisonment ; and
(b) in the case of a continuous offence, to an additional minimum fine of
N100,000 for each day during which the offence continues.
(4) The Commission shall in the exercise of its powers under this section
avoid undue hindrance of entities and persons engaged in lawful upstream
petroleum operations.
(5) The Commission can seal or close any premises or facility utilised
for purpose of upstream petroleum operations if the licensee, lessee or permit
holder is found to be in breach of the relevant provisions of this Act.
Special 27. The special powers of the Commission under section 26 of this
Investigation Act shall be performed by the Special Investigation Unit of the Commission
Unit.
or any person authorised by the Commission.
Indemnity of 28.—(1) The Commission Chief Executive, a commissioner or any
officers of officer of the Commission shall each be indemnified out of the Commission
the Fund against any liability incurred in defending any proceeding against the
Commission.
Commission or brought against him in his official capacity.
(2) Notwithstanding the provisions of subsection (1), the Commission
shall not indemnify the Commission Chief Executive, a commissioner or any
officer of the Commission for any liability incurred as a result of wilful
misconduct or gross negligence.
PART IV—THE AUTHORITY

Establishment 29.—(1) There is established the Nigerian Midstream and
of the Downstream Petroleum Regulatory Authority (in this Act referred to as
Nigerian “the Authority”), which shall be a body corporate with perpetual
Midstream
and succession and a common seal.
Downstream (2) The Authority shall have the power to acquire, hold and dispose of
Petroleum
Regulatory property, sue and be sued in its own name.
Authority. (3) The Authority shall be responsible for the technical and commercial
regulation of midstream and downstream petroleum operations in the
petroleum industry.
Application 30. The objects and functions of the Authority in this Part are limited
of this Part. to midstream and downstream petroleum operations in the petroleum industry.
Objectives 31. The objectives of the Authority shall be to—
of the
Authority. (a) regulate midstream and downstream petroleum operations, including
technical, operational, and commercial activities ;
(b) ensure efficient, safe, effective and sustainable infrastructural
development of midstream and downstream petroleum operations ;
(c) promote healthy, safe, efficient and effective conduct of midstream
and downstream petroleum operations in an environmentally acceptable
and sustainable manner ;
(d) promote a competitive market for midstream and downstream
(e) promote the supply and distribution of natural gas and petroleum
products in midstream and downstream petroleum operations and the
security of natural gas supply for the domestic gas market ;
(f ) ensure compliance with applicable laws and regulations governing
midstream and downstream petroleum operations ;
(g) ensure crude oil supply for domestic refineries ;
(h) determine, administer and ensure the implementation and maintenance
of technical standards, codes, practices and specifications applicable to
midstream and downstream petroleum operations pursuant to good
international petroleum industry practices ;
(i) implement Government policies for midstream and downstream
petroleum operations as directed by the Minister and in accordance with
this Act ;
(j) promote, establish and develop a positive environment for
international and domestic investment in midstream and downstream
(k) ensure strict implementation of environmental policies, laws and
regulations for midstream and downstream petroleum operations ;
(l) develop and enforce a framework on tariff and pricing for natural
gas and petroleum products ; and
(m) implement such other policies and objectives as are consistent with
32. The functions of the Authority shall be to— Functions
of the
(a) regulate and monitor technical and commercial midstream and Authority.
downstream petroleum operations in Nigeria ;
(b) regulate commercial midstream and downstream petroleum
operations, including—
(i) petroleum liquids operations,
(ii) domestic natural gas operations, and
(iii) export natural gas operations;
(c) determine appropriate tariff methodology, including for—
(i) processing of natural gas,
(ii) transportation and transmission of natural gas,
(iii) transportation of crude oil, and
(iv) bulk storage of crude oil and natural gas ;
(d) setting cost benchmarks for midstream and downstream petroleum
operations ;
(e) provide pricing and tariff frameworks for natural gas in midstream
and downstream gas operations and petroleum products based on the fair
market value of the applicable petroleum products ;
(f ) advise the Government, government agencies and other stakeholders
on commercial matters relating to tariff and pricing frameworks ;
(g) develop open access rules applicable to petroleum liquids and natural
gas transportation pipelines, terminal facilities and bulk storage facilities ;
(h) regulate the bulk storage, distribution, marketing and transportation
pipelines of petroleum products ;
(i) grant, issue, modify, extend, renew, review, suspend, cancel, reissue
or terminate licences, permits and authorisations for midstream and
downstream petroleum operations ;
(j) monitor and enforce compliance with the terms and conditions of
licences, permits and authorisations issued by the Authority ;
(k) keep public registers of—
(i) licences, permits and other authorisations issued by the
Authority, and
(ii) renewals, assignments, amendments, suspensions or revocations ;
(l) set, define and enforce approved standards and regulations for design,
construction, fabrication, operation and maintenance of plants, installations
and facilities used or to be used in midstream and downstream petroleum
operations ;
(m) carry out enquiries, tests, audits or investigations and take other
steps to monitor the midstream and downstream petroleum operations ;
(n) ensure security of supply, development of the markets and competition
in the markets for natural gas and petroleum products ;
(o) ensure third party access to facilities under gas processing licences,
transportation pipelines and transportation networks and midstream bulk
storage facilities, where such facilities are operated for the account of the
owner ;
(p) develop rules for trading in wholesale gas supplies to gas distributors ;
(q) establish customer protection measures in accordance with the
provisions of this Act ;
(r) publish decisions, directions or determinations of the Authority that
have implications for customers and industry participants, together with the
reasons for such decisions, directions or determinations which, in the opinion
of the Authority, shall be published ;
(s) promote the interests of customers with regard to midstream and
(t) promote the principles of economic development of infrastructure
with regard to midstream and downstream petroleum operations ;
(u) promote competition and private sector participation in midstream
and downstream petroleum operations ;
(v) determine the domestic gas demand requirement and the crude oil
required for the domestic crude oil supply obligation and ensure that economic
and strategic domestic demands are met ;
(w) regulate the supply, distribution, marketing and retail of petroleum
products ;
(x) administer and monitor strategic stocks of petroleum products ;
(y) monitor the application of petroleum product prices, pricing formulae
and frameworks ;
(z) monitor market behaviour with respect to midstream and downstream
(aa) identify, investigate and prevent abuse of dominant positions and
restrictive business practice with regard to midstream and downstream
(bb) establish, monitor, regulate and enforce technical, health,
environmental and safety measures relating to midstream and downstream
(cc) develop, specify and monitor technical and safety standards for
wholesale marketing, processing plant, retail marketing and bunkering of
petroleum products ;
(dd) ensure the accuracy of metering pumps and related measurement
facilities in midstream and downstream petroleum operations ;
(ee) define and enforce approved standards and guidelines for the design,
procurement, construction, operation and maintenance of plants, installations
and facilities in the midstream and downstream petroleum operations ;
(ff ) establish laboratories to provide data storage and testing, quality
assurance and certification of crude oil, natural gas and petroleum products
and regulate the activities of third party laboratories used in midstream and
(gg) keep and classify records, data and reports as may be prescribed in
regulations or guidelines ;
(hh) ensure the promotion of safety and development of midstream and
(ii) issue certificates of quality and quantity to exporters of crude oil,
LNG and petroleum products ;
(jj) implement and enforce compliance with laws, regulations and policies
relating to midstream and downstream petroleum operations ;
(kk) establish parameters and codes of conduct for operators in the
(ll) monitor the financial viability of operators with respect to midstream
and downstream petroleum operations ;
(mm) develop, maintain and publish a database of midstream and
(nn) monitor and ensure that the quality of petroleum products sold in
Nigeria conform to defined specifications ;
(oo) establish, monitor and ensure compliance with the standards for the
processing of petroleum products in Nigeria ;
(pp) request information and documents relating to licenced activities,
including pricing information and macro-economic data from any licensee
or permit holder in midstream and downstream petroleum operations ;
(qq) publish or direct licensees, lessees and permit holders to publish, in
the interest of the public, information relating to midstream and downstream
petroleum operations in accordance with applicable law or regulation ;
(rr) regulate the domestic base price and the prices applicable to wholesale
customers of the strategic sectors and gas distributors ;
(ss) perform such other function as may be necessary to give effect to
the provisions of this Act ;
(tt) ensure and monitor performance parameters of industry players and
the quality of service provided by servicing companies in the midstream
and downstream petroleum industry ; and
(uu) conduct studies relating to the economy and efficiency and
effectiveness of the midstream and downstream petroleum industry.
Regulations 33. Subject to section 216 of this Act, the Authority may make
by the regulations—
Authority.
(a) concerning the processing, refining, transmission, distribution, supply,
sale and storage of petroleum and petroleum products as well as other
(b) establishing those midstream and downstream petroleum operations
to be subject to a licence or permit from the Authority ;
(c) establishing the application criteria and procedure for licences and
permits for midstream and downstream petroleum operations ;
(d) establishing the procedure for review and approval of licence and
permit applications for midstream and downstream petroleum operations ;
(e) establishing the duration and conditions of licences and permits for
(f ) concerning those licences and permits already in effect prior to the
date of any regulations issued by the authority for midstream and
(g) establishing the conditions and procedures for the transfer, surrender,
suspension or revocation of licences and permits for midstream and
(h) establishing the procedure for the modification of licences and permits
for midstream and downstream petroleum operations ;
(i) establishing the penalties and enforcement mechanisms in respect of
breaches of the regulations issued by the Authority ;
(j) monitoring processes for midstream and downstream petroleum
operations ;
(k) concerning the construction and operation of, and third party access
to, infrastructure for midstream and downstream petroleum operations ;
(l) concerning the production, transportation, and sale of petrochemicals
and lubricants ;
(m) concerning the national strategic stock ;
(n) establishing tariffs for midstream and downstream petroleum
operations ;
(o) concerning domestic natural gas supply and demand;
(p) concerning natural gas trading and export ;
(q) ensuring the continuity and security of the supply of natural gas,
crude oil, and petroleum products to customers ;
(r) concerning rights of way and pertaining to surface rights ;
(s) relating to the retail sale and distribution of petroleum products ;
(t) concerning dispute resolution and customer protection ;
(u) regulating pricing regimes for midstream and downstream petroleum
operations ;
(v) establishing fees payable to the Authority subject to section 3 (1) (j)
of this Act ;
(w) concerning competition and anti-competitive behaviour ;
(x) establishing public and non-public registries in respect of licences,
permits and authorisations issued by the Authority, to be maintained by the
Authority ; and
(y) any other matters as may be determined by the Authority under this
Act which includes imposition of gas flare penalty arising from midstream
operations which shall be for the credit of the Midstream and Downstream
Gas Infrastructure Fund, and shall be utilised for midstream and downstream
gas infrastructure investment within the Host Community of a designated
facility.
Governing 34.—(1) There is established a Governing Board (in this Act referred
Board of the to as “the Board of the Authority”), which shall be responsible for the policy
Authority.
and general administration of the Authority.
(2) The Board of the Authority shall consist of—
(a) one non-executive chairman ;
(b) two non-executive members ;
(c) the Chief Executive of the Authority (in this Act referred to as “the
Authority Chief Executive”) ;
(d) two other executive directors responsible for finance and accounts
and distribution systems, storage and retailing infrastructure ;
(e) one representative of the Commission not below the rank of executive
commissioner ;
(f ) one representative of the Ministry not below the rank of
Director ; and
(g) one representative of the Ministry of Finance not below the rank of
Director.
(3) Appointments to the Board of the Authority under this section
shall be made by the President and be subject to confirmation by the Senate,
except for the appointments of ex-officio members under subsection (2)
(e), (f ) and (g).
(4) A person appointed under subsection (2) (a) and (b) shall have at
least 15 years post-qualification experience in petroleum or other relevant
sector of the economy and shall hold office for a period of five years and may
be re-appointed for a further term of five years, on such terms and conditions
as may be specified in the letter of appointment.
(5) Subject to subsection (4) and section 41 (3) of this Act, a member of
the Board of the Authority shall hold office for five years and may be re-
appointed for a further term of five years.
(6) A non-executive Board member shall hold office on part-time basis.
(7) The Board of the Authority may authorise in writing any executive
director, committee of the Board of the Authority, the Authority Chief Executive
or any other officer or employee of the Authority, to exercise any power or
carry out any duty or function of the Authority under this Act or regulation
made under this Act.
(8) The proceedings of the Board of the Authority and other ancillary
matters shall be as prescribed by regulation made under this Act.
35. The Board of the Authority shall— Functions
of the Board
(a) be responsible for the formulation of policy, supervision and giving of the
strategic direction to the Authority ; Authority.
(b) provide general guidance for the carrying out of the functions of the
Authority ;
(c) review and approve the business, strategic and operating plans of the
Authority ;
(d) consider and approve the annual budget of the Authority before
submission to the National Assembly for appropriation ;
(e) approve the management accounts and audited accounts of the
Authority and consider the management letter from the external auditors ;
(f ) determine the terms and conditions of service of employees of the
Authority ;
(g) recommend remuneration, allowances, benefits and pensions of
employees of the Authority in consultation with the National Salaries,
Incomes and Wages Commission, having regard to the—
(i) specialised nature of work to be performed by the Authority,
(ii) need to ensure the financial self-sufficiency of the Authority, and
(iii) remuneration and allowances paid in the private sector in upstream
petroleum operations to individuals with equivalent responsibilities,
expertise and skills ;
(h) structure the Authority into such number of departments as it deems fit
for the effective performance of the functions of the Authority ; and
(i) performance of other functions as may be necessary for the efficient
and effective administration of the Authority under this Act.
36.—(1) Executive directors of the Authority shall be paid from the Remuneration
funds of the Commission such remuneration and allowances as applicable. and
allowances
(2) The Authority shall comply with the policy and guidelines of the of members
National Salaries, Incomes and Wages Commission regarding remunerations. of the Board
of the
Authority.
37. A member of the Board of the Authority may be suspended or Suspension
removed from office by the President where the member— or removal of
a member of
(a) is found to be— the Board of
the
(i) unqualified for appointment under section 34 of this Act, Authority.
(ii) unqualified subsequent to his appointment, and
Act No 3, (iii) in breach of conflict of interest provisions in the Companies and
2020. Allied Matters Act or any regulation regarding conflicts of interest passed
under this Act ;
the Board of the Authority ;
(c) has demonstrated an inability to effectively discharge the duties of
his office ;
(d) has been absent from the meeting of the Board of the Authority for
three consecutive times without the consent of the Chairman or in the case
of the Chairman, without the consent of the President, except where good
reason is shown for the absence ;
jurisdiction ; or
discharged,
(iii) been declared to be of unsound mind.
Resignation 38. A non-executive member of the Board of the Authority may resign
of a non- his appointment by giving two month’s written notice to the President.
executive
member of
the Board of
the
Authority.
Vacancy on 39. A vacancy on the Board of the Authority shall occur, where a
the Board of member of the Board—
the
Authority. (a) dies ;
(b) is removed from office in accordance with section 37 of this Act ;
(c) resigns from office ;
(d) completes his tenure of office ; or
(e) is incapacitated.
Filling of 40. A vacancy on the Board of the Authority shall be filled by the
vacancy on appointment of another person in accordance with section 34 of this Act.
the Board
of the
Authority.
41.—(1) The Authority Chief Executive is the accounting officer and Authority
shall be responsible for the administration of the affairs of the Authority. Chief
Executive
(2) There shall be seven executive directors for the Authority, whose and
appointments shall comply with the Federal Character Commission Act subject Executive
Directors of
to confirmation by the Senate with each responsible for one of the following— the
(a) Hydrocarbon Processing Plants, Installations and Transportation Authority.
Infrastructure ; Cap. F7,
LFN, 2004.
(b) Distribution Systems, Storage and Retailing Infrastructure ;
(c) Health, Safety, Environment and Community ;
(d) Economic Regulations and Strategic Planning ;
(e) Corporate Services and Administration ;
(f ) Finance and Accounts ; and
(g) Midstream and Downstream Gas Infrastructure Fund.
(3) A person to be appointed as Authority Chief Executive and as an
executive director of the Authority shall have extensive managerial, technical
or professional knowledge of the midstream and downstream petroleum
operations with a minimum of 15 years post-qualification cognate experience.
(4) The Authority Chief Executive shall be appointed on such terms and
conditions as may be set out in the letter of appointment, except as otherwise
(5) An executive director shall be appointed on such terms and conditions
as may be set out in the letter of appointment, except as otherwise provided
for in this Act.
(6) The Authority Chief Executive shall be appointed for an initial term
of five years and may be re-appointed for a further term of five years, subject
to confirmation by the Senate.
(7) The President may, not later than 90 days prior to the expiration of
the tenure of the Authority Chief Executive or an executive director, re-appoint
the Authority Chief Executive or executive director or appoint another qualified
person.
(8) A person shall not be appointed as Authority Chief Executive, where
the person—
(a) is likely to be in breach of conflict of interest provisions under the Act No 3,
Companies and Allied Matters Act or regulation made under this Act ; 2020.
(b) has a financial interest in any business connected, directly or indirectly

(c) is engaged in any activity for remuneration or otherwise connected

(d) is a relative of a person who has an interest or is engaged in any of
the activities under paragraphs (a)-(c), provided that—
(i) such person may be appointed Authority Chief Executive or as an
executive director if he declares his interest and makes appropriate
arrangements to ensure the avoidance of a conflict of interest,
(ii) the President is satisfied that the interest or activity shall not interfere
with the person’s impartial discharge of his duties as the Authority Chief
Executive or as an executive director, or
(iii) the financial interest is terminated prior to the appointment taking
effect ; or
(e) has, under the laws in force in any country—
discharged,
creditors, which has not been rescinded or set aside,
(iii) been declared to be of unsound mind,
(iv) been convicted of any criminal offence by a court of competent
jurisdiction except for traffic offences,
(v) been disqualified, or
(vi) suspended from practising his profession by the order of a competent
authority.
Employees 42. The Board of the Authority shall determine the number of persons
of the that shall be employees of the Authority.
Authority.
Terms and 43.—(1) The employees of the Authority shall be subject to terms and
conditions of conditions set out by the Board of the Authority.
service in the
Authority. (2) The terms and conditions of service referred to in subsection (1)
may provide for—
(a) the appointment, promotion, dismissal and discipline of employees ;
(b) appeals by employees against dismissal or other disciplinary
measures ; and
(c) the grant of pensions, gratuities and other retirement benefits to
employees.
(3) In this section, “appointment” includes secondment, transfer and
contract appointments.
(4) Employees of the Authority shall be “public officers” as defined in Cap. C23,
the Constitution of the Federal Republic of Nigeria, 1999. LFN, 2004.
(5) Employment by the Authority shall be subject to the provisions of the Act No 4,
Pensions Reform Act and officers and employees of the Authority shall be 2014.
entitled to pension and other retirement benefits as prescribed under the
Pensions Reform Act.
(6) Nothing in subsection (5) shall prevent the Authority from appointing
a person to an office on terms that preclude the grant of pension or other
retirement benefits in respect of that office.
44. The Board of the Authority, in consultation with the National Salaries, Remuneration
Incomes and Wages Commission, shall determine and periodically review the and
remuneration and allowances payable to the employees of the Authority, having allowances
of
regard to the— employees
(a) specialised nature of work to be performed by the Authority ; of the
Authority.
(b) need to ensure the financial self-sufficiency of the Authority ; and
(c) remuneration and allowances paid within the petroleum industry to
individuals with equivalent responsibilities, expertise and skills.
45.—(1) The Authority shall, not later than 30th of September of each Statement of
year or such other date that the Minister responsible for Budget and National estimated
income and
Planning may determine, prepare and present to the National Assembly, a expenditure
statement of estimated income and expenditure of the Authority for the next of the
financial year. Authority.
(2) Notwithstanding the provisions of this section, the Authority may

also, in any financial year, submit to the National Assembly supplementary or
adjusted statements of estimated income and expenditure of the Authority.
(3) The financial year of the Authority shall be a period of 12 calendar
months commencing on the 1st of January in each year or such other date as
the Minister of Finance may determine.
46.—(1) The Board of the Authority shall appoint a Secretary, who Secretary
shall— to the
Authority.
(a) be the Legal Adviser to the Authority ;
(b) attend meetings of the Board of the Authority and keep minutes,
corporate records and the common seal of the Authority ; and
(c) carry out such administrative and other secretarial duties as the
Authority Chief Executive and the Board of the Authority may direct.
(2) The Secretary shall be a legal practitioner with a minimum of 10
years post-qualification experience.
Funds of 47.—(1) The Authority shall maintain a Fund (in this Act referred to
the
as “the Authority Fund”) into which money accruing to the Commission shall
Authority.
be paid.
(2) The source of the Authority Fund shall be—
(a) money appropriated by the National Assembly for the Authority ;
(b) fees charged by the Authority for services rendered to licensees,
lessees, permit holders and other authorisations issued by the Authority ;
(c) 0.5% of the wholesale price of petroleum products sold in Nigeria,
which shall be collected from wholesale customers ;
(d) income derived from publications made by the Authority and other
related activities, including data sales ;
(e) fees paid to the Authority for using facilities owned or managed by
the Authority ; and
(f ) money accruing to the Authority by way of grants, aids, gifts,
testamentary dispositions, endowments and contributions.
(3) The Authority Fund shall be applied—
(a) to meet the approved budgetary obligations of the Authority ;
(b) to meet the administrative and operating cost of the Authority ;
(c) to pay salaries, wages, fees or other remuneration or allowances,
pensions and other retirement benefits payable to employees of the
Authority ;
(d) to acquire and maintain any property acquired by or vested in the
Authority ;
(e) for investments, as provided under the Trustee Investments Act or
any other applicable legislation, subject to the approval of Minister responsible
for Finance ; and
(f ) in connection with any of the functions of the Authority under this
Act.
(4) At the end of each financial year, any money that accrued to the
Authority Fund under subsection (2), which have not been utilised for the
purposes provided under subsection (3), shall be paid into the Consolidated
Revenue Fund.
(5) The Authority may accept grants of money or property on such
terms and conditions as may be specified by the person or organisation making
the grant, provided that—
(a) the terms and conditions of the grant are consistent with the objectives
and functions of the Authority ; or
(b) no such grant is accepted from any person or organisation regulated

by the Authority.
(6) Nothing in subsection (6) shall be construed as authorising the
Authority Chief Executive, directors, officer or employee of the Authority to
accept any grant for their personal use.
(7) The Authority shall keep proper accounts of its income and expenditure
for each financial year and cause it to be audited within six months after the
end of each financial year by auditors appointed by the Authority from a list
and in accordance with guidelines supplied by the Auditor-General for the
Federation.
(8) The Authority shall submit to the Minister—
(a) a mid-year report of its operations and finances not later than the
31st of August of each year ;
(b) an annual report of its operations and performance ; and
(c) an audited financial account for the year, not later than 31st of March
of the following year.
(9) The Authority shall, not later than the 31st of March of each year—
(a) submit to the Minister a summary of its annual report and audited
financial accounts ; and
(b) publish the annual report and audited financial accounts on its website.
(10) The provisions of any enactment relating to the taxation of companies
or trust funds shall not apply to the Authority.
48.—(1) Any Government ministry, department or agency exercising Notice to
any power or function or taking any action, which may have direct impact on the
midstream or downstream petroleum operations shall consult with the Authority Authority.
prior to—
(a) issuing any regulation, guideline, enforcement order or directive ;
(b) exercising any such power or function ; or
(c) taking any such action.
(2) The Authority shall review the recommendations of the Government
ministry, department or agency and communicate decision accordingly and
the decision shall be complied with by the relevant Government ministry,
department or agency.
Special 49.—(1) The Authority shall in carrying out its functions under this Act
powers of have special powers to—
the
Authority. (a) inquire, inspect, examine or investigate any business or activity
relating to midstream or downstream petroleum operations under this
Act, where it believes that illegal midstream or downstream petroleum
operations are going on ;
(b) conduct surveillance on petroleum liquids and natural gas installations,
premises and vessels where it believes that illegal midstream or downstream
petroleum operations are going on ;
(c) enter any midstream or downstream wellsite, plant, facility or place—
(i) at which petroleum liquids oil or natural gas is refined, processed,
stored, handled or treated, or
(ii) that is used in connection with any midstream or downstream
wellsite, plant, facility or place where petroleum liquids or natural gas
are refined, processed, stored, handled or treated ;
(d) enter at any reasonable time premises containing any records or
property required to be maintained under this Act or related to the
administration of midstream or downstream petroleum operations under
this Act for the purpose of inspecting those records or that property ;
(e) require any person or his agent, representative, partner, director, officer
or employee engaged in midstream or downstream petroleum operations
to—
(i) answer any question that may be relevant to the inquiry, inspection,
examination or investigation, and
(ii) provide any required information contained in a computer hardware
or software or any other data storage, processing or retrieval device or
system used in connection with the business or activities relating to
midstream or downstream petroleum operations under this Act ;
(f ) take any sample or carry out any test or examination as it may
consider necessary in the performance of its functions ;
(g) use any midstream or downstream machinery, equipment, appliance
or thing as it may consider necessary in the performance of its functions ;
(h) remove for examination and copy anything that may be relevant to
the inquiry, inspection, examination or investigation, including removing any
computer hardware or software or any other data storage, processing or
retrieval device or system ;
(i) in conjunction with the Nigeria Police or other law enforcement
agencies, arrest with a warrant, any person reasonably believed to have
committed an offence under this Act ; and
(j) exercise any other power that may be conferred on it under any law
or regulation.
or employee of that entity or person under investigation by the Authority shall—
(a) grant access to officers of the Authority with regard to any place,
wellsite, plant, facility, midstream or downstream machinery, equipment,
appliances or things that may be relevant to the investigation ; and
(b) provide on request, any book, account, record, document, voucher,
information and explanation relating to midstream or downstream petroleum
operations as the officers of the Authority may require.
or employee of that entity or person who fails to comply with subsection (2)
commits an offence and is liable on conviction to—
(a) a minimum fine of N5,000,000 or a term of imprisonment for five
years, and
(b) in the case of a continuous offence, to an additional minimum fine of
N100,000 for each day during which the offence continues.
(4) The Authority shall in the exercise of its powers under this section
avoid undue hindrance of entities and persons engaged in lawful midstream or
downstream petroleum operations.
50. The special powers of the Authority under section 49 of this Act Special
shall be performed by the Special Investigation Unit of the Authority or any Investigation
person authorised by the Authority. Unit.
51.—(1) The Authority Chief Executive, a director or any officer of the Indemnity
of officers
Authority shall each be indemnified out of the Authority Fund against any
of the
liability incurred in defending any proceeding against the Authority or brought Authority.
against him in his official capacity.
(2) Notwithstanding the provisions of subsection (1), the Authority shall
not indemnify the Authority Chief Executive, a director or any officer of the
Authority for any liability incurred as a result of wilful misconduct or gross
negligence.
52.—(1) There is established the Midstream and Downstream Gas The
Infrastructure Fund subject to appropriation by the National Assembly, which Midstream
and
shall be—
Downstream
(a) a body corporate with perpetual succession and a common seal ; and Gas
Infrastructure
(b) reside in the Authority as prescribed in accordance with this Act. Fund.
(2) The Midstream and Downstream Gas Infrastructure Fund shall have
the power to acquire, hold and dispose of property, sue and be sued in its
corporate name.
(3) There shall be a Governing Council which shall supervise and make
investment decisions for the Fund.
(4) The Governing Council shall comprise the—
(a) Minister, who shall be the Chairman of the Council ;
(b) representative of the Central Bank of Nigeria not below the rank of
a director ;
(c) representative of the Ministry of Finance not below the rank of a
director ;
(d) Authority Chief Executive ;
(e) Executive Director Midstream and Downstream Gas Infrastructure
Fund ;
(f ) three independent members, who shall be appointed by the President
for a term of four years and may be reappointed for another four years and
no more ; and
(g) Legal Adviser of the Authority who shall serve as the Secretary to
the Governing Council.
(5) The Executive Director, Midstream and Downstream Gas
Infrastructure Fund shall—
(a) have extensive managerial, technical or professional knowledge
of the midstream petroleum operations, and fund management or any
other relevant industry with a minimum of 15 years’ post-qualification
experience ; and
(b) be responsible for project management and administration of the
Midstream and Downstream Gas Infrastructure Fund.
(6) The members referred to in subsection (4) (f) shall have extensive
managerial, technical or professional knowledge of the midstream petroleum
operations, fund management or any other relevant industry with a minimum
of 15 years post-qualification cognate experience.
(7) The source of the Midstream and Downstream Gas Infrastructure
Fund shall be—
(a) 0.5% of the wholesale price of petroleum products and natural
gas sold in Nigeria, which shall be collected from wholesale customers
and such levy shall be in addition to the levy provided for under
section 47 (2) (c) ;
(b) funds and grants accruing from multilateral agencies, bilateral institutions
and related sources dedicated partly or wholly for the development of
infrastructure for midstream and downstream gas operations in Nigeria ;
(c) interest, if any, payable in respect of money in the Midstream and
Downstream Gas Infrastructure Fund ;
(d) money received from gas flaring penalties by the Commission under
section 104 (4) of this Act, shall be for the purpose of environmental
remediation and relief of the host communities of the settlor on which the
penalties are levied ; and
(e) any other sum, freely donated or accruing to the Midstream and
Downstream Gas Infrastructure Fund for development of infrastructure in
midstream gas operations.
(8) The Authority shall ensure the prompt payment of all such sums
directly into the Midstream and Downstream Gas Infrastructure Fund’s
Account.
(9) The levy under section 52 (7) (a) of this Act shall become due within
21 days of the sale of petroleum products and natural gas sold in Nigeria, and
the Authority shall, after consultation with the Council, make regulations for—
(a) administration procedures ; and
(b) penalties for—
(i) late payment of the levy,
(ii) non-payment of the levy, or
(iii) submission of false information in respect of the levy.
(10) The purpose of the Fund shall be to make equity investments of
Government owned participating or shareholder interests in infrastructure
related to midstream and downstream gas operations aimed at—
(a) increasing the domestic consumption of natural gas in Nigeria in
projects which are financed in part by private investment ;
(b) encouraging private investment through risk sharing by
participating initially in selected high risk projects and in such other
equity investments that encourage investment in midstream and
downstream gas infrastructure ; and
(c) reducing or eliminating gas flare.
(11) There shall be a Transaction Advisor, who shall be responsible for
providing transaction advisory services, including technical and commercial
evaluation of proposals, defining project screening criteria and profitability
target for projects and any other duty as may be assigned by the Council on
behalf of the Fund.
(12) The Transaction Advisor shall be selected on need basis through a
competitive and transparent criteria specified by the Council and the selection
process shall be managed by the Executive Director, Midstream and
Downstream Gas Infrastructure Fund subject to the approval of the Council.
(13) The Transaction Advisor shall, in performing his duties under
subsection (11), submit report of his findings and recommendations to the
Council.
(14) The Midstream and Downstream Gas Infrastructure Fund shall be
managed as follows—
(a) the Council shall at the beginning of every financial year, approve
the Midstream and Downstream Gas Infrastructure Fund’s programme of
action with its cost implications and the Accountant-General of the Federation
shall release the approved amount for that financial year, subject to
appropriation by the National Assembly ;
(b) the money in the Midstream and Downstream Gas Infrastructure
Fund’s Account that is not utilised as prescribed under this Act shall be held
or invested as the Council may direct ;
(c) an annual statement of the Midstream and Downstream Gas
Infrastructure Fund shall be prepared and submitted to the Council and
Minister of Finance after three months of the end of the financial year to
which they relate ;
(d) a certified annual audited accounts of the Midstream and Downstream
Gas Infrastructure Fund, together with a report on the operations of the
Midstream and Downstream Gas Infrastructure Fund, shall be submitted
to the Council within six months of the end of the financial year to which
they relate ; and
(e) a certified annual audited accounts of the Midstream and Downstream
Gas Infrastructure Fund shall be published annually.
(15) Earnings, interest and other income accruing from the equity
investment made under subsection (10) shall be paid directly to the Midstream
and Downstream Gas Infrastructure Fund’s Account.
(16) Interest and other incomes accruing from the equity investment of
the Midstream and Downstream Gas Infrastructure Fund can be re-invested
in other secured low risk investments as approved by the Governing Council.
(17) The members of the Governing Council shall be paid such
allowances from the funds of the Midstream and Downstream Gas
Infrastructure Fund in accordance with the approved guidelines by the Revenue
Mobilization, Allocation and Fiscal Commission.
PART V—THE NIGERIAN NATIONAL PETROLEUM COMPANY LIMITED

53.—(1) The Minister shall within six months from the commencement Nigerian
of this Act, cause to be incorporated under the Companies and Allied Matters National
Petroleum
Act, a limited liability company, which shall be called Nigerian National
Company
Petroleum Company Limited (NNPC Limited). Limited.
(2) The Minister shall at the incorporation of NNPC Limited, consult with Act No 3,
the Minister of Finance to determine the number and nominal value of the shares 2020.
to be allotted, which shall form the initial paid-up share capital of NNPC Limited
and the Government shall subscribe and pay cash for the shares.
(3) Ownership of all shares in NNPC Limited shall be vested in the Eighth
Government at incorporation and held by the Ministry of Finance Incorporated Schedule.
and the Ministry of Petroleum Incorporated in equal portions on behalf of the
Federation and the Ministry of Petroleum Incorporated is incorporated under
the provisions of the Eighth Schedule to this Act.
(4) The Ministry of Finance Incorporated and the Ministry of Petroleum
Incorporated in consultation with the Government, may increase the equity
capital of NNPC Limited.
(5) Shares held by the Government in NNPC Limited are not transferable
including by way of sale, assignment, mortgage, or pledge unless approved by
the Government and endorsed by the National Economic Council on behalf of
the Federation.
(6) Notwithstanding any provision to the contrary in the Companies and Act No 3,
Allied Matters Act and except by way of security, any sale or transfer of shares 2020.
of NNPC Limited shall be at a fair market value and subject to an open,
transparent and competitive bidding process and the sale or transfer of the
shares of NNPC Limited shall be on equal proportion basis of shares held by the
Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated.
(7) NNPC Limited and any of its subsidiaries shall conduct their affairs
on a commercial basis in a profitable and efficient manner without recourse to
government funds and their memorandum and articles of association shall
state these restrictions, and NNPC Limited shall operate as a Companies and Act No 3,
Allied Matters Act entity, declare dividends to its shareholders and retain 20% 2020.
of profits as retained earnings to grow its business.
(8) Where NNPC Limited has a participating interest or 100% interest
in a lease or licence, NNPC Limited shall pay its share of all fees, rents,
royalties, profit oil shares, taxes and other required payments to Government
as any company in Nigeria.
Transfer of 54.—(1) The Minister and the Minister of Finance shall within 18 months
assets and of the effective date determine the assets, interests and liabilities of NNPC to
liabilities.
be transferred to NNPC Limited or its subsidiaries and upon the identification,
the Minister shall cause such assets, interests and liabilities to be transferred
to NNPC Limited.
(2) Assets, interests and liabilities of NNPC not transferred to NNPC
Limited or its subsidiary under subsection (1), shall remain the assets,
interests and liabilities of NNPC until they become extinguished or transferred
to the Government and six months following the determination under section
54 (1) of this Act, the Minister, the Minister of Finance and the Attorney-
General of the Federation shall develop a framework for the payment of the
liabilities not transferred to NNPC Limited and if such determination of
which assets, interests and liabilities to be transferred has not been concluded
within the stipulated period of 18 months, all the assets, interests, liabilities
of NNPC is deemed to be transferred to NNPC Limited after 18 months
from the effective date.
(3) NNPC shall cease to exist after its remaining assets, interests and
liabilities other than its assets, interests and liabilities transferred to NNPC
Limited or its subsidiaries under subsection (1) shall have been extinguished
or transferred to the Government.
(4) Bonds, hypothecations, securities, deeds, contracts, instruments,
documents and working arrangements with regards to assets, interests or
liabilities transferred to NNPC Limited or any of its subsidiary under subsection
(1) and which remains subsisting before the date of transfer shall, beginning
from the date of transfer, be effective and enforceable against or in favour of
NNPC Limited.
(5) Any pending action or proceeding brought by or against NNPC before
the transfer date with regard to assets, interests or liabilities transferred to
NNPC Limited under subsection (1) may be enforced or continued by or
against NNPC Limited as the successor of NNPC.
(6) Notwithstanding the provisions of subsection (5)—
(a) an action or proceeding shall not be commenced against NNPC
Limited, its subsidiary, director, officer, employee or agent with regard to
asset, interest or liability of NNPC Limited, where the time for commencing
the action or proceeding would have expired had such asset, interest or
liability not been transferred to NNPC Limited or its subsidiaries; and
(b) the transfer of asset, interest and liability of NNPC to NNPC Limited
under subsection (1) shall not create or be deemed to have created a new
cause of action in favour of a—
(i) creditor of NNPC, or

(ii) party to a contract, agreement or arrangement with NNPC that Second
was entered into before the date of transfer. Schedule.
(7) For the purpose of this section and the Second Schedule to this Act,
“assets, interests and liabilities” means tangible, intangible, real or personal
property, rights and obligations, in each case of all types.
(8) Subject to any arrangements that NNPC has entered into, any debt
to NNPC related to outstanding cash calls under joint venture agreements
shall become debt of—
(a) NNPC Limited where the assets have been transferred to NNPC
Limited under subsection (1) ; and
(b) Government where the assets have not been transferred under
subsection (2).
(9) The initial capitalisation of NNPC Limited shall be not less than its
financial requirements to effectively discharge its commercial role and deal
with its obligations and liabilities transferred to NNPC Limited.
55.—(1) The Minister shall upon incorporation of NNPC Limited, consult Appointment
with the Minister of Finance to appoint NNPC Limited as agent of NNPC for of NNPC
the purpose of managing the process of winding down the assets, interests Limited as
agent of
and liabilities of NNPC. NNPC.
(2) Subject to the appointment under subsection (1), the NNPC Limited
shall have the power to deal with the applicable assets, interests and liabilities
of NNPC and may enter into contract with third parties on such assets, interests
and liabilities.
(3) Pursuant to the appointment under subsection (1), NNPC shall—
(a) not deal with the applicable assets, interests and liabilities;
(b) at the request of NNPC Limited execute and deliver any
document and do such other acts or things as may be required by
NNPC Limited with regard to any asset, interest or liability referred
to under subsection (1) ; and
(c) pay a nominal fee of US $1 to NNPC Limited as administrative
charges on the applicable assets, interests and liabilities to which NNPC
Limited has been appointed under subsection (1).
(4) The cost of winding down the assets, interests and liabilities of NNPC
shall be borne by the Government.
(5) A cause of action shall not arise in tort, contract or otherwise between
NNPC and NNPC Limited in respect of the applicable assets, interests or
liabilities to which NNPC Limited has been appointed as agent under
subsection (1).
Subsistence 56. Subject to section 92 (3) (a) of this Act, any guarantee granted or
of guarantee. issued by the Government with regard to the transfer of liability of NNPC to
NNPC Limited under section 54 of this Act shall be enforceable against the
Government as if such liability was a liability of NNPC, provided that such
guarantee was effective prior to such transfer.
Transfer of 57.—(1) Upon incorporation of NNPC Limited under section 53 of this
employees Act, employees of NNPC and its subsidiaries shall be deemed to be employees
and of NNPC Limited on terms and conditions not less favourable than that enjoyed
conditions
of service. prior to the transfer of service and shall be deemed to be service for
employment related entitlements as specified under any applicable law.
(2) NNPC Limited shall continue to fulfil the statutory obligations of
NNPC in relation to the pension scheme of employees of NNPC and its
subsidiaries prior to the date of incorporation of NNPC Limited.
The Board 58. There shall be a Board of the NNPC Limited which shall perform
of NNPC its duties in accordance with this Act, the Companies and Allied Matters Act
Limited. and the articles of association of NNPC Limited.
Act No 3,
2020.
Composition 59.—(1) Except as set out in this section, the composition of the Board
of the Board of the NNPC Limited shall be determined in accordance with the Companies
of NNPC
and Allied Matters Act and its Articles of Association.
Limited.
Act No 3, (2) The Board of NNPC Limited shall be appointed by the President
2020. and composed of—
(a) a non-executive chairman ;
(b) the Chief Executive of NNPC Limited ;
(c) the Chief Financial Officer of NNPC Limited ;
(d) a representative of the Ministry of Petroleum, not below the rank of
a director ;
(e) a representative of the Ministry of Finance, not below the rank of a
director ; and
(f ) six non-executive members with at least 15 years post-qualification
cognate experience in petroleum or any other relevant sector of the economy
one from each geopolitical zone.
(3) A person to be appointed as the Chief Executive of NNPC Limited
shall have extensive managerial, technical and professional knowledge in the
petroleum or other relevant industry with at least 15 years’ post-qualification
experience.
(4) In the absence of the Chairman, the members of the Board of NNPC
Limited may appoint a non-executive member of the Board to act as alternate
Chairman.
(5) The provisions of this section shall apply where NNPC Limited
remains wholly-owned by the Government and where NNPC Limited is not
wholly owned by Government, the composition of the Board of NNPC Limited
shall be determined by the shareholders of NNPC Limited in accordance with
the provisions of the Companies and Allied Matters Act and the articles of Act No 3,
association of NNPC Limited. 2020.
60.—(1) The Board of NNPC Limited shall, within three months of the Committees
incorporation of NNPC Limited, develop formal and transparent process for of the Board
of NNPC
the creation of its committees and nomination of members of the Board of
Limited.
NNPC Limited to the committees.
(2) The mandate, composition and procedures of each committee of the
Board of NNPC Limited shall be comprehensive and open for inspection by
the shareholders of NNPC Limited.
(3) The Board of NNPC Limited shall nominate non-executive members
of the Board capable of exercising independent judgment to its committees
where there is likelihood of conflict of interest.
(4) The Board of NNPC Limited shall have committees for—
(a) ensuring the integrity of financial and non-financial reporting ;
(b) the nomination of Board of NNPC Limited members and key
executives ;
(c) remuneration of members of the Board of NNPC Limited ; and
(d) any other committee as the Board of NNPC Limited may consider
appropriate.
61.—(1) Members of the Board of NNPC Limited shall discharge their Application
responsibilities in accordance with the highest standards, practices and principles of principle
of corporate
of corporate governance. governance.
(2) The Board of NNPC Limited shall, upon request by one or more of
shareholders holding not less than 10% of the voting interests in NNPC Limited,
provide a comprehensive written explanation of any action or decision taken
by the Board of NNPC Limited to its shareholders, provided that the Board of
NNPC Limited may withhold the explanation if permitted under a duty of
confidentiality NNPC Limited owed to any third party.
Annual audit 62.—(1) NNPC Limited shall ensure that an annual audit of NNPC
of NNPC Limited is conducted by an independent, competent, experienced and qualified
Limited. auditor.
(2) The auditor of NNPC Limited shall provide an external and objective
assurance to the Board of NNPC Limited and shareholders of NNPC Limited
that the financial statements of NNPC Limited fairly represent the financial
position and performance of NNPC Limited.
(3) Where the auditor of NNPC Limited is unable to provide the assurance
required under subsection (2), the Board of NNPC Limited shall immediately
convene an extraordinary general meeting of the company to—
(a) notify the shareholders of NNPC Limited ; and
(b) consider any action that may be necessary in that regard.
Responsibilities 63.—(1) The Board of NNPC Limited shall, in addition to its
of the Board responsibilities under the Companies and Allied Matters Act and its articles of
of NNPC
association—
Limited.
Act No 3, (a) be responsible for the strategic guidance and determining the business
2020. structure of NNPC Limited ;
(b) be responsible for the approval of the annual budget of NNPC
Limited ;
(c) act in good faith and exercise due diligence and care in the best
interests of NNPC Limited, the shareholders and the sustainable
development of Nigeria ;
(d) apply the highest ethical standards in performing its duties, taking
into account the interests of its stakeholders and the fiduciary duty of the
directors to NNPC Limited ;
(e) make decisions guided by commercial and technical considerations
that represents good international petroleum industry practices ;
(f ) determine and report to the shareholders of NNPC Limited on key
performance indicators on at least annual basis ;
(g) review and guide corporate strategy, major plan of action, risk policy
and business plan ;
(h) set performance objectives for NNPC Limited, the Board of NNPC
Limited, members of NNPC Limited’s management and individual business
units and subsidiaries of NNPC Limited ;
(i) monitor NNPC Limited’s corporate performance;
(j) oversee major capital expenditures, acquisitions and divestitures ;
(k) monitor the effectiveness of NNPC Limited’s governance practices
and propose and implement changes ;
(l) select, compensate, monitor and replace management executives and
oversee succession plan ;
(m) align key executive and Board of NNPC Limited remuneration
with the longer term interests of NNPC Limited, its shareholders and
stakeholders ;
(n) monitor and address potential conflicts of interest of management
and members of the Board of NNPC Limited and breach of fiduciary duty
by members of the Board of NNPC Limited ;
(o) ensure the integrity of NNPC Limited’s accounting and financial
reporting systems, including audit of NNPC Limited’s accounts by
independent third party ;
(p) ensure that appropriate system of control is in place for risk
management, financial and operational control and compliance with
applicable law and relevant standards ;
(q) oversee the process of disclosure and communications to shareholders
and the public ; and
(r) determine the dividend policy of NNPC Limited, ensure sustained
growth and a sound financial base for NNPC Limited .
(2) The provisions of this section shall be incorporated into the
memorandum and articles of association of—
(a) NNPC Limited at the time of its incorporation ; and
(b) each of the NNPC Limited’s wholly-owned subsidiaries as if
references in this section to ‘NNPC Limited’ were references to such
wholly-owned subsidiary.
(3) A member of the Board of the NNPC Limited shall be suspended or
removed from office by the President, where the member—
(a) is found to be—
(i) unqualified for appointment under section 59 of this Act,
(ii) unqualified subsequent to his appointment, or
(iii) in breach of conflict of interest provisions in the Companies and Act No 3,
Allied Matters Act or any regulation regarding conflicts of interest passed 2020.
under this Act ;
the Board of the NNPC Limited ;
(c) has demonstrated an inability to effectively perform the duties of his
office ;
(d) has been absent from the meeting of the Board of the NNPC Limited
for three consecutive times without the consent of the Chairman or in the
case of the Chairman, without the consent of the President, except where
good reason is shown for the absence ;
jurisdiction ; or
discharged,
(iii) incapable to discharge the duties of his office as a result of infirmity
of body or mind.
Objectives 64. The objectives of NNPC Limited shall include to—
of NNPC
Limited. (a) carry out petroleum operations on a commercial basis, comparable
Act No. 14,
to private companies in Nigeria carrying out similar activities including
2007. exemption to Public Procurement Act, Fiscal Responsibility Act and Treasury
Act No. 31,
Single Account.
2007. (b) NNPC Limited to be vested as the concessionaire of all Production
Sharing Contracts (PSC), Profit Sharing and Risk Service Contracts as the
National oil company on behalf of the Federation in line with its competencies;
(c) lift and sell royalty oil and tax oil on behalf of the Commission and the
Service respectively for an agreed commercial fee and in the case of profit
oil and profit gas payable to the concessionaire, NNPC Limited shall promptly
remit the proceeds of the sales of the profit oil and profit gas to the Federation
less its 30% for management fee and Frontier Exploration Fund as specified
in section 9 (4) of this Act ;
(d) carry out test marketing to ascertain the value of crude oil and report
to the Commission ;
(e) be vested with the rights to natural gas under production sharing
contracts entered into prior to and after the effective date of this Act ;
(f ) carry out the management of production sharing contracts for a
fee, based on the profit oil share or profit gas share in accordance with
paragraph (c) ;
(g) with respect to any joint operating agreement in which NNPC is a
party on the effective date assume the working interest held by NNPC
irrespective of whether such licence or lease is converted under section 92
of this Act ;
(h) engage in the business of renewables and other energy
investments ;
(i) promote the domestic use of natural gas through development and
operation of large-scale gas utilisation industries ;
(j) maintain the role of NNPC, under section 54 of this Act ;
(k) carry out task requested by the Commission or Authority on a fee
basis and generally engage in activities that ensure national energy security
in an efficient manner, in the overall interest of the Federation ;
(l) carry out such other tasks as may be determined by the Board of
NNPC Limited ; and
(m) make NNPC Limited supplier of last resort for security reasons and
all associated costs shall be for the account of the Federation.
65.—(1) NNPC Limited and other parties to joint operating agreements Establishment
in respect of upstream petroleum operations, may on a voluntary basis of
incorporated
restructure their joint operating agreement as a joint venture carried out by joint venture
way of a limited liability company, each referred to as an “incorporated joint companies.
venture company” (IJVC), based on the principles established in the Second Second
Schedule to this Act. Schedule.
(2) The IJVC referred to in subsection (1) shall not be subject to the Act No 31,
provisions of the Fiscal Responsibility Act and the Public Procurement Act. 2007.
Act No 14,
(3) The proposed IJVC structure shall be an independent entity, having a 2007.
strong commercial orientation and transparent company operation for the IJVC
shareholders, with clear rules for accountability.
CHAPTER 2—ADMINISTRATION
PART I—GENERAL ADMINISTRATION
66.—(1) The objectives of Chapter 2 are to— Objectives.
(a) promote the exploration and exploitation of petroleum resources in

Nigeria for the benefit of the Nigerian people ;
(b) promote the efficient, effective and sustainable development of the
(c) promote the safe and efficient operation of the transportation and
distribution infrastructure for the petroleum industry ;
(d) provide the framework for developing third party access arrangements
to petroleum infrastructure ;
(e) encourage and facilitate both local and foreign investment in the
(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
(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 67. The administration and management of petroleum resources and
of their derivatives shall be conducted in accordance with this Act and the
petroleum
principles of good governance, transparency and sustainable development of
resources.
Nigeria.
PART II—ADMINISTRATION OF UPSTREAM PETROLEUM

OPERATIONS AND ENVIRONMENT
Administra- 68.—(1) Title to any data and its interpretation relating to upstream
tion of petroleum operations are vested in the Government of the Federation of Nigeria
acreage and
vesting of
and shall be administered by the Commission.
data. (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—
(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 Surveyor- National
General of the Federation, adopt a national grid system for acreage grid system.
management.
(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 Licences and
related to upstream petroleum operations— leases.
(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
(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, (2) A licence or lease may be granted under this Act only to a company
2020. incorporated and validly existing in Nigeria under the Companies and Allied
Matters Act.
Petroleum 71.—(1) The Commission shall be responsible for granting of petroleum
exploration exploration licences.
licence.
(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.
(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 Petroleum
the fulfilment of obligations imposed by this Act, have— prospecting
licence.
(a) exclusive right to drill exploration and appraisal wells and non-
exclusive 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.
(6) Notwithstanding the provisions of this section, a petroleum prospecting

licence may also be granted under section 93 of this Act.
Bidding 73.—(1) Subject to the provisions of sections 71 (5), 74 (3), 81 (1) and
process. 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 74.—(1) The grant of a petroleum prospecting licence or a petroleum
process. 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
(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 Licensing
licence for the petroleum prospecting licence or model lease for the petroleum round
guidelines.
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.
Model 76. The model licence or model lease for each bid round shall reflect
licence and the conditions of the licensing round guidelines for the bid round and shall
model lease.
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 77.—(1) A petroleum prospecting licence for onshore and shallow water
area of acreages shall be for a duration of not more than six years, comprising of an
petroleum initial exploration period of three years and an optional extension period of
prospecting
licence. 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 78.—(1) A petroleum prospecting licence shall contain a requirement
commitment, that the licensee commit to a work programme and such other terms and
commercial conditions as the Commission shall determine.
discovery
and (2) A licensee shall, during the initial exploration period and the optional
significant extension period provided for in a petroleum prospecting licence, commit to
gas
discovery. 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.
(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.
(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 79.—(1) Where a licensee under a petroleum prospecting licence
discovery declares a commercial discovery under section 78 (8) (a) of this Act, the
and field
licensee shall within two years of the declaration, submit to the Commission a
development
plan. 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 ;
(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 Act No 2,
Oil and Gas Industry Content Development Act ; 2010.
(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.
(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.
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
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 81.—(1) A petroleum mining lease shall be granted for each commercial
mining discovery of crude oil or natural gas or both, to the licensee of a petroleum
leases.
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.
(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.
(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 82.—(1) A lessee under a petroleum mining lease shall have the exclusive
right to right to carry out the development and production of the petroleum with respect
conduct
operations.
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 non-
exclusive 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
Confidentia- 83.—(1) A licensee or lessee shall for each petroleum prospecting licence
lity. 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.
(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.
(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 84.—(1) Unless otherwise prohibited by this Act or regulation under this
enter into Act, where the Minister grants a licence or lease, a licensee or lessee may
contracts.
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 85.—(1) The Commission shall develop a model licence and model lease,
contracts. 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.
(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 Duration and
shall be for a maximum period of 20 years, which term shall include the renewal of
development period prescribed under subsection (4). leases and
licences.
(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
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 87.—(1) A lessee of a petroleum mining lease may, not less than 12
for renewal months before the expiration of the lease, apply in writing to the Commission
of
for a renewal, of leased area or any part of it.
petroleum
mining (2) A petroleum mining lease shall be renewed by the Commission where
leases.
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.
(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 Relinquish-
years or of the optional extension period of three years under section 77 (1) of ment.
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.
(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
89.—(1) Notwithstanding the provisions of this Act on relinquishment, a
of licence
or lease. 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 90. Subject to applicable law, terms and conditions prescribed by the
way relating Commission, a holder of a petroleum prospecting licence, petroleum exploration
to upstream licence or petroleum mining lease is entitled with the approval of the Commission
petroleum
operations. 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.
91.—(1) Subject to subsection (2), the Commission may preserve in Rights of
accordance with applicable law, a right of way, easement or other right over way reserved
an area to which a petroleum prospecting licence, a petroleum exploration for the
Commission.
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.
(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 Voluntary
lease may enter into a voluntary conversion contract under this Act. conversion
of an oil
(2) A licensee or lessee under a conversion contract shall benefit from prospecting
the fiscal provisions under Chapter 4 of this Act, where the licensee or lessee licence to a
complies with the provisions of this Act. petroleum
prospecting
(3) The conversion contract shall contain a termination clause of all licence or oil
outstanding arbitration and court cases related to the respective oil prospecting mining lease
to petroleum
licence or oil mining lease and— mining lease.
(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 Cap. P13,
Petroleum Profit Tax Act shall not apply. LFN, 2004.
(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.
Relinquish- 93. (1) A holder of oil mining lease, including oil mining lease that is
ment upon subject to production sharing contract, shall at the renewal date applicable to
renewal or
the oil mining lease or at the conversion date, designate each area and zone of
conversion
of an oil the oil mining lease as areas and zones—
mining lease. (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
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—
(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 94.—(1) A producing marginal field shall be allowed to continue to
field. 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 regulations, farm out the discovery ; or
(c) relinquish the field in accordance with the provisions of this Act.
(5) The consent of the Commission to the farm-out of a marginal field
under subsection (4) (b) shall, amongst others, be subject to the farmee
presenting a field development plan over a period of time agreed with the
Commission and a regulation made under this Act.
(6) The failure to present a field development plan under section 94 (4)
(a) of this Act or within the time frame specified under section 94 (5) of this
Act shall require the relinquishment of the marginal field.
(7) A marginal field relinquished under subsection (4) (c) or (6) shall be
vested in the Government and be administered by the Commission.
(8) For the purpose of this section—
(a) “marginal field” means a field or discovery which has been declared
a marginal field prior to 1st January 2021 or which has been lying fallow
without activity for seven years after its discovery prior to the effective
date ; and
(b) “farm-out” means an agreement between the holder of a petroleum
mining lease or petroleum prospecting licence and a third party, which
permits the third party to explore, prospect, win, work and carry away any
petroleum encountered in a licence or lease area during the validity of the
licence or lease.
(9) No new marginal fields shall be declared under this Act.
95.—(1) A holder of a petroleum prospecting licence or petroleum mining Assignments,
lease shall not assign, novate or transfer his licence or lease or any right, mergers,
transfers
power or interest, or a shareholder of an incorporated joint venture shall not
and
sell or transfer its shares without prior written consent of the Minister. acquisitions.
(2) The consent of the Minister under subsection (1) shall be granted
upon the recommendation of the Commission.
(3) For the purpose of subsection (1), a change of control in the holder of
a licence or lease under subsection (1) shall be deemed to be an assignment.
(4) A licensee or lessee wishing to assign, novate or otherwise transfer
its interest, or a shareholder of an incorporated joint venture wishing to sell or
transfer its shares under subsection (1), shall make an application for approval
of the transfer to the Commission in the format prescribed by the Commission,
and be accompanied with any other information that may be pursuant to any
regulations published by the Commission.
(5) Notwithstanding the provisions of subsection (1), a holder of a licence
or lease may by way of security, wholly or partly assign, pledge, mortgage,
charge or hypothecate its interests under the applicable licence, lease or grant
a security interest in respect of the interest, provided that the consent of the
Commission shall be obtained.
(6) The Commission shall within 60 days of the receipt, act on the
application of the licensee or lessee under subsection (4) and on the request
for consent under subsection (5) and the consent of the Commission with
respect to subsection (5) shall not be unreasonably withheld.
(7) Within 60 days of the receipt of the recommendation of the Commission
under subsection (4), the Minister shall consider it for approval, such approval
not to be unreasonably withheld, and where—
(a) the Minister rejects the recommendation of the Commission, the
Minister shall provide the reason for such rejection ; and
(b) no response on the application has been received within 60 working
days from the receipt of the recommendation of the Commission, the consent
of the Minister under subsection (1) shall be deemed to have been granted.
(8) Where the consent of the Minister is granted in respect of the
application for a transfer, the Commission shall promptly record the transfer
in the appropriate register.
(9) The Commission shall communicate the refusal or approval of an
application for an assignment, novation or transfer of a licence or lease in
writing to the applicant.
(10) Where the application for an assignment or a transfer of a petroleum
prospecting licence or petroleum mining lease is refused, the Commission
shall inform the applicant of the reasons for the refusal and may give reasonable
time within which further representations may be made by the applicant or by
third parties in respect of the application.
(11) The Minister may grant consent to an assignment, novation or transfer
of a petroleum prospecting licence or petroleum mining lease, subject to the
following terms and conditions which the Commission may consider appropriate,
that the proposed transferee—
(a) is a company incorporated in Nigeria ;
(b) is of good reputation and standing ;
(c) has sufficient technical knowledge, experience and financial resources
to enable it effectively carry out all responsibilities of a licensee or lessee
under the licence or lease ; and
Act No 1, (d) shall comply with the Federal Competition and Consumer Protection
2018. Act.
(12) The Commission shall make regulation to prescribe for payment of
fees as a condition for any transaction under subsection (1), which fee shall
be based on a percentage of the value of the transaction and shall not be tax
deductible.
(13) The consummation and details of any transaction to which subsection
(1) applies shall be—
(a) fully disclosed to the Federal Inland Revenue Service by the parties
to the transaction ; and
(b) published in the Federal Government Gazette by the Commission.
(14) For the purpose of this section, “change of control” means any
person or persons acting jointly or in concert, to acquire direct or indirect
beneficial ownership of a percentage of the voting power of the outstanding
voting securities of the holder, by contract or otherwise, that exceeds 50% at
any time.
(15) A holder of a petroleum exploration licence shall not assign, novate
or transfer his licence or any right, power or interest without prior written
consent of the Commission.
96.—(1) Upon receipt of the written recommendation of the Commission Grounds for
for revocation, the Minister may revoke a petroleum prospecting licence or revocation of
petroleum mining lease, where the applicable licensee or lessee— licence or
lease.
(a) fails to conduct petroleum operations in accordance with good
international petroleum industry practices, the provisions of this Act and
any other relevant legislation ;
(b) interrupts production for a period of over 180 consecutive days without
justification or as provided for in the applicable licence, lease or approved
field development plan, provided that an event of force majeure shall be an
acceptable justification for interruption ;
(c) fails to fulfil the terms and conditions of the applicable licence or
lease or the approved field development plan ;
(d) fails to pay to Government, as they become due, rents, royalties,
taxes or other payments or production shares under this Act ;
(e) fails to furnish any reports or data on operations as required by law
after having been advised in writing by the Commission of such failure ;
(f ) assigns, novates or otherwise transfers any interest in the applicable
licence or lease other than in accordance with section 95 of this Act ;
(g) has obtained an interest, in the applicable licence or lease based on
false representation or contrary to corrupt practices and money laundering
laws ;
(h) is declared by a court of competent jurisdiction to be insolvent,
bankrupt or is liquidated, in each case except as part of a solvent plan or
scheme of re-organisation, amalgamation or arrangement ;
(i) has failed to comply with environmental obligations required by
applicable law or by the provisions of the applicable licence or lease ;
(j) is owned wholly or in part, directly or indirectly or is controlled by a
former or serving public official or member of the Government, who obtained
his interest in the applicable licence or lease other than as permitted by
applicable law ;
(k) does not submit and advance a field development plan and work
commitment under sections 78 and 79 of this Act ;
(l) fails to abide by any expert determination, arbitration award or
judgment arising from the dispute resolution provisions set forth in a licence,
lease or this Act ;
(m) fails to comply with domestic crude oil supply or domestic gas delivery
obligations under this Act and any subsidiary regulation ; or
(n) fails to comply with the host communities obligations under this Act.
(2) Subsection (1) (j) shall apply to a former public official or member of
Government only where the applicable interest was acquired while the public
official was in office or was a member of the Government.
Notice 97.—(1) Prior to the revocation of a petroleum prospecting licence or
of default petroleum mining lease by the Minister under section 96 of this Act, the
prior to Commission shall—
revocation.
(a) serve a notice of default on the applicable licensee or lessee stating
the grounds upon which the Commission may recommend a revocation of
the licence or lease to the Minister ; and
(b) provide the licensee or lessee with a remediation period of not less
than 60 days within which to remedy the default.
(2) Where the Commission is satisfied with the remedy provided by the
licensee or lessee under subsection (1) (b), the revocation process shall
terminate.
(3) Where, at expiration of the remediation period provided under
subsection (1) (b), the default persist, the licence or lease may subject to the
provisions of section 99 of this Act, be revoked in accordance with section 96
of this Act.
(4) A notice of default shall be—
(a) sent by the Commission to the last known address of the licensee or
lessee or its legal representative in Nigeria, or
(b) published in the Federal Government Gazette or on the website of
the Commission,
each of which shall constitute sufficient notice to the licensee or lessee of the
notice of default.
(5) Revocation of a petroleum prospecting licence or petroleum mining
lease shall be without prejudice to any—
(a) liability or obligation which the licensee or lessee may have incurred
in favour of the Commission, the Government or any third party ; or
(b) claim, which the Commission, the Federal Government or any third
party may make against the licensee or lessee.
(6) A revocation decision shall be published in the Federal Government
Gazette and the Commission shall amend relevant registers maintained by it
to reflect the revocation.
98.—(1) Within 30 days of the revocation of a petroleum mining lease Administration
or participating or shareholder interest in a petroleum mining lease which is of a revoked
producing
producing, the Minister may, on the recommendation of the Commission, appoint
lease.
an interim operator to ensure petroleum operations continue from the areas
and zones subject to the petroleum mining lease based on good international
petroleum industry practices.
(2) The interim operator appointed under subsection (1) shall serve for
a period to be determined by the Commission and the related contract shall be
on a service fee basis.
(3) During the tenure of an interim operator, the Commission may conduct
a fair, transparent and competitive bidding process for the grant of a new
petroleum mining lease to replace the revoked petroleum mining lease.
99.—(1) Where two or more persons are holders of a petroleum Power of
prospecting licence or petroleum mining lease and one or more of the revocation of
participating
grounds for revocation set forth in section 96 of this Act applies to not all
or
of the holders, the Minister— shareholders
(a) may, in accordance with section 96 of this Act, revoke the interest.
participating or shareholders interest of the holder or holders to which
the grounds apply ; and
(b) shall not revoke the interests of the other holder or holders to which
the grounds do not apply.
(2) A holder to which the grounds apply under subsection (1) (a) is
referred to as a “defaulting holder” and a holder to which the grounds do not
apply under subsection (1) (b) is referred to as a “non-defaulting holder”.
(3) Upon a revocation of an interest under subsection (1) (a), the rights
of the defaulting holder shall cease without prejudice to any obligation or liability
incurred or imposed on the defaulting holder under the terms and conditions of
the licence or lease prior to the time of the revocation.
(4) The interests of each non-defaulting holder shall not be affected by
a revocation of the interest under subsection (1) (b) and the non-defaulting
holders shall take such measures as provided for under the joint operating
agreement or shareholder agreement to redistribute the revoked participating
or shareholder interest to the non-defaulting holders or third parties.
(5) Where subsection (1) applies, an assignment to a third party may
require the approvals stipulated under this Act and any replacement of the
operator will require the approval of the Commission.
(6) The Minister may revoke a licence or lease, where a non-defaulting
holder under subsection (1) (b), fails to—
(a) take responsibility for the payment of rents, royalties, taxes, production
shares, profit shares or other contractual payments to Government of the
defaulting holder under the licence or lease ; or
(b) comply with any other obligation under the licence or lease in a
manner that may result in the revocation of the licence or lease under section
96 of this Act.
Fees, 100.—(1) A holder of a petroleum prospecting licence or petroleum
royalties, mining lease shall pay to the Government royalties, fees, rents and production
rents and or profit shares in the amount and time as prescribed in the licence or lease
other
payments to under this Act and regulations made by the Commission.
Government. (2) Where royalties, fees, rents, production or profit shares or other
required payment to Government due under this section remains unpaid for a
period of 30 days after the date when it becomes due for payment, it shall be
considered as a debt to the Commission with interest accruing at a prevailing
Central Bank of Nigeria (CBN) rate to be provided for in a regulation issued
by the Commission.
(3) The Commission may, after the 30 days period referred to under
subsection (2) and until the debt is repaid, together with accrued and unpaid
interest—
(a) enter into and upon any land, property or premises owned, possessed
or occupied by the holder of the licence or lease ;
(b) seize, distrain and sell any petroleum, petroleum products, engines,
machinery, tools, implements or other effects belonging to the holder of the
licence or lease, and the costs incurred by the Commission in connection
with the seizure, distress and sale shall be added to the debt ; and
(c) out of money arising from the sale of any item referred to in paragraph
(b), pay off the debt and any surplus shall be paid by the Commission to the
holder of the licence or lease.
(4) Payment to Government referred to under this section shall not be
waived or discounted.
(5) Nothing in this section shall be interpreted as to reduce or amend the
provisions of section 96 (1) (d) of this Act.
101.—(1) A licensee or lessee shall not enter upon, occupy or Damage to
exercise any of the rights or powers conferred by its licence or lease in protected
and
relation to any—
venerated
(a) area held to be sacred, the question as to whether the area is sacred or objects.
not shall be decided by the customary court of the area, where necessary ;
(b) part of the following relevant areas, except it obtains a written
permission from and subject to conditions as may be imposed by the
Commission, any part—
(i) set apart for, used or appropriated or dedicated to public purposes,
(ii) occupied for the purposes of the Government of the Federation or
a State,
(iii) situate within a township, town, village, market, burial ground or
cemetery,
(iv) which is the site of or is within 50 yards of any building, installation,
water reservoir, dam, public road or tramway or which is appropriated
for or situate within 100 metres of any railway, or
(v) of the land under cultivation ;
(c) any part consisting of privately owned or legally occupied land other
than private land falling under paragraph (b) except permission in writing to
do so has been obtained by the licensee or lessee from the Commission,
which may grant permission if the licensee or lessee has—
(i) given previous notice in writing to the Commission specifying by
name or other sufficient designation and by quantity, the land proposed
to be occupied and the purpose for which it is required, and
(ii) paid or tendered to the person in lawful occupation or the owner
or owners of the land fair and adequate compensation ; and
(d) dispute under paragraph (c) as to who is in lawful occupation or the
owner of any land or as to the amount of any compensation payable, the
licensee or lessee, pending the determination of the dispute, shall deposit
with the Federal High Court, with jurisdiction over the matter, such sum as
shall be determined by the Federal High Court to be reasonable compensation
payable to the rightful owner or occupier of the land, having due regard to
the existing regulatory framework.
(2) A person shall not, in the course of petroleum operations—
(a) injure or destroy any tree or object which is—
(i) of commercial value, or
(ii) the object of veneration to the people resident within the licence
or lease area ;
(b) damage or destroy any building or property ; or
(c) disturb or damage the surface of the land or any other rights to any
person who owns or is in lawful occupation of the surface area covered by
the licence or lease.
(3) A licensee or lessee who causes damage under subsection (2) shall
pay fair and adequate compensation to the persons or communities directly
affected by the damage or injury.
(4) The amount of compensation payable under subsections (1) (c) (ii)
and (3) shall be determined by the Commission and prescribed by regulation
(5) Where a licensee or lessee fails to pay compensation as prescribed
under subsection (4) within 30 days, the Commission may apply sanctions in
accordance with regulations made under this Act.
Environmental 102.—(1) A licensee or lessee who engages in upstream and midstream
management. petroleum operations shall within—
(a) one year of the effective date, or
(b) six months after the grant of the applicable licence or lease,
submit for approval an environmental management plan in respect of projects
which require environmental impact assessment to the Commission or Authority,
as the case may be.
(2) The environmental management plan under subsection (1) shall be in
accordance with the extant Acts.
(3) The Commission or Authority, as the case may be, shall approve the
environmental management plan, where—
(a) it complies with relevant environmental Acts ; and
(b) the applicant has the capacity or has provided for the capacity to
rehabilitate and manage negative impacts on the environment.
(4) The Commission or Authority, as the case may be, shall in considering
the environmental management plan, take into account the policy thrust of the
Government regarding environmental protection and management practices.
(5) The Commission or Authority, as the case may be, may request for
additional information from the licensee or lessee and may direct that the
environmental management plan be adjusted in a manner the Commission or
Authority may require.
(6) The Commission or Authority, as the case may be, may after its
approval of an environmental management plan and after engagement with
the operator of a licence or lease, call for an amendment of the environmental
management plan.
(7) Chemicals shall not be utilised for upstream petroleum operations,
except the Commission grants an applicable permit and approval.
103.—(1) As a condition for the grant of a licence or lease and prior to Financial
the approval of the environmental management plan by the Commission or contribution
Authority, a licensee or lessee shall pay a prescribed financial contribution to for
remediation
an environmental remediation fund established by the Commission or Authority, of
as the case may be, for the rehabilitation or management of negative environmental
environmental impacts with respect to the licence or lease. damage.
(2) In determining the amount of the financial contribution, the

Commission or Authority as the case may be, shall take into consideration the
size of the operations and the level of environmental risk that may exist.
(3) The financial contribution to an environmental remediation fund under
subsection (1) shall be subject to audit by the licensee or lessee, in accordance
with guidelines that the Commission or Authority may, as the case may be, issue.
(4) Where licensee or lessee fails to rehabilitate or manage or is unable
to undertake the rehabilitation or management of any negative impact on the
environment, the Commission or Authority, as the case may be, may, upon
written notice to the holder, apply the fund under subsection (1) to rehabilitate
or manage the negative environmental impact.
(5) A licensee or lessee shall, under subsections (1) and (2) assess its
environmental liability annually and increase its financial contribution to the
satisfaction of the Commission or Authority, as the case may be.
(6) Where the Commission or Authority, as the case may be, is not
satisfied with the assessment and financial contribution referred to in this
section, the Commission or Authority, as the case may be, may appoint an
independent assessor to conduct the assessment and determine the financial
contribution.
Gas flaring 104.—(1) A licensee, lessee or marginal field operator that flares or
penalties. vents natural gas, except —
(a) in the case of an emergency,
(b) pursuant to an exemption granted by the Commission, or
(c) as an acceptable safety practice under established regulations,
commits an offence under this Act and is liable to a fine as prescribed by the
Commission in regulations under this Act.
(2) A fine due under this section shall be paid in the same manner and be
subject to the same procedure for the payment of royalties to the Government
by companies engaged in the production of petroleum.
(3) A fine paid under this section shall not be eligible for cost recovery or
be tax deductible.
(4) Money received from gas flaring penalties by the Commission under
this section, shall be for the purpose of environmental remediation and relief
of the host communities of the settlors on which the penalties are levied.
Prohibition 105.—(1) A licensee or lessee shall pay a penalty prescribed pursuant
of flaring or to the Flare Gas (Prevention of Waste and Pollution) Regulations.
venting of
natural gas. (2) The Commission shall have the right to take free of charge natural
gas that is destined for flaring at the flare stack.
Measurement 106.—(1) A licensee shall, prior to the commencement of petroleum
of flared production, install metering equipment conforming to the specifications
natural gas. prescribed on every facility from which natural gas may be flared or vented
as the Commission or the Authority may prescribe in a regulation.
(2) A licensee or lessee who fails or refuses to install metering equipment
under subsection (1) commits an offence and is liable to a fine as the Commission
or the Authority may prescribe under a regulation.
Exemption. 107. The Commission or the Authority may grant a permit to a licensee
or lessee to allow the flaring or venting of natural gas for a specific period—
(a) where it is required for facility start-up ; or
(b) for strategic operational reasons, including testing.
Natural gas 108. Notwithstanding any provision to the contrary under this Act, a
flare licensee or lessee producing natural gas shall, within 12 months of the effective
elimination
plan.
date, submit a natural gas flare elimination and monetisation plan to the
Commission, which shall be prepared in accordance with regulations made by
the Commission under this Act.
109.—(1) The supply of crude oil and condensates for the domestic Domestic
market shall, subject to subsection (2), be on a willing supplier and willing crude oil
buyer basis. supply
obligations.
(2) The Commission may issue regulations or guidelines on the mechanism
for the imposition of a domestic crude oil supply obligation on lessees of upstream
petroleum operations, including applicable penalties.
(3) The Authority shall supply the Commission on a regular basis the
crude oil requirements of refineries in operation and where shortages or
inadequate supply conditions occur report such conditions to the Commission.
(4) The Commission shall ensure that the domestic crude oil supply
obligation contains the following, that—
(a) crude oil may only be sold to holders of crude oil refining licences,
whose refineries are in operation ;
(b) the supply of crude oil shall be commercially negotiated between
the lessee and the crude oil refining licensee, having regard to the prevailing
international market price for similar grades of crude oil ; and
(c) holders of crude oil refining licences shall provide payment guarantees
as required by the applicable lessee, and payment for crude oil purchased
pursuant to obligations shall be in US dollars or Naira, as may be agreed
between the lessees or suppliers and the licensee of the refining licence.
110.—(1) Subject to subsections (2) and (4), the Commission shall, by a Domestic
regulation or guideline made under this Act,— gas delivery
obligations.
(a) prescribe and allocate the domestic gas delivery obligation among
all lessees before 1st March of each year based on the domestic gas demand
requirements determined or updated under section 173 of this Act ; and
(b) ensure compliance by every lessee of the domestic gas delivery
obligation.
(2) A lessee may, on a voluntary basis, conclude contracts with wholesale
customers of the strategic sectors or with wholesale gas suppliers supplying
the strategic sectors for delivery of marketable natural gas on a free market
basis to these customers or suppliers and notify the Commission of the contracts
and where the volume of the contracts is equal to or higher than the domestic
gas delivery obligation for the lessee, the lessee shall—
(a) be deemed to have fulfilled its domestic gas delivery obligation ;
(b) not be a producer client of the gas aggregator ; and
(c) inform the gas aggregator.
(3) A lessee who has complied with its domestic gas delivery obligation
or may wish to supply wholesale customers who are not part of the strategic
sectors may deliver further supplies of marketable natural gas to the domestic
market on a willing seller and willing buyer basis.
(4) A wholesale gas supplier may, on a voluntary basis and following the
procedure stipulated under subsection (2)—
(a) enter into a contract with a lessee or wholesale customer of the
strategic sectors for the delivery of marketable natural gas to the
customers ; and
(b) inform the Commission and Authority of the contracts.
(5) The Commission shall require a lessee producing natural gas to
carry out works and operations which may be required to increase production
and to dedicate specific volume of the natural gas produced towards the
requirements of the domestic market.
(6) The volume of natural gas to be dedicated by a lessee towards the
domestic gas delivery obligation shall be based on an allocation system among
lessees as determined by the Commission upon consultation with the Authority
with consideration of supporting infrastructure availability.
(7) A lessee shall be obliged to deliver the volume of natural gas prescribed
under subsection (6) to a wholesale customer determined by the domestic gas
aggregator and at a location indicated by the domestic gas aggregator under
section 156 of this Act.
(8) Subject to the provisions of subsection (7), a lessee who fails to
comply with the domestic gas delivery obligation shall incur a penalty of US
$3.50 per MMBtu not delivered, provided that, where the lessee has signed a
gas purchase and sale agreement with a wholesale supplier of the strategic
sectors, the penalty for failure to deliver shall be as stated in that agreement.
(9) The penalty amount of US $3.50 per MMBtu referred to under
subsection (8) may be adjusted as the Commission may prescribe in a regulation
(10) A lessee shall not incur a penalty prescribed under subsection (8),
where it can establish that its failure to comply is as a result of—
(a) force majeure ;
(b) the inability of a purchaser to accept allocated natural gas volumes ;
(c) the inability to transport the allocated natural gas for reasons beyond
the control of the lessee ; or
(d) the failure of a purchaser to pay for allocated natural gas volumes.
(11) The Commission shall discontinue the imposition of domestic gas
delivery obligations, where the Authority has determined under section 167
(3) of this Act that the natural gas market has attained full market status.
(12) Upon being allocated the volumes to be supplied under the domestic
gas supply obligation under subsection (1), the lessee shall submit a marketable
natural gas production and supply plan consistent with these obligations to the
Authority.
(13) A producer-customer of the domestic gas aggregator shall pay
compensation to customer-client for any loss suffered as a result of default to
supply marketable natural gas in accordance with a gas purchase order issued
by the domestic gas aggregator.
(14) A lessee who does not comply with the domestic gas delivery
obligation as directed by the Commission shall—
(a) in addition to the penalties provided under subsection (8), not be
entitled to supply natural gas to any new midstream gas export operations,
provided that this provision shall not apply to gas sales agreements already
entered into ; and
(b) where the lessee is supplying natural gas to midstream gas export
operations, the Commission may impose other sanctions as are prescribed
in a regulation made under this Act.
(15) An approval for the supply of natural gas for export projects shall,
from the effective date, be subject to prior compliance by the lessee with its
domestic gas delivery obligation.
(16) Domestic gas delivery contracts entered into by lessees or licensees
prior to the effective date and continuing after the effective date, shall be
counted towards their domestic gas delivery obligation under this section.
PART III—GENERAL ADMINISTRATION OF MIDSTREAM

111.—(1) The Authority may grant, renew, modify or extend individual Matters
licences or permits, provided that, where it relates to the establishment of relating to
refineries the licence shall be issued by the Minister on the recommendation licence
applications.
of the Authority.
(2) The Authority shall only grant a licence for midstream or downstream
petroleum operations, where—
(a) it meets the technical standards required for petroleum operations
based on good international petroleum industry practices ;
(b) the location and size of the area occupied by the facilities or right of
way is acceptable to the Authority ;
(c) it meets the health, safety and environmental standards, as determined
by the Authority ; and
(d) it provides for the efficient and economic use of facilities and
pipelines.
(3) The Authority shall only grant a licence for midstream petroleum
operations where it—
(a) does not involve excessive capital or operating expenditures ;
(b) includes an acceptable environmental management plan under section
102 of this Act ;
(c) includes a decommissioning and abandonment plan and a
decommissioning and abandonment fund that complies with sections 232
and 233 of this Act ;
(d) provides for the elimination of routine natural gas flaring ;
(e) does not relate to midstream petroleum operations that would conflict
with a licence already granted ; and
(f ) 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.
(4) An application for the grant, renewal or extension of a licence or
permit shall—
(a) be made to the Authority in the form and manner prescribed by
regulation ;
(b) be accompanied by the payment of a prescribed fee, where applicable,
together with information or documents as prescribed in the regulations
under this Act ; and
(c) include a decommissioning and abandonment plan, where the licence
contemplates the construction of pipelines, storage tanks, processing or
other facilities.
(5) The Authority may furnish an applicant for the grant, renewal or
extension of a licence or permit, with non-confidential information as may be
necessary to facilitate the filing of the application.
(6) An applicant for a licence or permit, who is an affiliate of a body
corporate that has applied for or holds any other licence or permit shall disclose
such relationship to the Authority in its application.
(7) The Authority shall consider information presented in respect of an
application for a licence or permit, including representations from interested
parties in favour of or against the granting, extension or renewal of the licence
or permit and shall inform the applicant of its decision within 90 days of the
application.
(8) Where the Authority has decided to grant a licence or permit, it shall
publish a notice of its decision in the form and manner prescribed in regulations
issued by the Authority.
(9) Where the Authority decline an application, it shall inform the applicant
of its refusal of the application, reasons for the refusal and may state a
reasonable time within which the applicant may make further representations.
(10) The Authority shall consider any representation made by an applicant
for a licence or permit on the refusal of an application, where such representation
involves new information not previously considered.
(11) The Authority shall not consider further application or representation
made by an applicant in respect of a refusal of an application previously
considered and rejected by the Authority.
(12) An applicant that is not satisfied with the reasons given by the
Authority for refusal of an application may apply to the Federal High Court
for a judicial review.
112.—(1) The Authority shall publish a notification of any application Advertisement
made for the grant of a licence or renewal under this Part in a manner prescribed of licence
applications.
by a regulation under this Act.
(2) Upon the publication of the notification of the application referred to
under subsection (1), interested parties may comment or make representations
to the Authority in respect of the application in accordance with the time
prescribed by regulation under this Act.
(3) Upon the grant or renewal of a licence, the Authority shall publish
notification of the grant or renewal in the form and manner prescribed by
regulation under this Act.
113.—(1) The Authority shall make regulations and guidelines for the Licensing
grant or renewal of licence for midstream and downstream petroleum regulations.
operations.
(2) The Authority shall in consultation with the Commission ensure the
implementation of the domestic crude oil supply obligation and domestic gas
delivery obligation.
(3) The Authority shall ensure third party access to facilities and pipelines
for midstream and downstream petroleum operations where such facilities
and pipelines are operated for the own account of the licensee and shall ensure
open access where the facilities and pipelines are operated by the licensee on
an open access basis.
(4) The Authority shall encourage third party investment in facilities and
pipelines for midstream and downstream petroleum operations.
(5) The Authority may make regulations on tariffs, which shall be
consistent with the tariff methodology set out in this Act.
(6) The Authority may make such other regulations consistent with the
regulatory functions of the Authority under section 32 of this Act.
Conditions 114.—(1) Conditions in a licence or permit issued under this Act may
in licences or require the holder of a licence or permit to—
permits.
(a) comply with any directions of the Authority in relation to matters
specified in the licence or permit ;
(b) undertake or refrain from anything specified in the licence or permit ;
(c) secure the approval of the Authority prior to undertaking anything
specified in the licence or permit ;
(d) comply with relevant industry codes, standards and market rules ;
(e) undertake its activities subject to the prescribed tariffs or tariff
methodology ;
(f ) provide relevant information to the Authority ;
(g) prepare and submit to the Authority true, fair and sufficient annual
statements in such form, and particulars as the Authority may require ;
(h) make available to the Authority such books as may be requested by
authorised officers of the Authority ;
(i) impose restrictions on the disposal of assets ;
(j) adhere to undertakings made within a business plan submitted as part
of the application process ;
(k) prepare and submit to the Authority such information and periodical
reports as the Authority may require ;
(l) publish terms of access to its transportation or distribution pipeline or
petroleum liquids or gas transportation networks as the case may be ; and
(m) operate its licence or permit and related facilities, if any, according
to the standard of a reasonable and prudent operator.
(2) The duration of a licence or permit shall be specified by regulations
made under this Act and the conditions applicable to the licence or permit may
cease to have effect or be modified in accordance with terms specified in the
licence or permit.
(3) A licence or permit of the same class granted by the Authority, shall
contain similar conditions representing standard conditions for that class and
any difference in the conditions in the licence or permit shall only be for good
reasons, which shall be published in the Federal Government Gazette.
(4) Subject to this Act, the Authority shall have power to include special
conditions specific to a particular licence or permit or to a holder of the licence
or permit, provided that the special conditions are designed to meet specific
circumstances and shall not be a disadvantage to another holder of a licence
or permit.
(5) The Authority may specify in a licence or permit a date on which
activities shall commence.
(6) The Authority may provide that an activity be exclusive for all or
part of the period of the licence or permit for a—
(a) specific purpose ;
(b) specified geographical area and route ; or
(c) combination of paragraphs (a) and (b).
115.—(1) A licence or permit shall be issued subject to compliance by Compensation
the applicant with the provisions of the Land Use Act in respect of compensation for
acquisition
for acquisition of land for midstream and downstream petroleum operations.
of land.
Cap. L5,
LFN, 2004.
(2) The Governor of a State of which land is required for carrying out operations Cap. L5,
or activities subject to a licence or permit may issue a certificate of occupancy LFN, 2004.
under the Land Use Act in respect of the land and in accordance with existing
state law.
116. A holder of a licence or permit shall not discriminate against General
customers, classes of customers or their related undertakings in respect of non-
access, tariffs, prices, conditions or standards of service, except for justifiable discrimination
provisions.
and identifiable differences regarding matters such as quantity, transmission
distance, length of contract, load profile, interruptible supply or other
distinguishing features approved by the Authority.
Assignment 117.—(1) A holder of a licence or permit shall not, without the prior
or transfer of written consent of the Authority, assign or transfer its licence or permit or any
licence or
right or obligation arising from the licence or permit.
permit.
(2) An application for assignment or transfer of a licence or permit shall be
made to the Authority, which may require the applicant to publish a notice of the
application in the form, manner and time prescribed by regulation under this Act.
(3) The Authority shall, in the determination of whether a licence or
permit is to be assigned or transferred,—
(a) follow the same procedure with appropriate modifications ;
(b) apply the same rules and criteria ;
(c) consider the same issues as if the party to whom the licence or
permit is being assigned or transferred is applying for a new licence or new
permit ; and
(d) consider the representations made to it by third parties in respect of
the application.
(4) The Authority shall, subject to subsection (3), communicate in writing,
its approval or refusal of an application for assignment or transfer of a licence
or permit within the time prescribed by regulation under this Act.
(5) Where the Authority does not approve or refuse an application and
fails to communicate its decision to an applicant for the assignment or transfer
of a licence or permit within the prescribed time, the application shall be deemed
to be approved.
(6) Where the Authority refuses the grant of an application for an
assignment or a transfer of a licence or permit, it shall communicate to the
applicant the reason for the refusal and shall give reasonable time within which
further representation may be made by the applicant or by a third party in
respect of the application.
(7) Where the Authority grant consent to an assignment or transfer of a
licence or permit, it shall notify the applicant in writing, subject to any condition
it may consider appropriate.
Suspension 118.—(1) The Authority may suspend or amend the conditions applicable
and to a licence or permit or include additional conditions subject to subsection (2).
amendment
of conditions (2) The Authority shall not suspend or amend any condition applicable
in a licence to a licence or permit or include additional conditions to a licence or permit
or permit. unless it gives the holder—
(a) a written notice of its intention and a draft copy of the proposed
suspension or amendment ; and
(b) an opportunity to make a written submission to the Authority within
the time specified by regulation.
(3) The procedure for the suspension or amendment of a condition in a
licence or permit shall be as prescribed by the Authority in a regulation under
this Act.
(4) A holder of a licence or permit who is dissatisfied with the decision
of the Authority to suspend or amend a condition in a licence or permit may
apply to the Federal High Court against the decision.
119.—(1) The holder of a licence or permit may, upon an application in Surrender of
the form, manner and meeting any condition prescribed by the Authority in a licence or
regulation made under this Act surrender the licence or permit, where— permit.
(a) the licenced or permitted activity is no longer required ;

(b) the licenced or permitted activity is not economically justifiable ;
(c) another qualified person is willing and able to assume the rights and
obligations of the holder of the licence or permit in accordance with the
requirements and objectives of this Act ; and
(d) applicable, the holder of the licence or permit has complied with the
requirements of the law in respect of relinquishment, decommissioning and
abandonment of installations and reclamation of land.
(2) A holder of the licence or permit who has commenced activities and
has ongoing operations shall, except a shorter period is stipulated in the licence
or permit, give the Authority a minimum of 12 months’ notice in writing of its
intention to cease its activities.
(3) The form and procedure to be followed in surrendering a licence or
permit under subsection (2) shall be as prescribed by regulation.
120.—(1) Notwithstanding the provisions of Chapter 2 of this Act related Grounds for
to midstream and downstream petroleum operations, a licence or permit may the
revocation of
be revoked, where—
a licence or
(a) the holder becomes insolvent, bankrupt, enters into an agreement or permit.
composition with its creditors or takes advantage of any enactment for the
benefit of the debtors or goes into liquidation, except as part of a scheme
for an arrangement or amalgamation ;
(b) upon the transformation or dissolution of the company or corporation,
except it is for the purpose of amalgamation or reconstruction, provided
that the prior written consent of the Authority has been obtained ;
(c) a holder of a licence or permit fails to commence activity within the
timeframe prescribed in the licence or permit ;
(d) the holder of a licence or permit fails to comply with applicable laws
and regulations on terms and conditions of its licence or permit ;
(e) the holder interrupts midstream or downstream petroleum operations
for a period of more than 180 consecutive days without justification as
provided for in the licence or permit, the acknowledgement of an event of
force majeure, shall be an acceptable justification for interruption ;
(f ) the holder assigns or transfers any interest in the licence or permit
without obtaining the prior written consent of the Authority ;
(g) the holder has acquired the licence or permit based on false
representation or contrary to corrupt practices and money laundering laws ;
(h) the holder has failed to comply with environmental obligations as
required by law or the provisions of the licence or permit ;
(i) the holder is owned wholly or in part, directly or indirectly or is
controlled by a former or serving public official or member of the
Government, who obtained his interest in the applicable licence or lease
other than as permitted by applicable law ; and
(j) the holder fails to abide by any expert determination, arbitration award
or judgment arising from the dispute resolution provisions set forth in a
licence or this Act.
(2) Subsection (1) (i) shall apply to a former public official or member of
Government only where the applicable interest was acquired while the public
official was in office or was a member of the Government.
Notice of 121.—(1) Prior to a decision by the Authority to revoke a licence or
default prior permit under section 120 of this Act, the Authority shall—
to
revocation. (a) serve a notice of default on the holder setting forth in reasonable
detail the default of the holder ; and
(b) give the holder 60 days within which to remedy the default.
(2) Where the Authority is satisfied with the remedy of the holder under
subsection (1) (b), the revocation process shall terminate.
(3) Where, at the expiration of 60 days, the holder fails to remedy the
default, the licence or permit shall be terminated.
(4) A notice of default shall be—
(a) sent by the Authority to the last known address of the holder of
licence or permit or its legal representative in Nigeria, or
(b) published in the Federal Government Gazette or on the website of
the Authority,
each of which shall constitute sufficient notice to the holder of licence or
permit of the notice of default.
(5) Revocation shall be without prejudice to any—
(a) liabilities which the holder may have incurred ; or
(b) claim, which the Authority, the Government or any third party may
make against the holder of licence or permit.
(6) A revocation decision shall be published in the Federal Government
Gazette and the Authority shall amend relevant registers maintained by it to
reflect the revocation.
122.—(1) The Authority shall, in exercising its powers of commercial Tariff
regulations, be guided by the following principles in designing a pricing principles.
framework for transportation, distribution and processing petroleum tariffs—
(a) for transportation, distribution and processing of petroleum shall be
on a cost-reflective basis ;
(b) charged shall permit a reasonable return for licensees on their
investments ;
(c) shall not discriminate between customers with similar characteristics
under section 116 of this Act ; and
(d) shall be determined in US Dollars or other foreign currency as
applicable with a view to attracting foreign investment to midstream and
downstream petroleum operations, provided that payments of the tariffs
may be made in the respective foreign currency or equivalent value of
Naira at the open market rate published by the CBN as applicable under
the regulations.
(2) The tariff methodology for tariffs related to new gas transportation
pipelines, gas distribution networks and facilities requiring a gas processing
licence shall include, that—
(a) tariffs shall be determined in US Dollars, but may be paid in Naira,
where the applicable exchange rate shall be based on the Securities and
Exchange Commission over the counter market rate or any successor rate ;
(b) the capital costs may be recovered in equal installments over a
period as determined by the Authority ;
(c) the after tax rate of return on equity shall be such that it attracts
major investment and the rate of return shall apply during construction ;
(d) where short pipelines connecting producers or consumers to a gas
transport pipeline or gas transport pipeline network and in other justified
cases, the Authority may approve that capital costs be based on 100%
equity, otherwise a reasonable debt or equity ratio shall apply ;
(e) where a debt or equity ratio applies under paragraph (d) of this
subsection, the cost of any interest and financing charges shall be recovered ;
(f ) operating costs, including allocation for overhead and profit margin
on operating costs, shall be recovered and the costs shall be adjusted for
inflation ;
(g) line losses and gas energy use shall be taken into account ;
(h) any applicable tax, levy and duty shall be recovered ;
(i) where capital costs have been fully recovered, the tariff shall no
longer include the items under paragraphs (b), (c) and (d) ; and
(j) tariffs shall be based on the estimated throughput as estimated by the
Authority, notwithstanding the capacity of the gas transportation pipeline, gas
distribution network or processing plant.
(3) The Authority may by regulation modify or provide further detail on
the provisions of subsection (2) and establish more favorable tariffs for credit
worthy shippers willing to commit to long term ship-or-pay agreements
facilitating the financing of the respective pipelines or plants.
(4) The Authority may approve negotiated tariffs where one or more
wholesale customers connect with a pipeline to a transportation network or
transportation pipeline or in other cases where justified in the opinion of the
Authority.
Tariff 123.—(1) Tariffs charged by licensees for the use of any facility or
methodology. infrastructure licenced by the Authority for use in midstream and downstream
petroleum operations shall be set according to one or more tariff methodologies
adopted by the Authority for a particular set of licences, in conformity with
the applicable fiscal regime, provided that the tariff methodologies shall—
(a) allow an operator to recover reasonable cost incurred, benchmarked
against industry best practice and a reasonable return on the capital invested
in the business ;
(b) ensure the efficiency of the business ;
(c) ensure the continued improvement of the quality of services ;
(d) avoid discrimination between customers with similar characteristics,
such as similar size or similar consumption profile under section 116 of this
Act ;
(e) in case of distribution licences, ensure efficient charges relating to
petroleum product or natural gas supply covering Acting, metering and other
services ;
(f ) avoid economic distortions and ensure a competitive market for the
sale and distribution of petroleum products and natural gas in Nigeria ; and
(g) avoid cross-subsidies among different categories of consumers.
(2) Tariffs may differentiate between credit worthy shippers willing to
make long term ship-or-pay agreements facilitating the financing of the pipeline
or plant and other shippers or users.
(3) The Authority shall, prior to establishing a tariff methodology, initiate
and conduct a stakeholders’ consultation in the manner specified in subsection
(5) to consult applicants, operators, consumers, prospective customers,
consumers associations, associations of prospective customers and any other
persons with interest in the subject matter of the proposed tariff methodology.
(4) The Authority may, in establishing a tariff methodology, take into
consideration the submissions of the stakeholders’ consultation referred to in
subsection (3).
(5) Prior to holding a stakeholders’ consultation referred to in subsection
(3), the Authority 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 licensees and 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 Authority would require submissions ;
(f ) the form in which licensees and stakeholders are to make submissions
to the Authority 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.
(6) Notwithstanding the requirements under subsection (3), the Authority
may, due to the exigency of the circumstances, establish a tariff methodology
without conducting a stakeholders’ consultation, where it considers it necessary
to do so.
(7) A tariff methodology made under subsection (6) shall be valid for six
months with effect from its commencement date, except it is confirmed
following a stakeholders’ consultation conducted in accordance with subsections
(4) and (5).
(8) The Authority shall fix a date for which the determined tariff
methodology shall come into effect and shall cause the notice of the
commencement date to be published in at least two national newspapers with
wide coverage and its website.
(9) Where the Authority considers it necessary that an existing tariff
methodology or tariff should be amended, the Authority shall conduct a
stakeholders’ consultation on the proposed amendment in accordance with
subsections (4) and (5).
(10) A person under obligation to set tariffs shall be bound by operative
tariff methodology adopted through the method prescribed in this section.
(11) A holder of a licence engaged in the sale of petroleum products to
retail customers or who is subject to third party access or open access
obligations under this Act, shall display at its office a current copy of the
tariffs applicable to the services provided by the holder.
(12) A holder of a licence shall not pass the costs of any fine or penalty
incurred under this Act or any other law to a consumer.
Approval 124.—(1) A licensee subject to tariff regulation by the authority shall—
and
publication (a) propose tariffs for the approval of the Authority prior to the application
of charging of the charges ;
structures. (b) impose tariffs in accordance with the approval referred to under
paragraph (a) ; and
(c) publish the tariffs as required by the Authority in a manner that
ensures that the customers of the licensees are able to identify and calculate
the charges for which they will become liable.
(2) The Authority shall, within 24 months after the effective date, review,
confirm or modify all applicable tariffs including for licences under sections
125 (6) and 174 (6) of this Act.
PART IV—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM

GAS OPERATIONS
Activities 125.—(1) Except in accordance with an appropriate licence issued by
requiring a the Authority, a person shall not undertake the following activities with respect
licence for to midstream and downstream gas operations—
midstream
and (a) establish, construct or operate a facility for the processing of natural
downstream gas ;
gas
operations. (b) establish, construct or operate a facility for the storage of natural gas ;
(c) establish, construct or operate a gas transportation pipeline ;
(d) engage in bulk transportation of natural gas by rail, barge or other
means of transportation ;
(e) operate a gas transportation network ;
(f ) establish, construct or operate a terminal, jetty, or other facility for
the export or importation of natural gas ;
(g) engage in wholesale gas supply ; or
(h) engage in the construction or operation of petrochemical or fertiliser
plants.
(2) Except in accordance with an appropriate licence issued by the
Authority, a person shall not undertake the following activities with respect to
downstream gas operations—
(a) retail trading, distribution or supplies of natural gas ;
(b) establishment, construction or operation of a gas distribution
network ; or
(c) establishment, construction or operation of a facility for the supply or
trading of natural gas.
(3) The Authority may, by regulation, prescribe additional activities to be
undertaken only on the basis of a licence or permit and shall have power to
issue licences or permits for the activities in accordance with this Act.
(4) Where a person engages in any of the activities set out in subsection
(1), (2) or (3) without a licence or permit, the Authority shall—
(a) seal the premises where the activity is undertaken ;
(b) seize the facilities by which the activities were undertaken ;
(c) confiscate and dispose of equipment or materials employed by the
person in the activity in a manner prescribed by regulations under this Act ;
(d) impose penalties as prescribed by regulations under this Act ; or
(e) impose any combination of the provisions under paragraphs (a), (b),
(c) and (d).
(5) Notwithstanding any provision of this Act, a person who engages in
any of the activities set out in subsection (1), (2) or (3) without a licence or
permit, commits an offence and is liable to imprisonment for a term of—
(a) one year or to a fine prescribed by regulation, in the case of an
activity requiring a licence ; or
(b) six months or to a fine prescribed by regulation, in the case of an
activity requiring a permit.
(6) A holder of a subsisting lease, licence or permit who is engaged in
activities in midstream or downstream gas operations prior to the effective
date shall, within 18 months from the effective date, apply to the Authority for,
and the Authority may issue the appropriate licence or permit, where applicable.
(7) The provisions of subsections (4) and (5) shall not apply to any person
under subsection (6) until the Authority has considered the application and
given a decision.
(8) Where any person, in applying for a licence or permit, knowingly
makes a false or misleading statement, the Authority may —
(a) suspend or revoke the licence or permit ; or
(b) impose a fine on the licensee or permit holder on the basis of the
false or misleading information.
Special 126. In addition to any matter provided under section 113 of this Act,
regulations the Authority may issue regulations with respect to midstream and downstream
for gas operations, which shall include—
midstream
and (a) the establishment and operation of a wholesale natural gas market
downstream scheme to ensure continuity of supply of natural gas to customers, which
gas
operations.
will apply to the owners and operators of gas transportation pipelines, shippers
of natural gas, holders of natural gas storage and distribution licences and
gas retailers ; and
(b) matters ancillary to or consequential on the activities set out in
paragraph (a).
Rights of 127. Subject to applicable law and the terms and conditions prescribed
way relating by the Authority, a licensee or permit holder is entitled to rights of way for the
to
laying, operation and maintenance of pipelines, communication lines and other
midstream
and similar lines through or across the areas the licensee or permit holder may
downstream require for carrying on midstream or downstream gas operations under the
gas licence or permit.
operations.
Surface 128. The Authority may for the purpose of efficiency, preserve in
rights accordance with applicable law, rights of way, easements or other rights over
reserved for
any surface or seabed areas subject to an existing licence or permit, which
the
Authority may be necessary for the laying, operation and maintenance of transportation
relating to pipelines, communication lines, power lines and other similar lines and any
midstream right of way or other rights reserved shall continue for the benefit of any
and entity to whom the Authority may subsequently grant the same for a licence
downstream
gas
or permit.
operations.
Grant of a 129.—(1) Subject to sections 111 and 125 of this Act, the Authority may
gas upon approval of an application and payment of prescribed fees, grant and
processing issue a qualified person a gas processing licence, which shall permit the person
licence.
to install and operate the following facilities, on its own account or on the basis
of open access for customers as stipulated in the licence,—
(a) gas conditioning plants, to condition natural gas removing CO2, H2S
or other impurities ;
(b) gas processing plants, to produce ethane, propane, butane, other
natural gas liquids and marketable natural gas ;
(c) gas to liquids plants ;
(d) liquefied natural gas (LNG) plants ;
(e) ethane extraction plants ; and
(f ) other plants, which in the opinion of the Authority, require a gas
processing licence.
(2) The Authority shall, in considering an application for a gas processing
licence, take into account the economic case for the specific facility as provided
under subsection (1), including the potential demand for its use.
130. The holder of a gas processing licence shall undertake the activities General
contemplated by the licence in a manner that complies with the following duties of the
general obligations— holder of a
gas
(a) to construct, operate and maintain its gas processing equipment and processing
facilities in an economical, safe, reliable and environmentally sustainable licence.
manner ;
(b) shut down its facilities in emergencies and in order to carry out
maintenance or in accordance with curtailment directives issued by the
Authority ;
(c) manage its facilities as a responsible and prudent operator ;
(d) avoid any act or omission that may affect the compatibility of the
processing facility with any natural gas facility or network that is likely to
prejudice the public interest or the integrity of network operations ;
(e) operate the facilities in a manner that results in output of products
with specifications as determined by the Authority ;
(f) to operate its facilities subject to open access commitments as
stipulated in the licence or where the licence is issued for operations on its
own account, provide third party access in an equitable manner ;
(g) treat all customers in a non-discriminatory manner under section 116
of this Act, where the licence is issued on an open access basis ; and
(h) abstain from activities, which in the opinion of the Authority may
prevent, restrict or distort competition.
Conditions 131. A gas processing licence shall, in addition to the conditions that
applicable to may be imposed by the Authority under section 114 of this Act, be deemed to
a gas
processing be granted subject to the condition that—
licence. (a) the holder shall not process natural gas on its own account, where
the licence is issued on an open access basis ;
(b) a licensee operating on its own account, being an affiliate of a lessee,
may own, or the affiliate may own, the natural gas in a gas conditioning
plant or gas processing plant for the purpose of conditioning or processing
natural gas from the fields under lease with the affiliate, subject to such
third party access provisions as may be included in the licence ;
(c) a licensee operating on its own account, who is also a wholesale
customer or a holder of a gas distributor licence, may own the natural gas
in a gas processing plant, ethane extraction plant or other plant requiring a
gas processing licence, where the principal user of the natural gas is the
wholesale customer or gas distributor, subject to any third party access
provisions as may be included in the licence ;
(d) the holder shall conduct its licenced activities safely and reliably in
compliance with any law in force and any prescribed health and safety
regulations, standards and operating procedures made under this or any
other Act ;
(e) the holder shall have regard to the effect of its licenced activities
on the environment and comply with the requirements for environmental
protection, management and restoration under this Act and any law in
force ; and
(f ) the holder shall mark, maintain and secure the boundaries of its
facilities and associated infrastructure constructed under the terms of its
licence and any law in force.
Grant of a 132.—(1) Subject to sections 111 and 125 of this Act, the Authority may
bulk gas upon approval of an application and payment of prescribed fees, grant and
storage
issue a qualified person a bulk gas storage licence authorising the holder to
licence.
undertake the bulk storage of natural gas either for its own account or on
behalf of customers as stipulated in the licence.
(2) The Authority shall, in considering an application for a bulk gas storage
licence, take into account the economic case for a bulk gas storage facility,
including the potential demand for its use.
General 133. The holder of a bulk gas storage licence shall undertake the activities
duties of a contemplated by the licence in a manner that complies with the following
bulk gas general obligations—
storage
licensee.
(a) establish and make available to the public at its offices, the—
(i) procedure and terms for obtaining third party access or throughput
services on an open access basis, and
(ii) method of response to the request for its services ;
(b) construct, operate and maintain its facilities in a safe, economical,
reliable, and environmentally sustainable manner taking into account any
strategic plans formulated by the Authority ;
(c) shut down its facilities in emergencies and in order to carry out
maintenance or in response to curtailment directives issued by the Authority ;
(d) where the licensee operates for its own account, grant to third parties
the right to use or have access to capacity within its facilities for the purpose
of ensuring competitive gas supply ;
(e) consult with and obtain from the Authority written permission prior to
any modification of technical and operational rule of practice concerning
the operation of its facilities ;
(f ) conduct its licenced activities in a non-discriminatory manner under
section 116 of this Act, where the licence is issued on an open access basis ;
(g) manage its facilities as a reasonable and prudent operator ; and
134. In addition to conditions the Authority may impose under section Conditions
114 of this Act, a bulk gas storage licence shall be deemed to be granted applicable to
subject to the conditions that— a bulk gas
storage
(a) a licensee operating on its own account, being an affiliate of a licence.
lessee, may own, or the affiliate may own, the natural gas in the bulk storage
facilities for the purpose of storing natural gas from the fields of the
affiliate, subject to such third party access provisions as may be included
in the licence ;
(b) a licensee operating on its own account, who is also a wholesale
customer or holder of a gas distributor licence, may own the natural gas in
the bulk storage facilities, where the principal user of the natural gas is the
wholesale customer or gas distributor, subject to any third party access
provisions as may be included in the licence ;
(c) the holder conduct its licenced activities safely and reliably in
compliance with any law in force and prescribed health and safety regulations
issued under this or any other Act ;
(d) the holder have regard to the effect of its licenced activities on the
environment and comply with the requirements for environmental protection,
management, and restoration under this Act and any law in force ; and
(e) the holder mark, maintain and secure the boundaries of its facilities
and associated infrastructure constructed under the terms of its licence
and any law in force.
Grant of gas 135.—(1) Subject to sections 111 and 125 of this Act, the Authority
transportation may upon approval of an application and payment of prescribed fees, grant
pipeline
and issue a qualified person a gas transportation pipeline licence with the
licence.
exclusive right to own, construct, operate and maintain a gas transportation
pipeline within a route as defined in the licence for its own account with third
party access provisions or as common carrier as stipulated in the licence.
(2) The Authority shall, in considering an application for a gas
transportation pipeline licence, take into account the economic case for a gas
transportation pipeline, including the potential demand for its use.
General 136. The holder of a transportation pipeline licence shall undertake the
duties of a activities contemplated by the licence in a manner that complies with the
transportation following general obligations—
pipeline
owner. (a) establish and make available to the public at its offices, the—
(i) procedure for obtaining and terminating transmission and
interconnection services for natural gas, on a third party access or open
access basis as determined in the licence and publish the tariffs
established by the Authority, and
(ii) method of response to the request for its service ;
(b) construct, operate and maintain its gas transportation pipeline in a
safe, economical, and reliable manner taking into account any strategic
plans formulated by the Authority ;
(c) meet on a reasonable endeavours basis requests for transportation
above contractual volumes ;
(d) shut down its gas transportation pipeline in emergencies and in order
to carry out maintenance or in response to curtailment directives issued by
the Authority ;
(e) provide access on a non-discriminatory basis under section 116 of
this Act, where the licence is granted on a common carrier basis ;
(f ) consult with and obtain from the Authority written permission prior
to any modification of technical and operational rule of practice concerning
the operation of its pipeline ;
(g) manage its gas transportation pipeline as a reasonable and prudent
operator ;
(h) where the pipeline is operated on a common carrier basis, ensure
development and operation of terms for access to the gas transportation
pipeline in conjunction with the natural gas shipping community and where
applicable comply with the relevant network code ;
(i) where the pipeline is operated for its own account, operate its facilities
subject to third party access obligations under this Act and regulations
prescribed by the Authority ; and
(j) abstain from activities, which in the opinion of the Authority may
137. A gas transportation pipeline licence shall, in addition to the conditions Conditions
that may be imposed by the Authority under section 114 of this Act, be deemed applicable to
to be granted subject to the condition that— a gas
transportation
(a) the holder shall not supply natural gas to customers on its own account pipeline
where the licence is granted on a common carrier basis ; licence.
(b) a licensee operating on its own account, who is an affiliate of a

lessee, may own, or the affiliate may own, the natural gas in a gas
transportation pipeline, for the purpose of—
(i) connecting marketable natural gas produced in a field under a
lease with an affiliate to another gas transportation pipeline or gas
transportation network, and
(ii) transporting natural gas to a plant for conditioning or processing
natural gas from fields under lease with an affiliate,
subject to third party access provisions as may be included in the licence ;
(c) a licensee operating on its own account, who is also a wholesale customer
or holder of a gas distributor licence, may own the natural gas in a gas
transportation pipeline, where it is the principal user of the natural gas, subject
to any third party access provisions as may be included in the licence ;
(d) a licensee operating on its own account, who is also a holder of a
wholesale gas supply licence, may own the natural gas in a gas transportation
pipeline, for the purpose of connecting a lessee or wholesale customer to or
from a gas transportation network or gas transportation pipeline, subject to
such third party access provisions as may be included in the licence ;
(e) the holder shall conduct its licenced activities safely and reliably in
compliance with any law in force and prescribed health and safety regulations
(f ) the holder shall have regard to the effect of its licenced activities on
the environment and comply with the requirements of environmental protection,
management and restoration under this Act and any law in force ;
(g) the holder shall mark, maintain and secure the boundaries of the
pipelines and associated infrastructure constructed under the terms of its
licence and any law in force ;
(h) a pipeline transporting un-processed gas to a gas processing plant or
gas conditioning plant shall require a gas transportation pipeline licence and
the Commission shall—
(i) determine and advise the Authority on the characteristics of the
gas to be transported, and
(ii) cooperate with the Authority in determining possible third party
access to the pipeline ; and
(i) the gas transportation pipeline may, with the approval of the Authority,
be in whole or in part, a low-pressure pipeline at the request of the licensee.
Grant of gas 138.—(1) Subject to sections 111 and 125 of this Act, the Authority may
transportation upon approval of an application and payment of prescribed fees, grant and
network
issue a qualified person a gas transportation network operator licence
operator
licence. authorising the conduct of activities specified in the licence, which shall
include—
(a) conveyance of natural gas through the gas transportation network
on an open access basis ;
(b) balancing the inputs and off takes from the gas transportation
network ;
(c) providing access to shippers based on the gas network code under
section 160 of this Act to the gas transportation network ; and
(d) charging for the use of the gas transportation network based on
tariffs established by the Authority.
(2) The Authority shall grant only one gas transportation network operator
licence within a geographically defined area to a single network operator,
provided that the Authority may at its discretion, issue licences to other parties
for the operation of isolated or dedicated gas transportation pipelines and for
connecting to the gas transportation network.
General 139. The gas transportation network operator shall exercise the rights
duties of a and obligations imposed on it in a manner that complies with the following
gas general obligations—
transportation
network (a) establish and make available to the public at its offices, the—
operator.
(i) procedure, terms and conditions for obtaining and terminating access
and interconnection services to the transportation network, and
(b) operate an efficient and economical gas transportation network for
the safe and reliable conveyance of natural gas in such a manner that is
designed to meet all reasonable demands for natural gas transportation ;
(c) operate a nomination and balancing mechanism and an equitable
curtailment of natural gas transportation whenever technical or operational
expediencies requires ;
(d) consult with and obtain from the Authority written permission prior
to any modification of technical and operational rule of practice concerning
the operation of its gas transportation network ;
(e) ensure the development and operation of the network code and terms
for access into the gas transportation network in collaboration with the
Authority, natural gas shippers, all licensees and permit holders operating
essential infrastructure ;
(f ) ensure equitable and transparent access to the transportation network ;
(g) manage the gas transportation network as a reasonable and prudent
operator ;
prevent, restrict or distort competition ; and
(i) enter into agreements with gas transportation pipeline owners, gas
distributors and wholesale customers for connection to and operation of the
gas transportation network.
140. Subject to this Act, the Authority may grant the following special Powers of a
powers or authority to a gas transportation network operator to facilitate the transportation
network
conduct of its licenced activities—
operator.
(a) the power to request for and obtain from the relevant shippers,
information required to operate the nominations and balancing mechanism,
to operate the network or to facilitate competition ;
(b) the right to recover on the basis of an invoice, expenses reasonably
incurred in undertaking its licenced activities, subject to any restrictions or
conditions imposed by the Authority with respect to both the level and
structure of its charges ; and
(c) to purchase natural gas for its own operations for purposes such as
testing and commissioning of facilities, compression and line fill, but shall
not supply natural gas to customers on its own account.
141.—(1) In addition to the conditions as may be imposed by the Authority Conditions
under section 114 of this Act, a transportation network operator licence may applicable
to a gas
include an obligation to develop market rules in accordance with this Act. transportation
(2) A gas transportation network operator may be an owner of any or all network
operator
of a gas transportation pipelines in a gas transportation network. licence.
(3) Where a third party is the owner of a gas transportation pipeline in a
gas transportation network, the owner shall be paid the tariffs determined by
the Authority for non-operating owners of the pipelines by the gas transportation
network operator.
(4) A gas transportation network operator shall not misuse its monopoly
position in the geographical area to charge franchise or other access charges
for providing access to the gas transport network, other than the charges
specifically permitted under this Act, and regulations made under this Act.
Grant of a 142. (1) Subject to sections 111 and 125 of this Act, the Authority may
wholesale upon approval of an application and payment of prescribed fees, grant and
gas supply
licence. issue a wholesale gas supply licence to a qualified person.
(2) A company who is a lessee producing natural gas is a qualified person
for the purpose of subsection (1) and shall be entitled to apply for and be
issued with a wholesale gas supply licence by the Authority.
(3) A wholesale gas supply licence authorises the supplier to—
(a) purchase natural gas directly from any lessee or third party ; and
(b) sell and deliver wholesale gas to wholesale customers and gas
distributors at any location in Nigeria.
General 143. A wholesale gas supplier shall undertake the activities contemplated
duties of a by the wholesale gas supply licence in a manner that complies with the following
wholesale
general obligations, to—
gas supplier.
(a) provide a reliable supply of wholesale gas to wholesale customers
who have entered into a gas purchase and sale agreement with the
supplier ; and
(b) abstain from activities, which in the opinion of the Authority may
Rights of a 144. Subject to the provisions of this Act, the Authority may grant the
wholesale following specific powers or authority to a wholesale gas supplier to facilitate
gas supplier. the conduct of its licenced activities, the right to—
(a) terminate wholesale gas supply to a wholesale customer in the event
of non-payment, following a notice period ;
(b) recover from a customer, on the basis of an invoice and subject to
any conditions imposed by the Authority on the level and structure of a
licensee’s charges and costs reasonably incurred in the supply of wholesale
gas, including the cost of natural gas incurred by the supplier, the cost of
transportation of natural gas ; and
(c) enter a premises, in accordance with a metering code issued by the
Authority, for the purpose of reading the meters, testing and maintaining
metering equipment, disconnecting customers and to remove the meters.
145.—(1) In addition to conditions the Authority may impose under section Conditions
114 of this Act, a wholesale gas supply licence shall be deemed to be granted applicable
to a
subject to the supplier—
wholesale
(a) requesting security or applying a credit scoring methodology approved gas supply
by the Authority in deciding whether supply is economical ; licence.
(b) supplying marketable natural gas to a wholesale customer with whom

the supplier has entered into a gas purchase and sale agreement and who in
order to connect to a gas transportation network or gas transportation pipeline
is willing and able to—
(i) pay for the connection,
(ii) construct its own gas transportation pipeline under section 137 (c)
of this Act, or
(iii) pay the respective tariff to the supplier for the gas transportation
pipeline owned by the supplier,
subject to safety and network capacity constraints ;
(c) conducting its licenced activities safely and reliably in compliance
with any law in force and prescribed health and safety regulations issued
under this or any other Act ; and
(d) complying with customer protection measures in accordance with
sections 164, 165 and 166 of this Act.
(2) A wholesale gas supplier shall undertake its licenced activities in a
manner that complies with the conditions of the licence.
146.—(1) Subject to sections 111 and 125 of this Act, the Authority may Grant of
upon approval of an application and payment of prescribed fees, grant and retail gas
issue a qualified person a retail gas supply licence authorising the holder to— supply
licence.
(a) sell or retail compressed or liquefied marketable natural gas to
customers based on being a wholesale customer or third party access to
gas distribution systems of gas distributors ; and
(b) establish, construct and operate facilities to deliver compressed natural
gas and small scale facilities for LNG, not requiring a gas processing licence,
for transportation by truck, railcar or marine vessel to customers in
compressed or liquefied form, including customers using LNG as marine
bunker fuel.
(2) A company who is a lessee producing natural gas is a qualified
person for the purpose of subsection (1) and shall be entitled to apply for and
be issued with a retail gas supply licence by the Authority.
(3) A retail gas supply licence authorises the gas retailer, to—
(a) purchase marketable natural gas directly from a lessee, wholesale
gas supplier or third party on a free market basis ; and
(b) sell and deliver compressed or LNG to customers at any location in
Nigeria on a free market basis.
General 147. In addition to conditions the Authority may impose under section
duties of gas 114 of this Act or that may be prescribed by regulation, a retail gas supply
retailer. licence shall be deemed to be granted subject to the duty of the holder to—
(a) develop and maintain a safe, efficient, reliable and economical service
for the retailing of marketable natural gas ;
(b) carry on its business in a manner that shall promote competition and
avoid monopoly in the natural gas market in Nigeria ;
(c) construct, operate and maintain its gas compression and liquefaction
facilities in a safe, economical, and reliable manner taking into account any
(d) shut down its gas compression and liquefaction facilities in
emergencies in order to carry out maintenance or respond to curtailment
directives issued by the Authority ;
(e) conduct its activities in a safe and reliable standard in compliance
with prescribed environmental, health and safety-related regulations issued
under this or any other Act ;
(f ) publish the prices to be charged and to be paid by a person to whom
the gas retailer sells natural gas in a manner to ensure adequate publicity
unless the Authority direct otherwise ; and
(g) comply with customer protection measures set out in sections 164,
165 and 166 of this Act.
Grant of gas 148.—(1) Subject to sections 111 and 125 of this Act or regulations
distribution made under this Act, the Authority may upon approval of an application and
licence.
payment of prescribed fees, grant and issue a qualified person gas distribution
licence with rights to establish, construct, and operate a gas distribution system
and to distribute and sell its natural gas without discrimination to consumers in
a local distribution zone.
(2) Notwithstanding the rights of a gas retailer under this Act, the holder
of a gas distribution licence shall be entitled to sell natural gas to customers
that are not wholesale customers.
(3) The Authority shall, in considering an application for a gas distribution
licence, take into account the economic case for the licence, including the
potential demand for its use.
(4) The geographical limit of a local distribution zone shall be defined in
the relevant gas distribution licence.
(5) The rights and duties under a gas distribution licence shall be exclusive
to the gas distributor for the validity period of the distribution licence.
(6) A gas distribution licence may—
(a) include provisions for providing third party access to the gas distribution
network to a gas retailer or gas distributor on its own initiative ; and
(b) permit access to a gas retailer to the gas distribution network under
terms and conditions agreed to by the parties.
(7) Subject to subsection (6), the gas distributor shall own the marketable
natural gas in the gas distribution network.
149. A gas distributor shall undertake the activities contemplated by the General
gas distribution licence in a manner that complies with the following general duties of a
gas
obligations, to—
distributor.
(a) develop, operate and maintain an economical gas distribution network
for the safe and reliable conveyance of natural gas ;
(b) ensure a reliable and efficient distribution of natural gas to customers
on request, provided that it is economical to do so ;
(c) distribute and sell natural gas on request to a customer who is willing
and able to pay for connection to the gas distribution network, subject to
safety and network capacity constraints ;
(d) conduct licenced activities safely and reliably in compliance with
any law in force and any health and safety-related regulations issued by the
Authority under this or any other Act ;
(e) connect all customers within its local distribution zone in accordance
with regulations if economically practicable to do so ;
(f ) offer and publish terms and conditions of access to its gas distribution
network as required and publish gas prices applicable to different classes
of customers, which have been approved by the Authority ;
(g) comply with customer protection measures set out in sections 164,
165 and 166 of this Act ;
(h) prepare a distribution development plan, within one year after the
effective date or after having been granted the licence, for connecting
customers within its local distribution zone and any amendments as a result
of economic or social developments in the zone for the consideration and
approval of the Authority ; and
(i) abstain from activities, which in the opinion of the Authority may
Rights of the 150. Subject to the provisions of this Act, the Authority may, in order to
gas facilitate the conduct of its licenced activities, grant the gas distributor the
distributor.
right to—
(a) enter a premises for the purpose of reading the meters, testing and
maintaining metering equipment, disconnecting customers and to remove
its meters ; and
(b) recover, on the basis of an invoice, costs reasonably incurred in the
provision of appropriate infrastructure, subject to any conditions imposed
by the Authority to both the level and structure of a distributor’s charge,
provided that reasonably incurred costs shall include any amount paid to
the Authority as a licence fee.
Conditions 151. In addition to conditions the Authority may impose under section
applicable to 114 of this Act or that may be prescribed by regulation, a distribution licence
a gas
shall be deemed to be granted subject to the distributor—
distribution
licence. (a) conducting its licenced activities in a safe and reliable standard in
compliance with prescribed management, health and safety related regulations
(b) having regard to the effect of its licenced activities on the environment
and complying with the requirements for environmental protection, management,
and restoration under this Act and any law in force ; and
(c) marking, maintaining and securing the boundaries of the distribution
pipelines constructed or other distribution infrastructure as prescribed.
Arrangements 152. A gas distributor shall consult stakeholders on the proposed
for gas distribution development plan and any amendments within its local distribution
distribution.
zone and consider all representations received.
Domestic 153.—(1) Subject to sections 111 and 125 of this Act, the Authority may
gas upon approval of an application and payment of prescribed fees, grant and
aggregation issue a qualified person a domestic gas aggregation licence.
licence.
(2) The duration of the domestic gas aggregation licence shall be for a
period of two years effective from the date of the grant of the licence.
(3) The domestic gas aggregation licence may be renewed by the
Authority for further period of two years in each instance until the attainment
of liquidity in the domestic gas market pursuant to the criteria of section 167
(3) of this Act, whereupon gas aggregation shall cease and the domestic gas
aggregation licence shall be terminated by the Authority.
(4) The board of domestic gas aggregator shall determine the fees for
the services of the domestic gas aggregator and the fees shall be paid by the
producer clients and customer clients in order to ensure self-financing of the
domestic gas aggregator.
154. The domestic gas aggregator shall— Functions of
the domestic
(a) support the implementation of the domestic gas delivery obligation ; gas
(b) implement a natural gas management model, through which the aggregator.
demand and supply of natural gas for use in the strategic sectors shall be
monitored ;
(c) operate a nomination and balancing mechanism for equitable
curtailment of natural gas deliveries in cooperation with the Authority,
whenever demand and supply expediencies require ;
(d) ensure transparency of dealing between natural gas suppliers and
wholesale customers of the strategic sectors ;
(e) conduct its operations in a business-like and transparent manner and
shall not engage in any anti-competitive behaviour and practices ;
(f ) abstain from activities, which in the opinion of the Authority may
prevent, restrict or distort competition ;
(g) establish an escrow account into which customer clients shall
contribute their payments for the marketable natural gas received and from
which the domestic gas aggregator shall pay the producer clients for their
supplies of natural gas under this Act ; and
(h) do other things as are necessary or incidental to the carrying out of
its functions and duties under this Act.
155.—(1) The domestic gas aggregator shall be a not-for-profit company Establishment
limited by guarantee established under the Companies and Allied Matters Act. of the
aggregator.
(2) The company under subsection (1) shall not be a company that is Act No 3,
controlled by licensees or lessees of upstream petroleum operations or by 2020.
wholesale customers or is an affiliate of such entities, provided that ownership
of the company may be by a combination of licensees or lessees, wholesale
customers and other interested parties, such as licensees of gas transportation
pipelines and gas transportation networks.
156. The domestic gas aggregator shall issue a gas purchase order to Gas
a producer client where a customer client requires a specific volume of purchase
orders.
marketable natural gas, which is included in the domestic gas demand
requirement under section 173 of this Act, provided, however, that where the
producer client and customer client have entered into a gas purchase and sale
agreement, the domestic gas delivery obligation shall be dealt with pursuant to
such agreement which may continue to use the escrow account mechanism
as provided for under section 154 (g) of this Act and where such agreement
is concluded under section 110 (2) of this Act, there shall be no further
involvement of the aggregator.
Price 157. The gas purchase order under section 156 of this Act and the
conditions
escrow mechanism under 154 (g) of this Act shall be based on the prices for
of gas
purchase marketable natural gas established by the Authority under section 167 of this
orders. Act.
Wholesale 158.—(1) The Authority shall, following consultations with interested

customers. stakeholders, issue regulations—
(a) defining the class or classes of customers that shall constitute eligible
wholesale customers under this Act, and
(b) specifying the qualifying criteria for the classification :
Provided that the regulations may be amended from time to time to facilitate
the introduction of competition in supply and any amendment of the regulations
resulting in a change of the class of customers shall not affect the rights and
obligations of parties under natural gas supply contracts entered into prior to
such amendment.
(2) Wholesale customers shall be entitled to secure marketable natural
gas or raw gas from any wholesale gas supplier or lessee, subject to section
173 (3) of this Act.
Trading and 159.—(1) The Authority shall develop arrangements for the safe and
settlement of efficient trading of wholesale gas, where it determines that there is need for
wholesale formal arrangements for the trading of wholesale gas.
gas.
(2) The Authority shall, where required, make regulations under subsection
(1) for the trading and settlement of wholesale gas in consultation with industry
participants and interested stakeholders.
Gas network 160.—(1) The operation of a gas transportation network shall be in
code. accordance with the existing network code issued by the Government.
(2) The Authority may in consultation with stakeholders in midstream
and downstream gas operations modify the network code or create other
network codes for common carrier operations.
(3) The Authority shall make copies of the gas network code available to
interested parties upon payment of prescribed fees.
Access 161.—(1) A person shall be permitted access to an open access gas
related to transportation pipeline or a gas transportation network for the purpose of having
midstream marketable natural gas transported to points of consumption subject to
and
downstream
compliance with the prescribed terms and conditions for access stated in the
gas gas network code.
operations.
(2) The gas network code shall set out standard terms and conditions
for connection to, interconnection with access and use of the gas transportation
network.
(3) Where a gas transportation pipeline is isolated from the main gas
transportation network, the Authority shall develop separate terms of access
for the isolated gas transportation pipeline.
(4) The Authority may develop special terms for third party access to a
gas distribution network.
162.—(1) Where open access applies, open access to the gas Conditions
transportation pipeline or gas transportation network shall be— for the
provision of
(a) provided on a non-discriminatory basis between system users with open access
similar characteristics under section 116 of this Act ; in relation to
gas
(b) provided in respect of any available capacity, where the capacity is operations.
not subject to a previous contractual commitment ;
(c) provided in accordance with and governed by the terms and conditions
of the network code approved by the Authority, where applicable ;
(d) provided on the condition that the applicant for access is or becomes
a party to and undertakes to comply with the applicable network code ; and
(e) subject to the pricing principles set out in section 170 of this Act.
(2) Connection agreements may be entered into between—
(a) gas transportation pipeline owners and gas transportation network
operator ;
(b) a gas distributor and the gas transportation network operator, where
a gas distribution network connects to the main transportation network ; or
(c) a supplier and a transportation pipeline owner or transportation network
operator.
163. The Authority may mediate in disputes in respect of third party Disputes
access. in relation
to access.
164.—(1) The Authority may, to protect the interests of customers, issue Customer
regulations requiring suppliers, gas distributors and petroleum product protection.
distributors to—
(a) publish their terms of supply or distribution including tariffs, other
than for negotiated tariffs under section 122 (4) of this Act ;
(b) establish or to facilitate the establishment of a forum at which
customers are able to express their views and raise concerns ;
(c) formulate and adhere to standards of performance as are, in its
opinion, necessary to ensure the safety, reliability and quality of supply and
distribution services to customers and set penalties, pursuant to regulations,
for failure to comply ;
(d) prepare and submit reports to the Authority, at least on an annual
basis, indicating their performance levels and status of their operations in respect
of licenced activities at such times as the Authority may by regulation or in
their respective licences prescribe ; and
(e) develop and adhere to customer service codes, setting out the practices
and procedures to be followed in the conduct of specified licenced activities,
which may include—
(i) the installation, testing, maintenance and reading of meters,
(ii) fault repairs and response to customer emergencies,
(iii) the connection and disconnection of customers,
(iv) responding to customer complaints and complaint resolution,
(v) Billing and invoicing,
(vi) the extension of payment and credit facilities,
(vii) the provision of information to customers and the use and
protection of customer information, and
(viii) the establishment of special services for economically or socially
disadvantaged customers.
(2) The customer service codes shall be approved by the Authority prior
to publication and may be reviewed at intervals as may be considered necessary
by the Authority.
(3) The customer service codes shall be made available to all customers
upon request and published on the website of the Authority.
(4) The Authority shall notify or by regulation require licensees to notify
customers of the customer service codes that shall be adhered to by licensees.
(5) The Authority shall, in developing customer protection regulations,—
(a) consult with suppliers, gas distributors, petroleum product distributors
and interested stakeholders ; and
(b) take into account existing procedures, practices and standards issued
by the Federal Competition and Consumer Protection Commission.
Provision of 165. The Authority shall, at its discretion and at such time or times as it
service to deems appropriate, designate distributors of last resort and suppliers of last
customers. resort to provide services to customers—
(a) where an existing gas distributor for a local distribution zone, a
petroleum product distributor or a supplier becomes insolvent, is unable to
provide licenced services or has had its licence suspended or revoked,
(b) where the gas distributor for a local distribution zone or supplier
refuses or fails to fulfil the terms of its licence to distribute or supply natural
gas or petroleum product to customers, and
(c) in such other circumstances as the Authority may deem appropriate:
Provided that, in each case, any reasonable additional costs associated with
the obligation to act as distributor or supplier of last resort shall be recoverable
through appropriate charging arrangements agreed with the Authority.
166. Where the designation of a supplier or distributor of last resort Transfer of
requires the transfer of customers from one licensee to another, the Authority customers.
shall prepare, or require the applicable supplier or distributor of last resort to
prepare—
(a) procedures to secure the effective transfer of customers ; and
(b) a statement of any costs reasonably incurred in undertaking the
transfer, which if approved by the Authority, shall be recoverable through
regulated charges.
167.—(1) The Authority shall, in accordance with this section and for Natural gas
each year, determine the domestic base price under the Third Schedule to this prices for
the strategic
Act, for the purpose of determining the prices for the power sector, commercial
sectors and
sector and gas based industries. gas
distributors.
(2) The Authority shall continue to determine the prices referred to
under subsection (1), if in its opinion, the control of prices for natural gas for Third
Schedule.
the strategic sector is required.
(3) The price control and the corresponding role of the domestic gas
aggregator shall not be required, where the—
(a) entire domestic gas demand requirement under section 173 (2) is
covered by contracts under sections 110 (2) and 173 (3) of this Act ; or
(b) domestic market for natural gas is largely characterised by free
market based contracting for natural gas between willing buyers and willing
sellers, based on criteria established by the Authority in consultation with
the stakeholders and at such time the provisions of subsections (4), (5), (6)
and (7) and section 168 shall no longer be applicable and the criteria under
this subsection may include that certain classes of wholesale customers,
but not all, of the strategic sectors will no longer be subject to price controls
as part of an ongoing process towards full free market conditions.
(4) The aggregate gas price for a month shall be the price calculated
based on the procedures established by the domestic gas aggregator on the
basis of the prices determined by the Authority under subsection (1).
(5) The price of marketable natural gas applicable to the power sector
shall be the domestic base price at the marketable natural gas delivery point.
(6) The price of marketable natural gas applicable to the commercial
sector shall be the domestic base price at the marketable natural gas delivery
point plus US $0.50 per MMBtu.
(7) Gas distributors shall not be part of the strategic sectors and shall
negotiate the supply and pricing of their natural gas directly, provided that the
applicable price for gas distributors for the marketable natural gas at the
marketable gas delivery point shall not exceed that of the commercial sector
under subsection (6).
(8) Where applicable, wholesale gas suppliers, the wholesale customers
of the strategic sectors and gas distributors shall pay for the transportation
cost of the marketable natural gas from the marketable natural gas delivery
point to the facilities of the wholesale customers.
(9) The wholesale gas suppliers, wholesale customers of the strategic
sectors and gas distributors shall, for the purpose of transportation, have the
option to—
(a) use the gas transportation network applicable to their geographical
areas ; or
(b) obtain a gas transportation licence in order to transport their natural
gas connecting to the gas transportation network, another existing gas
transportation pipeline or directly to a marketable natural gas delivery point.
(10) Each producer client shall, for any month, receive from the escrow
account of the domestic gas aggregator an amount that is equal to the aggregate
gas price multiplied by the customer client volume that was paid for such
producer client in such month by the customer client.
Gas based 168.—(1) Subject to the provisions of section 167 (3) of this Act, the
industries gas price for the gas based industries shall be determined by the pricing principles
gas price. specified in the Fourth Schedule to this Act.
Fourth
Schedule. (2) The floor price for the gas based industries shall be US $0.90 per
MMBtu.
(3) The ceiling price shall be the domestic base price applicable for any
particular year.
(4) The prices determined in the Fourth Schedule to this Act shall be Fourth
prices at the marketable gas delivery point from where transport costs need to Schedule.
be added for delivery to the respective gas based industries.
(5) The Authority may by regulation adjust the price mechanism to add
other gas based industries in line with market realities.
169.—(1) Where the Authority determines that— Power to
regulate and
(a) a particular licenced activity is a monopoly service, review
(b) competition has not yet developed in the market to such an extent as prices.
to protect the interests of customers, or
(c) a particular licensee is a dominant provider,
the Authority shall regulate the prices charged by licensees in respect of the
activities, in a manner consistent with its functions under this Act and with the
pricing principles set out in section 170 of this Act.
(2) The Authority shall undertake periodic pricing methodology reviews,
provided that the pricing methodology review shall not affect arrangements
entered into or approvals given for the development of a gas infrastructure or
utilisation project prior to the effective date.
(3) The Authority shall consult with licensees, industry participants and
stakeholders before undertaking a pricing review or establishing a methodology
for regulating prices and revenues earned by licensees providing monopoly or
dominant services.
170. Subject to the provisions of this Chapter, the Authority shall, in the Pricing
exercise of its powers to regulate prices charged by licensees, be guided by principles
in relation
the following principles—
to gas.
(a) marketable natural gas prices shall be disaggregated into the
component elements of the supply chain including the costs of wholesale
gas, tariffs for gas processing, tariffs for transportation pipelines for natural
gas, distribution and supply ;
(b) the prices charged for each licenced activity shall reflect the costs
incurred in the efficient provision of that activity ;
(c) prices charged shall permit a reasonable return for licensees on their
investments ; and
(d) prices shall not discriminate between customers with similar
characteristics, such as similar size or a similar consumption profile.
Public 171. The Authority may issue regulations imposing public service
service obligations on licensees in relation to matters including—
obligations
related to (a) security of supply ;
policy
issues.
(b) economic development and the achievement of wider economic policy
objectives ;
(c) environmental protection ; and
(d) health and safety.
Public 172.—(1) The Authority shall, by regulation, provide for the recovery of
service levy. any additional costs incurred in complying with the public service obligations
through a public service levy, which may be imposed on customers, provided
that it would, in the opinion of the Authority, be in the wider public interest.
(2) The amount of, and mechanism for the collection and remittance of,
the public service levy imposed on each customer shall be set out in the
regulations contemplated by subsection (1).
Domestic 173.—(1) The Authority shall, prior to the 1st of March of each calendar
gas demand year, determine the domestic gas demand requirement and inform the
requirement.
Commission of this requirement.
(2) Subject to subsection (3), the domestic gas demand requirement
shall be the total amount of marketable natural gas required for all wholesale
customers of the strategic sectors.
(3) Each wholesale customer of the strategic sectors shall have the
right to negotiate its own supply contracts directly with lessees or suppliers
and where the wholesale customer is of the view that the contracts are
satisfactory for its requirements, it shall inform the—
(a) Authority that there is no need to be a customer client of the domestic
gas aggregator ; and
(b) Commission of the lessees from which the required marketable
natural gas has been obtained.
PART V—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM

PETROLEUM LIQUIDS OPERATIONS
Activities 174.—(1) Except in accordance with an appropriate licence issued by
requiring a the Authority, a person shall not undertake the following activities with respect
licence for
midstream
to midstream petroleum liquids operations—
and (a) establish, construct or operate a terminal or other facility for the
downstream export or importation of crude oil or petroleum products ;
petroleum
liquids (b) establish, construct or operate a crude oil refinery ;
operations.
(c) establish, construct or operate a pipeline for the bulk transportation
of petroleum liquids ;
(d) engage in bulk transportation of petroleum liquids by rail, barge or
other means within Nigeria ;
(e) establish, construct or operate a facility for the bulk storage of
petroleum liquids ;
(f ) establish, construct or operate a petroleum liquids transportation
network ;
(g) engage in the bulk sale of petroleum liquids ; or
(h) undertake construction or operation of any facility for the production
of lubricants or petrochemicals based on petroleum products.
(2) Except in accordance with an appropriate licence or permit issued
by the Authority, a person shall not undertake the following activities with
respect to downstream petroleum products operations—
(a) construct or operate any facility for the distribution or sale of
petroleum products to retail customers ;
(b) establish, construct or operate a depot for the storage of petroleum
products ; or
(c) undertake distribution, marketing or retail trading of petroleum
products.
(3) The Authority may, by regulation, prescribe additional activities to be
undertaken only on the basis of a licence or permit and shall have power to
issue licences or permits for the activities in accordance with this Act.
(4) Where a person engages in any of the activities set out in subsection
(1), (2) or (3) without a licence or permit, the Authority shall—
(a) seal the premises where the activity is undertaken ;
(b) dismantle and seize the facilities by which the activities were
undertaken ;
(c) confiscate equipment or materials employed by the person in such
activity ; or
(d) impose penalties as prescribed by regulations under this Act.
(5) Notwithstanding any provision of this Act, a person who engages in
any of the activities set out in subsection (1), (2) or (3) without a licence or
permit, commits an offence and is liable on conviction to imprisonment for a
term of—
(a) one year or to a fine prescribed by regulation, in the case of an
activity requiring a licence ; or
(b) six months or to a fine prescribed by regulation, in the case of an
activity requiring a permit.
(6) A holder of a subsisting lease, licence or permit who is engaged in
activities in midstream or downstream petroleum liquids operations prior to
the effective date shall, within 18 months from the effective date, apply to the
Authority for, and the Authority may issue the appropriate licence or permit,
where applicable.
(7) The provisions of subsections (4) and (5) shall not apply to any
person under subsection (6) until the Authority has considered the application
and given a decision.
(8) Where any person, in applying for a licence or permit, knowingly
makes a false or misleading statement, the Authority may—
(a) suspend or revoke the licence or permit ; or
(b) impose a fine on the licensee or permit holder on the basis of the
false or misleading information.
(9) Crude handling agreements and any other agreements among parties
entered into prior to the effective date related to midstream or downstream
operations shall be submitted for review to the Authority and the Commission
and where so ordered by the Authority or Commission, as the case may be,
amendments shall be made in such agreements to comply with the Act.
Special 175. In addition to any matter provided under section 113 of this Act,
regulations the Authority may issue regulations with respect to midstream and downstream
for
midstream
petroleum liquids operations, which shall include—
and (a) the establishment and operation of a wholesale market, to ensure the
downstream continuity of supply of petroleum products to customers, that will apply to
petroleum
liquids the owners and operators of crude oil refineries, transportation pipelines
operations. and other facilities or vessels for the bulk transportation of petroleum liquids,
bulk storage facilities for petroleum liquids and terminals and outlets for
retail trading of petroleum products ; and
(b) matters ancillary to or consequential on the activities set out in
paragraph (a).
Rights of 176. Subject to applicable law and the terms and conditions prescribed
way relating by the Authority, a licensee or permit holder is entitled to rights of way for the
to midstream
laying, operation and maintenance of petroleum liquids transportation pipelines,
and
downstream communication lines, power lines and other similar lines through or across the
petroleum areas the licensee or permit holder may require for carrying on midstream or
liquids downstream petroleum liquids operations under the licence or permit.
operations.
177. The Authority may for the purpose of efficiency, preserve rights Surface
of way, easements or other rights over any surface or seabed areas subject to rights
reserves for
an existing licence or permit, which may be necessary for the laying, operation
the
and maintenance of petroleum liquids transportation pipelines, communication Authority
lines, power lines and other similar lines and any right of way or other rights for
reserved shall continue for the benefit of any entity to whom the Authority midstream
may subsequently grant the same for a licence or permit. and
downstream
petroleum
liquids
operations.
178.—(1) The Authority may in consultation with licensees and other Petroleum
stakeholders with respect to midstream petroleum liquids operations, develop liquids
a network code governing the terms of access into facilities and infrastructure midstream
network
used in midstream petroleum liquids operations. code.
(2) The network code may include the following matters—
(a) a connection and interconnection policy, standard terms for connection
to an open access petroleum liquids transportation pipeline or petroleum
liquids transportation network and a statement of the connection charging
methodology ;
(b) a mechanism by which users reserve capacity in facilities and
infrastructure and at any time there is a greater demand for access than
available capacity, a mechanism for allocating capacity between users ;
(c) the nomination ;
(d) requirements for the provision of information to the petroleum liquids
transportation network operator about the volume, timing and flow-rate of
injections into and withdrawals from the petroleum liquids transportation
network ;
(e) the structure of charges and the applicable tariffs charged for using
the petroleum liquids transportation network ;
(f ) the balancing of crude oil, condensates or petroleum products being
conveyed ;
(g) registration arrangements ;
(h) metering, allocation and settlement arrangements ;
(i) governance arrangements ; and
(j) the maintenance of a register of customers and suppliers.
(3) The petroleum liquids midstream network code shall be published on
the website of the Authority and physical copies shall be made available to
interested persons on payment of a prescribed fee.
Third party 179.—(1) Subject to section 162 of this Act, any person licenced under
access the provisions of this Act to supply petroleum liquids shall be permitted third
relating to
midstream party access to facilities and infrastructure used for midstream petroleum
and operation by owners, operating on their own account, of such facilities and
downstream infrastructure—
petroleum
liquids (a) in the manner prescribed by this Act, the regulations, codes and
operations. other guidelines issued by the Authority under this Act ; and
(b) on commercially viable terms based on a cost reflective pricing
methodology.
(2) The Authority may mediate in disputes related to third party access.
Conditions 180.—(1) Where open access applies, open access to the facilities and
for the infrastructure used with respect to midstream petroleum liquids operations
provision of
shall be—
open access
in relation to (a) undertaken on a non-discriminatory basis between system users
petroleum with similar characteristics under section 116 of this Act,
liquids
operations. (b) provided in respect of any available capacity, where the capacity is
not subject to a previous contractual commitment,
(c) provided in accordance with and governed by the terms and conditions
of the network code approved by the Authority, where applicable,
(d) provided on the condition that the applicant for access is or becomes
a party to and undertakes to comply with the applicable network code, and
(e) subject to the pricing principles set out in section 207 of this Act :
Provided that facilities and infrastructure which are specifically defined by
the Authority for the storage of national strategic stocks shall be exempt from
the provisions of this Act relating to open access.
(2) The Authority may mediate in disputes in respect of open access.
National 181. The Authority shall—
strategic
stocks. (a) establish, administer and ensure the storage and distribution of the
national strategic stocks of petroleum products in accordance with regulations
issued by the Authority ;
(b) determine and publish the amount to be charged as a levy for the
financing of the national strategic stocks, which shall form part of the retail
price of each petroleum product, such levy to be determined as a percentage
of the retail price and be deducted on wholesale basis ; and
(c) designate, in consultation with the appropriate authorities and national
security agencies, the strategic locations across the country where the
national strategic stocks shall be distributed and maintained.
182. The Authority shall ensure that all companies with a licence for the Operating
bulk storage of petroleum products granted under section 187 of this Act stock.
maintain operating stocks in accordance with guidelines published by the
Authority.
183.—(1) Subject to sections 111 and 174 of this Act and upon the Grant of a
approval of the Authority of an application and payment of a prescribed fee by crude oil
refining
a qualified person, the Minister may, on the recommendation of the Authority,
licence.
grant and issue to that person a crude oil refining licence which shall permit
the licensee to—
(a) procure, construct, install and operate facilities to process crude oil
on its own account into derivative chemicals and petroleum products ; and
(b) sell such chemicals and petroleum products at the exit of the refinery.
(2) In considering an application for a crude oil refining licence, the
Authority shall take into account the economic case for a refinery, including
the potential demand for its use.
184. The crude oil refiner shall undertake the activities contemplated General
by the licence in a manner that best complies with the following general duties of a
obligations, to— crude oil
refiner.
(a) procure, construct, install, operate and maintain its refinery and
associated facilities in an economical, safe, reliable and environmentally
friendly manner ;
(b) shut down its facilities in emergencies and in order to carry out
maintenance or in accordance with curtailment directives issued by the
Authority ;
(c) manage its facilities as a reasonable and prudent operator ;
(d) avoid any act or omission that may affect the compatibility of the
refinery with any facility or network that is likely to prejudice the public
interest or the integrity of network operations ;
(e) produce petroleum products to a quality suitable for the transportation
system as specified in the licence ;
(f ) produce petroleum products to a quality suitable for use in accordance
to the specifications approved by the Authority ;
(g) treat all customers in a non-discriminatory manner under section 116
of this Act ; and
Access 185. A crude oil refiner shall have the right of access to facilities,
rights. including harbours, jetties, petroleum bulk storage, transportation facilities and
pumping installations in accordance with the open access or third party access
requirements and the tariff methodology approved by the Authority.
Conditions 186. In addition to conditions as may be imposed by the Authority under
applicable section 114 of this Act, a crude oil refining licence shall be deemed to be
to a crude granted subject to the conditions that the holder shall—
oil refining
licence. (a) conduct its licenced activities safely and reliably in compliance with
any law in force and prescribed health and safety related regulations,
standards and operating procedures issued under this Act ;
(b) have regard to the effect of its licenced activities on the environment
and complying with the requirements for environmental protection,
management and restoration under this Act ;
(c) mark, maintain and secure the boundaries of its facilities and
associated infrastructure constructed under the terms of its licence and
any law in force ; and
(d) comply with any conditions precedent or other conditions as the
Authority may prescribe by regulation.
Grant of a 187.—(1) Subject to sections 111 and 174 of this Act, the Authority
bulk may upon approval of an application and payment of prescribed fees, grant
petroleum
and issue a qualified person bulk petroleum liquids storage licence authorising
liquids
storage the holder to undertake the bulk storage of petroleum liquids whether for its
licence. own account or on behalf of customers as provided for in the licence.
(2) In considering an application for a bulk petroleum liquids storage
licence, the Authority shall take into account the economic case for bulk storage
facility, including the potential demand for its use.
General 188. The holder of a bulk petroleum liquids storage licence shall undertake
duties of a the activities contemplated by the licence in a manner that best complies with
bulk storage the following general obligations, to—
licensee.
(a) establish and make available to the public at its offices, the—
(i) procedure for obtaining third party access or open access, as
provided for in the licence, throughput and terminating its services, and
(b) procure, construct, install, operate and maintain its facilities in a safe,
economical, reliable and environmentally friendly manner taking into account
any strategic plans formulated by the Authority ;
(c) shut down its facilities in emergencies and in order to carry out
maintenance or in response to curtailment directives issued by the Authority ;
(d) grant third party access to use or have access to spare capacity within
its facilities for the purpose of ensuring competitive supply of crude oil and
petroleum products, where the licensee operates on its own account ;
(e) consult with the Authority and obtain written permission prior to any
modification of technical and operational rules of practice concerning the
operation of its facilities ;
(f ) conduct its licenced activities in a non-discriminatory manner between
all classes of customers under section 116 of this Act, where the licence is
for bulk storage for customers and is operated on an open access basis ;
(g) manage its facilities as a reasonable and prudent operator ; and
189. In addition to conditions as may be imposed by the Authority under Conditions
section 114 of this Act, a bulk petroleum liquids storage licence shall be deemed applicable
to be granted subject to the conditions that the holder shall— to a bulk
petroleum
(a) where the licence is operated for the own account of the licensee, liquids
the licensee may own the petroleum liquids contained in the storage and storage
licence.
where the licence is operated on an open access basis the licensee shall not
own the petroleum liquids ;
(b) conduct its licenced activities safely and reliably in compliance with
any law in force and prescribed health and safety related regulations issued
under this Act ;
(c) have regard to the effect of its licenced activities on the environment
and complying with the requirements for environmental protection,
management and restoration under this Act ; and
(d) mark, maintain and secure the boundaries of its facilities and
associated infrastructure constructed under the terms of its licence and
any law in force.
190.—(1) Subject to sections 111 and 174 of this Act, the Authority Grant of
may upon approval of an application and payment of prescribed fees, grant petroleum
liquids
and issue a qualified person a petroleum liquids transportation pipeline licence
transportation
with the exclusive right to own, construct, operate and maintain a transportation pipeline
pipeline for the bulk transportation of petroleum liquids within a route as defined licence.
in the licence for its own account with third party access provisions or as
common carrier as stipulated in the licence.
(2) In considering an application for a petroleum liquids transportation
pipeline licence, the Authority shall take into account the economic case
for a petroleum liquids transportation pipeline including the potential demand
for its use.
General 191. The holder of a petroleum liquids transportation pipeline licence
duties of a shall undertake the activities contemplated by the licence in a manner that
petroleum
liquids best complies with the following general obligations—
transportation (a) establish and make available to the public at its offices, the—
pipeline
owner. (i) procedure for obtaining and terminating transmission and
interconnection services, and
(b) construct, operate and maintain its petroleum liquids transportation
pipeline in a safe, economical, and reliable manner taking into account any
(c) manage supply shortfalls and meet on a reasonable endeavours
basis requests for transportation above contractual volumes ;
(d) shut down its petroleum liquids transportation pipeline in emergencies
and in order to carry out maintenance or in response to curtailment directives
issued by the Authority ;
(e) provide access on a non-discriminatory basis under section 116 of
this Act, where the licence is granted on a common carrier basis and provide
for third party access pursuant to the licence conditions where the transportation
pipeline is operated for the own account of the licensee ;
(f ) consult with the Authority and obtain written permission prior to any
operation of its pipeline ;
(g) manage its transportation pipeline as a reasonable and prudent
operator ; and
Conditions 192. In addition to conditions as may be imposed by the Authority under
applicable to section 114 of this Act, a transportation pipeline licence shall be deemed to be
a petroleum
granted subject to the conditions that the holder shall—
liquids
transportation (a) not own petroleum liquids in the pipeline, where the licence is issued
pipeline on a common carrier basis ;
licence.
(b) where the holder is a licensee operating on its own account, who is
a company which is an affiliate of a company that is a lessee, the licensee
may own, or the affiliate may own, the petroleum liquids in a petroleum
liquids transportation pipeline for the purpose of removing petroleum liquids
from the lease ;
(c) where the holder is a company that also holds a licence to be a wholesale
petroleum liquids supplier, operating on its own account, may own the
petroleum liquids in a petroleum liquids transportation pipeline, for the purpose
of connecting to a lessee or wholesale customer to or from a petroleum
liquids transportation network or petroleum liquids transportation pipeline,
(d) where the holder is a company that also holds licence as a petroleum
product distributor, operating on its own account, may own the petroleum
liquids in a petroleum liquids transportation pipeline, where the principal
user of the transportation pipeline is the petroleum product distributor, subject
to third party access provisions as may be included in the licence ;
(e) where the holder is a company that also holds a licence to be a wholesale
petroleum liquids supplier, operating on its own account, may own the
petroleum liquids in a petroleum liquids transportation pipeline, for the purpose
of connecting to a lessee or wholesale customer to or from a petroleum
liquids transportation network or petroleum liquids transportation pipeline,
(f ) conduct its licenced activities safely and reliably in compliance with
any law in force and prescribed health and safety related regulations issued
under this Act ;
(g) have regard to the effect of its licenced activities on the environment
and comply with the requirements for environmental protection,
management, and restoration under this Act ; and
(h) mark, maintain and secure the boundaries of the pipelines and
associated infrastructure constructed under the terms of its licence.
193.—(1) Subject to sections 111 and 174 of this Act, the Authority may Grant of a
upon approval of an application and payment of prescribed fees, grant and petroleum
issue a qualified person a petroleum liquids transportation network operator liquids
transportation
licence authorising the conduct of activities specified in the licence, which network
shall include— operator
licence.
(a) conveyance of petroleum liquids through the transportation network ;
(b) balancing the inputs and off takes from the transportation network ;
(c) providing open access to the transportation network ; and
(d) charging for the use of the transportation network.
(2) The Authority shall grant only one petroleum liquids transportation
network operator licence for specified petroleum liquids within a geographically
defined area to a single network operator, provided that the Authority may, at
its discretion, issue licences to other parties for the operation of isolated or
dedicated pipelines.
General 194. The petroleum liquids transportation network operator shall exercise
duties of a the rights and obligations imposed on it in a manner that best complies with the
petroleum
liquids following general obligations—
transportation (a) establish and make available to the public at its offices, the—
network
operator. (i) procedure, terms and conditions for obtaining and terminating access
and interconnection services to the transportation network, and
(b) operate an efficient and economical transportation network for the
safe and reliable conveyance of specified petroleum liquids in a manner
that is designed to meet all reasonable demands for the specified petroleum
liquids ;
(c) operate a nomination and balancing mechanism and an equitable
curtailment of transportation whenever technical or operational expediencies
require ;
(d) consult with the Authority and obtain written permission prior to any
operation of its transportation network ;
(e) ensure the development and operation of a network code and terms
for access into the transportation network in collaboration with the Authority,
shippers, licensees and permit holders operating essential infrastructure ;
(f ) ensure equitable and transparent open access, subject to the provisions
of section 116, to the transportation network in accordance with the network
code ;
(g) manage the transportation network as a reasonable and prudent
operator ;
prevent, restrict or distort competition ; and
(i) enter into agreements with transportation pipeline owners, distributors
and wholesale customers for connection to, and operation of, the
transportation network.
Powers of a 195. Subject to this Act, the Authority may grant the following special
petroleum powers or authority to a petroleum liquids transportation network operator to
liquids facilitate the conduct of its licenced activities—
transportation
network (a) the power to request and obtain from shippers information required
operator. to operate the nominations and balancing mechanism to operate the network
or to facilitate competition ;
(b) the right to recover, on the basis of an invoice, expenses reasonably
incurred in undertaking its licenced activities, subject to any conditions
imposed by the Authority with respect to the level and structure of its
charges ; and
(c) to purchase petroleum liquids for its own operations for purposes
such as testing and commissioning of facilities, compression purposes and
line fill.
196.—(1) In addition to such conditions as may be imposed by the Conditions
Authority under section 114 of this Act, a petroleum liquids transportation applicable to
network operator licence may include an obligation to develop market rules in a petroleum
liquids
accordance with the provisions of this Act. transportation
(2) A petroleum liquids transportation network operator may be owner network
operator
of any or all of the petroleum liquids transportation pipelines in the petroleum licence.
liquids transportation network.
(3) Where third parties are owners of certain petroleum liquids
transportation pipelines in the petroleum liquids transportation network, the
owners shall be paid by petroleum liquids transportation network operator the
tariffs determined for non-operating owners of the pipelines.
(4) A petroleum liquids transportation network operator shall not misuse
its monopoly position in the geographical area to charge franchise or other
access charges for providing access to the petroleum liquids transport network
other than the charges specifically permitted under this Act and its regulations.
upon approval of an application and payment of prescribed fees, grant and wholesale
issue a qualified person a wholesale petroleum liquids supply licence. petroleum
liquids
(2) A company that is a lessee producing crude oil or condensates or supply
both or is a holder of a crude oil refining licence is a qualified person for the licence.
purpose of subsection (1) and shall be entitled to apply for and be issued a
wholesale petroleum liquids supply licence by the Authority.
(3) A wholesale petroleum liquids supply licence authorises the supplier
to sell and deliver petroleum liquids to bulk customers in Nigeria or for export.
198. A wholesale petroleum liquids supplier shall undertake the activities General
contemplated by the licence in a manner that best complies with the following duties of a
wholesale
general obligations, to—
petroleum
(a) provide a reliable supply of petroleum liquids to purchasers on request, liquids
provided that it is economically feasible ; and supplier.
(b) abstain from activities, which in the opinion of the Authority may
Rights of a 199. Subject to this Act, the Authority may grant the following specific
wholesale powers or authority to the holder of a wholesale petroleum liquids supply
petroleum
liquids
licence to facilitate the conduct of its licenced activities, the right to—
supplier. (a) terminate wholesale supply to a customer in the event of non-
payment, following a notice period as prescribed by regulation ;
(b) recover from a customer, on the basis of an invoice and subject to
any conditions imposed by the Authority on the level and structure of a
licensee’s charges and costs reasonably incurred in the supply of petroleum
liquids, provided that the sale of petroleum liquids to customers by the
wholesale petroleum liquids supplier shall be subject to the provisions of
this Chapter ; and
(c) enter a premises, in accordance with a metering code issued by the
Authority, for the purpose of reading the meters, testing, maintaining metering
equipment, disconnecting customers and to remove meters.
Conditions 200.—(1) In addition to conditions as may be imposed by the Authority
applicable under section 114 of this Act, a wholesale petroleum liquids supply licence
to a shall be deemed to be granted subject to the supplier—
wholesale
petroleum (a) ensuring a reliable and efficient supply of petroleum liquids to
liquids customers on request, provided that it is economically feasible ;
supply
licence. (b) supplying petroleum liquids on request to a customer who is willing
and able to pay for connection to the transportation network or transportation
pipeline, subject to safety and network capacity constraints ; and
(c) conducting licenced activities safely, reliably and in an
environmentally friendly manner in compliance with any law in force
and any health and safety related regulations issued by the Authority
under this or any other Act.
(2) A wholesale petroleum liquids supplier shall undertake its licenced
activities in a manner that best complies with the covenants and conditions of
the licence and with customer protection measures approved by the Authority.
Grant of 201. Subject to sections 111 and 174 of this Act, the Authority may upon
licence for approval of an application and payment of prescribed fees, grant and issue a
distribution
qualified person a petroleum product distribution licence.
of
petroleum
products.
General 202. In addition to conditions the Authority may impose under section
duties of 114 of this Act or that may be prescribed by regulation, a petroleum product
petroleum
product distribution licence shall be deemed to be granted subject to the duty of the
distributor. holder to—
(a) develop and maintain a safe, efficient, reliable and economical service
for the distribution of petroleum products to individual customers and
petroleum product retailers ;
(b) carry on its business in a manner that will promote competition and
avoid monopoly in the retail supply of petroleum products in Nigeria ;
(c) conduct its licenced activities safely and reliably in compliance with
any law in force and prescribed environmental, health and safety regulations
(d) publish the prices to be charged and to be paid by a person to whom
the distributor sells petroleum products in a manner to ensure adequate
publicity unless the Authority prescribes otherwise ;
(e) avoid undue preference or discriminate as between persons or any
class of persons in establishing prices ; and
(f ) comply with customer protection measures approved by the Authority.
upon approval of an application and payment of prescribed fees, grant and licence to
issue a qualified person a petroleum product retail licence authorising the holder construct
and operate a
to establish, construct and operate a facility to be employed for retail sale of facility for
petroleum products. retail supply
and
(2) The Authority shall issue guidelines in respect of the process for the distribution
establishment, construction and operation of facilities to be employed by of petroleum
petroleum product retailers for retail sale of petroleum products. products.
upon approval of an application and payment of prescribed fees, grant and licence to
issue a qualified person a petrochemicals production licence authorising the construct
and operate
holder to establish, construct and operate a facility for the production of a facility for
petrochemicals and sell the petrochemicals produced. the
production
(2) The Authority shall issue guidelines in respect of petrochemicals of
production licences. petrochemicals.
205.—(1) Subject to the provisions of this section, wholesale and retail Pricing
prices of petroleum products shall be based on unrestricted free market pricing regime and
conditions. power to
regulate
(2) Where the Authority determines that a particular licenced activity is tariffs.
a monopoly service or a service by an excessively dominant supplier, the
Authority shall have the power to regulate the tariffs and prices charged by
the respective licensee in respect of the activities in a manner consistent with
the Authority’s duties under this Act and with the pricing principles set out in
section 207 of this Act.
Wholesale 206.—(1) The holder of a wholesale petroleum liquids supply licence
prices for and a wholesale customer shall, subject to the provisions of this Chapter,
petroleum
products.
negotiate the wholesale prices directly between the parties on an arm’s length
basis, provided that the transfer price shall be transparent and reflect the
transfer price between the parties.
(2) The Authority shall have power to monitor bulk sale of petroleum
products and may publish market-based prices in order to ensure that the
transactions are undertaken in a manner that transfer pricing between the
supplier and the wholesale customer are undertaken at a transparent arm’s
length basis.
(3) The supplier shall, within 14 days of the consummation of a transaction
relating to the bulk sale of petroleum products, provide the Authority with
information relating to the transaction including, where applicable, the cost
incurred by the supplier in the production or supply of the product and other
information relevant to the price at which the product is sold.
(4) A supplier who knowingly provides information, which is false or
misleading with respect to the information required in subsection (3) is liable
to a fine stipulated by the Authority in regulations.
Pricing 207. Where under section 205 (2) of this Act, the Authority regulates
principles in
the tariffs and prices of a licensee, the Authority shall allow the seller to
relation to
petroleum recover reasonably and prudently incurred costs, including a reasonable return
products. on the capital invested in the business.
Publication 208. Licensees shall publish prices as required by the Authority in a
of prices. manner that ensures that the customers are able to identify and calculate the
extent of charges for which they will become liable.
PART VI—OTHER MATTERS RELATED TO MIDSTREAM

AND DOWNSTREAM OPERATIONS
Public 209. The Authority may issue regulations imposing public service
service obligations on licensees or a class of licensees in relation to the maintenance
obligations of strategic stock for which the Authority shall approve a tariff to be paid by
the consumers.
Competition 210. The Authority shall, subject to the provisions of the Federal
and market Competition and Consumer Protection Act, have the responsibility to—
regulation.
(a) monitor the state of the markets regulated by the Authority ;
Act No 1,
2018. (b) administer, monitor and ensure compliance with the provisions of
this Act and any law or regulation issued in respect of competition and
market regulation ;
(c) monitor market behaviour including the development and
maintenance of competitive markets ;
(d) arrest situations of abuse of dominant power and restrictive business
practices ;
(e) assess whether the petroleum industry is operating efficiently or the
existing market arrangements may constitute barriers to entry into the market
for new market participants ;
(f ) determine whether there is any anti-competitive activity being carried
on and exercise its powers under this section to prevent the continuance of
the activity ; and
(g) determine any pre-conditions and any transitional arrangements
required for any services to be offered competitively.
211.—(1) Subject to the provisions of the Federal Competition and Power to
Consumer Protection Act, the Authority shall have the responsibility to prevent prevent
anti-
anti-competitive behaviour with respect to midstream and downstream
competitive
petroleum operations and may take any or a combination of the following behaviour.
actions— Act No 1,
(a) monitor and determine whether any conduct by a licensee or any 2018.
other person operating or intending to operate in midstream and downstream
petroleum operations—
(i) has the purpose or effect of substantially lessening competition in
any segment of the midstream and downstream petroleum operations,
(ii) may likely result in anti-competitive or discriminatory conduct,
including an unlawful exercise of market power that may prevent
customers from obtaining the benefits of a properly functioning and
competitive market,
(iii) may amount to practices which reflect an apparent or probable
effect of crippling, excluding or deterring the entry of another person
into midstream and downstream petroleum operations, or
(iv) may likely be indicative of an abuse of dominant position in respect
of the provision of any service ;
(b) consider how best to prevent or mitigate abuse of market power in
its decisions and determinations regarding matters including licence
applications, grant of licence, licence terms and conditions and the regulation
of prices for services in competitive markets ; and
(c) where, in the opinion of the Authority there is or may be, anti-
competitive behaviour and in particular an abuse of market power, the
Authority shall—
(i) issue “cease and desist” orders as may be required,
(ii) require and compel the disclosure of information from licensees,
(iii) undertake inquiries and investigations, and
(iv) levy fines prescribed by regulations issued by the Authority, which
shall not exceed 5% of the annual turnover of the company for the
preceding year.
(2) Notwithstanding the provisions of this section, where the Authority
deems it to be in national interest or necessary to preserve or promote the
benefits of a functional and effective competitive market, the Authority may,
on the application by a licensee or other person with the ability to influence the
price of petroleum products,—
(a) give written approval to the application upon such terms and conditions
and impose other requirements as it may deem appropriate ; and
(b) issue directions to prevent or mitigate any conduct that shall or is
likely to lead to the unlawful exercise of market power that will prevent
customers from obtaining the benefits of a properly functioning and
competitive market.
(3) The Authority may at any time withdraw an approval granted under
subsection (2) upon such terms and conditions as it may deem appropriate.
Separation 212.—(1) The Authority may require the holder of a licence to maintain
of certain separation in management, accounting or legal entities of its licenced or
licenced
activities.
permitted activities, which may prohibit the holder of the licence from directly
holding licences of another type.
(2) Licenced activities between a holder of a licence and an affiliate
shall be undertaken in a manner that the transfer pricing between both entities
is undertaken on a transparent arm’s length basis and in a manner that reflects
the pricing principles contained in sections 170 and 207 of this Act.
(3) A holder of a licence shall not, without the prior written consent of
the Authority, directly or indirectly acquire an interest in, purchase or merge
with another holder of a licence or an affiliate of a holder of a licence.
Non- 213. A holder of a licence or permit shall not discriminate between
discrimination customers or classes of customers or their related undertakings or network
among
customers.
users in respect of access, tariffs, prices, conditions or standards of service
under section 116 of this Act.
214. In the exercise of its powers under this Chapter, the Authority may Considerations
consider— for exercise
of the
(a) the relevant economic market ; Authority’s
(b) global trends in the relevant economic market ; powers.
(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 Power to
prohibited under this Chapter has been or is likely to be undertaken by any serve notice,
person, the Authority may— issue “cease
and desist”
(a) serve a notice on the person, specifying the act or activity and its order.
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.
(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

216.—(1) The Commission and Authority shall consult with stakeholders Consultation
prior to finalising any regulations or amendments to regulations. for
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.
(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 217.—(1) Where it appears to the Commission or Authority that the
and holder of a lease, licence or permit is contravening, has contravened or is
enforcement
of conditions
likely to contravene any of the conditions of the lease, licence or permit, the
of leases, Commission or Authority, as the case may be, may publish a notice in a
licences or manner as it considers appropriate to draw the attention of other persons
permits affected or likely to be affected by the contravention or threatened contravention
where it of the lease, licence or permit—
appears.
(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.
Mandatory 218. A person engaged in petroleum operations, which require a lease,
registration. 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 219.—(1) The Commission and Authority shall establish, maintain and
licences, make publicly available, a register of leases, licences, permits and authorisations,
permits and issued, revoked, suspended, surrendered or withdrawn and any modification
authorisations.
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 220.—(1) A lease, licence, permit or authorisation and any exemption
of leases, granted under this Act shall be prepared in duplicate, one copy shall be delivered
licences, to the holder of the lease, licence, permit or authorisation and the other copy
permits and
to be retained by the Commission or Authority which shall be bound up in a
authorisations.
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.
221.—(1) The lease, licence, permit or authorisation or any exemption Effective
shall be authenticated under the seal of the Commission or Authority, as the date and
case may be and the validity of the lease, licence, permit or authorisation or authentication
of licences,
any exemption shall commence from the date of its issuance. permits and
(2) The date of issuance of any lease, licence, permit or authorisation or authorisations.
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 Register of
enter in the appropriate register a memorial of any extension, transfer, memorials
and
surrender, revocation, exemption, relinquishment, change of address, change interests.
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.
(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 Effect of
shall, subject to the provisions of this Act, be conclusive evidence— 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, Public access
222 and 223 of this Act shall be readily accessible to the public during the to the
registry.
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.
Radioactive 225. The storage, application, transportation, and other petroleum
materials. operations of radioactive materials and other equipment generating ionizing
Cap. N142, radiation in all aspects of oil and gas operations shall be in compliance with the
LFN, 2004. Nuclear Safety and Radiation Protection Act and such other legislative
provisions as may be applicable.
Default 226.—(1) Any matter which requires the Commission’s or Authority’s
approvals. 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 227.—(1) Where a director or employee of the Commission or Authority,
of in the course of his duties, acquires information relating to the financial affairs
confidential
or other of any person or to any commercial secret or where any other person indirectly
information. 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.
228.—(1) A person shall not— 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 Penalties.
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.
Refusal to 230. A person who—
furnish,
return or (a) fails or refuses to furnish, return or supply information to the
supply Commission or Authority or any other lawful authority at the time and in the
information. 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.
Power to 231.—(1) The Commission or Authority, as the case may be, may
issue assess a penalty in the prescribed amount against any person for prescribed
administrative
contraventions of this Act, regulations or an order made under this Act.
penalties.
(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—
(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, Abandonment,
installations, structures, utilities, plants and pipelines for petroleum operations decommission-
ing and
on land and offshore shall be conducted in accordance with—
disposal.
(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 ;
(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
(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 Decommission-
a decommissioning and abandonment fund held by a financial institution that is ing and
not an affiliate of the lessee or licensee, in the form of an escrow account abandonment
fund.
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.
(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.
(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— Objectives
and
(a) foster sustainable prosperity within host communities ; regulations.
(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.
(3) The regulations under subsection (2) shall include a grievance
mechanism to resolve disputes between settlors and host communities.
(4) The regulations under subsection (2) shall include the ability of the
settlor to make the following adjustments to reduce expenditures where the
available funds for administration under section 244 (c) of this Act are
insufficient to fund the ongoing operations—
(a) reduce the number of members of the Board of Trustees and
frequency of meetings ;
(b) not fund the reserve fund under section 244 (b) and not hire the
respective fund manager under section 246 ;
(c) reduce the number of members of the management committee under
section 247 and the frequency of meetings ; and
(d) reduce the frequency of meetings of the host communities advisory
committee under section 249.
Incorporation 235.—(1) The settlor shall incorporate host communities development
of host trust (in this Act referred to as “the trust”) for the benefit of the host
communities communities for which the settlor is responsible.
development
trusts. (2) Where there is a collectivity of settlors operating under a joint
operating agreement with respect to upstream petroleum operations, the
operator appointed under the agreement shall be responsible for compliance
with this Chapter on behalf of the settlors.
(3) For settlors operating in shallow water and deep offshore, the littoral
communities and any other community determined by the settlors shall be host
communities for the purposes of this Act.
Act No 3, (4) The settlor shall for the purpose of setting up the trust, in consultation
2020. with the host communities, appoint and authorise a board of trustees (“the
Board of Trustees”), which shall apply to be registered by the Corporate
Affairs Commission as a corporate body under the Companies and Allied
Matters Act in the manner provided under this Chapter.
(5) The name of the corporate body to be registered by the Board of
Trustees shall contain the phrase “host communities’ development trust”.
(6) The Commission or Authority, as the case may be, shall—
(a) make regulations on the administration, guide and safeguard the
utilisation of the trust fund ; and
(b) have the oversight responsibility for ensuring that the projects
proposed by the Board of Trustees are implemented.
(7) The settlor shall undertake needs assessment that will metamorphose
into the community development plan for the purpose of determining the projects
to be undertaken by the host communities development trust.
236. The host communities development trust shall be incorporated— Timeframe
for
(a) within 12 months from the effective date for existing oil mining leases ; incorporation
(b) within 12 months from the effective date for existing designated of host
communities
facilities ;
development
(c) within 12 months from the effective date for new designated facilities trust.
under construction on the effective date ;
(d) prior to the application for field development plan for existing oil
prospecting licences ;
(e) prior to the application for any field development plan under a
petroleum prospecting licence or petroleum mining lease granted under this
Act ; and
(f ) prior to commencement of commercial operations for licensees of
designated facilities granted under this Act.
237.—(1) Subject to the provisions of this Act, where the whole or part Transfer of
of an interest in a licence or lease governed by this Act is assigned, novated or settlor’s
interest and
otherwise transferred to another party, the legal and equitable interest, rights obligations
and obligations of the transferor in relation to any associated host communities subject to
development plan and host communities development trust, shall be deemed host
to attach to the property to be transferred to the transferee, the legal and communities
equitable interests, rights and obligations of the transferor shall be deemed to development
trust
become the interests, rights and obligations of the transferee. obligation.
(2) Where the whole or part of a licence or lease governed by this Act
is surrendered under this Act, the holder or holder nominee will continue to
discharge its surviving obligations, notwithstanding that the area that is
surrendered may be granted to a new lessee or licensee and where the surviving
obligations have been complied with the holder shall have no further obligations
relating to the part that was surrendered or the whole of the licence or lease
where the entire licence or lease was surrendered.
(3) Where any licence or lease governed by this Act is revoked,
terminated or expired, the holder will continue to discharge its surviving
obligations, notwithstanding that the area revoked, terminated or expired may
be granted to a new lessee or licensee and where the surviving obligations
have been complied with, the holder shall have no further obligations.
Failure to 238. Unless as otherwise provided for in this Act, failure by any holder
incorporate of a licence or lease governed by this Act to comply with its obligations under
host this Chapter, after having been informed of such failure in writing by the
communities
development Commission or Authority as the case may be, may be grounds for revocation
trust. of the applicable licence or lease.
Objectives 239.—(1) The constitution of the host communities development trust

of host shall allow the host communities development trust to manage and supervise
communities the administration of the annual contribution of the settlor contemplated under
development
trust.
this Chapter and any other sources of funding.
(2) The objectives of the host communities development trust shall be
specified in the constitution as set out in subsection (3) (a) to (e).
(3) The objectives of the host communities development trust shall
include, to —
(a) finance and execute projects for the benefit and sustainable
development of the host communities ;
(b) undertake infrastructural development of the host communities within
the scope of funds available to the Board of Trustees for such purposes ;
(c) facilitate economic empowerment opportunities in the host
communities ;
(d) advance and propagate educational development for the benefit of
members of the host communities ;
(e) support healthcare development for the host communities ;
(f ) support local initiatives within the host communities, which seek to
enhance protection of the environment ;
(g) support local initiatives within the host communities which seek to
enhance security ;
(h) invest part of available fund for and on behalf of the host
communities ; and
(i) assist in any other developmental purpose deemed beneficial to the
host communities as may be determined by the Board of Trustees.
(4) Notwithstanding the provisions of this Act relating to funding of the
trust fund, nothing shall preclude the host communities from their entitlements
under any other law.
240.—(1) The constitution of each host communities development trust Sources of
shall establish a fund comprising of one or more accounts (“host communities funding for
development trust fund”) to be funded under this section. petroleum
host
(2) Each settlor, where applicable through the operator, shall make an communities
annual contribution to the applicable host communities development trust fund development
trust.
of an amount equal to 3% of its actual annual operating expenditure of the
preceding financial year in the upstream petroleum operations affecting the
host communities for which the applicable host communities development trust
fund was established.
(3) Each host communities development trust may receive donations,
gifts, grants or honoraria that are provided to such host communities
development trust for the attainment of its objectives.
(4) Profits and interest accruing to the reserve fund of host communities
development trust shall also be contributed to the applicable host communities
development trust fund.
241. The constitution of each host communities development trust shall Matters on
provide that the applicable host communities development trust fund be used which the
exclusively for the implementation of the applicable host communities funds may
be utilised.
development plan.
242.—(1) The constitution of the host communities development trust The Board
shall contain provisions requiring the Board of Trustees to be set up by the of Trustees,
composition
settlor, who shall determine its membership and the criteria for their appointment,
and
provided that the membership of the Board of Trustees of the host communities management.
development trust shall be subject to the approval of the Commission or
Authority, as the case may be.
(2) The settlor shall, in consultation with the host communities determine
the membership of the Board of Trustees to include persons of high integrity
and professional standing, who shall come from the host communities and the
Members of the Board of Trustees shall elect a Chairman from amongst
themselves.
(3) The settlor shall determine—
(a) the selection process, procedure for meeting, financial regulations
and administrative procedures of the Board of Trustees ;
(b) the remuneration, discipline, qualification, disqualification, suspension
and removal of members of the Board of Trustees ; and
(c) other matters other than the above relating to the operation and
activities of the Board of Trustees.
(4) Each member of the Board of Trustees shall serve a term of four
years in the first instance and may be reappointed for another term of four
years and no more.
(5) Board of Trustees shall have a secretary, who shall be appointed by
the settlor to keep the books of the Board.
Duties and 243. The Board of Trustees shall be responsible for the general
functions of management of the host communities development trust and shall be
the Board of responsible for—
Trustees.
(a) determining the criteria, process and proportion of the host
communities development trust fund to be allotted to specific development
programs ;
(b) approving the projects for which the host communities development
trust fund shall be utilised ;
(c) providing general oversight of the projects for which the host
communities development trust fund shall be utilised ;
(d) approving the appointment of fund managers for purposes of
managing the reserve fund ;
(e) set up the management committee of the host communities
development trust and appoint its members ; and
(f ) determining the allocation of funds to host communities based on the
matrix provided by the settlor.
Allocation 244. The Board of Trustees shall in each year and under section 240 of
of funds. this Act allocate from the host communities development trust fund, a sum
equivalent to—
(a) 75% to the capital fund out of which the Board of Trustees shall
make disbursements for projects in each of the host communities as may
be determined by the management committee in furtherance of the objectives
set out in section 234 of this Act, provided that any sums not utilised in a
given financial year shall be rolled over and utilised in subsequent year;
(b) 20% to the reserve fund, which sums shall be invested for the utilisation
of the host communities development trust whenever there is a cessation in
the contribution payable by the settlor ; and
(c) an amount not exceeding 5% to be utilised solely for administrative
cost of running the trust and special projects, which shall be entrusted by
the Board of Trustee to the settlor, provided that at the end of each financial
year, the settlor shall render a full account of the utilisation of the fund to
the Board of Trustees and where any portion of the fund is not utilised in a
given year, it shall be returned to the capital fund.
245.—(1) The settlor shall provide to the Board of Trustees a matrix for Matrix for
distribution of the trust fund to the host communities. distribution
of trust
(2) The Board of Trustees shall utilise the matrix provided under fund.
subsection (1) for distribution of the funds in the host communities development
trust fund to each of its host communities.
246.—(1) The Board of Trustees shall engage a fund manager to invest Engagement
the reserve fund as the fund accrues. of fund
managers.
(2) The Board of Trustees shall manage the interest and profits accruable
from the investment of the reserve fund and allocate the gain in accordance
with section 244 of this Act.
247.—(1) The constitution of the host communities development trust Management
shall contain provisions requiring the Board of Trustees to set up a management committee,
committee for the host communities development trust. composition
and powers.
(2) The membership of the management committee shall comprise—
(a) one representative of each host community, who shall be nominated
by the host community as a non-executive member ; and
(b) executive members, selected by the Board of Trustees shall be
Nigerians of high integrity and professional standing, and may not necessarily
be members of the host communities.
(3) A person appointed under subsection (2) (a) and (b) shall serve a
term of four years in the first instance and may be reappointed for another
term of four years and no more.
(4) The Board of Trustees shall in accordance with the host communities
development trust determine—
(a) the selection process, procedure for meetings, financial regulations
and administrative procedures of the management committee ;
and removal of members of the management committee ; and
(c) any other matter relating to the operations and activities of the
management committee.
(5) The management committee shall have a secretary, who shall be
appointed by the Board of Trustees to keep the books of the committee.
248. The management committee shall be responsible for the general Duties and
administration of the host communities development trust on an ad hoc basis functions of
the
and be responsible for the—
management
(a) preparation of the budget of the host communities development trust committee.
and submit it to the Board of Trustees for approval ;
(b) development and management of the contracting process for project
award on behalf of the host communities development trust subject to
approval of the Board of Trustees ;
(c) determination of project award winners and contractors to execute
projects on behalf of the host communities development trust through a
transparent process subject to approval of the Board of Trustees ;
(d) supervision of projects execution ;
(e) nomination of fund managers for appointment by the Board of Trustees
for approval, to manage the reserve fund ;
(f ) reporting on the activities of the management committee, contractors
and other service providers to the Board of Trustees ; and
(g) undertaking of any other function and duty that may be assigned to
it by the Board of Trustees to enhance the performance of the host
communities development trust.
Host 249.—(1) The constitution of the host communities development trust
communities shall contain provisions mandating the management committee to set up an
advisory
advisory committee (“host communities advisory committee”), which shall
committee
and contain at least one member of each host community.
composition.
(2) The management committee shall in accordance with the constitution
of the host communities development trust, determine—
(a) the selection process, procedure for meetings, financial regulations
and administrative procedures of the host communities advisory
committee ;
and removal of members of the host communities advisory committee ; and
(c) any other matter relating to the operations and activities of host
communities advisory committee.
(3) Decisions of the management committee with respect to
subsection (2) shall be subject to the approval of the Board of Trustees.
Duties and 250. The host communities advisory committee shall perform the
functions of following functions—
the host
communities (a) nominate member to represent the host communities on the
advisory management committee ;
committee.
(b) articulate community development projects to be transmitted to the
management committee ;
(c) monitor and report progress of projects being executed in the
community to the management committee ; and
(d) advise the management committee on activities that may lead to
improvement of security of infrastructure and enhancement of peace-building
within the communities and the entire area of operation.
251.—(1) The settlor shall after the grant of any licence or lease Host
issued under this Act, conduct a needs assessment (“host communities communities
needs assessment”) in accordance with this Act and regulations made needs
assessment.
under this Act.
(2) Each host communities needs assessment shall, from a social,
environmental, and economic perspective—
(a) determine the specific needs of each affected host communities ;
(b) ascertain the effect that the proposed petroleum operations might
have on the host communities ; and
(c) provide a strategy for addressing the needs and effects identified.
(3) Each host communities needs assessment shall show that the
settlor has—
(a) engaged with each affected host communities to understand the
issues and needs of such host communities ;
(b) consulted with and considered the reasonable concerns of women,
youth and community leaders ; and
(c) engaged with each affected host communities in developing a strategy
to address the needs and effects identified in the applicable host communities
needs assessment.
(4) The settlor shall develop a host communities development plan and
shall submit to the Commission or Authority, as the case may be, based on the
findings of the host communities needs assessment, in order to undertake its
oversight function preparatory to the establishment of the trust.
252. The host communities development plan shall be based on the matrix Host
provided for in section 245 and such single plan shall— communities
development
(a) specify the community development initiatives required to respond plan.
to the findings and strategy identified in the host communities needs
assessment ;
(b) determine and specify the projects to implement the specified initiatives ;
(c) provide a detailed timeline for projects ;
(d) determine and prepare the budget of the host communities
development plan ;
(e) set out the reasons and objectives of each project as supported by
the host communities needs assessment ;
Act No 2, (f ) conform with the Nigerian content requirements provided in the
2010. Nigerian Oil and Gas Industry Content Development Act ; and
(g) provide for ongoing review and reporting to the Commission.
Financial 253. The financial year of the host communities development trust shall
year of the commence on 1st January and end on 31st December of each year or any
host
other date set for this purpose by the Board of Trustees.
communities
development
trust.
Accounts 254. The constitution of the host communities development trust shall
and audit. contain provisions requiring the Board of Trustees to—
(a) keep account of the financial activities of the host communities
development trust ; and
(b) appoint auditors to audit the accounts of the host communities
development trust annually.
Mid-year 255. The constitution of the host communities development trust shall
and annual contain provisions requiring the—
reports.
(a) management committee to submit a mid-year report of its activities
to the Board of Trustees not later than 31st August of the particular year ;
(b) management committee to submit an annual report accompanied by
its audited account to the Board of Trustees not later than 28th February of
the succeeding year ;
(c) Board of Trustees to submit an annual report of the activities of the
host communities development trust accompanied by its audited account to
the settlor not later than 31st March of the particular year ; and
(d) settlor to submit an annual report of the activities of the host
communities development trust accompanied by its audited account to the
Commission or Authority, as the case may be, not later than 31st May of
the particular year.
Exemption 256. The funds of the host communities development trust created under
from income this Act shall be exempted from taxation.
tax.
Deduction 257.—(1) Any payment made by the settlor under section 240 (2) of
of payment this Act, shall be deductible for the purposes of hydrocarbon tax and companies
for
petroleum income tax as applicable.
host
communities
development.
(2) Where in any year, an act of vandalism, sabotage or other civil
unrest occurs that causes damage to petroleum and designated facilities or
disrupts production activities within the host communities, the community shall
forfeit its entitlement to the extent of the costs of repairs of the damage that
resulted from the activity with respect to the provisions of this Act within that
financial year :
Provided the interruption is not caused by technical or natural cause.
(3) The basis for computation of the trust fund in any year shall always
exclude the cost of repairs of damaged facilities attributable to any act of
vandalism, sabotage or other civil unrest.
CHAPTER 4 —PETROLEUM INDUSTRY FISCAL FRAMEWORK

PART I—OBJECTIVES AND ADMINISTRATION
258.—(1) The objectives of this Chapter are to— Objectives.
(a) establish a progressive fiscal framework that encourages investment
in the Nigerian petroleum industry, balancing rewards with risk and enhancing
revenues to the Federal Government of Nigeria ;
(b) provide a forward-looking fiscal framework that is based on core
principles of clarity, dynamism and fiscal rules of general application ;
(c) establish a fiscal framework that expands the revenue base of the
Federal Government, while ensuring a fair return for investors ;
(d) simplify the administration of petroleum tax ; and
(e) promote equity and transparency in the petroleum industry fiscal
regime.
(2) All money collected from the petroleum industry that are due to the
Government shall be transferred to the Federation Account in a timely manner,
subject to this Act and these payments shall include taxes, royalties, production
shares, profit shares, signature bonuses, production bonuses, renewal bonuses,
rents, fees, fines, and other levies due in relation to the grant, assignment,
termination, and breach of licences, leases and permits.
259. From the commencement of this Act, the administration and Administration.
collection of Government revenue in the petroleum industry shall be the
function of the Federal Inland Revenue Service (the Service) and the
Commission, and—
(a) the Service shall be responsible for the assessment and
collection of—
(i) hydrocarbon tax and enforcement of the provisions of this Act as
it relates to hydrocarbon tax assessment and revenue collection, and
(ii) companies income tax and tertiary education tax in accordance
with this Act as it relates to taxable petroleum operations ;
(b) the Commission shall be responsible for the determination and
collection of —
(i) royalties, signature bonus, rents, and related payments and its
enforcement under this Act, and
(ii) related payments or production shares, where the model contract
includes provisions related to production sharing, profit sharing or risk
service provisions ; and
(c) the Authority shall be responsible for the determination and collection
of the gas flare penalty arising from midstream operations and its enforcement
under this Act.
PART II—HYDROCARBON TAX

Application 260.—(1) This part applies to companies engaged in upstream petroleum
of this operations in the onshore, shallow water and deep offshore, provided that—
Part.
(a) hydrocarbon tax shall apply to crude oil as well as field condensates
and liquid natural gas liquids derived from associated gas and produced in the
field upstream of the measurement points ; and
(b) hydrocarbon tax under this Part shall not apply to—
(i) associated natural gas, including gaseous natural gas liquids
produced in the field and contained in the rich gas, and non-associated
natural gas,
(ii) condensates and natural gas liquids produced from non-associated
gas in fields or gas processing plants, provided the related volumes are
determined at the measurement points or at the exit of the gas processing
plant, regardless of whether the condensates or natural gas liquids are
subsequently commingled with crude oil, and
(iii) any condensates and natural gas liquids produced from associated
gas at gas processing or other facilities downstream of the measurement
points.
(2) The costs of production of associated gas, upstream of the
measurement point shall be allocated to crude oil for the purposes of calculating
hydrocarbon tax, provided that capital and operating costs for wells solely
Cap. C21, producing associated gas-cap gas shall not be allocated to crude oil, but shall
LFN, 2004. be claimed under the Companies Income Tax Act.
(3) This Part shall not apply to a frontier acreage until it is reclassified
under section 68 (3) of this Act and to deep offshore.
(4) For the purpose of determining royalties, condensates shall be treated
as crude oil and natural gas liquids as natural gas.
(5) Upstream petroleum operations shall also be subject to Companies Cap. C21,
Income Tax Act. LFN, 2004.
261. There shall be levied upon the profits of any company engaged in Charge of
upstream petroleum operations in relation to crude oil a tax to be known as hydrocarbon
hydrocarbon tax, which shall be charged and assessed upon its profits related tax.
to the operations and payable during each accounting period in accordance
with this Act.
262.—(1) Subject to this Act, in relation to any accounting period, the Ascertainment
crude oil revenue of a company for that period shall be the value of any of crude oil
chargeable oil adjusted to the measurement points, based on the— revenue,
adjusted
(a) proceeds of all chargeable oil sold by the company ; and profit,
assessable
(b) value of all chargeable oil disposed by the company.
profits and
(2) For the purpose of subsection (1), the value of any chargeable oil chargeable
profits.
disposed of, shall be regarded as the aggregate of the value of that crude oil
determined for royalties for all fields in accordance with this Act or any
applicable law.
(3) Subject to section 266 (2) of this Act, the adjusted profits of an
accounting period shall be the profits of that period after the deductions allowed
by section 263 (1) of this Act.
(4) The assessable profit of an accounting period shall be the adjusted
profit of that period after any deduction allowed by section 265 of this Act.
(5) The chargeable profits of an accounting period shall be the assessable
profits of that period after the deduction allowed by section 266 of this Act.
263.—(1) In computing the adjusted profit of a company in upstream Allowable
petroleum operations related to crude oil for any accounting period, there shall deductions.
be deducted expenses wholly, reasonably, exclusively and necessarily incurred
during that period for the following, including but without otherwise expanding
or limiting the generality of—
(a) rents incurred by the company for the period pursuant to a petroleum
mining lease or petroleum prospecting licence ;
(b) all royalties the liability for which was incurred and were paid by the
company during that period in respect of crude oil and associated gas and
where a petroleum mining lease includes payments to the Federation Account
related to production sharing, profit sharing, risk service contracts or other
contractual features under a model contract and the company has incurred
liability for such payments in kind or in cash ;
(c) expenses directly incurred for repair of plant, machinery or fixtures
employed for the purpose of carrying on production activities or for the
renewal, repair or alteration of production implement, utensils or articles so
employed ;
(d) an expenditure, tangible or intangible directly incurred in connection
with the drilling of the first exploration well and the first two appraisal wells
in the same field, whether the wells are productive or not, provided that
subsequent exploration wells, appraisal wells and other wells shall be treated
Fifth as qualifying drilling expenditure under the Fifth Schedule to this Act and
Schedule. where a deduction may be given under this section in respect of any such
expenditure, that expenditure shall not be treated as qualifying drilling
expenditure for the purpose of the Fifth Schedule to this Act ;
(e) any amount contributed to a fund, scheme or arrangement
approved by the Commission for the purpose of decommissioning and
abandonment, provided that the surplus or residue of the fund shall be
subject to tax under this Act at the end of life of the field, where such
surplus is returned to the lessee ;
(f ) all sums the liability of which was incurred by the company to the
Federal Government or any State or Local Government Council by way of
levies, stamp duties and fees ;
(g) costs of gas reinjection wells, which are re-injecting natural gas that
otherwise would be flared, subject to ratification by the Commission ; and
(h) any amount contributed to any fund, scheme or arrangement approved
by the Commission pursuant to the establishment of host communities
development trusts under Chapter 3 of this Act, Environmental Remediation
Fund, Niger Delta Development Commission and other similar contributions.
(2) Where a deduction has been allowed to a company under this section
in respect of a liability of the company and the liability or part of the liability is
waived, released or recovered, the amount of the deduction corresponding to
the liability or part thereof shall, for the purpose of section 262 (1) of this Act,
be treated as income of the company of its accounting period, in which such
waiver or release was made or given.
Deductions 264. Subject to this Act, for the purpose of ascertaining the
not allowed. adjusted profit of a company in the accounting period from its upstream
petroleum operations applicable to crude oil, no deduction shall be
allowed in respect of—
(a) disbursements or expenses not being money wholly, reasonably,
exclusively and necessarily incurred for the purpose of those operations ;
(b) expenditure for the purchase of information relating to the existence
and extent of petroleum deposits, other than for the acquisition of geophysical,
geological and geochemical data and information ;
(c) expenditure incurred as a penalty, natural gas flare fees or imposition
relating to natural gas flare ;
(d) financial or bank charges, arbitration and litigation costs, bad debts
and interest on borrowing ;
(e) head office or affiliate costs, shared costs, research and development
costs or any other like shared indirect production costs ;
(f ) production bonuses, signature bonuses paid for the acquisition of, or
of rights in or over, petroleum deposits, bonuses or fees paid for renewing
petroleum mining lease or petroleum prospecting licence or marginal field
or fees paid for assigning rights to another party ;
(g) tax inputted into a contract or an agreement on a net tax basis and
paid by a company on behalf of the vendor or contractor ;
(h) capital withdrawn or sum employed or intended to be employed as
capital ;
(i) capital employed in improvements as distinct from repairs ;
(j) sum recoverable under an insurance or contract of indemnity, except
an amount that is not recovered under the scheme ;
(k) rent of or cost of repairs to any premises or part of premises not
incurred for the purpose of those operations ;
(l) amounts incurred in respect of tertiary education tax, companies
income tax, any income tax, profits tax or other similar taxes, whether
charged within Nigeria or elsewhere ;
(m) the depreciation of any premises, buildings, structures, works of a
permanent nature, plant, machinery or fixtures ;
(n) payment to provident, savings, widows and orphans or other society,
scheme or fund ;
(o) any contribution to a pension, provident or other society, scheme or
fund for production staff which may be approved, with or without
retrospective effect, by the National Pension Commission subject to such
general conditions or particular conditions in the case of the society, scheme
or fund as the Service may prescribe, provided that any sum received by or
the value of any benefit obtained by the company, from any approved pension,
provident or other society, scheme or fund, in the accounting period of that
company shall, for the purpose of section 262 (1) of this Act, be treated as
income of the company for that accounting period ;
(p) all customs duties ; and
Sixth (q) costs under paragraph 2 (2) (c) of the Sixth Schedule to this Act.
Schedule.
Assessable 265.—(1) The assessable profits for each company or petroleum mining
profits and lease for any accounting period shall be the amount of the adjusted profit of
losses.
that period after the deduction of the amount of any loss incurred by that
company during any previous accounting period.
(2) The assessable profit shall be determined separately for each of the
two classes of chargeable tax identified in section 267 (a) and (b).
(3) A deduction under subsection (1) shall be made so far as possible
from the amount, if any, of the adjusted profit of the first accounting period
after that in which the loss was incurred, and, so far as it cannot be so made,
then from the amount of the adjusted profit of the next succeeding accounting
period and so on until such loss is fully deducted.
(4) Within five months after the end of any accounting period of a
company, or within such further time as the Service may permit in writing, the
company may elect in writing that a deduction or any part to be made under
this section shall be deferred to and be made in the succeeding accounting
period, and may so elect in any succeeding accounting period.
Chargeable 266.—(1) The chargeable profits of any company for any accounting
profits and period shall be the amount of the assessable profits of that period after the
allowances. deduction of any amount to be allowed in accordance with the provisions of
this section, namely—
Fifth (a) the aggregate amount of capital allowances due to the company
Schedule. under the provisions of the Fifth Schedule to this Act for the accounting
period ;
Sixth (b) the aggregate amount of all production allowances due to the company
Schedule. under the provisions of the Sixth Schedule to this Act for the accounting
period ; and
(c) in the case of acquisition costs of petroleum rights, the value of the
rights and the value of the assets acquired shall be reported separately to the
Service, provided that the value of the rights shall be eligible for annual
allowance of 20% per annum and the value of the assets shall be depreciated
based on the applicable depreciation rates for the respective assets, and there
shall be a retention of 1% in the last year until the asset is disposed of.
(2) In determining the chargeable profit, the total cost shall not exceed Sixth
the cost-price ratio as determined in the Sixth Schedule to this Act. Schedule.
(3) The chargeable profits and allowances shall be determined

separately for the two classes of assessable profits under section 267 (a)
and (b) of this Act.
PART III—ASCERTAINMENT OF CHARGEABLE TAX

267. The chargeable tax for any accounting period of a company Chargeable
shall be a percentage of the chargeable profit for that period aggregated tax.
and it shall be—
(a) 30% of the profit from crude oil for petroleum mining leases
selected under section 93 (6) (b) and (7) (b) of this Act with respect to
onshore and shallow water areas ; and
(b) 15% of profit from crude oil for onshore and shallow water and
for petroleum prospecting licences selected under section 93 (6) (a)
and (7) (a) of this Act.
268.—(1) Where, for any accounting period of a company, the amount Additional
of the chargeable tax for that period, calculated in accordance with the chargeable
tax payable
provisions of this Act other than this section, is less than the amount mentioned in certain
in subsection (2), the company is liable to pay an additional amount of chargeable circumstances.
tax for that period equal to the difference between those two amounts.
(2) The amount referred to in subsection (1) is, for any accounting
period of a company, the amount which the chargeable tax for crude oil for
that period, calculated in accordance with this Act, would come to, in the case
of crude oil exported from Nigeria by the company, the reference in section
262 (1) (a) of this Act to the proceeds of sale were a reference to the amount
obtained by multiplying the number of barrels of that crude oil determined at
the measurement point by the fiscal oil price per barrel.
(3) For the purpose of subsection (2), the Commission shall establish the
fiscal oil price at each measurement point on an export parity basis under
paragraph 8 (1) and (2) of the Seventh Schedule and the total value of the Seventh
chargeable oil for a company shall be the sum of the multiplications of volume Schedule.
and fiscal oil price at all measurement points as established by the Commission.
(4) The whole of any additional chargeable tax for crude oil and
associated gas payable by a company by virtue of this section for any accounting
period shall be payable concurrently with the final instalment of the chargeable
tax payable for that period.
(5) Where there is no fiscal oil price established for a crude oil stream,
the Commission shall establish fiscal oil price for such stream and every fiscal
oil price per barrel established shall bear a fair and reasonable relationship—
(a) to the established fiscal oil price of Nigerian crude oil streams of
comparable quality and specific gravity ; or
(b) where there are no such Nigerian crude oil streams of comparable
quality and specific gravity it shall bear a fair and reasonable relationship to
the official selling prices at main international trading centers for crude oil
of comparable quality and gravity, due regard being had in either case to
freight differentials and other relevant factors.
(6) Where any crude oil, which in relation to a particular company is its
chargeable oil, is exported from Nigeria by another company, that crude oil
shall for the purpose of this section be deemed to be exported from Nigeria by
that particular company.
PART IV—ASCERTAINMENT OF CHARGEABLE PROFITS

AND CONSOLIDATION FOR TAX PURPOSES
Artificial 269.—(1) Where the Service is of the opinion that any disposition is not
transactions. given effect to or that any transaction which reduces or would reduce the
amount of any tax payable is artificial or fictitious, the Service may disregard
any such disposition or direct that such adjustments shall be made with respect
to the companies’ liability to tax as the Service considers appropriate to
counteract the reduction of liability to tax effected or reduction which would
otherwise be effected, by the transaction and the companies concerned shall
be assessed accordingly.
(2) In subsection (1), the expression “disposition” includes any trust,
grant, covenant, agreement or arrangement.
(3) For the purpose of this section, the following transactions shall be
deemed to be artificial or fictitious, namely, transactions between persons one
of whom has control over the other or between persons both of whom are
controlled by some other person which, in the opinion of the Service, were not
made on terms which might be expected to have been made by independent
persons engaged in the same or similar activities dealing with one another at
arm’s length.
(4) A company in respect of which any direction is made under this
section, shall have a right of appeal in like manner as though for the purpose
of Part III of this Chapter such direction was an assessment.
(5) Subject to this Act, the provisions of the Income Tax (Transfer Pricing)
Regulations 2018 shall apply.
270. Where a company has not yet commenced the production and Pre-
sale or disposal of chargeable oil, all costs incurred wholly, reasonably, production
exclusively and necessarily for the purpose of coming into upstream petroleum cost.
operations, subject to sections 263 and 264 of this Act, shall upon
commencement of production and sale or disposal of chargeable oil be deemed
to have incurred a qualifying pre-production capital expenditure which shall Fifth
be amortised in line with paragraphs 5 and 17 of the Fifth Schedule to this Act. Schedule.
271.—(1) Without prejudice to section 275 of this Act, where a trade or Trade or
business of upstream petroleum operations carried on in Nigeria by a company business
is sold or transferred to another company for the purposes of better organisation sold or
transferred.
of that trade or business or the transfer of its management and any asset
employed in that trade or business is sold or transferred, then, if the Service is
satisfied that one of those companies has control over the other or that both
companies are controlled by some other person or are members of a recognised
group of companies and have been so for a consecutive period of at least
three years prior to the date of reorganisation, the provisions set out in
subsection (2) shall have effect.
(2) Where subsection (1) applies, the Service may in its discretion if, on
or before the date on which the trade or business is so sold or transferred, the
first sale of or bulk disposal of chargeable oil by or on behalf of the company
selling or transferring the trade or business has occurred, but the first sale of
or bulk disposal of chargeable oil by or behalf of the company acquiring that
trade or business has not occurred, direct that—
(a) the first accounting period of the company acquiring that trade or
business shall commence on the date on which the sale or transfer of the
trade or business takes place and end on 31st December of that same year,
and the definition of accounting period in section 318 of this Act shall be
construed accordingly ;
(b) for the purpose of the Fifth Schedule to this Act, the asset sold or Fifth
transferred to the company acquiring that trade or business by the company Schedule.
selling or transferring the trade or business shall be deemed to have been sold
for an amount equal to the residue of the qualifying expenditure on the asset
on the day following the day on which the sale or transfer occurred ; and
(c) the company acquiring the asset so sold or transferred shall be Fifth
deemed to have received all allowances given to the company selling or Schedule.
transferring the trade or business in respect of the asset under the Fifth
Schedule to this Act and any allowances deemed to have been received by
that company under the provisions of the Fifth Schedule, provided that the
Service in its discretion may—
(i) require the company selling or transferring the trade or business
or the company acquiring that trade or business, to guarantee or give
security to the satisfaction of the Service for payment in full of tax
due or to become due from the company selling or transferring the
trade or business, and
(ii) impose such conditions as it deems fit on either of the companies
or on both of them.
(3) In the event of failure by the company or companies selling to fulfil
the guarantee or conditions, the Service may revoke the direction and may
make the additional assessments or repayment of tax as may be necessary to
give effect to the revocation.
(4) Where the acquiring company makes a subsequent disposal of the
assets thereby acquired within the succeeding three years after the date of
acquisition, any concession enjoyed under this subsection shall be rescinded
and the company shall be treated as if it did not qualify for the concession as
at the date of the initial reorganisation.
(5) Where a trade or business of petroleum operations carried on in
Nigeria by a company incorporated under any law in force in Nigeria is sold or
transferred to another company and any asset employed in that trade or business
is so sold or transferred, and the Service is satisfied that the companies are
not connected and that none has control over the other or both are not controlled
by another company, the—
(a) transaction shall be dealt with under section 266 (1) (c) ; and
(b) accounting period of the new trade or business shall be as provided
for in subsection (2).
(6) For the purpose of subsection (2) (a), the accounting period of the
company acquiring that trade or business shall commence on the date on
which the sale or transfer of the trade or business to the company takes place
or on such date within the calendar month in which the sale or transfer takes
place as may be elected by the company with the approval of the Service and
end on 31st December of that same year and the definition of “Accounting
Period” under this Act shall be construed accordingly.
(7) A merger, take-over, transfer or restructuring of the trade or business
carried on by a company shall not take place without the approval and having
obtained direction of the Service on any tax that may be due and payable.
(8) Reference to a ‘trade or business’ in this section shall include references
to any part of the trade or business.
272.—(1) A company engaged in upstream petroleum operations across Consolidation

terrains shall be allowed to consolidate costs for the purpose of companies of costs and
taxes.
income tax.
(2) A company engaged in upstream petroleum operations related to
crude oil across terrains shall be allowed to consolidate costs and taxes for
the purposes of hydrocarbon tax only across assets in which it holds licences
and leases in accordance with the two categories of chargeable tax stipulated
in section 267 of this Act.
(3) In respect of a company in existence prior to the commencement of
this Act, the amount of any loss incurred during any accounting period by a
company selling or transferring its trade or business whether to a connected
or unrelated party, being a loss which has not been allowed against any
assessable profit of any accounting period of that company shall not be allowed
against any assessable profit of the company acquiring that trade or business.
(4) A company that is a contractor in a contract under section 85 of this
Act shall be allowed to consolidate its losses and revenues across petroleum
prospecting licences and petroleum mining leases granted after the
commencement of this Act, for the purposes of subsections (1) and (2) with
respect to the two tax classes under section 267 of this Act.
PART V—PERSONS CHARGEABLE

273.—(1) Any person, other than a company, who engages in upstream Partnerships.
petroleum operations either on his own account or jointly with any other person
or in partnership with any other person with a view to sharing the profits
arising from the operations, commits an offence.
(2) Where the person referred to in subsections (1) has benefitted from
any profits on upstream petroleum operations, the person shall be subject to
hydrocarbon tax and companies income tax under this Act on the profits and
shall pay a penalty provided under section 297 of this Act.
(3) Where two or more companies are engaged in upstream petroleum
operations either in partnership, in a joint venture or in concert under any
scheme or arrangement, tax shall be charged and assessed on them in
accordance with subsection (4).
(4) The apportionment of any profits, outgoings, expenses, liabilities,
deductions, qualifying expenditure and the tax chargeable upon each company
shall be in line with the equity interest of the parties under a jointly executed
agreement that will be made available to the Service and where no jointly
executed agreement is made available, the Commission shall advise the Service
the approved equity interest of the parties and it shall be binding on the parties.
Act No. 13, (5) Subject to this Act, where two or more companies are engaged in
2007. upstream petroleum operations either in partnership, in a joint venture or in
concert under any scheme or arrangement, the Service may make regulation,
in compliance with section 61 of the Federal Inland Revenue Service
(Establishment) Act, for the ascertainment of tax to be charged or assessed
upon each company so engaged.
(6) Regulations made under subsection (5) may make provisions—
(a) with respect to apportionment of any profits, outgoings, expenses,
liabilities, deductions, qualifying expenditure and tax chargeable upon each
company ;
(b) for the computation of any tax as if the partnership, joint venture,
scheme or arrangement were carried on by one company and apportion
that tax between the companies concerned ;
(c) to accept other basis of ascertaining the tax chargeable upon each of
the companies ; and
(d) which have regard to any circumstances whereby the operations are
partly carried on for any company by an operating company whose expenses
are reimbursed by those companies.
(7) Regulations made under this section may be of general application
for the purpose of this section and this Part or for a class of arrangement or
for a particular application to a specific partnership, joint venture, scheme or
arrangement.
(8) The effect of any regulation made under this section shall not impose
a greater burden of tax upon any company so engaged in any partnership, joint
venture, scheme or arrangement than would have been imposed upon that
company under this Part, if all things enjoyed, done or suffered by such
partnership, joint venture, scheme or arrangement had been enjoyed, done or
suffered by that company in the proportion in which it enjoys, does or suffers
those things under or by virtue of that partnership, joint venture, scheme or
arrangement.
Company 274.—(1) Where a company is being wound up or where in respect of
wound up. a company a receiver has been appointed by any court, by the holders of any
debentures issued by the company or otherwise, the company may be assessed
and charged to tax in the name of the liquidator of the company, the receiver
or any agent in Nigeria of the liquidator or receiver and may be so assessed
and charged to tax for any accounting period whether before, during or after
the date of the appointment of the liquidator or receiver with respect to
companies income tax and hydrocarbon tax.
(2) Any liquidator, receiver or agent under subsection (1) shall be
answerable for doing the acts required to be done by virtue of this Act for the
assessment and charge to tax of the company and for payment of such tax.
(3) A liquidator or receiver under subsection (1) shall not distribute any
asset of the Company to the shareholders or debenture holders unless he has
made provision for the payment in full of any tax which may be found payable
by the company or by the liquidator, receiver or agent on behalf of the company.
275. Where a company which is or was engaged in petroleum operations Avoidance
transfers a substantial part of its assets to any person without having paid any by transfer.
companies income tax or hydrocarbon tax, assessed or chargeable upon the
company, for any accounting period ending prior to such transfer and in the
opinion of the Service one reason for such transfer by the company was to
avoid payment of such tax then that tax as charged upon the company may be
sued for and recovered from that person in a manner similar to a suit for any
other tax under section 294 of this Act.
276. Every person answerable under this Act for the payment of Indemnifica-
companies income tax or hydrocarbon tax on behalf of a company may retain tion of
representative.
out of any money in or coming to his hands or within his control on behalf of
such company so much as shall be sufficient to pay the tax and shall be
indemnified against any person for payments made by him in accordance with
this Act.
PART VI—APPLICABILITY, ACCOUNTS AND PARTICULARS

277.—(1) Every company engaged in upstream petroleum operations Preparation
related to crude oil shall for each accounting period of the company make up and delivery
accounts of its profits or losses and prepare the following particulars for the of accounts
and
purpose of determining hydrocarbon tax—
particulars.
(a) a statement of accounts of its profits or losses ;
(b) computations of its actual adjusted profit or loss and actual assessable
profits of that period ;
(c) in connection with the Fifth Schedule to this Act, a schedule Fifth
showing— Schedule.
(i) the residues at the end of that period in respect of its assets,
(ii) all qualifying petroleum expenditure incurred by it in that period,
(iii) the values of any of its assets disposed of in that period, and
(iv) the allowances due to it under that schedule for that period ;
Sixth (d) in connection with the Sixth Schedule to this Act, a schedule showing
Schedule. total production allowance from each and every field of its upstream
petroleum operations related to crude oil ;
(e) a computation of its actual chargeable profits for that period for the
two classes of chargeable profits identified in section 267 (a) and (b) of
this Act ;
(f ) a statement of amounts repaid, refunded, waived or released to it,
referred to in section 263 (2) of this Act, during that period ;
(g) a computation of its chargeable tax for that period and where
associated gas is being sold or otherwise delivered through the measurement
point the methodology used to determine the chargeable tax ;
(h) duly completed self-assessment form attested to by the principal
officer of the company ; and
(i) evidence of payment of the final instalment.
(2) Every company engaged in upstream petroleum operations related
to crude oil shall, with respect to any accounting period of the company and
within five months after the expiration of that period or within five months
after the effective date of this Act, whichever is later, deliver to the Service a
copy of its accounts, bearing an auditor’s certificate, of that period, in
accordance with subsection (1) and copies of the particulars referred to in
subsection (1) relating to that period with the copy of the delivered company
accounts and each copy of those particulars, shall, where the copies are—
(a) not estimates, contain a declaration signed by authorised officer of
the company or by its liquidator, receiver or the agent of the liquidator or
receiver, that the same is true and complete ; and
(b) estimates, contain a declaration, similarly signed, that the estimate
was made to the best of the ability of the person signing same.
(3) Notwithstanding the provisions of this section, every company which
is yet to commence bulk sales or disposal of chargeable oil, shall file with the
Service its audited accounts and returns—
(a) within 18 months from the date of its incorporation, in the case of a
newly incorporated company ; and
(b) within five months after any period ending on 31st December, in
the case of any other company, provided that where there is an interval
between 31st December of the preceding year and the date on which
the company commences the bulk sale or disposal of chargeable oil,
natural gas or condensate, the interval shall be deemed to form part of
the preceding period.
(4) A company which fails to comply with subsection (2) or (3) is liable
to pay as penalty for late filing—
(a) N10,000,000 on the first day the failure occurs and N2,000,000 for
each and every subsequent day in which the failure continues ; or
(b) other sum as may be prescribed by the Minister of Finance by order
published in the Federal Government Gazette.
278. The Service may give notice in writing to any company engaged in Power of
upstream petroleum operations related to crude oil as the Service may deem the Service
to request
necessary requiring the company to furnish further information, within
further
reasonable time as may be specified, in relation to any matter referred to in information.
section 277 of this Act or any other matter which the Service may consider
necessary for the purpose of this Act.
279.—(1) For the purpose of obtaining information in respect of any Power to
company’s upstream petroleum operations related to crude oil, the Service call for
returns and
may give notice to a company requiring it within a period not less than 21 days
books.
from the date of service of the notice, to complete and deliver to the Service
any information called for in such notice and in addition or alternatively requiring
an authorised representative of such company or its liquidator, receiver or the
agent of such liquidator or receiver, to attend before the Service or its authorised
representative on the date or dates as may be specified in the notice and to
produce for examination any books, documents, accounts and particulars which
the Service may deem necessary.
(2) Where a company assessable to hydrocarbon tax under the provisions
of this Act fails or refuses to keep books or accounts which, in the opinion of
the Service are adequate for the purpose of ascertaining the tax, the Service
may by notice in writing require it to keep such records, books and accounts
as the Service considers to be adequate in a form and in a language as the
Service may direct and the company shall keep the records, books and accounts
as directed.
(3) An appeal shall lie from any direction of the Service made under this
section to the Tax Appeal Tribunal.
280.—(1) Not later than two months after the commencement of each Returns of
accounting period of any company engaged in upstream petroleum operations estimated
related to crude oil, the company shall submit to the Service an estimated tax.
return of its profits or losses for that accounting period for the purpose of
hydrocarbon tax, which shall include—
(a) computations of its estimated adjusted profit or loss and of its
estimated assessable profits of that period ;
Fifth (b) in connection with the Fifth Schedule to this Act, a schedule
Schedule. showing—
(i) the estimated residues at the end of that period in respect of its
assets,
(ii) all estimated qualifying petroleum expenditure incurred by it in
that period,
(iii) the values of any of its assets, estimated by references to the
provisions of that schedule, to be disposed of in that period, and
(iv) the allowances due to it under that schedule for that period ;
Sixth (c) in connection with the Sixth Schedule to this Act, a schedule showing
Schedule. estimated total production allowance from all its upstream petroleum
operations related to crude oil on field by field basis ;
(d) a computation of its estimated chargeable profits of that period ; and
(e) a computation of its estimated tax for that period.
(2) Where, at any time during the accounting period, there is a change in
price, cost or volume, the company shall submit further returns on a monthly
basis containing its revised estimated tax for such period.
(3) Where the further returns provided for under subsection (2) is not
made, the Service shall impose interest at the prevailing LIBOR or any other
successor rate plus 10% points for the differential of the revised tax over the
estimated tax paid by the company.
(4) Every return made by a company engaged in upstream petroleum
operations related to crude oil in fulfilment of the provisions of this section
shall be subject to review and validation by the Service.
(5) Where a company does not provide the estimates under subsections
(1) and (2), the Service shall have the right to determine such estimates on the
best of judgment basis and impose same on the company.
(6) A company which fails to comply with subsection (1) is liable to pay
as penalty for late filing—
281. Where it is shown by any company to the satisfaction of the Service Extension of
that for some good reason, the company is not able to comply with section 277 periods for
of this Act within the time limited by that section or any notice given to it under making
returns.
section 278 or 279 of this Act, within the time limited by any such notice, the
Service may grant in writing such extension of that time as the Service may
consider necessary.
282.—(1) The Service shall proceed to assess a company with the Assessment
hydrocarbon tax for any accounting period of the company immediately after of tax
payable.
the expiration of the time allowed to such company for the delivery of self-
assessment provided for in section 277 of this Act.
(2) Where a company has delivered a self-assessment for any accounting
period of the company, the Service may—
(a) accept the self-assessment ; or
(b) refuse to accept the self-assessment and proceed as provided in
subsection (3) upon any failure as mentioned and the like consequences
shall ensue.
(3) Where, for any accounting period, a company files a self-assessment
which was rejected by the Service or has failed to file self-assessment as
provided in section 277 of this Act within the time limited by that section or
has failed to comply with any notice given to it under section 278 or 279 of this
Act within the time specified in such notice or within any extended time
provided in section 281 of this Act, and the Service is of the opinion that the
company is liable to pay hydrocarbon tax, the Service may estimate the amount
of the tax to be paid by the company for that accounting period and make an
assessment accordingly, provided that—
(a) the assessment shall not affect any liability otherwise incurred by
such company by reason of its failure or neglect to deliver the accounts and
particulars or to comply with the notices ; and
(b) nothing in this subsection shall affect the right of the Service to make
any additional assessment under the provisions of section 283 of this Act.
283.—(1) Where the Service discovers or is of the opinion at any time Additional
that, with respect to any company liable to hydrocarbon tax, tax has not been assessments.
charged and assessed upon the company or has been charged and assessed
upon the company at an amount less than that which ought to have been
assessed and charged for any accounting period of the company, the Service
may within six years after the expiration of that accounting period—
(a) assess the company, as often as may be necessary, with tax for that
accounting period at such amount or additional amount as in the opinion of
the Service ought to have been charged and assessed; and
(b) may make any consequential revision of the tax charged or to be
charged for any subsequent accounting period of the company.
(2) Where a revision under subsection (1) results in a greater amount of
tax to be charged than has been charged or would otherwise be charged, an
additional assessment or an assessment for any such subsequent accounting
period shall be made and the provisions of this Act as to notice of assessment,
objection, appeal and other proceedings under this Act shall apply to any such
assessment or additional assessment and to the tax charged.
(3) For the purpose of computing under subsection (1) the amount or
the additional amount of tax for any accounting period of a company which
ought to have been charged, all relevant facts consistent with section 289 (4)
of this Act shall be taken into account even though it is not known when any
previous assessment or additional assessment on the company for that
accounting period was made or could have been made.
(4) Notwithstanding the provisions of this section, where any form of
fraud, willful default or neglect has been committed by or on behalf of any
company in connection with hydrocarbon tax imposed under this Act, the
Service may, at any time and as often as may be necessary, assess the company
on such amount as may be necessary for the purpose of recovering any loss
of tax attributable to fraud, willful default or neglect.
Making of 284.—(1) Assessments of hydrocarbon tax shall be made in such form
assessments. and in such manner as the Service shall authorise and shall contain the—
(a) names and addresses of the companies assessed to tax or of the
persons in whose names any companies have been assessed to tax, provided
that the names of the represented companies are indicated; and
(b) particular accounting period and the amount of the chargeable profits
and chargeable tax for that period, in the case of each company for each of
its accounting periods.
(2) When any assessment is to be amended or revised, a form of amended
or revised assessment shall be made in a manner similar to that in which the
original of that assessment was made under subsection (1) showing the
amended or revised amount of the chargeable profits and chargeable tax.
(3) A copy of each assessment and of each amended or revised
assessment shall be filed in a list which shall constitute the assessment list for
the purpose of this Act.
285.—(1) The Service shall cause to be served personally on or sent by Notices of
courier to a company which is liable to hydrocarbon tax under this Act, by assessment.
way of an additional assessment or an assessment by the Service, a notice of
assessment stating the—
(a) accounting period and the amount of its chargeable profits and
chargeable tax assessed and charged upon the company ;
(b) place at which payment of the tax should be made ; and
(c) rights of the company under subsection (2).
(2) Where any person in whose name an assessment was made in
accordance with this Act, disputes the assessment, the person may apply to
the Service by notice of objection in writing, to review and revise the assessment
made on him and the application shall be made within 30 days from the date of
service of the notice of the assessment, stating the amount of chargeable—
(a) profits of the company of the accounting period in respect of which
the assessment is made ; and
(b) tax and the tax which such person claims should be stated on the
notice of assessment.
(3) The Service, upon being satisfied that due to absence from Nigeria,
sickness or other reasonable cause, the person in whose name the assessment
was made was prevented from making the application within such period of
30 days, shall extend the period as may be reasonable in the circumstances.
(4) After receipt of a notice of objection referred to in subsection (2),
the Service may within such time and place as it shall specify, require—
(a) the person giving the notice of objection to furnish such particulars
as the Service may deem necessary ; and
(b) any other person, by notice, to give evidence orally or in writing in
respect of any matter necessary for the ascertainment of the hydrocarbon
tax payable and the Service may further require that where such evidence
is given—
(i) orally, it shall be given on oath, and
(ii) in writing, it shall be given by affidavit.
(5) In the event of any person assessed who has objected to an
assessment made upon him agreeing with the Service as to the amount of tax
liable to be assessed, the assessment shall be amended accordingly and notice
of the tax payable shall be served upon the person.
(6) Where an applicant for revision under subsection (2) fails to agree
with the Service on the amount of the hydrocarbon tax, the Service shall give
such applicant notice of refusal to amend the assessment as desired by the
applicant or may revise the assessment to such amount as the Service may
determine and give the applicant notice of the revised assessment and tax
payable, together with notice of refusal to any subsequent request to amend
the revision and, where necessary, any reference in this Act to an assessment
or additional assessment shall be treated as a reference to an assessment or
additional assessment as revised under the provisions of this subsection.
Errors and 286.—(1) An assessment, warrant or other proceeding purporting to be
defects in made in accordance with this Act shall not be quashed or deemed to be void
assessment or voidable for want of form or be affected by reason of a mistake, defect or
and notice.
omission, if the—
(a) substance and effect of the assessment is in conformity with the
provisions of this Act ; and
(b) company assessed or intended to be assessed or affected is designated
according to common intent and understanding.
(2) An assessment shall not be invalidated or affected by reason of—
(a) a mistake as to the—
(i) name of a company liable or of a person in whose name a company
is assessed, or
(ii) amount of the tax; or
(b) any variance between the assessment and the notice, if in cases of
assessment, the notice be duly served on the company intended to be
assessed or on the person in whose name the assessment was to be made
on a company, and such notice contains, in substance and effect, the
particulars on which the assessment is made.
Tax 287. Notwithstanding anything to the contrary in any law—
computation.
(a) all hydrocarbon tax computation made under this Act shall be in US
Dollars ; and
(b) any assessment made under section 284 of this Act shall be in US
Dollars.
PART VII—APPEALS
Appeals to 288. Any Company or tax payer, who does not agree with an assessment
Tax Appeal made under section 285 (6) of this Act, may appeal against the assessment to
Tribunal.
the Tax Appeal Tribunal established under the provisions of section 59 of the
Act No. 13,
Federal Inland Revenue Service (Establishment) Act.
2007.
289. (1) Where— Assessment

to be final
(a) no valid objection or appeal has been lodged within the time limited and
by section 285 of this Act or the rules of the relevant tribunal or court, as conclusive.
the case may be, against an assessment as regards the amount of the
hydrocarbon tax assessed,
(b) the amount of the tax has been agreed to under section 285 (5) of
this Act, or
(c) the amount of the tax has been determined on objection or revision
under section 285 (6) of this Act or on appeal,
the assessment as made, agreed to, revised or determined on appeal, as the
case may be, shall be final and conclusive for all purposes of this Act as
regards the amount of such tax.
(2) Where the full amount of the tax in respect of the final and conclusive
assessment under subsection (1) is not paid within the appropriate period or
periods prescribed in this Act, the provisions relating to the recovery of tax
and to any penalty under section 292 of this Act, shall apply to the collection
and recovery, subject only to the set-off of the amount of any tax repayable
under any claim, made under any provision of this Act, which has been agreed
to by the Service or determined on an appeal against a refusal to admit any
such claim.
(3) Where an assessment has become final and conclusive, any tax
overpaid shall be repaid or treated as credit in favour of the assessed party.
(4) Nothing in section 285 of this Act or in this Chapter shall prevent the
Service from making any assessment or additional assessment to hydrocarbon
tax for any accounting period which does not involve re-opening any issue on
the same facts which have been determined for that accounting period, under
section 285 (5) and (6) of this Act by agreement or otherwise or on appeal.
PART VIII—COLLECTION, RECOVERY AND REPAYMENT OF TAX

290. Collection of hydrocarbon tax shall, in cases where notice of an Procedure in
objection or an appeal has been given, remain in abeyance and any pending cases where
proceedings for any payment in instalment shall be stayed until the objection objection or
appeal is
or appeal is determined but the Service may in any such case, enforce payment pending.
of that portion of the tax which is not in dispute by an application to the tribunal
or court, as the case may be.
291.—(1) Subject to section 280 of this Act, hydrocarbon tax for any Time within
accounting period shall be payable in equal monthly instalments together with which
payment is
a final instalment as provided in subsection (4). to be made.
(2) The first monthly payment shall be due and payable not later
than the third month of the accounting period and shall be in an amount
equal to one-twelfth or where the accounting period is less than a year, in
an amount equal to equal monthly proportion, of the amount of tax estimated
to be chargeable for such accounting period in accordance with section
280 (1) of this Act.
(3) Each of the remainder of monthly payments to be made subsequent
to the payment under subsection (2) shall be due and payable not later than
the last day of the month in issue and shall be in an amount equal to the
amount of tax estimated to be chargeable for such period by reference to the
latest returns submitted by the company in accordance with section 280 (2) of
this Act less so much as has already been paid for such accounting period
divided by the number of such of the monthly payments remaining to be made
in respect of such accounting period.
(4) A final instalment of tax shall be due and payable on or before the
due date of filing of the self-assessment of tax for such accounting period and
shall be the amount of the tax assessed for that accounting period less so
much as has already been paid under subsections (2) and (3).
(5) Any instalments on account of tax estimated to be chargeable shall
be treated as hydrocarbon tax charged and assessed for the purposes of
sections 292 and 294 of this Act.
Penalty for 292.—(1) Where any hydrocarbon tax or any instalment of tax due and
non- payable is not paid within the appropriate time limit prescribed in section 291
payment of of this Act—
tax and
enforcement (a) a sum equal to 10% of the amount of the tax payable shall be added
of payment. and the provisions of the Act relating to the collection and recovery of tax
shall apply to the collection and recovery of such sum ;
(b) the tax due shall incur interest at the prevailing LIBOR or any
successor rate, plus 10% from the date when the tax becomes payable
until it is paid and the provisions of this Act relating to collection and recovery
of tax shall apply to the collection and recovery of the interest ;
(c) the Service shall serve a demand notice upon the company or person
in whose name a tax is chargeable and if payment is not made within one
month from the date of the service of the demand notice, the Service may
proceed to enforce payment under this Act ; and
(d) an addition imposed under this subsection shall not be deemed to be
part of the tax paid for the purpose of claiming relief under any of the
provisions of this Act.
(2) Any person who without lawful justification or excuse fails to pay
hydrocarbon tax within the period of one month prescribed in subsection (1)
(c), commits an offence under this Act and the provisions of subsection (1)
(a) to (c) shall apply.
(3) The Service may, for any good cause shown, remit the whole or
any part of the additional 10% penalty and interest on the tax due under
subsection (1).
293.—(1) Where payment of hydrocarbon tax in whole or in part has Collection of
been held in abeyance pending the result of a notice of objection or of appeal, tax after
determination
the tax outstanding under the assessment as determined on such objection or
of objection
appeal, as the case may be, shall be payable within one month from the date or appeal.
of service on the company assessed or on the person in whose name the
company is assessed, of the notification of the tax payable by the Service or
Tribunal.
(2) Where such balance is not paid within one month, section 292 of this
Act shall apply.
294.—(1) Hydrocarbon tax may be sued for and recovered in a court of Suit for tax
competent jurisdiction at the place at which payment shall be made by the by the
Service.
Service.
(2) In any suit under subsection (1) the production of a certificate signed
by any person duly authorised by the Service giving the name and address of
the defendant and the amount of tax due by the defendant shall be sufficient
evidence of the amount due.
295.—(1) Where a person who has paid hydrocarbon tax for an Relief in
accounting period alleges that any assessment made upon him or in his name respect of
for that period, was excessive by reason of some error or mistake in the error or
mistake.
accounts, particulars or other written information supplied by him to the Service
for the purpose of the assessment, that person may, not later than six years
after the end of the accounting period in respect of which the assessment was
made, make an application in writing to the Service—
(a) for a relief ; or
(b) to set-off the credit against the liability of a similar tax payable to the
Service.
(2) On receiving an application under subsection (1), the Service shall
inquire into it and subject to the provisions of this section shall by way of
repayment of tax give such relief or approve the set-off in respect of the error
or mistake as appears to the Service to be reasonable and just.
(3) A relief shall not be given under this section in respect of an error or
mistake as to the basis on which the liability of the applicant ought to have
been computed where the accounts, particulars or information was in fact
made or given on the basis or in accordance with the practice of the Service
generally prevailing at the time when the accounts, particulars or information
was made or given.
(4) In determining any application under this section, the Service shall
have regard to all the relevant circumstances of the case and in particular
shall consider whether the granting of relief would result in the exclusion from
charge to tax of any part of the chargeable profits of the applicant and for this
purpose, the Service may take into consideration the liability of the applicant
and assessments made upon him in respect of other years.
Repayment 296.—(1) Except as otherwise expressly provided in this Act, a claim
of tax. for the repayment of any hydrocarbon tax overpaid shall not be allowed unless
it is made in writing within six years next after the end of the accounting
period to which it relates.
(2) The Service shall cause to be refunded or set-off at the option of the
applicant upon presentation of relevant documents evidencing the tax to be
refunded.
(3) Any tax claimed based on this section, which is proven not to be due,
shall attract a penalty at the prevailing LIBOR or any other successor rate
plus 10% from the date the payment or set-off was made up to the date the
refund is made by the applicant.
PART IX—OFFENCES AND PENALTIES

Penalty for 297.—(1) A person who fails to comply with the provisions of this Chapter
defaults. or any regulation made under this Act for which no other penalty is specifically
provided, shall be liable to an administrative penalty of N10,000,000, and
where the default continues beyond a period stipulated by this Act or regulation,
the person shall be liable to a further administrative penalty of N2,000,000 or
such other sum as may by order be prescribed by the Minister of Finance, for
each day the default continues.
(2) Notwithstanding the provisions of subsection (1), a person who is
found guilty of an offence under this Chapter or in a regulation made under
this Act for which no other penalty is specifically provided, shall, on conviction,
be liable to a fine of N20,000,000 or other sum as may be prescribed by the
Minister of Finance by an order and where the offence continues beyond a
period stipulated by this Act or regulation, the person shall be liable to an
additional fine of N2,000,000 or such other sum as may, by order, be prescribed
by the Minister of Finance for each day the default continues, or imprisonment
for a term of six months.
(3) A person who—
(a) fails to comply with the requirements of a notice served on him
under this Chapter ;
(b) fails to comply with section 277 of this Act,
(c) without sufficient cause fails to attend in answer to a notice or
summons served on him under this Chapter or having attended fails to
answer any question lawfully put to him, or
(d) fails to submit any return required to be submitted under section 277
or 281 of this Act,
commits an offence.
(4) Any violation in respect of which a penalty is provided for in subsection
(1) shall be deemed to occur in Nigeria.
298.—(1) A person who without reasonable excuse— Penalty for
making
(a) makes up or causes to be made up any incorrect accounts by omitting incorrect
or understating any profits or overstating any losses of which he is required accounts.
under this Act to make up accounts,
(b) prepares or causes to be prepared any incorrect schedule or statement
required to be prepared under section 277 of this Act by overstating any
expenditure or overstating any royalties or other sums or by omitting or
understating any amounts repaid, refunded, waived or released, or
(c) gives or causes to be given any false or misleading information in
relation to any matter or thing affecting his liability to hydrocarbon tax,
is liable to an administrative penalty of the sum of N15,000,000 or 1% of the
amount of tax which has been undercharged in consequence of such incorrect
account, schedule, statement or information or would have been so
undercharged if the account, schedule, statement or information had been
accepted as correct, and is also liable for the appropriate tax which would
have been charged.
(2) Notwithstanding the provisions of subsection (1) (c), a person who
gives or causes to be given any false or misleading information in relation to any
matter or thing affecting his liability to hydrocarbon tax, commits an offence and
on conviction is liable to a fine of N15,000,000 or 1% of the amount of tax which
has been undercharged in consequence of such incorrect account, schedule,
statement or information, or would have been so undercharged if the account,
schedule, statement or information had been accepted as correct and is also
liable for the appropriate tax which would have been charged.
(3) The Service may compound any offence under this Act by accepting
a sum of money not exceeding the maximum fine specified for the offence
and shall issue an official receipt for any money so received.
False 299.—(1) A person who—
statements
and returns. (a) for the purpose of obtaining any deduction, refund, rebate, reduction
or repayment in respect of hydrocarbon tax for himself or for any other
person or who in any return, account, particulars or statement made or
furnished with reference to tax, knowingly makes any false statement or
false representation or forges or fraudulently alters or uses or fraudulently
lends or allows to be used by any other person any receipt or token as
evidence for payment of the tax under this Act ; or
(b) aids, abets, assists, counsels, incites or induces any other person—
(i) to make or deliver any false return or statement under this Act,
(ii) to keep or prepare any false accounts or particulars affecting
tax, or
(iii) unlawfully refuses or neglects to pay tax,
commits an offence and is liable on conviction to a fine of N15,000,000 or 1%
of the amount of tax for which the person assessable is liable under this Act
for the accounting period in respect of or during which the offence was
committed, or to imprisonment for six months or to both the fine and
imprisonment and is also liable for the appropriate hydrocarbon tax which
would have been assessed and charged.
(2) Notwithstanding the provisions of subsection (1), any person who does
any of the acts or makes the omissions contained in subsection (1), may be liable
to an administrative penalty of N15,000,000 or 1% of the amount of hydrocarbon
tax for which the person assessable is liable under this Act for the accounting
period in respect of or during which the act or omission occurred and shall still be
liable for appropriate tax which would have been assessed and charged.
Penalties for 300. A person who,—
offences by
authorised or
(a) being a member of the Service charged with the administration of
unauthorised this Act or any assistant employed in connection with the assessment and
persons. collection of the hydrocarbon tax who—
(i) demands from any person an amount in excess of the authorised
assessment of the tax payable,
(ii) withholds for his own use or otherwise any portion of the amount
of tax collected,
(iii) renders a false return, whether verbal or in writing of the amounts
of tax collected or received by him, or
(iv) defrauds any person, embezzles any money or otherwise uses his
position to deal wrongfully with the Service or any other individual; or
(b) not being authorised under this Act, collects or attempts to collect the
tax under this Act,
commits an offence and is liable on conviction to a fine equivalent to 200% of
the sum in question or to imprisonment for a term not exceeding three years or
to both such fine and imprisonment.
301. The institution of proceedings for or the imposition of a penalty, Tax to be
fine or term of imprisonment under this Act shall not relieve any person payable
notwithstanding
of liability to payment of any hydrocarbon tax for which he is or may
any
become liable. proceedings
for penalties.
PART X—APPLICATION OF COMPANIES INCOME TAX
TO PETROLEUM OPERATIONS
302. (1) Without prejudice to Companies Income Tax Act and any other General
applicable law, the provisions of this Act shall apply and any company, requirement
of
concessionaire, licensee, lessee, contractor or subcontractor involved in the
companies
upstream, midstream or downstream petroleum operations under this Act, engaged in
shall also be subject to the Companies Income Tax Act. petroleum
operations
(2) For the purpose of determining the value of chargeable crude oil, or to pay
chargeable gas, in relation to any accounting period, the crude oil and gas companies
revenue of a company for that period shall be the value of any chargeable oil income tax.
or chargeable gas adjusted to the measurement points, based on the— Cap. C21,
LFN, 2004.
(a) proceeds of all chargeable oil or gas sold by the company ; and
(b) value of all chargeable oil or gas disposed by the company.
(3) Subject to sections 142 (2) and 197 (2) of this Act, a person intending
to be involved in more than one stream, that is upstream, midstream or
downstream petroleum operations shall register and use a separate company
for each stream of petroleum operations under this Act provided that, for
companies with petroleum mining leases selected under section 93 (6) (b) and
(7) (b) of this Act, no stamp duties and capital gains tax shall be levied by
Government on such segregation.
(4) For strategic projects in the upstream petroleum operations that seek
to produce oil and natural gas to be processed or refined to finished petroleum
products, and supplied in wholesale solely to the domestic market, such projects
shall have the option to be established as an integrated strategic project (ISP),
whereby the capital investment in the associated midstream petroleum
operations as defined under this Act, can be consolidated with the upstream
petroleum operations for purposes of tax, and where an ISP option is elected,
the following provisions shall apply—
(a) arms-length transfer prices shall be established to fiscalise the
hydrocarbons transferred from the upstream petroleum operations to the
midstream petroleum operations ; and
(b) capital investment in the midstream petroleum operations consolidated
with upstream petroleum operations cannot be represented for capital
allowances when fiscalising the income from midstream petroleum
operations.
(5) In determining the companies income tax, the hydrocarbon tax under
this Act shall not be deductible.
(6) All companies engaged in domestic midstream petroleum operations,
Cap. C21, downstream gas operations and large-scale gas utilisation industries as defined
LFN, 2004. in this Act, shall be entitled to benefit from the incentives provided under
section 39 of the Companies Income Tax Act, and investors in gas pipeline
will be granted an additional tax-free period of five years at the expiration of
the tax-free period granted in section 39 of the Companies Income Tax Act.
Cap. C21, (7) Natural gas transferred or disposed from the upstream to the
LFN, 2004. midstream or downstream shall be subject to tax under the Companies Income
Tax Act.
(8) Natural gas liquids and liquid petroleum gases derived from natural
gas shall be subject to companies income tax.
(9) Acquisition costs of petroleum rights shall be eligible for annual
allowance at the rate of 20% with a retention value of 1% in the last year until
the asset is disposed.
(10) Capital allowances for other assets shall be granted as follows—
Fifth (a) upstream petroleum operations assets shall be in accordance with
Schedule. the Fifth Schedule to this Act ; and
Cap. C21, (b) midstream and downstream operations shall be in accordance with
LFN, 2004. the Second Schedule to the Companies Income Tax Act.
(11) Section 24 of the Companies Income Tax Act shall be read in
conjunction with the following provisions of this Act—
(a) all rents and royalties the liability for which was incurred by the
company during that period in respect of crude oil sold, condensate sold
and natural gas sold or delivered or disposed of in any other commercial
manner and where a petroleum mining lease includes payments to the
Federation Account related to production sharing, profit sharing, risk service
contracts or other contractual features and the company has incurred liability
for such payments and such payments were made ;
(b) any amount contributed to any fund, scheme or arrangement approved
by the Commission or Authority for the purpose of providing for—
(i) abandonment and decommissioning,
(ii) petroleum host communities development trust, or
(iii) environmental remediation ; and
(c) other deductions as may be prescribed by the Minister of Finance by
order published in the Federal Government Gazette.
(12) Section 27 of the Companies Income Tax Act shall be read in Cap. C21,
conjunction with the following provisions of this Act— LFN, 2004.
(a) any expenditure for the purchase of information relating to the

existence and extent of petroleum deposits, other than for the acquisition of
geological, geophysical and geochemical data or information ;
(b) any expenditure incurred as a penalty including natural gas flare fees
or any such imposition relating to natural gas flare ;
(c) production bonuses, signature bonuses paid for the acquisition of, or
of rights in or over, petroleum deposits; signature bonuses or fees paid for
renewing petroleum mining lease or petroleum prospecting licence or fees
paid for assigning rights to another party including for marginal fields ; and
(d) any tax inputed into a contract or an agreement on a net tax basis
and paid by a company on behalf of the vendor or contractor.
(13) Any company involved in upstream petroleum operations shall apply
the accounting periods established for hydrocarbon tax on an actual year basis
for its company’s income tax in accordance with sections 277, 280 and 291 of
this Act.
(14) Any company involved in upstream petroleum operations that is in
default of subsection (13) in relation to filing of companies income tax returns,
shall be liable to pay a penalty for late filing as follows—
(15) Offences and penalties specified under Part IX of this Chapter
shall be applicable to companies income tax of upstream petroleum companies.
(16) The tax due from a company involved in upstream petroleum
operations shall in the case of —
(a) Naira remittances, carry interest at the prevailing NIBOR plus 10%
from the date when the tax becomes payable until it is paid, and
(b) foreign currency remittances, incur interest at the prevailing LIBOR
or any successor rate plus 10% from the date when the tax becomes payable
until it is paid,
and the provisions of this Act relating to collection and recovery of tax shall
apply to the collection and recovery of the interest.
(17) Furthermore upstream petroleum operations shall be subject to the
following provisions—
(a) where, for any accounting period of a company, the amount of the
chargeable tax for that period, calculated in accordance with this section
other than this subsection, is less than the amount mentioned in paragraph
(b), the company shall be liable to pay an additional amount of chargeable
tax for that period equal to the difference between those two amounts ;
(b) the amount referred to in paragraph (a) is, for any accounting period
of a company, the amount which the chargeable tax for crude oil or gas for
that period, calculated in accordance with this section, would come to if the
reference in subsection (2) (a) and (b), to the proceeds of sale or disposal
were a reference to the amount obtained by multiplying the number of
barrels of that crude oil or gas determined at the measurement point by the
fiscal oil per barrel or fiscal gas per MMBtu ;
(c) for the purpose of paragraph (b), the relevant sum per barrel of
crude oil, condensate or gas per MMBtu by a company is the fiscal oil price
or fiscal gas price applicable to that crude oil or gas as may be established
by the Commission ;
(d) the whole of any additional chargeable tax for crude oil or chargeable
gas payable by a company by virtue of this subsection for any accounting
period shall be payable concurrently with the final instalment of the
chargeable tax payable for that period ;
(e) where there is no fiscal oil price or fiscal gas price established for a
crude oil stream or gas, the Commission shall establish fiscal oil price or
fiscal gas price for such stream and every fiscal oil or gas price established
shall bear a fair and reasonable relationship—
(i) to the established fiscal oil or gas price of Nigerian crude oil streams
or gas of comparable quality and specific gravity, or
(ii) where there are no such Nigerian crude oil streams or gas of
comparable quality and specific gravity it shall bear a fair and reasonable
relationship to the official selling prices at main international trading centers
for crude oil or gas of comparable quality and gravity, due regard being
had in either case to freight differentials and other relevant factors ; and
(f ) where any crude oil or gas, which in relation to a particular company
is its chargeable oil or chargeable gas, is exported from Nigeria by another
company, that crude oil or gas shall for the purpose of this section be deemed
to be exported from Nigeria by that particular company.
PART XI—GENERAL PROVISIONS

303.—(1) The provisions of this Act shall not apply to holders of an oil General
prospecting licence or oil mining lease who do not enter into a conversion application
of this Part
contract until the termination or expiration of the respective oil prospecting
and other
licence or oil mining lease save for the provisions of section 311 and paragraphs matters.
10 and 11 of the Seventh Schedule to this Act which shall apply to licences Seventh
and leases awarded to indigenous Nigerian companies on a sole risk basis Schedule.
under the Petroleum Act, on which the Government has successfully exercised Cap. P10,
its back-in rights prior to the effective date of this Act but any renewal of an LFN, 2004.
oil mining lease shall be based on this Act.
(2) The fiscal provisions of this Act are the base terms that are applicable
and the Commission may under section 74 (2) of this Act conduct a licensing
round whereby the bid parameter is a higher royalty, profit oil share or other
fiscal features in order to ensure that the Government receives the full market
value for each block.
304.—(1) Where matters relate to hydrocarbon tax and companies income Regulations,
tax, the Minister of Finance may make regulations for the carrying out of the rules and
provisions of this Act and the Service may make rules and specify the form of forms.
returns, claims, statements and notices under this Act.
(2) Where matters relate to fees, rents, royalties and payments to
Government other than taxes and duties, the Commission may make regulations
and rules generally for the carrying out of the provisions of this Act.
(3) Where matters relate to the environment, the Commission and
Authority shall have responsibility over all environmental matters in respect of
upstream petroleum operations and midstream and downstream respectively
except in relation to environmental impact assessment which shall be in
accordance with applicable laws.
Fiscal 305. Fiscal stabilisation clauses contained in any production sharing
stabilisation. contract or other contract entered into after the commencement of this Act
shall not be applicable to the fiscal provisions listed in this section, regardless
of whether these changes affect the contractor favorably or unfavorably, if
changes are being made in a manner that is not discriminatory to the petroleum
industry or the contractor and the respective fiscal provisions are—
(a) generally applicable taxes, such as withholding taxes, companies
income tax, tertiary education tax and VAT ;
(b) levies, taxes or payments to comply with modern principles in respect
of environment, labour laws, health and safety ; and
(c) new taxes, levies or duties to implement Nigeria’s commitments with
respect to climate change under the United Nations Framework Convention
on Climate Change and other related international agreements.
Royalty. 306. All production of petroleum, including production tests shall be
Seventh subject to royalties as provided in the Seventh Schedule to this Act.
Schedule.
CHAPTER 5—MISCELLANEOUS PROVISIONS

Legal 307.—(1) The provisions of the Public Officers Protection Act shall
proceedings. apply in relation to any suit instituted against the Commission or the Authority,
Cap. P41, the Commission Chief Executive or the Authority Chief Executive, any
LFN, 2004. commissioner or director, officer or employee of the Commission or Authority.
(2) No action, claim, proceeding or suit shall lie or be commenced against
the Commission or the Authority, the Commission Chief Executive or Authority
Chief Executive, any commissioner or director or any other employee or officer
of the Commission or Authority, for any act done, attempted to be done or
omitted to be done under this Act or any other law or enactment or of any
public duty or authority in respect of any alleged neglect or default in the
execution of this Act or any other law or enactment, duty or authority or be
instituted in any court unless it is commenced within three months after the
accrual of any cause of action in respect of any such act, neglect or default
and provided such act or omission was not done in good faith.
Pre-action 308.—(1) A suit shall not be commenced against the Commission or
notice. Authority or any officer of the Commission or Authority, before the expiration
of a period of one month after a written notice of the intention to commence
the suit has been served on the Commission or the Authority.
(2) The notice referred to in subsection (1) shall state the cause of
action, the particulars of claim, the name and address of the claimant and the
reliefs sought.
(3) A notice, summons or other document required or authorised to be
served on the Commission or Authority under this Act or any other law or
enactment, may be served by delivering it to the office of the Commission
Chief Executive or the Authority Chief Executive.
(4) An order for execution or attachment of any property of the
Commission or Authority shall not be issued unless a three months’ notice of
the intention to commence execution process has been given to the Commission
or Authority.
309. Subject to the Constitution of the Federal Republic of Nigeria, Consequential
1999, upon the commencement of this Act, where the provisions of any amendments.
other enactment or law except the Nigeria Oil and Gas Industry Content Cap. C23,
Development Act are inconsistent with the provisions of this Act, the LFN, 2004.
provisions of this Act shall prevail and the provisions of that other enactment Act No. 2,
or law shall, to the extent of that inconsistency, be void in relation to matters 2010.
310.—(1) From the effective date of this Act the following enactments Repeals.
and regulations are repealed—
(a) Associated Gas Reinjection Act, 1979, Cap. A25, Laws of the
Federation of Nigeria, 2004, and its Amendments ;
(b) Hydrocarbon Oil Refineries Act No. 17 of 1965, Cap. H5, Laws of
the Federation of Nigeria, 2004 ;
(c) Motor Spirits (Returns) Act, Cap. M20, Laws of the Federation of
Nigeria, 2004 ;
(d) Nigerian National Petroleum Corporation (Projects) Act No. 94 of
1993, Cap. N124, Laws of the Federation of Nigeria, 2004 ;
(e) Nigerian National Petroleum Corporation Act (NNPC) 1977 No. 33,
Cap. N123, Laws of the Federation of Nigeria as amended, when NNPC
ceases to exist under section 54 (3) of this Act ;
(f ) Petroleum Products Pricing Regulatory Agency (Establishment) Act
No. 8, 2003 ;
(g) upon the completion of the conversion process under section 92,
the Petroleum Profit Tax Act, Cap. P13, LFN, 2004, provided the repeal
shall apply from the effective date to any new acreage granted under
this Act ; and
(h) upon the completion of the conversion process under section 92, the
Deep Offshore and Inland Basin Production Sharing Contract Act, 2019, as
amended, provided the repeal shall apply from the effective date to any new
acreage granted under this Act.
(2) With respect to the Petroleum Equalisation Fund, the Authority as of
the Effective Date shall be in charge of —
(a) the collection of net surplus revenues from oil marketing companies
shall cease, except for the collection of unpaid net surplus revenues earned
prior to the effective date ; and
(b) the payment for reimbursements to oil marketing companies shall
cease, except for possible remaining payment obligations incurred prior to
the effective date.
(3) Where the Petroleum Equalisation Fund is insufficient to make the
payments under subsection (2) (b), the Authority may prorate the amounts
payable based on the ratio between the funds remaining and the outstanding
payables, provided that where the Petroleum Equalisation Fund is in a deficit,
the proration shall be zero, and oil marketing companies shall have no claim as
to further outstanding amounts.
(4) Any amount remaining in the Petroleum Equalisation Fund after the
completion of the transactions under subsections (2) (a), (b) and (3) shall be
transferred to the Midstream and Downstream Gas Infrastructure Fund.
Saving 311.—(1) Any Act, subsidiary legislation or regulation, guideline, directive
provisions. and order made under any principal legislation repealed or amended by this
Act, shall, in so far as it is not inconsistent with this Act, continue in force
mutatis mutandis as if they had been issued by the Commission or Authority
under this Act until revoked or replaced by an amendment to this Act or by
subsidiary legislation made under this Act and shall be deemed for all purposes
to have been made under this Act.
Cap. P10, (2) Any oil prospecting licence or oil mining lease granted under the
LFN, 2004. Petroleum Act, that is subsisting as at the effective date of this Act shall
continue to have effect, subject to the following terms and conditions—
(a) with respect to renewed leases renegotiated production sharing
contracts within the period specified in this section, the following conditions
shall apply,—
(i) where negotiations of the contracts are continuing upon the
effective date of this Act, such contracts shall be signed within one year
of the effective date and in the event of failure to complete the negotiations
within one year of the effective date, such contract shall be deemed to
conform to the provisions of this Act at the expiration of the lease,
(ii) where the contracts were or are signed by NNPC, the leases
shall be assigned to NNPC Limited without prior approval of the
contractor and NNPC Limited shall continue its role as concessionaire
under such leases, NNPC shall by written notice notify the contractor
of such assignment,
(iii) the renewed leases renegotiated production sharing contracts,
shall not feature any investment tax credits unless such investment tax
credits are carried forward as part of a renegotiation of a production
sharing contract within the period specified in this section and shall feature
a cost oil limit of not more than 60% of the total oil production, a minimum
of 55% haircut on disputed amount and for the purpose of determining
the profit oil share based on cumulative production, the production from
the total production of all production areas selected under section 93 of
the Act shall be used,
(iv) the contracts and leases shall continue to be subject to the
legislation under subsection (9), provided that such leases shall be subject
to section 93 of this Act and in this respect the conversion date for the
purpose of the interpretation of section 93 of this Act shall be the signing
date of such renegotiated production sharing contracts, and
(v) upon expiration or terminations, the leases and renegotiated
production sharing contracts can only be renewed on the basis of the
provisions of this Act ;
(b) any oil prospecting licence and oil mining lease that is being converted
shall be converted under section 92 (1) - (5) and (7) of this Act ;
(c) with respect to other oil prospecting licences and oil mining leases
that do not wish to convert under section 92 (6), section 303 (2) of this Act
and subsection (9) of this section shall apply and the domestic gas price
that is the applicable gas prices established prior to the effective date of
this Act and for licence and leases awarded to indigenous Nigerian companies
on a sole risk basis under the Petroleum Act on which the Government has Cap. P10,
successfully exercised its back-in rights prior to the effective date of this LFN, 2004.
Act, section 92 (5) of this Act shall apply save for the royalty which shall
be 0% per field for the period of five years from the date of commencement
of the field production including all relevant accounting period prior to the
effective date and section 311 (9) (d) of this Act, any Act, subsidiary
legislation or regulation, guideline, directive or order saved under this Act
shall be deemed amended accordingly ; and
(d) contractors of NNPC, oil prospecting licences and oil mining leases
shall be subject to sections 232 and 233 of this Act.
(3) Any other licence, lease, certificate, authority or permit which was
issued by the Department of Petroleum Resources, Petroleum Products Pricing
and Regulatory Agency or Petroleum Equalisation Fund, as the case may be
and which had effect immediately before the effective date shall continue to
have effect, mutatis mutandis, for the remainder of its period of validity as if it
had been issued by the Commission or Authority.
(4) Any tariff, price, levy, or surcharge which was payable to the
Department of Petroleum Resources, Petroleum Products Pricing and
Regulatory Agency or Petroleum Equalisation Fund prior to the effective date
shall continue in force until the expiration of the term of the said tariff, price,
levy, or surcharge, or until alternative provisions are made under this Act or
any regulations made under it, whichever is earlier.
(5) Pending the decision of the Authority under sections 125 (6) and 174
(6) of this Act, the existing licence, permit or right shall continue in force as if
it had been issued under this Act.
(6) Any other permit or other right in respect of any sector of the petroleum
industry to which subsections (2), (3) and (4) do not apply and that has been
granted by the Department of Petroleum Resources, Petroleum Pricing and
Product Regulatory Agency or Petroleum Equalisation Fund, as the case may
be, and which is still in existence on the effective date, shall continue in force
for the remainder of its duration as if it had been issued under this Act.
(7) With respect to subsection (4), any payments under Chapter 2 of
this Act shall be applicable to the respective licensees and holders of permits
and rights.
(8) Within three months from the effective date, the Minister of Petroleum
on the advice of the Commission or Authority, may make any further transitional
and savings provisions that are necessary or desirable, provided that such
provisions are consistent with the transitional and savings provisions in this
Act.
(9) Notwithstanding the provisions of section 310 of this Act, the following
laws shall be saved until the termination or expiration of all oil prospecting
licences and oil mining leases under subsection (2) (c)—
(a) Petroleum Act, Cap. P10, Laws of the Federation of Nigeria, 2004 ;
(b) Petroleum Profit Tax Act, Cap. P13, Laws of the Federation of
Nigeria, 2004 ;
(c) Oil Pipelines Act, Cap. 07, Laws of the Federation of Nigeria, 2004
and any subsidiary legislation shall, in so far as it is consistent with this Act,
remain in operation until it is repealed or revoked and shall be deemed for
all purposes to have been made under this Act ;
(d) Deep Offshore and Inland Basin Production Sharing Contracts
Act, Cap. D3, Laws of the Federation of Nigeria, 2004 and its
Amendment ; and
(e) any other law or regulations that are consistent with the principles of
section 92 (6) of this Act.
(10) Subject to sections 125 (6) and 174 (6) of this Act, parties to gas
sales agreements related to domestic sales or exports entered into prior to the
effective date shall be entitled to continue such agreements unaltered until the
termination of such agreements, provided, however, that such agreements
shall be submitted for review to the Authority and the Commission and where
so ordered by the Authority or Commission, as the case may be, amendments
shall be made in such agreements to comply with the Act.
312.—(1) The Commission shall be vested with all assets, funds, Transfer of
resources and other movable and immovable properties which immediately assets and
liability to
before the effective date were held by the Petroleum Inspectorate or the
the
Department of Petroleum Resources. Commission.
(2) The rights, interests, obligations and liabilities of the Petroleum
Inspectorate and Department of Petroleum Resources existing immediately
before the effective date under any contract or instrument or law or in equity
are assigned to and vested in the Commission.
(3) Any contract or instrument covered by subsection (2) shall be of the
same force and effect against or in favour of the Commission and shall be
enforceable as fully and effectively as if instead of the Petroleum Inspectorate
or Department of Petroleum Resources, the Commission had been named
therein or had been a party thereto.
(4) The Commission shall be subject to all the obligations and liabilities
to which the Petroleum Inspectorate and Department of Petroleum Resources
were subject immediately before the effective date and all other persons shall
as from the effective date have the same rights, powers and remedies against
the Commission as they had against the Petroleum Inspectorate or Department
of Petroleum Resources immediately before the effective date.
313.—(1) The Authority shall be vested with all assets, funds, resources Transfer of
and other movable and immovable properties, which immediately before the assets and
liability to
effective date were held by the Petroleum Pricing and Product Regulatory
the
Agency, the Petroleum Equalisation Fund (Management Board) and the Authority.
relevant assets, funds, resources and other movable and immovable properties
held by Department of Petroleum Resources, the Petroleum Pricing and
Product Regulatory Agency, and the Petroleum Equalisation Fund
(Management Board).
(2) The rights, interests, obligations and liabilities of the Department of
Petroleum Resources, the Petroleum Pricing and Product Regulatory Agency,
and the Petroleum Equalisation Fund (Management Board) existing immediately
before the effective date under any contract or instrument or law or in equity
are assigned to and vested in the Authority.
(3) Any contract or instrument covered by subsection (2) shall be of the
same force and effect against or in favour of the Authority and shall be
enforceable as fully and effectively as if instead of the Department of Petroleum
Resources, the Petroleum Pricing and Product Regulatory Agency, and the
Petroleum Equalisation Fund (Management Board) had been named therein
or had been a party thereto.
(4) The Authority shall be subject to all the obligations and liabilities to
which the Petroleum Pricing and Product Regulatory Agency, the Petroleum
Equalisation Fund (Management Board) and the relevant divisions of
Department of Petroleum Resources, were subject immediately before the
effective date and all other persons shall as from the effective date have the
same rights, powers and remedies against the Authority as they had against
the Petroleum Pricing and Product Regulatory Agency, the Petroleum
Equalisation Fund (Management Board) and the relevant divisions of
Department of Petroleum Resources immediately before the effective date.
Transfer of 314.—(1) From the effective date, employees in the relevant divisions
employees
in the Petroleum Inspectorate or the Department of Petroleum Resources
and
conditions of shall be employees of the Commission on terms no less favourable to those in
service. effect immediately prior to such transfer, and all years of service with the
Petroleum Inspectorate or the Department of Petroleum Resources, as
applicable, shall be deemed to be years of service qualifying for employment-
related entitlements under any applicable law.
(2) The Commission shall assume and continue to fulfil all statutory
obligations in respect of pension schemes to which the Petroleum Inspectorate
or the Department of Petroleum Resources, as applicable, was obliged in
respect of its employees, prior to the effective date.
(3) From the effective date, employees in the relevant divisions of the
Department of Petroleum Resources, the Petroleum Pricing and Product
Regulatory Agency, and the Petroleum Equalisation Fund (Management
Board), shall be employees of the Authority on terms no less favourable to
those in effect immediately prior to the effective date, and all years of service
with the Department of Petroleum Resources, the Petroleum Pricing and
Product Regulatory Agency or the Petroleum Equalisation Fund (Management
Board), as applicable, shall be deemed to be years of service qualifying for
employment-related entitlements under any applicable law.
(4) The Authority shall assume and continue to fulfil all statutory
obligations in respect of pension schemes to which the Department of Petroleum
Resources, the Petroleum Pricing and Product Regulatory Agency and the
Petroleum Equalisation Fund (Management Board), as applicable, was obliged
in respect of its employees, prior to the effective date.
315. As part of the implementation process of sections 313 and 57 of Movement
this Act, the Minister may within 24 months of the effective date cause an of staff of
inter-agency transfer of any staff of the institutions listed below to the the
institutions.
Commission, the Authority or NNPC Limited based on skills and competence
requirements of the new institutions, if the skills and competence of the said
staff are most suitable in any of the successor institutions during the
implementation process—
(a) Department of Petroleum Resources ;
(b) Nigerian National Petroleum Corporation and any of its subsidiaries ;
(c) Petroleum Equalisation Fund ;
(d) Petroleum Inspectorate ; and
(e) Petroleum Products Pricing and Regulatory Authority.
316.—(1) Every settlor shall transfer any existing host communities Transfer of
development project or scheme under its corporate social responsibility or existing host
communities
memorandum of understanding or any other agreement to a host communities
development
development trust established under this Act. projects and
host
(2) Every applicable settlor shall notify the Commission or Authority, as
communities
the case may be, upon completion of any transfer under subsection (1) to any development
one or more host communities development trusts of any of its existing host schemes.
communities development projects or schemes.
(3) Any financial contribution made by a settlor from the effective date
until the date falling 12 months after the effective date to any ongoing host
communities development project or scheme in accordance with their terms,
shall be deemed to constitute a contribution made by such holder or holder
nominee under section 240 (2) of this Act.
317.—(1) Anything made or done, or having effect as if made or done, Transitional
before the effective date of this Act under or pursuant to any provision of the and savings
provisions.
Petroleum Act, the Petroleum Profit Tax Act and the Deep Offshore and
Cap. P10.
Inland Basin Production Sharing Contract Act by the Service and having any
LFN, 2004.
continuing or resulting effect with respect to the taxation of the profits of a
Cap. P13,
company or any matter connected to it, shall be treated and for all purposes LFN, 2004.
shall have effect as if it were made or done by the Service under the Cap. D3,
corresponding provisions of this Act. LFN, 2004.
(2) All rules, orders, notices or other subsidiary legislation made under
the Petroleum Act, the Petroleum Profits Tax Act, and the Deep Offshore
and Inland Basin Production Sharing Contract Act shall continue to have effect
as if made under the corresponding provisions of this Act.
(3) All references in any other enactment to provisions of the Petroleum
Act, the Petroleum Profits Tax Act and the Deep Offshore and Inland Basin
Production Sharing Contract Act shall be construed as references to the
corresponding provisions of this Act.
(4) With respect to petroleum mining leases selected under section 93
(6) (b) and (7) (b) of this Act, any capital allowances existing at the effective
date for the related oil mining leases shall be carried over to the selected
petroleum mining leases, provided the allowances relate to upstream petroleum
operations and do not include investment tax allowances and investment tax
credits.
(5) Subject to section 303 (1) of this Act, the provisions of Chapter 4,
Parts II and X of this Act shall apply upon the commencement of the first
accounting period following the effective date.
(6) From the effective date, the Government on behalf of the Federation
may request the services of NNPC Limited as supplier of last resort to ensure
adequate supply and distribution of premium motor spirit (PMS) for a period
not exceeding six months and all associated costs shall be for the account of
the Federation.
(7) The Minister shall set forward a clear transition plan within 60 days
of the effective date of the Act to prevent disruptions of the industry operations.
(8) The Authority may apply the Backward Integration Policy in the
downstream petroleum sector to encourage investment in local refining.
(9) Pursuant to subsection (8), licence to import any product shortfalls
may be assigned to companies with active local refining licences or proven
track records of international crude oil and petroleum products trading.
(10) Import volume to be allocated between participants shall be based
on criteria to be set by the Authority taking into account the respective refining
output in the preceding quarter, share of active wholesale customers competitive
pricing and prudent supply, storage and distribution track records.
(11) To safeguard the health of Nigerians, imported petroleum products
shall conform to the Afri-5 Specification (50 ppm Sulphur) as per the ECOWAS
declaration of February, 2020 on adoption of the Afri-Fuels Roadmap or as
may be prescribed by regulation.
Interpretation. 318. In this Act—
“accounting date” means the date on which a company usually prepares
its accounting statement ;
“accounting period” in relation to a company engaged in upstream
petroleum operations, means —
(a) a period of one year commencing on 1st January and ending on
31st December of the same year,
(b) any shorter period commencing on the day the company first
makes a sale or bulk disposal of chargeable oil, domestic, export or both,
and ending on 31st December of the same year, or
(c) any period of less than a year being a period commencing on 1st
January of any year and ending on the date in the same year when the
company ceases to be engaged in petroleum operations,
and in the event of any dispute with respect to the date of the first sale of
chargeable oil above or with respect to the date on which the company
ceases to be engaged in petroleum operations, the Commission shall
determine the same and no appeal shall lie ;
“Act” means the Petroleum Industry Act, 2021 ;
“adjusted profits” means adjusted profit as stated in section 262 of this
Act ;
“advisory committee” has the meaning given to it in section 249 of this
Act ;
“affiliate” means the relationship that exists between two persons when
one controls or is controlled by, an entity which controls, the other person,
where ‘control’ means the direct or indirect ownership of more than 50%
of the voting rights in a company, partnership or legal entity ;
“aggregate gas price” means the gas price determined under section
167 (4) of this Act ;
“appraisal well” means a well that in the opinion of the Commission is
aimed at determining the size, distribution, characteristics and commerciality
of a petroleum discovery ;
“area of operation” means the territory which hosts a lessee’s or
licensee’s operational or designated facilities and any other ancillary
facilities related to upstream and midstream petroleum operations ;
“assessable profit” means assessable profit as stated in section 262 of
this Act ;
“associated gas” means—
(a) natural gas, commonly known as gas-cap gas, which overlies and
is in contact with crude oil in a reservoir ; and
(b) solution gas dissolved in crude oil in a reservoir and emerging
from the fluid as pressure drops ;
“authorisation” means approval issued by the Commission or Authority
for an activity in the petroleum industry ;
“Authority” means the Nigerian Midstream and Downstream Petroleum
Regulatory Authority” as provided for in this Act ;
“Authority Fund” means the Fund established under section 47 of this
Act ;
“barrel” means a barrel of 42 United States gallons ;
“Board” means the governing board of the Commission, Authority,
NNPC Limited or an incorporated joint venture company (IJVC) ;
“Board of Trustees” means the governing board of the trust established
“bulk gas storage licence” means a licence granted under section 132
of this Act ;
“capital fund” means the fund available to the Board of Trustees of a
host communities development trust for communities development projects
and other matters on behalf of the holder or holders as provided for in this
Act ;
“chargeable oil” means crude oil, condensate or natural gas liquids
produced upstream of the measurement point as provided for under section
260 (1) (a) of this Act ;
“chargeable profit” means chargeable profit as stated in section 262 of
this Act ;
“chargeable tax” means chargeable tax as stated in section 267 of
this Act ;
“chargeable volume” in relation to a company engaged in upstream
petroleum operations means the chargeable volume as set out in paragraph
7 of the Seventh Schedule to this Act ;
“commercial discovery” means a discovery of crude oil, natural gas or
condensates within a petroleum prospecting licence or petroleum mining
lease which can be economically developed in the opinion of the licensee or
lessee after consideration of all relevant economic factors normally applied
for the evaluation and development of crude oil, natural gas or condensate ;
“Commission” means the Nigerian Upstream Petroleum Regulatory
Commission established under this Act ;
“common carrier” means a transportation pipeline which is operated on
an open access basis ;
“Commission Fund” means the fund established under section 24 of
this Act ;
“company” means in this Act, any company or corporation, other than a
corporation sole, incorporated under the Companies and Allied Matters
Act, Act No. 3, 2020 ;
“condensate” means a portion of natural gas of such composition that
are in the gaseous phase at temperature and pressure of the reservoirs, but
that, when produced, are in the liquid phase at surface pressure and
temperature ;
“connection agreement” means an agreement setting out the terms on
which individual, physical connections to the transportation pipeline,
transportation network or gas distribution network will be effected and
matters such as the configuration, pressure, technical parameters and cost
of the connection ;
“Constitution” means the Constitution of the Federal Republic of Nigeria,
1999, Cap. C23, Laws of the Federation of Nigeria, 2004 ;
“conversion contract” means a contract under section 92 of this Act ;
“conversion date” means the date under section 92 of this Act ;
“Corporate Affairs Commission” means the Corporate Affairs
Commission established under the Companies and Allied Matters Act, Act
No. 3, 2020 ;
“corrupt practices and money laundering laws” means—
(a) the laws of the Government in respect of bribery, kickbacks and
corrupt business practices,
(b) the Foreign Corrupt Practices Act of 1977 of the United States of
America (Pub. L. No. 95-213 §§ 101-104 et. seq.),
(c) the OECD Convention on Combating Bribery of Foreign Public
Officials in International Business Transactions, signed in Paris on 17
December, 1997, which entered into force on 15 February, 1999, and the
Convention’s Commentaries,
(d) the United Kingdom Bribery Act, 2010, and
(e) any other law of general application relating to bribery, kickbacks
or corrupt business practices ;
“Council” means the Governing Council established under section 52
(3) of this Act ;
“crude oil” means petroleum, which is in liquid conditions upon production
from a reservoir either in its natural state or after the extraction of water,
sand or other foreign substance from it, but before any such oil has been
refined or otherwise treated, other than oil extracted by destructive distillation
from coal, bituminous shales or other stratified deposits ;
“crude oil refiner” means the holder of a crude oil refining licence
under section 183 of this Act;
“customary court” means a customary court established by the applicable
laws of a State of the Federation or the Federal Capital Territory ;
“customer client” means a wholesale customer of the strategic sector
who is a client of the domestic gas aggregator making use of the escrow
account mechanism ;
“customer client volume” is the volume of natural gas that is paid for by
a customer client for the benefit of a specific producer client into the escrow
account of the domestic gas aggregator in any one month ;
“customer protection” means the standards, practices and service
protections for customers including, those relating to pricing, service quality
and standards, billing practices, performance reporting and any regulations
of the Commission and Authority that provide such protections ;
“decommissioning and abandonment” means the approved process
of cessation of operations of crude oil and natural gas wells, installations,
plants and structures, including shutting down an installation’s operations
and production, total or partial removal of installations and structures where
applicable, chemicals and all such other materials handling, removal and
disposal of debris and removed items, environmental restoration of the area
after removal of installations, plants and structures, and ‘decommission’
has a corresponding meaning ;
“decommissioning and abandonment fund” has the meaning given to
it in section 233 of this Act ;
“decommissioning and abandonment plan” means the plan to be
submitted in the field development plan under section 79 (2) for upstream
petroleum operations and under section 111 (3) of this Act for midstream
“deep offshore” means any area within the territorial waters, continental
shelf or exclusive economic zone offshore of Nigeria having a water depth
in excess of 200 meters ;
“deep rights” means petroleum rights vested in the Government after
relinquishment under section 88 (5) (b) of this Act ;
“Department of Petroleum Resources” means the Department of
Petroleum Resources of the Federal Ministry of Petroleum Resources ;
“designated facilities” means petroleum crude oil and natural gas
transportation pipelines, bulk storage tank farms, refineries, and gas
processing plants in midstream petroleum operations and petrochemical
plants ;
“distribution pipeline” means a low-pressure pipeline for the purpose
of conveying natural gas or petroleum products to customers ;
“disposal” and “disposed of” in relation to chargeable oil owned by a
company engaged in petroleum operations, means—
(a) delivery or export, without sale, of chargeable oil to an affiliate or
other company, and
(b) chargeable oil delivered or transferred, without sale, to facilities
used for midstream operations ;
“domestic base price” means the price determined under the Third
Schedule to this Act ;
“domestic crude oil supply obligation” means the obligations of an
upstream crude oil producer to dedicate a specific volume of crude oil
towards the domestic refineries as stipulated in section 109 of this Act ;
“domestic gas aggregator” means a licensee of a domestic gas
aggregation licence ;
“domestic gas aggregation licence” means a licence granted under
section 153 of this Act ;
“domestic gas demand requirement” means an aggregate of the volume
of natural gas required to meet the natural gas demand for strategic sectors
within the domestic economy for a specified period under section 173 of
this Act ;
“domestic gas delivery obligation” means the obligations of a lessee
producing natural gas to dedicate and deliver to a transfer point a specific
volume of natural gas towards meeting the domestic gas demand
requirement, as stipulated in section 110 of this Act ;
“downstream gas operations” means all activities entered into for the
purpose of, distribution and supply of natural gas to retail customers, city
gate reception terminals for natural gas, stations for the distribution, marketing
and retailing of natural gas ;
“downstream petroleum products operations” means all activities
entered into for the purpose of distribution and supply of petroleum products
to retail customers, tank farms for distribution of petroleum products, and
stations for the distribution, marketing and retailing of petroleum products ;
“downstream petroleum operations” means downstream gas operations
and downstream petroleum products operations ;
“effective date” means the date on which this Act comes into force ;
“exploration well” means a well that in the opinion of the Commission
is aimed at discovering petroleum in a separate field in which petroleum
has not been previously discovered ;
“domestic base price” means the price determined under subsection
167 (1) of this Act ;
“Federal High Court” means the Federal High Court established by
section 249 of the Constitution of the Federal Republic of Nigeria, 1999 ;
“Federation Account” means the Federation Account stated in section
162 of the Constitution of the Federal Republic of Nigeria, 1999 ;
“field development plan” means a field development plan as specified
under section 79 (2) of this Act ;
“field” includes an area consisting of a single reservoir or multiple
reservoirs all grouped on, or related to, the same geological structural feature,
stratigraphic condition, a combination of both and refers to the underground
productive formations or their vertical projection to the surface ;
“fiscal gas price” means the price established in paragraph 8 (3) of the
Seventh Schedule to this Act ;
“fiscal oil price” means the price established in paragraphs 8 (1) and
(2) of the Seventh Schedule to this Act ;
“force majeure” includes delays or inability to perform any obligations
under this Act (other than a payment obligation), due to any event beyond
the reasonable control of a person, and the event may be, but is not limited
to, any act, event, happening, or occurrence due to natural causes, and acts
or perils of navigation, fire, hostilities, war (declared or undeclared), blockade,
labour disturbances, strikes, riots, insurrection, civil commotion, quarantine
restrictions, epidemics, storms, floods, earthquakes, accidents, blowouts or
lightning and an event of force majeure shall not include changes in the
laws of Nigeria or any political subdivision thereof or any acts or orders of
Government, any minister, ministry, department, subdivision, agency,
authority, council, committee, or other constituent element thereof, or any
corporation owned or controlled by any of the foregoing, where operations
are delayed, curtailed or prevented by force majeure, then the time for
carrying out the obligation and duties thereby affected, and rights and
obligations hereunder, shall be extended for a period equal to the period
thus involved provided that such period shall not exceed three years in total
after which each party can terminate the respective licence or lease ;
“frontier acreages” means any or all acreages in an area on land in
Nigeria defined as a frontier in a regulation issued by the Commission ;
“frontier basin” means basins where hydrocarbon exploration activities
have not been carried out or previous commercial discovery oil and gas
have not been made or an area that is undeveloped and includes Anambra,
Dahomey, Bida, Sokoto, Chad and Benue trough or as may be declared by
the Commission through a regulation ;
“frontier exploration fund” means the fund established in section 9 (3)
of this Act;
“fund manager” means a person or company appointed by the Board
of Trustees to manage and invest the reserve fund established under the
provisions of Chapter 3 of this Act for the benefit of the trust;
“gas distribution licence” means a licence for the distribution of natural
gas through a low-pressure pipeline system in a specific geographical area
“gas distribution network” means a set of interconnected distribution
pipelines for natural gas ;
“gas distributor” means the holder of a gas distribution licence ;
“gas processing licence” means a licence granted under section 129 of
this Act ;
“gas retailer” means a holder of a retail gas supply licence under section
146 of this Act ;
“gas transportation network” means a set of interconnected gas
transportation pipelines in a particular geographical area ;
“gas transportation network operator licence” means a licence to
operate a gas transportation network under section 138 of this Act ;
“gas transportation network operator” means the holder of a gas
transportation network operator licence ;
“gas transportation pipeline” means a pipeline for the transportation
of natural gas ;
“gas transportation pipeline licence” means a licence for a gas
transportation pipeline granted under section 135 of this Act ;
“good international petroleum industry practices” means those uses
and practices that are, at the time in question, generally accepted in the
international petroleum industry as being good, safe, economical,
environmentally sound and efficient in petroleum operations and should
reflect standards of service and technology that are either state-of-the-art
or otherwise appropriate to the operations in question and should be applied
using standards in all matters that are no less rigorous than those in use by
petroleum companies in global operations ;
“Government” means the Federal Government of Nigeria ;
“host communities” means communities situated in or appurtenant to
the area of operation of a settlor, and any other community as a settlor may
determine under Chapter 3 of this Act ;
“host communities development plan” has the meaning given to it in
section 252 of this Act ;
“host communities development trust” has the meaning given to it in
section 235 (1) of this Act ;
“host communities development trust fund” means the fund established
under section 240 (1) of this Act ;
“host communities needs assessment” has the meaning given to it in
section 251 (1) of this Act ;
“large-scale gas utilisation industries” means—
(a) large-scale industries that use natural gas as a feedstock such as
gas-to-liquid plants, petrochemical industries and fertiliser plants; and
(b) mini-LNG plants, power plants and such other industries as defined
in regulations ;
“lease” means a petroleum mining lease ;
“lessee” means a holder of a lease ;
“LIBOR” means London Interbank Offered Rate ;
“licence” means a licence issued by the Commission or Authority in
respect of any applicable upstream, midstream or downstream petroleum
operations ;
“licensee” means a holder of a licence ;
“licensing round guidelines” means guidelines that are established by
the Commission to govern the process of issuing licences or leases during a
licensing round ;
“liquefied natural gas” or “LNG” means natural gas in liquid form
through condensation at close to atmospheric pressure and at a temperature
of approximately minus 162 degrees celsius ;
“liquefied petroleum gas” or “LPG” means mixtures of propane and
butane and small concentrations of other gases which are gaseous under
room temperature and pressure but are liquefied by applying pressure ;
“local distribution zone” means an authorised area as specified in
regulations, within which one gas distributor may operate ;
“loss” means a loss ascertained in like manner as an adjusted profit ;
“management committee” means the committee set up under section
247 of this Act ;
“marginal field” means a field or discovery which has been declared a
marginal field prior to 1st January 2021 ;
“marketable natural gas” means natural gas which meets specifications
determined by the Authority for distribution to wholesale customers and
retail customers—
(a) for use as a domestic, commercial and industrial fuel ; and
(b) as feedstock or industrial raw material ;
“marketable natural gas delivery point” means a point where
marketable natural gas is made available to customers, at the exit of a gas
processing plant or gas conditioning plant or at a measurement point, or
such other location immediately downstream of a facility in which such
natural gas has been produced, processed, conditioned or treated in order
to produce marketable natural gas ;
“measurement point” means—
(a) a point determined in the field development plan under section 79
(2) of this Act, where petroleum is being measured and its value is
determined for royalty purposes,
(b) where the point has not been determined, a point directly
downstream of the flow station in the petroleum mining lease, and
(c) where measurements take place outside the petroleum mining
lease, a deemed measurement point in the petroleum mining lease based
on a calculation procedure approved by the Commission adjusting from
the points where petroleum is being measured ;
“midstream and downstream gas infrastructure fund” means the fund
established under section 52 of this Act ;
“midstream and downstream gas operations” means activities
downstream of the measurement points of petroleum mining leases, whether
or not related to the petroleum mining lease, with respect to the construction
and operation of natural gas transport or transmission pipelines, including
the related compressor stations, construction and operations of facilities to
compress, transport and deliver compressed natural gas (CNG); construction
and operations of gas processing facilities and central processing facilities,
producing ethane, propane, butane and natural gas liquids and marketable
natural gas; construction and operation of underground or above ground
facilities for the storage of natural gas, ethane extraction plants, construction
and operation of gas to liquids (GTL) plants, construction and operation of
lubricant, petrochemical and fertiliser plants, construction and operation of
LNG plants, and related LNG terminals as well as storage and transport of
LNG, acquisition, operation or chartering of LNG tankers for coastal and
marine transportation, purchase and sale, trading, bartering, aggregating
and marketing of natural gas transported by pipelines, compressed natural
gas, LNG, methane, ethane, propane, butane, natural gas liquids and liquids
from GTL plants with respect to wholesale customers and gas distributors
and related administration and overhead ;
“midstream petroleum liquids operations” means activities downstream
of the measurement points of petroleum mining leases, whether or not related
to the petroleum mining lease, with respect to the construction and operation
of facilities for upgrading of heavy oil, construction and operation of lubricant,
petrochemical and fertiliser plants, construction and operation of petroleum
liquids transport pipelines, including the related pumping stations; acquisition,
operation, leasing, rental or chartering of barges, coastal or ocean-going
tankers, railcars and trucks for the transport of petroleum liquids,
construction, leasing and operation of tank farms and other storage facilities
and export terminals for petroleum liquids, construction and operation of
refineries, purchase and sale, trading, bartering, marketing of petroleum
liquids and related administration and overhead ;
“midstream and downstream petroleum operations” means midstream
petroleum liquids operations and midstream and downstream gas operations ;
“Minister of Petroleum” or “Minister” means the Minister of Petroleum
Resources or any person designated by the President as having responsibility
for overseeing the Petroleum Industry ;
“Ministry of Environment” means the Federal Ministry in charge of
environmental matters ;
“Ministry of Finance” means the Federal Ministry in charge of finance
matters ;
“Ministry of Finance Incorporated” means the corporation sole
established by the Ministry of Finance Incorporated Act, Cap. M15, Laws
of the Federation of Nigeria, 2004 ;
“MMBtu” means millions of British thermal units ;
“model contract” means a contract under section 85 of this Act ;
“model lease” means a standard petroleum mining lease with terms and
conditions adopted for a specific licensing round and may contain contractual
provisions in a model contract attached to or incorporated in the model
lease ;
“model licence” means a standard petroleum prospecting licence with
terms and conditions adopted for a specific licensing round and may contain
contractual provisions in a model contract attached to or incorporated in
the model licence ;
“National Data Repository” means national petroleum data bank as defined
in the National Data Repository Regulation, 2007 and its amendment ;
“National Salaries, Incomes and Wages Commission” means the
National Salaries, Incomes and Wages Commission established by section
1 of the National Salaries, Incomes and Wages Commission Act, Cap.
N72, Laws of the Federation of Nigeria, 2004 ;
“national strategic stock” means the reserve of petroleum products
kept in certain storage depots and facilities by the Government or on behalf
of the Government to provide for emergency ;
“natural gas” means all gaseous hydrocarbons, and all substances
contained in it and as exist in natural state in strata, associated or not with
crude oil, and are in a gaseous state upon production from a reservoir and
excludes condensates ;
“natural gas liquids” or “NGL” means hydrocarbons liquefied at the
surface in separators, field facilities or in gas processing plants, and include
ethane, propane, butanes, pentanes, and natural gasoline ;
“Nigeria” means the territory of the Federal Republic of Nigeria inclusive
of its land borders, territorial waters, continental shelf and exclusive
economic zone ;
“Nigerian National Petroleum Corporation” or “NNPC” means the
Nigerian National Petroleum Corporation established by section 1 of the
Nigerian National Petroleum Corporation Act, Cap. N123, Laws of the
Federation of Nigeria, 2004 ;
“NNPC Limited” means Nigerian National Petroleum Company Limited,
a company to be incorporated under the Companies and Allied Matters Act
under this Act ;
“non-associated gas” means natural gas that is found in a reservoir
which does not contain significant quantities of crude oil ;
“oil mining lease” means an oil mining lease granted under the Petroleum
Act, Cap. P10, Laws of the Federation of Nigeria, 2004 prior to the effective
date of this Act ;
“oil prospecting licence” means an oil prospecting licence granted under
the Petroleum Act, Cap. P10, Laws of the Federation of Nigeria, 2004
prior to the effective date of this Act ;
“onshore” means any land areas above the high-water mark, other than
frontier acreages ;
“open access” means, subject to section 116, non-discriminatory access
to a midstream facility, transportation pipeline or transportation network for
all users or shippers under conditions where the licensee does not have any
preferential rights to these facilities, under conditions stipulated in the licence
and in the case of a transportation network or pipeline ;
“paying quantities” means in relation to the level of production of a
field, the production of volumes of oil or gas or both, of which the value
exceeds the royalty and operating costs on a regular basis, based on levels
of production that are aimed at achieving maximum economic recovery of
the petroleum ;
“parcel” means a parcel under section 69 (4) of this Act ;
“permit” means an official certificate of permission to undertake an
activity issued by the Commission or Authority ;
“person” means any individual, company or other juristic person ;
“petroleum” means hydrocarbons and associated substances as exist in
its natural state in strata, and includes crude oil, natural gas, condensate
and mixtures of any of them, but does not include bitumen and coal ;
“Petroleum Equalisation Fund” means the fund established under the
Petroleum Equalisation Fund (Management Board, etc.) Act, Cap. P11,
Laws of the Federation of Nigeria, 2004 ;
“petroleum exploration licence” means a licence under section 71 of
this Act ;
“petroleum exploration operations” means any geological, geophysical,
geochemical and other surveys and any interpretation of data relating thereto,
and the drilling of such shot holes, core holes and stratigraphic tests, related
to the exploration for crude oil and natural gas, but not including exploration
wells or appraisal wells ;
“petroleum industry” means the industries involved in upstream,
midstream and downstream petroleum operations in Nigeria ;
“Petroleum Inspectorate” means the Petroleum Inspectorate established
under section 10 of the Nigerian National Petroleum Corporation Act, Cap.
N123, Laws of the Federation of Nigeria, 2004 ;
“petroleum liquids” means crude oil, condensates, liquid petroleum
products and natural gas liquids ;
“petroleum liquids transportation pipeline licence” means a licence
for a petroleum liquids transportation pipeline granted under section 190 of
this Act ;
“petroleum liquids transportation network operator” means the
holder of a petroleum liquids transportation network operator licence ;
“petroleum liquids transportation network operator licence” means
a licence to operate a petroleum liquids transportation network under section
193 of this Act ;
“petroleum liquids transportation pipeline” means a pipeline
transporting petroleum liquids ;
“petroleum mining lease” means a lease under section 81 of this Act ;
“petroleum operations” means upstream, midstream and downstream
“Petroleum Pricing and Product Regulatory Agency” means the
Petroleum Pricing and Product Regulatory Agency established under section
1 of the Petroleum Pricing and Product Regulatory Agency (Establishment)
Act, Cap. P43, Laws of the Federation of Nigeria, 2004 ;
“petroleum product distribution licence” means a licence for the
distribution of petroleum products under section 201 of this Act ;
“petroleum product distributor” means the holder of a petroleum product
distribution licence ;
“petroleum product retailer” means a holder of a petroleum product
retail licence ;
“petroleum product retail licence” means a permit to retail petroleum
products to final customers under section 203 of this Act ;
“petroleum products” means materials derived from crude oil and natural
gas processing such as ethane, propane, butanes, pentanes, liquefied
petroleum gas, natural gas liquids, asphalts, gasoline, diesel, gas oil, jet fuel,
transportation fuels, fuel oils for heating and electricity generation and such
other derivatives ;
“petroleum prospecting licence” means a licence under section 72 of
this Act ;
“pipeline” means all parts of any tubular infrastructure through which
petroleum is conveyed, including pipes, valves, pumping and compressor
stations and other equipment appurtenant to pipes ;
“President” means the President of the Federal Republic of Nigeria ;
“producer client” means a lessee who is a client of the domestic gas
aggregator making use of the escrow account mechanism ;
“production sharing contract” means any agreement for the
exploration, development and production of petroleum on terms under which
the financial risk-bearing party shall recover costs and receives a share of
the profits based on a share of production as established in the contract
from the applicable area ;
“public service obligations” means specific obligations imposed by
the Authority on licensees in relation to security of supply, social service,
economic development, environmental protection or the use of indigenous
materials ;
“qualified person” means a person designated by regulation in respect
of the issuance of a licence, lease or permit to any person with respect to
upstream, midstream and downstream petroleum operations ;
“raw gas” means natural gas prior to any conditioning for the removal of
H2S, CO2 and other impurities and prior to processing to remove natural gas
liquids and which does not have the qualities of marketable natural gas ;
“regulation” means rule or order having force of law issued by the
Minister, Minister of Finance, the Commission or Authority in accordance
with this Act ;
“rent” means the annual charge made in respect of a licence or lease

granted under this Act ;
“renegotiated production sharing contract” means a production
sharing contract for which court cases or arbitration cases were outstanding,
and was or is being renegotiated after the effective date of this Act with
the objective of settling the outstanding court cases or arbitration cases ;
“reserve fund” is the fund under section 244 (b) of this Act ;
“reservoir” means a subsurface rock formation containing an individual
and separate natural accumulation of producible petroleum characterised
by a single natural pressure system ;
“retail gas supply licence” means a licence granted under section 146
of this Act ;
“retention area” means the area approved by the Commission for a
significant gas discovery or significant crude oil discovery under this Act ;
“retention period” means the period not exceeding 10 years granted by
the Commission to the holder of a petroleum licence to retain rights to
develop an area over which a significant gas discovery or significant crude
oil discovery has been made ;
“royalties” means the royalties specified in the Seventh Schedule to this
Act ;
“settlor” is a holder of an interest in a petroleum prospecting licence or
petroleum mining lease whose area of operations is located in or appurtenant
to any community or communities ;
“shallow water” means any area within the territorial waters, continental
shelf or exclusive economic zone offshore of Nigeria up to and including a
water depth of 200 meters ;
“signature bonus” means a payment made to Government with respect
to the grant of a petroleum prospecting licence or petroleum mining lease ;
“Significant crude oil discovery” means a discovery of crude oil that
is substantial in terms of reserves and is potentially commercial, but cannot
be declared commercial for one or both of the following reasons—
(a) no pipeline or facilities are available in existing systems where
commercial conditions indicate that the best option for development is
based on the future expansion of such systems or the use of such systems
when capacity will become available in the future ; or
(b) where the crude oil discovery would only be commercial when
jointly developed with other existing discoveries or potential future
discoveries ;
“significant gas discovery” means a discovery of natural gas that is
substantial in terms of reserves and is potentially commercial, but cannot
be declared commercial for one or more of the following reasons—
(a) no markets for natural gas within Nigeria ;
(b) export markets need to be identified and developed ;
(c) no pipeline, processing or liquefaction capacity is available in existing
systems where commercial conditions indicate that the best option for
development is based on the future expansion of such systems or the use
of such systems when capacity will become available in the future ; or
(d) where the natural gas discovery would only be commercial when
jointly developed with other existing natural gas discoveries or potential
future natural gas discoveries ;
“special investigation unit” means a unit established either under section
27 or 50 of this Act ;
“standard cubic foot” means, in relation to natural gas, the quantity of
dry ideal natural gas at a temperature of 60 degrees Fahrenheit and a
pressure of 14.696 pounds per square inch absolute contained in a volume
of one cubic foot ;
“supplier” means the holder of a wholesale gas supply licence, a
wholesale petroleum liquids supply licence or a retail gas supply licence ;
“tariff” means the price charged for the provision of a particular service,
or group of services, with respect to midstream and downstream petroleum
operations ;
“terrain” means the area of any petroleum exploration licence, petroleum
prospecting licence or petroleum mining lease ;
“terminal” means a terminal for petroleum liquids, pumping or booster
station, or other installation or structure associated with a terminal, including
its storage facilities, other than a terminal situated within “a port or any
approaches thereto” within the meaning of the Nigerian Ports Authority
Act, Cap. N126, Laws of the Federation of Nigeria, 2004 ;
“third party access” means the legal requirement for owners of certain
infrastructure facilities to grant access to those facilities to parties other
than themselves or their own customers, for uncommitted capacity, including
competitors in the provision of the relevant services, on terms stipulated in
this Act or regulations ;
“transportation fuels” means fuels used for transport on land, on water
and in the air, such as gasoline, aviation gasoline, diesel, jet fuel, marine
bunker fuel, LNG, CNG and other fossil fuel based products, as well as
hydrogen, bio-diesel, bio-jet fuel, ethanol and other fuels used for transport
purposes ;
“transportation network” means a system of interconnected
transportation pipelines and other facilities required to transport natural gas
or petroleum liquids ;
“transportation pipeline” means a pipeline used for the bulk conveyance
of petroleum liquids and for natural gas under high-pressure ;
“transportation pipeline owner” means the holder of a gas
transportation pipeline licence or a petroleum liquids transportation pipeline
licence ;
“upstream petroleum operations” means the exploration for, appraisal
of, development of and winning or obtaining of petroleum in Nigeria by or
on behalf of a company on its own account for commercial purposes,
petroleum exploration operations, the drilling of exploration, appraisal and
development wells, all activities upstream of the measurement points, related
to the winning of petroleum through wells or mining from petroleum
reservoirs, drilling, fracking, completing, treatment and operation of wells
producing petroleum, construction and operation of gathering lines and
manifolds for crude oil, natural gas and water, construction and operation
of high and low pressure separators, construction and operation of facilities
to treat crude oil and natural gas, flaring of natural gas, compression and
reinjection of natural gas in reservoirs, construction and operation of facilities
for the production of electricity or heat from natural gas or other fuels as
energy source for the winning of petroleum, injection or re-injection of
water into the reservoirs, construction and operation of pipelines and other
facilities for the discharge of water, construction and operation of fixed or
floating platforms or other vessels required for the winning of petroleum,
construction and operation of fixed or floating storage facilities of crude oil
in the licence area, transportation to and from the licence area of personnel,
goods and equipment, metering of well stream fluids, metering of petroleum
at the measurement points prior to transportation, sale and marketing of
crude oil, natural gas or condensates or any of them at the measurement
points and such other activities which by regulation are considered upstream
petroleum operations, and related administration and overhead, provided,
however, that where field facilities or fixed or floating platforms or vessels
provide for fully integrated upstream and midstream petroleum operations,
the Commission may consider the entire operations as upstream petroleum
operations under section 8 (d) of this Act ;
“UTM” means the Universal Transverse Mercator, a conformal
projection which uses a two-dimensional Cartesian coordinate system to
give locations on the surface of the earth ;
“wholesale customer” means a class of customers designated in
regulations with respect to—
(a) natural gas, the right to contract for and purchase a supply of
wholesale gas, with a capability to connect individually and economically
to a transportation pipeline or transportation network and shall include
gas distributors, and
(b) crude oil or petroleum products, it shall be a customer of a yearly
volume defined by regulation and shall include petroleum product
distributors ;
“wholesale gas” means natural gas sold by a supplier to wholesale
customers ;
“wholesale gas supplier” means the holder of a wholesale gas supply
licence ;
“wholesale gas supply licence” means a licence for the supply to
wholesale customers of natural gas under section 142 of this Act ;
“wholesale petroleum liquids supplier” means a holder of a wholesale
petroleum liquids supply licence ;
“wholesale petroleum liquids supply licence” means a licence for the
supply to wholesale customers of petroleum liquids under section 197 of
this Act.
319. This Act may be cited as the Petroleum Industry Act, 2021. Citation.
SCHEDULES
FIRST SCHEDULE Section 3 (3)
RIGHTS OF PRE-EMPTION
1. The licensee or lessee shall use his best endeavours to increase so far
as possible with his existing facilities, the supply of petroleum or petroleum
products, or both, for the Federal Government to the extent required by the
Minister.
2. The licensee or lessee shall, with all reasonable expedition and so as
to avoid demurrage on the vessels conveying the same, use his best endeavours
to deliver all petroleum or petroleum products purchases by the Minister under
the right of pre-emption in such quantities, and at such places of shipment or
storage in Nigeria, as may be determined by the Minister.
3. Where a vessel employed to carry petroleum or petroleum products
under paragraph 2 is detained on demurrage at the port of loading, the licensee
or lessee shall pay the amount due for demurrage according to the terms of
the charter-party or the rates of loading previously agreed to by the licensee
or lessee, unless the delay is due to causes beyond the control of the licensee
or lessee.
4. Any dispute which may arise as to whether a delay is due to causes
beyond the control of the licensee or lessee shall be settled by agreement
between the Minister and the licensee or lessee or, in default of agreement, by
arbitration.
5. The price to be paid for petroleum or petroleum products taken by the
Minister in exercise of the right of pre-emption shall be—
(a) the reasonable value at the point of delivery, less discount to be
agreed by both parties ; or
(b) where no such agreement has been entered into prior to the exercise
of the right of pre-emption, a fair price at the port of delivery to be settled
by agreement between the Minister and the licensee or lessee or, in default
of agreement, by arbitration.
6. To assist in arriving at a fair price for the purposes of paragraph 5 (b),
the licensee or lessee shall, if the Minister so requires—
(a) furnish for the confidential information of the Minister particulars
of quantities, descriptions and prices of petroleum or petroleum products
sold to other customers and of charters or contracts entered into for
their carriage ; and
(b) exhibit original or authenticated copies of the relevant contracts or
charter-parties.
7. Any arbitration under the First Schedule shall take place after the
petroleum or petroleum products have been delivered.
SECOND SCHEDULE
Sections 54 (7) and 65 (1)
PRINCIPLES OF NEGOTIATING INCORPORATED JOINT VENTURES
General Provisions
1. (1) An IJVC may be created for an existing joint operating agreement
and each IJVC shall be formed under the Companies and Allied Matters Act,
and NNPC Limited shall enter into negotiations with the other parties to such
existing joint operating agreements with a view to, among other things—
(a) agreeing and executing a shareholders’ agreement in respect of the
applicable IJVC ;
(b) agreeing the provisions of the memorandum and articles of association
of the applicable IJVC ; and
(c) incorporating the applicable IJVC.
(2) Prior to the incorporation of each IJVC, the parties to each applicable
joint operating agreement shall continue to carry out their obligations under
such joint operating agreement in the ordinary course of business.
(3) Each IJVC shall be owned by the parties to the applicable existing
joint operating agreement in the same proportion as their existing participating
interests set forth in such joint operating agreement, or in such other proportion
as the parties thereto shall mutually agree.
(4) Upon and following the incorporation of an IJVC—
(a) it can carry out upstream, midstream and downstream petroleum
operations subject to the appropriate fiscal regime as specified in this Act,
provided, however, that where the parties wish to enter into more than one
stream of operations, the parties shall incorporate separate companies under
section 302 (3) and (4) ;
(b) it shall be deemed to be the sole licensee or lessee (as applicable) of
each petroleum prospecting licence or petroleum mining lease held jointly
under the applicable existing joint operating agreement immediately prior to
its incorporation ;
(c) it shall at all times be the operator of petroleum operations under each
petroleum prospecting licence and petroleum mining lease that it holds ;
(d) it may contract for specific petroleum services but may not enter into
any contract or group of contracts which would have the effect of transferring,
directly or indirectly, any of the functions as operator except with the approval
of the Commission, in the case of upstream petroleum operations, or Authority,
in the case of midstream and downstream petroleum operations ;
(e) it shall by publication on its website make public reasonable details
relating to its incorporation and constitutional documents ; and
(f ) it may render any services related to its operations (other than
financial and insurance services), to any other IJVC, NNPC Limited, or
any other third party under such conditions as it may deem necessary or
desirable.
Special Provisions Relating to Incorporated Joint Venture Companies
2.—(1) No IJVC shall be subject to the provisions of the Fiscal
Responsibility Act and the Public Procurement Act.
(2) Once incorporated, the following provisions shall apply to each IJVC—
(a) prior to any sale of shares in an IJVC by any shareholder, the
other shareholders (including NNPC Limited) shall have the right of
first refusal on such transaction at fair market value and appropriate
ministerial consent ; and
(b) each IJVC shall have its head office and main operational offices in
Nigeria.
Organisation of Incorporated Joint Venture Companies
3.—(1) Each IJVC shall have a Board of directors to be appointed by
the shareholders of the IJVC.
(2) The Board of directors of each IJVC shall be made up of persons
who—
(a) have distinguished themselves in their various capacities ; and
(b) are able to exercise independence and objectivity with respect to
the affairs of the IJVC.
(3) The powers of the Board of directors of each IJVC shall be established
in the articles of association of such IJVC, provided that, the Board of directors
of such IJVC shall have the power to approve the annual work program and
budget of such IJVC and any revisions thereof.
(4) The Board of directors of each IJVC may create committees and
subcommittees.
(5) Decisions of the Board of directors of each IJVC shall be guided by
commercial and technical considerations that represent good international
Special provisions relating to the shares of Incorporated
Joint Venture Companies
4.—(1) The share capital of each IJVC shall initially consist only of
ordinary shares.
(2) The shares held directly or indirectly by NNPC Limited in each IJVC
shall at all times during the life of each IJVC remain non-transferable either by
way of sale, assignment, mortgage or pledge to any other entity except as approved
by the Government and such sale or transfer shall be at fair market value after
an open, transparent and competitive bidding process in which only companies
who qualify under section 95 (11) of this Act can participate.
Special provisions relating to rents, royalties, taxes and
other levies payable by an IJVC
5.—(1) Each IJVC shall be subject to this Act on payment of rents,
royalties and taxes.
(2) The initial capitalisation of each IJVC and the transactions required
to create such IJVC shall not create any additional tax liabilities for any of the
holders of shares in the IJVC, provided that, all assets, interests and liabilities
previously held jointly pursuant to the applicable joint operating agreement are
transferred to the IJVC at their net book value.
Special right of shareholders in an Incorporated Joint Venture
Company to purchase petroleum and any petroleum derivatives
6.—(1) Each direct holder of shares in an IJVC shall have the right to
purchase from the IJVC—
(a) at open market prices, a percentage of the crude oil, natural gas and
condensates produced by such IJVC equal to its shareholding interest in
such IJVC ; and
(b) at open market prices, a percentage of the petroleum products
produced by such IJVC equal to its percentage ownership interest in
the IJVC.
(2) Where the direct holders of shares in an IJVC do not purchase all
crude oil, natural gas, condensates and petroleum products that they are entitled
to under subsection (1), such IJVC may sell the remaining balance to any
person at open market prices on arm’s length terms.
(3) Any income received by an IJVC as a result of the export of petroleum
may be held in bank accounts abroad and may be used by such IJVC to pay
its obligations outside Nigeria, subject to any obligation of such IJVC under
this Act and any other applicable enactments.
(4) The transfer overseas of any fund by an IJVC shall be subject to the
regulations and policies of the Central Bank of Nigeria.
Pro-rata Dividend Distribution
7.—(1) Each IJVC shall pay dividends and other distributions pro rata
among the number of issued shares held directly by its shareholders.
(2) Each dividend payment or other distribution shall be subject to any
withholding tax applicable under the Companies Income Tax Act.
Dividend Policy
8. The Board of directors of each IJVC shall establish and from time to
time amend the dividend distribution policy of such IJVC and such dividend
distribution policy shall be premised on the prudent and commercially reasonable
management of the finances and operations of the IJVC.
Special Provisions Relating to Financing of Operations
9.—(1) Each IJVC shall finance any exploration for new prospects,
development of new fields, or any other investments in accordance with the
applicable approved annual work program and budget for such incorporated
joint venture from the cash flows of the IJVC and any borrowings by such
IJVC, in each case as approved by its Board of directors.
(2) Where the cash flow, together with any borrowings, of an IJVC is
insufficient to finance the work program in respect of any exploration for new
prospects, development of new fields, or any other investments approved by
the Board of directors of such IJVC, the shareholders of such IJVC shall
consult as to the manner in which further financing can be raised.
(3) With respect to subparagraph (2), the shareholders may consider
among others—
(a) permitting any of the shareholders to contribute equity in exchange
for the issuance of ordinary shares ; and
(b) the creation of preferred shares for any shareholder that wishes to
make a financial contribution to the incorporated joint venture.
THIRD SCHEDULE
Sections 167 (1) and 318
1. The domestic base price at the marketable gas delivery point under
section 167 (1) shall be determined based on regulations incorporating among
such other matters as may apply pursuant to the subsequent paragraph, the
following principles—
(a) the price must be of a level to bring forward sufficient natural gas
supplies for the domestic market on a voluntary basis by the upstream
(b) unless required to satisfy conditions under sub-subparagraph (a),
the price shall not be higher than the average of similar natural gas prices in
major emerging countries that are significant producers of natural gas based
on countries determined by the Authority ;
(c) subject to the limitations under sub-subparagraph (b) the price shall
be adjusted upward on a yearly basis in order to account for inflation on a
yearly amount or percentage basis ; and
(d) the Authority shall determine the domestic base price based on the
regulations within three months following the effective date and modify this
price where required by the circumstances in the domestic market pursuant
to regulations.
Allocation and Pricing of the Domestic Delivery Obligation
2. Pursuant to section 110 of this Act, the Commission shall establish the
criteria for allocation of domestic gas delivery obligations including the
following—
(a) all available gas at low cost of supply shall be eligible for designation
to the domestic gas market —
(i) the ranking of gas available for the domestic gas market shall be
determined by a tier system based on the cost of supply,
(ii) the pricing of gas for the domestic market shall be based on the
lowest cost of supply of gas available in the three-tier classification of
supply sources for the domestic market, and
(iii) the Commission shall determine the pricing mechanism to be utilised
for gas supply to the domestic market under the domestic delivery obligation
and such pricing may include gas on gas, oil based price mechanism,
equivalent energy mechanism and bilateral pricing mechanism or any other
such mechanism that reflects the prevailing market condition ;
(b) all associated gas from producing fields shall be eligible for designation
as tier one gas for the domestic gas market ;
(c) all gas cap gas from depleted oil fields shall be considered as tier two
gas and designated for the domestic gas market ; and
(d) available gas in non-associated gas fields onshore and shallow

offshore shall be considered as tier three to be evaluated for eligibility of
supply to the domestic gas market based on its cost of supply.
FOURTH SCHEDULE
Section 168 (1) and (4)
Pricing formula for gas price for the gas based Industries
The gas price for the gas based industries shall be determined by the
following pricing formula—
CP = NRP * (1 + EPF) <=EPP

Where - CP is the applicable price in US $/MMBtu, EPP is the domestic base
price under section 168 (3), NRP is the National Reference Price which is
US $1/MMBtu
EPF is the End Product Factor which is described by the following formula
(CMPP – PRP)/PRP
CMPP is the Average Current Month End Product Price in US $/MT
PRP = Product Reference Price in US $/MT i.e. dollar per metric tonne
which varies depending on the industry
NRP (US $/mmbtu)

End Product Net of transport Tariff PRP (US$/MT)
US $/Kcf
Ammonia 1.00 250
Urea 1.00 250
Methanol 1.00 250
Polypropylene 1.00 250
(LDPPE/HDPPE)
Low Sulphur Diesel (GTL) 1.00 325
The Authority may by regulation change the formulas or the values for NRP,
CMPP and PRP and introduce other values for one or more gas based industries
where the circumstances so justify.
FIFTH SCHEDULE
Sections 263 (1) (d), 266 (1) (a), 270, 271 (2) (b) and (c),
277 (1) (c) 280 (1) (b) and 302 (10) (a)
CAPITAL ALLOWANCES
Interpretation
1. For the purpose of this Schedule—
(a) “concession” includes a petroleum exploration licence, petroleum
prospecting licence, petroleum mining lease, any right, title or interest in or
to petroleum in the ground and any option of acquiring any such right, title
or interest ;
(b) “lease” includes an agreement for a lease where the term to be
covered by the lease has begun, any tenancy and any agreement for the
letting or hiring out of an asset, but does not include a mortgage, and all
cognate expressions including “LEASEHOLD INTEREST” shall be
construed accordingly and where,—
(i) with the consent of the lessor, a lessee of any asset remains in
possession after the termination of the lease without a new lease being
granted, that lease shall be deemed for the purpose of this Schedule to
continue so long as the lessee remains in possession, and
(ii) on the termination of a lease of any asset, a new lease of that
asset is granted to the lessee, the provisions of this Schedule shall have
effect as if the second lease were a continuation of the first lease ;
(c) “qualifying expenditure” means, subject to the express provisions
of this Schedule, expenditure incurred for the purpose of hydrocarbon tax
in an accounting period, which is capital expenditure, referred to as—
(i) “qualifying plant expenditure” incurred on plant, machinery and
fixtures directly for upstream petroleum operations applicable to crude
oil for petroleum mining leases or petroleum prospecting licence,
(ii) “qualifying pipeline and storage expenditure” including floating
production systems incurred directly or gathering pipelines for upstream
petroleum operations applicable to crude oil for petroleum mining leases
or petroleum prospecting licences,
(iii) “qualifying building expenditure” other than expenditure, which
is included in sub-subparagraph (c) (i), (ii) or (iv) of this “Interpretation”,
incurred directly on the construction of buildings, structures or works of
a permanent nature for upstream petroleum operations applicable to crude
oil for petroleum mining leases or petroleum prospecting licences, or
(iv) “qualifying drilling expenditure”, tangible and intangible, other
than expenditure which is included in sub-subparagraph (c) (i) or (ii) of
this “Interpretation”, incurred directly in connection with upstream
petroleum operations for petroleum mining leases or petroleum prospecting
licence, in view of searching for or discovering and testing petroleum
deposits, or winning access, or the construction of any works or buildings
which are likely to be of little or no value when the upstream petroleum
operations for which they were constructed cease to be carried on,
provided that, for the purposes of these definitions, qualifying expenditure
shall not include any sum which may be deducted under section 263 of
this Act and have benefited from capital allowances prior to the
acquisition of the asset by another entity ;
(d) for the purpose of interpretation of qualifying expenditure, where
expenditure is incurred by a company before its first accounting period and
such expenditure would have fallen to be treated as qualifying expenditure,
ascertained without the qualification contained in the foregoing proviso if it
had been incurred by the company on the first day of its first accounting
period and that expenditure is incurred in respect of an asset, owned by the
company then such expenditure shall be deemed to be qualifying expenditure
incurred by it on that day, or which has been disposed of by the company
before the beginning of its first accounting period, then any loss suffered by
the company on the disposal of such asset shall not be allowed on
commencement of accounting period and any profit realised by the company
on such disposal shall be liable to capital gains tax in the same period
accordingly.
Provisions relating to pre-production expenditure
2. For the purpose of this Schedule, where—
(a) expenditure has been incurred before its first accounting period and the
expenditure would have been treated as a qualifying expenditure in any of the
classes of qualifying expenditures stated in subparagraph (1) (c) (i)-(iv), then it
shall be so classified and capital allowances claimed accordingly ; and
(b) Where the expenditure before the first accounting date should
have been treated as allowable deduction in an accounting period, it
shall be so allowed but fully amortised over a period of five years with
a 1% retention value.
Owner and meaning of relevant interest
3.—(1) For the purpose of this Schedule, where an asset consists of a
building, structure or works, the owner shall be taken to be the owner of the
relevant interest in such building, structure or works.
(2) Subject to this paragraph, the expression “the relevant interest”
means, in relation to any expenditure incurred on the construction of a building,
structure or works, the interest in such building, structure or works to which
the company which incurred the expenditure was entitled when it incurred the
expenditure.
(3) Where a company incurs qualifying building expenditure or qualifying
drilling expenditure on the construction of a building, structure or works, the
company is entitled to two or more interests therein, and one of those interests
is an interest which is reversionary on all the others, that interest shall be the
relevant interest for the purpose of this Schedule.
(4) Where the owner of the relevant interest does not have statutory
title to the asset, that is, it is not the licensee or lessee to the asset, the qualifying
capital expenditure and the capital allowances accruing therefrom, for the
purposes of this Schedule, shall be to the benefit of the holder of the licence or
lease.
Sale of Buildings
4. Where capital expenditure has been incurred on the construction of a
building, structure or works and the relevant interest is sold, the company which
buys that interest shall be deemed, for the purpose of this Schedule, to have
incurred, on the date when the purchase price became payable, capital
expenditure on the construction equal to the price paid by it for such interest or
to the original cost of construction, whichever is the less and the capital
expenditure shall not be eligible for capital allowance deduction under the
hydrocarbon tax, provided that where such relevant interest is sold before the
building, structure or works has been used, the foregoing provisions of this
paragraph shall have effect with respect to sale and the original cost of
construction shall be taken to be the amount of the purchase price on such sale.
Annual Allowance
5.—(1) Subject to this Schedule, where in any accounting period, a
company owning any asset has incurred in respect of the asset qualifying
expenditure wholly, reasonably, exclusively and necessarily for the purpose of
upstream petroleum operations applicable to crude oil carried on by it, there
shall be due to that company as from the accounting period in which the
expenditure was incurred, an allowance “an annual allowance” at the
appropriate rate percent specified in the table to this Schedule.
(2) Notwithstanding the provisions of subparagraph (1) of this paragraph,
there shall be retained in the books, in respect of each asset 1% of the initial
cost of the asset which may only be written off in accordance with
subparagraph (3).
(3) Any asset or part of it in respect of which capital allowances have
been granted, may only be disposed of on the authority of a certificate of
disposal issued by the Commission or any person authorised by it.
6. Subject to paragraph 18, an annual allowance in respect of qualifying
expenditure incurred in respect of any asset shall only be due to a company
for any accounting period if at the end of the accounting period it was the
owner of that asset and the asset was in use for the purpose of the upstream
petroleum operations applicable to crude oil carried on by it.
Balancing allowances
7. Subject to this Schedule, where in any accounting period of a company,
the company owning any asset in respect of which it has incurred qualifying
expenditure wholly and exclusively for the purposes of upstream petroleum
operations applicable to crude oil carried on by it, disposes of that asset, an
allowance “a balancing allowance” shall be due to that company for that
accounting period of the excess of the residue of that expenditure, at the date
such asset is disposed of, over the value of that asset at that date, provided
that a balancing allowance shall only be due in respect of such asset if
immediately prior to its disposal it was in use by such company for the purposes
of the upstream petroleum operations applicable to crude oil for which such
qualifying expenditure was incurred.
Balancing charges
8. Subject to this Schedule, where in any accounting period of a company,
the company owning any asset in respect of which it has incurred qualifying
expenditure wholly and exclusively for the purposes of upstream petroleum
operations applicable to crude oil carried on by it, disposes of that asset, the
excess “a balancing charge” of the value of that asset, at the date of its
disposal, over the residue of that expenditure at that date shall, for the purpose
of section 262 (1) (a) of this Act, be treated as income of the company of that
accounting period, provided that a balancing charge in respect of such asset
shall only be so treated if immediately prior to the disposal of that asset it was
in use by such company for the purposes of the upstream petroleum operations
applicable to crude oil for which the qualifying expenditure was incurred and
shall not exceed the total of annual allowances due under this Schedule, in
respect of such asset.
Residue
9. The residue of a qualifying expenditure, in respect of any asset, at any
date, shall be taken to be the total qualifying expenditure incurred on or before
that date, by the owner, in respect of that asset, less the total of any annual
allowances due to such owner, in respect of that asset, before that date.
Meaning of “disposed of ”
10. Subject to any express provision to the contrary, for the purpose of
this Schedule—
(a) a building, structure or works of a permanent nature is disposed of if
any of the following events occur—
(i) the relevant interest is sold,
(ii) that interest, being an interest depending on the duration of a
concession, comes to an end at the end of that concession,
(iii) that interest, being a Leasehold interest, comes to an end and the
possession of the building, structure or works of a permanent nature
reverts to the holder of the reversionary interest, or
(iv) the building, structure or works of a permanent nature are
demolished, destroyed or, without being demolished or destroyed, cease
altogether to be used for the purpose of upstream petroleum operations
applicable to crude oil carried on by the owner ;
(b) plant, machinery or fixtures are disposed of if they are sold, discarded
or cease altogether to be used for the purposes of upstream petroleum
operations applicable to crude oil carried on by the owner ; or
(c) assets in respect of which qualifying drilling expenditure is incurred
are disposed of if they are sold or if they cease to be used for the purpose
of the upstream petroleum operations applicable to crude oil of the company
incurring the expenditure either on the company ceasing to carry on the
operations or on such company receiving insurance or compensation money
therefrom.
Value of an asset or interest in a petroleum prospecting
licence or petroleum mining lease
11.—(1) The value of an asset or interest in a petroleum prospecting
licence or petroleum mining lease at the date of its disposal shall be the net
proceeds of the sale or of the relevant interest, or, where it was disposed of
without being sold, the amount which, in the opinion of the service, the asset
or the relevant interest, as the case may be, would have fetched if sold in the
open market at that date, less the amount of any expenses which the owner
might reasonably be expected to incur if the asset were so sold.
(2) For the purpose of this paragraph, where an asset is disposed of in
the circumstances that insurance or compensation money are received by the
owner, the asset or the relevant interest, as the case may be, shall be treated
as having been sold and as though the net proceeds of the insurance or
compensation money were the net proceeds of the sale.
Apportionment
12.—(1) Any reference in this Schedule to the disposal, sale or purchase
of any asset or interest includes a reference to the disposal, sale or purchase of
that asset, as the case maybe, together with any associated asset, whether or
not qualifying expenditure has been incurred on such associated asset, and,
where an asset is disposed of, sold, or purchased together with another asset, so
much of the value of the assets as, on a just apportionment, is properly attributable
to the first mentioned asset shall, for the purposes of this Schedule, be deemed
to be the value of, or the price paid for that asset, as the case may be.
(2) For the purpose of this subparagraph, all the assets or interest which
are purchased or disposed of in pursuance of one bargain shall be deemed to
be purchased or disposed of together, notwithstanding that separate prices
are or purport to be agreed for each of those assets or that there are or
purport to be separate purchases or disposals of those assets.
(3) The provisions of subparagraph (1) shall apply, with modifications,
to the sale or purchase of the relevant interest in any asset together with any
other asset or relevant interest in that other asset provided that the provisions
for apportionment in subparagraphs (1) and (2) shall not apply in the sale or
disposal of concessions or interest in a part of the asset.
Part of an asset
13. Any reference in this Schedule to any asset shall be construed
whenever necessary as including a reference to a part of any asset, including
an undivided part of that asset in the case of joint interests and when so
construed, any necessary apportionment shall be made in a manner, which in
the opinion of the Service, is just and reasonable.
Exclusion of certain expenditure
14. Subject to the express provisions of this Schedule, where any
company has incurred expenditure which is allowed to be deducted under any
provision, other than a provision of this Schedule, such expenditure shall not
be treated as qualifying expenditure.
Asset used or expenditure incurred partly for the

purpose of petroleum operations
15.—(1) The following provisions of this paragraph shall apply where
either or both of the following conditions apply with respect to any asset the—
(a) owner of the asset has incurred in respect of the asset a qualifying
expenditure partly for the purpose of upstream petroleum operations
applicable to crude oil carried on by him and partly for other purposes ; or
(b) asset in respect of which the owner has incurred qualifying
expenditure is used partly for the purpose of upstream petroleum operations
applicable to crude oil carried on by such owner and partly for other purposes.
(2) Any allowances which would be due or any balancing charges which
would be treated as income if both expenditure were incurred wholly and
exclusively for the purpose of the upstream petroleum operations applicable
to crude oil and if the asset were used wholly and exclusively for the purpose
of such operations, shall be computed in accordance with the provisions of
this Schedule.
(3) So much of the allowances and charges computed in accordance
with subparagraph (2) shall be due or shall be so treated, as the case may be,
as in the opinion of the Service is just and reasonable having regard to all
circumstances and to the provisions of this Schedule.
Disposal without change of ownership
16.—(1) Where an asset in respect of which qualifying expenditure has
been incurred by the owner has been disposed of in circumstances that the
owner remains the owner, then, for the purpose of determining whether and, if
so, in what amount, any annual or balancing allowance or balancing charge
shall be made to or on such owner in respect of his use of that asset after the
date of the disposal—
(a) qualifying expenditure incurred by the owner in respect of the asset
prior to the date of the disposal shall be left out of account ; and
(b) the owner shall be deemed to have bought such asset immediately
after the disposal for a price equal to the residue of the qualifying expenditure
at the date of the disposal, increased by the amount of any balancing charge
or decreased by the amount of any balancing allowance made as a result of
the disposal.
(2) Capital allowances shall be for the computation of hydrocarbon tax
and not for cost recovery purposes in production sharing contracts, which
shall have their own provisions under the model contract.
Capital allowance rates
17.—(1) Qualifying expenditure shall be subject to the rates below—
Qualifying Capital Expenditure 1st 2nd 3rd 4th 5th

Year Year Year Year Year
Qualifying Plant Expenditure 20% 20% 20% 20% 19%
Qualifying Pipeline Expenditure 20% 20% 20% 20% 19%
Qualifying Building Expenditure 20% 20% 20% 20% 19%
Qualifying Drilling Expenditure 20% 20% 20% 20% 19%
(2) Exploration expenditure and the first two appraisal wells expenditure
in the same field are to be treated as deductible costs 100% in the year incurred,
while for additional exploration expenditures and appraisal expenditures in the
same field relating to pre-production period are to be amortised and deducted
on commencement of accounting period at an annual allowance of 20% in the
first to fourth year and 19% in the fifth year with a 1% retention value.
18.—(1) For the purpose of this Schedule, an asset shall be deemed to
be in use during a period of temporary disuse.
(2) For the purpose of paragraphs 5 and 6 of this Schedule—
(a) an asset in respect of which qualifying expenditure has been incurred
by the owner for the purpose of petroleum operations carried on by him
shall be deemed to be in use between the dates mentioned, where the
Service determines that the first use to which the asset will be put by that
owner will be for such operations ; and
(b) the said date shall be the date on which such expenditure was incurred
and the date on which the asset is in fact first put to use—
Provided that where any allowance has been given in consequence of
subparagraph (2) and the first use to which such asset is put is not for the
purpose of such operations, or it is not put to use within five years from
the date the expenditure was incurred, capital allowances already claimed
on such assets shall be withdrawn and the amount so claimed shall be
assessed to tax.
SIXTH SCHEDULE
Sections 264 (q), 266 (1) (b) and (2),
277 (1) (d) and 280 (1) (c)
PRODUCTION ALLOWANCES AND COST PRICE RATIO LIMIT
Production Allowance
1.—(1) There shall be a production allowance for crude oil production
by leases which are converted oil mining leases based on a conversion contract
and their renewals, which shall be the lower of US $2.50 per barrel and 20%
of the fiscal oil price.
(2) There shall be a production allowance per field for crude oil production
by a company for leases granted after the commencement of this Act and
determined as follows—
(a) for onshore areas — the lower of US $8.00 per barrel and 20% of
the fiscal oil price per barrel up to a cumulative maximum production of 50
million barrels from commencement of production and the lower of US
$4.00 per barrel and 20% of the fiscal oil price thereafter ;
(b) for shallow water areas — the lower of US $8.00 per barrel and
20% of the fiscal oil price, up to a cumulative maximum production of 100
million barrels from commencement of production and the lower of US
$4.00 per barrel and 20% of the fiscal oil price thereafter ; and
(c) for deep offshore areas and frontier basins — the lower of US $8.00
per barrel and 20% of the fiscal oil price, up to a cumulative maximum
production of 500 million barrels from the commencement of production
and the lower of US $4.00 per barrel and 20% of the fiscal oil price thereafter.
(3) The detailed procedures for determining the production allowances
shall be established in regulations.
(4) Any allowances for crude oil shall also apply to condensates and
liquid natural gas liquids under section 260 (1) (a) of this Act.
Cost Price Ratio (CPR) Limit

2.—(1) All costs prescribed under section 263 and under the Fifth
Schedule to this Act, excluding those related to section 263 (1) (a), (b) and
(h), in an accounting period the sum of which is eligible for deduction under
the hydrocarbon tax shall be subject to a cost price ratio limit of 65% of gross
revenues determined at the measurement points.
(2) Where, as a result of subparagraph (1), any excess costs incurred
not allowed for deduction for that year of assessment, then—
(a) the costs may be allowed for deduction for the purposes of ascertaining
the profits of the company for subsequent years of assessment provided that
the total costs to be deducted shall not exceed the actual costs incurred ;
(b) the total costs to be allowed as deduction in those subsequent years
shall be such an amount that if added to the sum of the total costs to be
allowed as deduction under subparagraph (1) shall not exceed the specified
cost price ratio limit of 65% ; and
(c) where under paragraph 2 (2) (b), any cost exceed the cost price
ratio limit upon the termination of upstream petroleum operations related to
crude oil, such costs shall not be deductible for purpose of calculation of
the hydrocarbon tax.
SEVENTH SCHEDULE
Section 268 (3),
303 (1), 306 and 318
PETROLEUM FEES, RENTS AND ROYALTY
PART I—FEES
Fees payable for licences and leases
1. Commission shall through regulations publish the rates or fees payable
in respect of the following—
(a) application for a petroleum exploration licence ;
(b) application for a renewal of a petroleum mining lease ;
(c) application to assign an interest or sublet a petroleum exploration
licence, petroleum prospecting licence or petroleum mining lease ;
(d) application to terminate or effect a partial or full surrender of a
petroleum exploration licence, petroleum prospecting licence or petroleum
mining lease ;
(e) application for permit to operate a drilling rig ;
(f ) application for grant of field development plan approval and the
related petroleum mining lease ;
(g) application for the approval of the drilling of a well ;
(h) permit to export samples for analysis ;
(i) application to withdraw any of the applications in sub-subparagraph
(a)-(h) ; and
(j) application for other fees as may be deemed necessary by the
Commission.
PART II—RENTS AND BONUSES

Rents for Licences
2. Every petroleum prospecting licence and petroleum mining lease
shall be subject to rent as prescribed in the relevant regulation and the rent
shall be an amount per hectare per year.
Payment of fees before grant of licence or lease
3.—(1) A petroleum prospecting licence and petroleum mining lease
shall not be granted without prior payment of the applicable fees, applicable
signature bonus, and the rent applicable to the first year.
(2) A petroleum mining lease shall not be renewed without prior payments
of the renewal bonus under this Act.
Penalty for default in payment of rent
4. Failure to pay the rent as prescribed in the relevant regulation shall
result in a penalty as prescribed in the said regulation or any other enactment,
provided that where no penalty is prescribed in the said regulation, there shall
be an application of an interest rate of LIBOR or any other successor rate
plus 10% to the outstanding payment in US Dollars and where the payment of
the applicable rent is not made within three months, revocation of such licence
or lease under this Act shall be initiated.
Verification and payment account
5.—Any rents imposed under this section shall be paid into the Federation
Account and verified by the Commission.
PART III—ROYALTIES
All Petroleum production subject to Royalties
6. All production of petroleum, including production tests, shall be subject
to royalties on a non-discriminatory basis with respect to all licensee and lessees
and shall be paid into the Federation Account and verified by the Commission
and for royalty purposes condensates shall be treated as crude oil and natural
gas liquids shall be treated as natural gas.
Measurement Point for the determination of production volumes
7.—(1) Royalties shall be determined on a monthly basis at the
measurement points and where there is production from production tests
under a petroleum prospecting licence, the Commission shall determine
measurement point for such production and where there is no measurement
equipment at a possible measurement point in the field at the commencement
of this Act, or where logistical conditions make the installation of
measurement equipment at a possible measurement point impractical or
uneconomic in the opinion of the Commission, the Commission may approve
procedures for determining the chargeable volumes at a deemed
measurement point in the field based on measurements at the point of sale,
export terminal or other point downstream of such deemed measurement
point under the regulations or guidelines and the measurement of crude oil,
condensates and natural gas liquids shall be in barrels and of natural gas in
standard cubic feet and where so justified, the Commission may approve
reporting of production of natural gas liquids in metric tons.
(2) The chargeable volume for royalty purpose shall be calculated by
ascertaining the quantity of natural gas, crude oil, condensates and natural gas
liquids produced in the relevant month from each field operated by the licensee
or lessee under a regulation or guideline.
(3) Where natural gas liquids are extracted in a gas processing plant
downstream of the measurement point, the rich natural gas volumes, still
including the natural gas liquids, shall be measured at the measurement point
and be the basis for royalty calculations and the value of such rich natural gas
shall be the value of the marketable natural gas plus the natural gas liquids at
the exit of the gas processing plant, less the gas processing costs and less the
transport cost between the measurement point and the gas processing plant
based on tariffs established by the Authority.
(4) Natural gas liquids and liquid petroleum gases shall have the same
royalty rates as the natural gas from which these products are derived.
(5) The chargeable volume shall be measured at standard temperatures
and pressures as defined by regulation or guidelines and production shall not
include any—
(a) volumes burned, flared or vented with the approval of the Commission;
(b) volumes re-injected by the lessee into reservoirs for the purpose of
improving or enhancing production of crude oil or for conservation of natural
gas ;
(c) volumes used in the upstream petroleum operations for the production
of electricity or heat for exclusive use in the operations of the lessee ; and
(d) water or sediments.
(6) The obligation to install the necessary measurement equipment shall
be that of the licensee or lessee and shall be certified by the Commission and
the measurement procedures and equipment for measurement at and prior to
the measurement point shall be established in regulations or guidelines.
Determination of price for royalty

8.—(1) The royalties applicable to crude oil and condensates shall be
based on the fiscal oil price determined for the field at the measurement
points under applicable regulations or guidelines, and this price shall be
determined by the Commission on the basis of information supplied by the
lessees and from non-confidential independent publications, making such
adjustments for quality and transport costs as appropriate to prices of
comparable crude oils and condensates sold in the international market, as
determined by the Commission, for which appropriate information is
available and with the objective to approximate as reasonably as possible
the average fair market value of the month of the crude oil and condensates
for such month for such field.
(2) The fiscal oil price for each field shall consider any quality differentials
related to international crude oils and condensates and shall be an export
parity price taking into consideration the deduction of transportation costs
within Nigeria from the measurement points as determined by the Authority to
export terminals.
(3) Royalties applicable to natural gas shall be based on the fiscal gas
price determined for the field at the measurement point under applicable
regulations or guidelines and this price shall be determined by the Commission,
taking into consideration submissions by the lessees, and shall be based on the
netback value at the measurement point based on the composition of the natural
gas in terms of marketable natural gas, ethane, propane, butane, pentanes and
other natural gas liquids as may be derived by processing of the natural gas
and the net back procedure shall take into consideration the type of natural
gas markets to which the natural gas from the field is being sold, such as
export markets, domestic wholesale markets, markets based on the aggregate
gas price or other natural gas pricing framework as permitted under this Act
and the procedure shall take into consideration conditioning costs, processing
costs and transportation costs within Nigeria as determined by the Authority
from the measurement point to the market, where the sales point is downstream
of the measurement point, and where natural gas liquids are produced in the
field, the total gross value of the liquids shall be taken into account in the
determination of the total gross value of the natural gas for the purpose of the
fiscal gas price.
Royalties in kind or cash
9.—(1) The Commission shall receive the royalty in kind or in cash at its
discretion and the payment shall be subject to notice periods and procedures
as provided for in regulations or guidelines and where royalties are paid in
cash the payments shall be based on the fiscal oil price and fiscal gas price.
(2) The licensee or lessee shall pay royalties to the Commission within
a period that is not more than one month after the end of every month
during which the petroleum is produced or as the Commission may direct,
with respect to—
(a) crude oil and condensates the royalties shall be based on the royalties
based on production under paragraph 10 plus the royalties based on price
under paragraph 11 ; and
(b) natural gas and natural gas liquids the royalties shall be based on the
royalties based on production under paragraph 10.
(3) Royalties shall be paid in US Dollars, however, for production delivered
for local refining, royalties may be wholly or partly paid in Naira at Central
Bank of Nigeria applicable exchange rate for the valuation of crude oil
delivered.
(4) The Commission shall inform the Minister responsible for Finance
of instances where the Commission intends to levy royalties in kind rather
than in cash.
Royalties based on production
10.—(1) For the purpose of paragraph 9, royalties based on production
shall be calculated on a field basis.
(2) The royalty shall be at a rate per centum of the chargeable volume of
the crude oil and condensates produced from the field area in the relevant
month on terrain basis as follows—
(a) onshore areas 15% ;
(b) shallow water (up to 200m water depth) 12.5% ;
(c) deep offshore (greater than 200m water depth) 7.5% ; and
(d) frontier basins 7.5%.
(3) For deep offshore fields with a production during a month of not
more than 50,000 bopd, the royalty rate shall be 5% and the share of the
production above 50,000 bopd shall be at the royalty rate specified in
subparagraph (2).
(4) Royalties for onshore fields and shallow water fields, including marginal
fields, with crude oil and condensate production not more than 10,000 bopd
during a month shall be at a rate per centum of the chargeable volume of the
crude oil and condensates produced from the field area per production day
during a month on tranched basis as follows—
(a) for the first 5,000 bopd 5% ; and
(b) for the next 5,000 bopd, for the share of production over 5000
bopd 7.5% :
Provided that fields with crude oil and condensate production more than 10,000
bopd during a month, the share of the production over 10,000 bopd per month
shall be at the royalty rates specified under subparagraph (2).
(5) With respect to paragraphs (3) and (4), where a single field covers
two or more petroleum mining leases, the royalty shall be determined based
on the total production from the field.
(6) Royalty based on production for natural gas and natural gas liquids
shall be at a rate of 5% of the chargeable volume and royalty rate for natural
gas produced and utilised in-country shall be 2.5% of the chargeable volume.
(7) Where a field is located partially in onshore and in shallow water or
partially in shallow water and deep offshore areas, the weighted average
royalty shall be calculated as per regulations.
Royalty by price
11.—(1) There shall be payable, in addition to the royalty set out in
paragraph 10 for onshore, shallow water and deep offshore a royalty by price
with respect to crude oil and condensates at the rates set out below—
(a) below US $50 per barrel — 0%,
(b) at US $100 per barrel — 5%,
(c) above US $150 per barrel — 10%, and
(d) between US $50 and US $100 per barrel and between US $100 and
US $150 per barrel the royalty by price shall be determined based on linear
interpolation,
as an example, if in 2020 the price is US $75 per barrel, the royalty by price
shall be 2.5%, and the price levels mentioned in sub-subparagraphs (a), (b)
(c) and (d) shall apply to the year 2020, and at the beginning of 2021 and of
each succeeding calendar year these price levels shall be increased by 2%
relative to the values of the previous year.
(2) There shall be no royalty by price for frontier acreages.
(3) Royalty derived from “royalty by price” shall be for the credit of
Nigerian Sovereign Investment Authority.
12. Penalty for non-payment and outstanding payments of royalties and
enforcement of payment where any royalty due and payable under this Act is
not paid within two months after the month in which the royalty is due, then it
qualifies to be a debt which shall attract—
(a) a sum equal to 10% of the amount of the royalty payable which shall
be added to the royalty ;
(b) in the case of foreign currency transactions, the outstanding payments
due shall incur interest at the prevailing LIBOR or any other successor rate
plus 10% point basis ;
(c) in the case of Naira transactions, the outstanding payments due shall
incur interest at the prevailing NIBOR plus 10% point basis ;
(d) N10,000,000 or US Dollar equivalent on the first day the failure to
pay the royalty occurs ; and
(e) N2,000,000 or US Dollar equivalent for each day in which the failure
continues.
Revocation, Seizure and Sistrain
13. Where any fee, rent or royalty due under this Act is unpaid within
three months after the month when it becomes due, whether legally demanded
or not, the Commission may, in addition to any other remedy which may be
available—
(a) initiate revocation of such licence or lease under this Act ; and
(b) enter into any land, property or premises possessed or occupied by
the licensee or lessee in connection with the licence or lease, and—
(i) seize and distrain and sell as landlords may do for rents in arrears,
any petroleum, petroleum products, engines, machinery, tools, implements
or other effects belonging to the licensee or lessee which may be found
in or upon the land, property or premises, and
(ii) out of money arising from the sale of the distress, retain and pay
off the arrears of the fee, rent or royalty and also the costs and expenses
incidental to the distress and sale, rendering the surplus, if any, to the
licensee or lessee.
PART IV—SUPPLEMENTAL
Production Sharing, Profit Sharing and Risk Service Contracts
14.—(1) Where the Commission decides to grant a petroleum prospecting
licence or petroleum mining lease under contractual terms under section 85 of
this Act, the Commission shall prepare the related model contract, which
stipulates the fiscal and other provisions related to fees, rents, royalties for
such contract, to be attached to such licence or lease.
(2) The model contract shall contain as a minimum, the provisions related
to fees, rents, royalties, hydrocarbon tax and companies income tax stipulated
in this Act.
(3) A model licence related to frontier acreages shall not contain
contractual provisions under section 85 of this Act and shall only contain the
minimum provisions related to fees, rents, royalties under paragraph 10 and
companies income tax stipulated in this Act and upon the renewal of any
petroleum mining leases, hydrocarbon tax and royalty based on price under
paragraph 11 based on onshore conditions shall apply.
(4) For new acreage any production sharing contract shall have a cost
limit of 70% based on total oil production, and where applicable condensates
and natural gas liquids derived from associated gas, measured at the
measurement point, and the minimum profit oil scale to Government in a
production sharing contract shall be based on cumulative production per field
as follows—
(a) up to and including 50 million barrels - 5% ;
(b) over 50 million barrels and up to and including 100 million
barrels — 10% ;
(c) over 100 million barrels and up to and including 350 million
barrels — 15% ;
(d) over 250 million barrels up to and including 750 million
barrels — 25% ;
(e) over 750 million barrels ad up to and including 1500 million
barrels — 35% ; or
(f ) over 1500 million barrels — 45%.
(5) There may be production sharing for associated or non-associated
natural gas, to which only the rents, royalties and companies income tax applies
under this Act, capital and operating costs related to making associated natural
gas available at the measurement points can be recovered from cost oil.
(6) The contractors shall be the licensees or lessees and shall thereby be
entitled to the capital allowances under the Fifth Schedule.
(7) The profit oil for crude oil under conversion contracts or for new
acreages shall be determined as the total volume of crude oil, where applicable,
condensates and natural gas liquids derived from associated gas, less the
royalties and less the cost oil as defined in the model contract.
(8) For production sharing purpose, the adjusted profit of a company for
hydrocarbon tax shall be determined under section 263 (1) (b), which means
that royalties and the value of profit oil delivered in kind or cash from all fields
to the Federation Account shall be deductible for the purposes of determining
the adjusted profits and the calculation shall be consolidated as per the two
classes under section 267 and the capital allowances under the Fifth Schedule
shall be applied.
(9) For a production sharing contract subject to a conversion contract
under this Act, the cost limit shall be 60%.
EIGHTH SCHEDULE Section 53 (3)

Creation of the Ministry of Petroleum Incorporated
1. The Corporation sole known as the Ministry of Petroleum Incorporated
(the Corporation) is established and shall continue to be a Corporation sole
under that title.
2. The Corporation may sue and be sued in its said name and shall have
perpetual succession and a corporate seal which may from time to time be
broken, changed, altered and made anew as the Corporation deems fit, and,
until a seal is provided under this section, a stamp bearing the inscription
“Federal Ministry of Petroleum” may be used as the corporate seal.
3. The Corporation may enter into contracts and may acquire, purchase,
take, hold and enjoy movable and immovable property of every description,
and may convey, assign, surrender and yield up, charge, mortgage, demise,
reassign, transfer or otherwise dispose of, or deal with, any movable or
immovable property vested in the Corporation upon such terms as the
Corporation deems fit.
4. (1) All deeds and other instruments requiring the seal of the Corporation
shall be sealed, with the seal of the Corporation in the presence of the
Permanent Secretary and signed by the Permanent Secretary, and such signing
shall be sufficient evidence that the said seal was duly and properly affixed
and that the same is the lawful seal of the Corporation.
(2) Any other document requiring the signature of the Corporation shall
be signed by the Permanent Secretary.
5. The Minister may, by order, vest in any public officer or authority any
property, movable or immovable, for the time being vested in the Corporation
and, upon the coming into operation of any such order, the property to which
such order relates shall, without any conveyance, assignment or transfer, vest
in such officer or authority for the like title, estate or interest and on the like
tenure and for the like purposes as the same was vested or held immediately
before the coming into operation of the order.
I certify, in accordance with section 2 (1) of the Acts Authentication

Act, Cap. A2, Laws of the Federation of Nigeria 2004, that this is a true copy
of the Bill passed by both Houses of the National Assembly.
OJO O. A., fnia, fcia

Clerk to the National Assembly
9th Day of August, 2021
EXPLANATORY MEMORANDUM
This Act is to provide legal, governance, regulatory and fiscal framework
for the Nigerian petroleum industry, and the development of host communities
.
SCHEDULE TO PETROLEUM INDUSTRY BILL, 2021
(1) (2) (3) (4) (5)

Short Title Long Title of the Summary of the Date Passed by Date Passed by
of the Bill Bill Contents of the Bill the Senate the House of
Representatives
Petroleum An Act to provide legal This Bill provides legal

15th July, 2021. 16th July, 2021.
Industry Bill, governance, regulatory and fiscal governance, regulatory and fiscal
2021. framework for the Nigerian framework for the Nigerian
Petroleum Industry, the petroleum industry, and the
development of host communties ; development of host communties.
and for related matters.
I certify that this Bill has been carefully compared by me with the decision reached by the National Assembly and found by me to be
Petroleum Industry Act, 2021
true and correct decision of the Houses and is in accordance with the provisions of the Acts Authentication Act Cap. A2, Laws of the
Federation of Nigeria, 2004.
I ASSENT
OJO O. A., fnia,fcia
Clerk to the National Assembly
9th Day of August, 2021.
LS
2021 No. 6
MUHAMMADU BUHARI, GCFR

President of the Federal Republic of Nigeria
16th Day of August, 2021.
A 371

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Petroleum Industry Act, 2021 2021 No.

Federal Republic of Nigeria

The following is published as supplement to this Gazette :

Act No. Short Title Page

Printed and Published by The Federal Government Printer, Lagos, Nigeria

PART V—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM

201. Grant of licence for distribution of petroleum products.

209. Public service obligations.

216. Consultation for regulations.

CHAPTER 4—PETROLEUM INDUSTRY FISCAL FRAMEWORK

PART III—ASCERTAINMENT OF CHARGEABLE TAX

302. General requirement of companies engaged in petroleum operations to

[16th Day of August, 2021] Commence-

PART III—THE COMMISSION

6. The objectives of the Commission shall be to— Objectives

Suspension 14. A member of the Board of the Commission may be suspended or

18.—(1) The Commission Chief Executive is the accounting officer Commission

(5) Employment by the Commission shall be subject to the provisions of Act No 4,

PART IV—THE AUTHORITY

(b) has a financial interest in any business connected, directly or indirectly

(c) is engaged in any activity for remuneration or otherwise connected

(2) Notwithstanding the provisions of this section, the Authority may

(b) no such grant is accepted from any person or organisation regulated

PART V—THE NIGERIAN NATIONAL PETROLEUM COMPANY LIMITED

(i) creditor of NNPC, or

(a) promote the exploration and exploitation of petroleum resources in

PART II—ADMINISTRATION OF UPSTREAM PETROLEUM

(a) petroleum exploration licence, which may be granted to qualified applicants

(6) Notwithstanding the provisions of this section, a petroleum prospecting

(h) it includes an environmental management plan in a form that complies

80.—(1) A licensee or lessee shall promptly notify the Commission of Unitisation.

(2) In determining the amount of the financial contribution, the

PART III—GENERAL ADMINISTRATION OF MIDSTREAM

(a) the licenced or permitted activity is no longer required ;

PART IV—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM

(b) a licensee operating on its own account, who is an affiliate of a

(b) supplying marketable natural gas to a wholesale customer with whom

Wholesale 158.—(1) The Authority shall, following consultations with interested

PART V—ADMINISTRATION OF MIDSTREAM AND DOWNSTREAM

PART VI—OTHER MATTERS RELATED TO MIDSTREAM

PART VII—COMMON PROVISIONS FOR UPSTREAM, MIDSTREAM

CHAPTER 3—HOST COMMUNITIES DEVELOPMENT

Objectives 239.—(1) The constitution of the host communities development trust

CHAPTER 4 —PETROLEUM INDUSTRY FISCAL FRAMEWORK

PART II—HYDROCARBON TAX

(3) The chargeable profits and allowances shall be determined

PART III—ASCERTAINMENT OF CHARGEABLE TAX

PART IV—ASCERTAINMENT OF CHARGEABLE PROFITS

272.—(1) A company engaged in upstream petroleum operations across Consolidation

PART V—PERSONS CHARGEABLE

PART VI—APPLICABILITY, ACCOUNTS AND PARTICULARS

289. (1) Where— Assessment

PART VIII—COLLECTION, RECOVERY AND REPAYMENT OF TAX

PART IX—OFFENCES AND PENALTIES

(a) any expenditure for the purchase of information relating to the

PART XI—GENERAL PROVISIONS

CHAPTER 5—MISCELLANEOUS PROVISIONS

“rent” means the annual charge made in respect of a licence or lease

FIRST SCHEDULE Section 3 (3)