Mr Uche Val Obi SAN, Ngozi Chinwa Ole, Lilian Adat and Kelechi Njaka1

1. Introduction

The absolute ownership of all petroleum operations in Nigeria reside with the federal government.2 To this end, applicants seeking to engage in petroleum operations in Nigeria can only do the same upon issuance of a petroleum license by the Minister of Petroleum. The hallmark of issuing petroleum licenses, for upstream, midstream and downstream petroleum activities to companies is to ensure effective and efficient harnessing of petroleum resources, sustainable development of petroleum resources and fostering business environment that would guarantee conducive petroleum operations in Nigeria.3

The petroleum licenses granted to the applicants under the Petroleum Industrial Act (PIA) 2021 are not exclusive as they are amenable to revocation.4 This simply means that the federal government reserves the right to revoke petroleum licenses from time to time for such good reasons as stipulated under the Act to ensure transparency in the exploration, mining, and distribution of petroleum resources in Nigeria.5 The basis of the revocation of these licenses is to ensure strict compliance with the provisions of the PIA, Petroleum Regulations, and the terms upon which the licenses are issued. These terms include environment preservation and protection from hazards . Failure to comply with the provisions of the Act while revoking the license would render such revocation subject to judicial review.6

2. What is A Petroleum License

The term "License" in common parlance simply entails a permission from an authority to a given person or body to do a particular thing. A license has also been defined as "the permission by a competent authority that an act which without such permission would be illegal, a trespass or a tort."7 Furthermore, the court in Alhaji Uban Kari v Alhaji Isa Abba Ganaram,8 reiterates that a license is a privilege to go on premises for a certain purpose but does not operate to confer on or vest in the licensee any title, interest, or estate in such property. The interpretation section of the PIA defines a petroleum license as a license issued by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC or the Commission) or Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA or the Authority) in respect of any applicable upstream, midstream or downstream petroleum operations.9

Under the Act, the license is classified into three categories, namely;

(a) Petroleum Exploration License (PEL): This license authorizes the licensee to engage effectively in exploration activities on a non–exclusive basis within the area covered by the license.10 It is granted by NUPRC period for three years.11

(b) Petroleum Prospecting License (PPL): This kind of license is granted to applicants by the Minister to ; (i) carrying out drill exploration, appraise petroleum wells and engage in production on an exclusive basis. (ii) to engage in petroleum exploration activities that have to deal with a non-exclusive basis.12 This license is granted by Minister upon recommendation by the Commission.13

(c) Petroleum Mining Lease (PML): This leasehold granted to applicants is for upstream petroleum operations of mining, among others.

It should be noted that these petroleum licenses are only granted to companies duly incorporated in Nigeria.14 It is granted to applicants after a highly competitive process and upon recommendation by the NUPRC.15

3. Revocation of Petroleum License under the Petroleum Industry Act 2021

The grounds for revocation of a PPL and PML in Nigeria are specifically laid down in section 96 of the PIA. The PIA empowers the Minister of Petroleum to revoke PPL or PML upon the recommendation of the Commission. Thus, licenses/leases can only be revoked when such recommendation is made on those grounds clearly stipulated in section 96(1) of the Act. These grounds are as follows:

  1. Non-Compliance with International Best Practices: Every holder of a petroleum license is obligated to observe international petroleum operations' best practices in the course of its petroleum operation. Failure to comply with these practices and the provisions of other laws in carrying out petroleum operations is a ground for the revocation of the license.16
  2. Interruption with Petroleum Production: A holder of a petroleum license/lease is duty bound not to interrupt petroleum production after the license has been given for a period of time exceeding 180 consecutive days without reasonable justification. Any unjust interruption of production by the licensee within the prescribed period, shall be a ground for the revocation of the license/lease.17
  3. Non-Compliance with the Terms of the License/Lease: PPL and PML are granted upon certain terms and conditions. Failure of the holder to adhere strictly to the prescribed terms and conditions in the course of carrying out operations constitutes a ground for revocation of the license.18
  4. Payment of Rent, Royalties, Taxes and other Accruable Payments: Where a holder of a PPL or PML fails to pay the specified rent, taxes, and royalties as at when due, it constitutes a ground for revocation of such license.19
  5. Giving Reports or Information on Petroleum Operations: The Act requires a holder of petroleum license to periodically furnish information on how petroleum operations are carried out. Thus, failure to furnish report or data out after being advised by the commission in writing of such failure, is a ground for revocation of the license.20
  6. Assignment of interest in petroleum license: A petroleum license cannot be assigned or transferred without the prior written consent of the which shall be giving, upon recommendation by the Commission.21 The implication is that interest in a petroleum license can only be transferred or assigned upon an application to the Commission22 which shall upon finding the application expedient, recommend to the minister to give consent to the licensee or lessee. Where the interest in the license is novated or assigned without prior consent of the minister, such default shall be a ground for revocation.23 Although, where a PEL to be assigned, it is only the written consent of the Commission that is required.24
  7. False Information: Where the information supplied by the applicant upon which petroleum license was given is found to be fraudulent, such shall be a ground to revoke the license.25
  8. Insolvency: where the holder of a petroleum license is declared insolvent by a competent court, such declaration of insolvency on the licensee/lessee shall be a ground for the revocation of the license.26
  9. Non-Compliance with Environmental Obligation: Environmental sanity is pivotal to a healthy living; the environmental laws ensure that best practices are put in place to prevent environmental degradation caused by oil spillage and gas flaring. So, the holder of petroleum license owes a duty to uphold environmental obligations in the course of carrying out petroleum operations and failure to so do, shall be a ground for revocation of petroleum license.27
  10. Arbitral Award or Judgment of the Court: License holders are obligated to comply with arbitral award or judgment of the court in the course of resolving the dispute which arose in the course of petroleum operations. Failure to comply with such award or judgement, is a ground for revocation of the license.28 Finally, failure to do the following, also constitutes grounds for revocation of licenses under the Act: non-submission of field development plan and work commitment; noncompliance with domestic crude oil supply or domestic gas delivery obligations; and noncompliance with host community obligations. Revocation of licenses under the Act is provided for, in order to ensure transparency, sustainability and environmental protection in carrying out petroleum operations in Nigeria.

4. Procedures for Revocation Petroleum Licenses under the PIA 2021.

Before a license can be revoked by the Minister on any of the grounds laid down in section 96, the laid down procedures of revocation under the Act must be complied with by the revoking authority. Where the Minister fails to comply with the stipulated procedures shall give rise to a ground for judicial review of such wrongful revocation. The following are the procedures for revoking a petroleum license which must be duly carried out:

  1. The NUPRC must first give default notice to the licensee/lessee whose license is to be revoked, stating the default of the licensee or lessee. Such default notice shall be sent to the last known address of the licensee or published in the Commission's official gazette.29
  2. After the default notice has been given to the licensee/lessee, sufficient period of time will be given to the licensee/lessee to remedy the default. The license holder has a period of not less than sixty (60) days to remedy their default.30
  3. In the event the 60 days' timeframe has elapsed and the default remains unremedied, the Commission shall recommend that the petroleum license of the default holder be revoked.31
  4. After the revocation, it shall be published in the gazette of the federal government and the Commission has a duty to immediately reflect such revocation in its registers.32
  5. Within thirty (30) days of the revocation, in the case of a PML, the Minister upon the recommendation of the commission shall appoint an interim operator to be in charge of mining. The hallmark of this, is to ensure that the revocation of the PML does not interrupt the production of petroleum.33

It becomes imperative to state here that where PPL or PML is jointly owned and one of the owners defaults, it is only the interest of the defaulter that would be affected by the revocation.34

5. Is the Petroleum Industry Act 2021 a Game Changer?

The elaborate provisions of the Petroleum Industry Act 2021 have immensely impacted in the administration, management and control of petroleum resources in the country. It outlined in clear terms the grounds upon which petroleum license can be revoked and it provided step by step procedures to apply in revoking same. This is to prevent unconscionable revocation of petroleum license by the Minister.35 The vital objective of the Act is to ensure that there is transparency, accountability, good governance and conducive environment in carrying out petroleum operations in Nigeria. In order to guarantee transparency and fairness in the revocation exercise, the Act in section 97(1) provides a remediation period of sixty (60) days or more be given to the defaulting holder to enable him remedy the default upon which revocation of the license would have been made. This provision of the Act shows that the intent of the law makers is not to promote arbitrary revocation of licenses, but to ensure that international petroleum best practices are put in place by the licensees/lessees in carrying out petroleum activities in Nigeria. The Act also recognises the power of the court to checkmate the actions of the commission and minister. Therefore, the Act in section 96(1)(l) recognizes non-adherence to arbitral award or judgment of the court as a ground for revocation of petroleum license.

With these elaborate provisions of the Act as it concerns revocation of petroleum license, it is safe to conclude that the Act is a game changer if and only if these provisions are fully implemented.

6. Conclusion

The Petroleum Industry Act 2021 which vest ownership, control and management of petroleum resources empowered the Minister of petroleum or the NUPRC to issue licenses, depending on the kind of license the applicant is seeking. The PIA made extensive provisions on the grounds upon which a license can be revoked. The essence of this, is to ensure Nigeria's petroleum operations align and are in tandem with international best practices in order to guarantee effectiveness and efficiency in the industry and ensure compliance with environmental standards. In order to ensure fairness in the process, the Act laid down the due procedure to be followed and satisfied before a petroleum license can be successfully revoked. The procedure for revocation of licenses laid down in the Act serves as a check on the Minister and the Commission to forestall arbitrariness in the revocation of licenses of operators. Furthermore, the grounds and procedure for revocation being clearly spelt out in the Act if strictly complied with, will improve confidence and trust in the industry.

Footnotes

1. Mr Uche Val Obi SAN, Ngozi Chinwa Ole, Lilian Adat and Kelechi Njaka are the Managing Partner, Managing Associate (Consultant), Executive Associate and Associate of Alliance Law Firm respectively.

2. Constitution for the Federal Republic of Nigeria (CFRN) 1999 (as amended) s. 44(3); Petroleum Industry Act (PIA) 2021, s 1.

3. PIA 2021, s 2.

4. Ibid, s 71(2).

5. Igbuya v Eregare (1990) 3 NWLR (Pt 139) 425, 431 Para. F – G.

6. Korea National Oil Corporation v OPS (Nig) Ltd (2018) 2 NWLR (Pt 1604) 394.

7. O. Babalola, Babalola's Law Dictionary of Judicially Defined Words and Phrases. 2nd Ed. (Noetico Repertem Inc, 2019) 234.

8. (1997) 2 NWLR (Pt 488) 380.

9. PIA 2021, s. 318.

10. PIA 2021, s 70(1)(a).

11. PIA 2021, s 71.

12. PIA 2021, s 70(1)(b).

13. PIA 2021, s 72.

14. PIA 2021, s 70(2).

15. PIA 2021, s 73.

16. PIA 2021, s 96(1)(a).

17. Ibid, s 96(1)(b).

18. PIA 2021, s 96(1)(c).

19. PIA 2021, s 96(1)(d).

20. PIA 2021, s 96(1)(e).

21. PIA 2021, s 95(1) & (2).

22. PIA 2021, s 95.

23. PIA 2021, s 96(1)(f).

24. PIA 2021, s 95(15).

25. PIA 2021, s 96(1)(g).

26. Ibid, s 96(1)(h).

27. PIA 2021, s 96(1)(i).

28. Ibid, s 96(1)(j)

29. Ibid, s 96(1)(j)

30. PIA 2021, s 97(1).

31. Ibid, s 97(3).

32. Ibid, s 97(6).

33. PIA 2021, s 98(1).

34. PIA 2021, s 99.

35. PIA 2021, ss. 96, 98 & 99.

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