Aptitud Productiva del Suelo

128. The promulgation of the Petroleum Act of 1969 marked a watershed in the history of crude-oil legislation in Nigeria. Its significance is that, among other things, it stipulated for the first time that the entire ownership and control of all petroleum in the country is vested in the Federal Government of Nigeria. It also revised all the terms and conditions under which pre- 1969 concessions were granted and indeed repealed in toto the Minerals Oils Ordinance of (1914), as amended. The Act has been amended by the following decrees:

i) Petroleum (Amendment) Decree (No. 16) 1973;

ii) Petroleum (Amendment) Decree (No. 49) 1976;

iii) Petroleum (Amendment) Decree (No. 37) 1977.

129. One of the fundamental changes introduced by the 1969 Petroleum Act is that it prescribes three types of grant to regulate petroleum operations in the country: (i) the oil exploration licence (OEL); (ii) the oil prospecting licence (OPL); and (iii) the oil mining lease (OML). These collectively form the legal framework for petroleum development in Nigeria, and the Petroleum Act Cap 350 and its subsidiary legislation, the Petroleum (Drilling and Production) Regulations of 1969, govern the industry’s operations. Other local legislation, including the provisions of the 1979 Constitution, as amended, have transformed the petroleum industry in Nigeria into a highly regulated one, propelling the country into the ranks of the world’s greatest producers of crude. Companies, foreign and local, wishing to participate in the exploration or production of petroleum and/or natural gas require a formal written authorization in the form of an OEL, OPL or OML.

B.1 The oil exploration licence (OEL)

130. An oil exploration licence confers on the licensee a non-exclusive right to carry out aerial and surface geological and geophysical surveys, excluding drilling below 300 feet or 91.44 metres. The OEL areas of operations must not exceed 12,950 square kilometers and, as the

right granted is non-exclusive, another OEL can be granted for the same area. The duration of the OEL is one year, with possible extension for one further year.

B.2 The oil prospecting licence (OPL)

131. A licensee under an OPL has an exclusive right (a) to search for, (b) to drill, (c) to extract samples, (d) to export crude oil, and (e) to refine in Nigeria. The exclusivity of the license ensures that no other OPL can be granted for the same area as is covered by an existing OPL. The area covered must not exceed 2,590 square kilometres, and the holder may drill to any depth. The duration of an OPL is three years but it may be extended for another two years, giving it a possible total life of five years.

B.3 The oil mining lease (OML)

132. An OML is in the nature of a mineral lease (which does not involve an estate in land) but which permits the lessee the use of the land to explore and dispose of any petroleum discovered within the leased area for a definite time. An OML confers all the rights of an OPL in addition to the exclusive right within the leased area to: (i) Conduct exploration and prospecting operations;

(ii) To win, get, work, store, carry away, transport, export or otherwise treat petroleum discovered in or under the leased area.. OMLs are granted in Nigeria to cover two separate zones: (i) land and territorial waters; and (ii) the continental shelf, which may cover the submarine areas of the Exclusive Economic Zone (EEZ). An OML may be granted only to the holder of an OPL who has:

(i) Satisfied all the conditions imposed on the license or otherwise imposed on him by the Act;

(ii) Discovered oil in commercial quantities and is capable of producing at least 10,000 barrels of crude oil per day from the licensed area; but

(iii) The term of OML may not exceed 20 years, but may be renewed. The area covered by the grant must not exceed 1,295 square kilometres;

(iv) Ten years after the grant of an OML, one half of the area of the lease must be

relinquished, but this does not apply where a lease has been renewed. The shape and size of the areas to be retained and relinquished are to be approved by the Minister.

Several important issues pertaining to the operational rights and privileges of holders of these licenses are described below.

B.4 Assignments

133. Assignments are regulated as follows: i) The holder of an OPL or an OML may not

assign his licence or lease or any right, power or interest therein or thereunder without the prior consent of the Minister; ii) The Minister may not give his consent to an

assignment unless he is satisfied that the proposed assignee is of good reputation, or is a member of a group of companies of good reputation, or is owned by a company or companies of good reputation.

B.5 Terminations

134. The holder of an OPL or OML may at any time terminate it by giving the Minister not less than three months’ notice in writing to that effect. He is entitled to surrender the license or lease in respect of any particular part of the licensed or leased area.

B.6 Revocations

135. The Minister may revoke any OPL or OML if its holder becomes controlled directly or indirectly by a citizen or subject of or a company incorporated in any country which is:

a) A country other than the holder’s country of origin; and

b) A country whose laws do not permit citizens of Nigeria or Nigerian companies to acquire, hold and operate petroleum concessions on conditions which in the opinion of the Minister are reasonably comparable with other conditions under which concessions are granted to subjects of that country; c) The Minister may revoke any OPL or OML

if in his opinion the holder has failed to comply with any provisions of the Act or any regulation or direction given thereunder or is not fulfilling his obligations under the special conditions of his license or lease; or

d) Is not conducting operations continuously and in a vigorous business-like manner and in accordance with good oil practice or is not paying his rent or royalties;

e) Fails to furnish reports on his operations as the Director of Petroleum Resources may lawfully require.

136. Lastly, in addition, and more importantly in the light of the later development of the relations between oil operators and local communities, the Act states that the holder of an OPL, OEL or OML, in addition to any liability for compensation to which he may bear under any other provision of the Act, shall also be liable to pay fair and adequate compensation for the disturbance of surface or other rights of any person who owns or is in lawful occupation of licensed or leased lands. The duration of an OML is 20 years and the area covered by the grant must not exceed 1,295 square kilometres. It is clear from a comparison of the three types of grants, in terms of their nature, rights conferred, duration, royalties, area of coverage and assignment, that it is the OML that confers the greatest benefits in petroleum exploration and production. The OEL and OPL are but the means whereby the end - an OML - is attained.

B.7 Interpretation

137. Section 14 of the 1969 Petroleum Act gives the following definitions:

- “Barrel” means a barrel of forty-two United States gallons; “Minister” means the Federal Minister for Mines and Power.

- “Continental shelf” means the seabed and subsoil of those submarine areas adjacent to the coast of Nigeria, the surface of which lies at a depth no greater than two hundred metres (or where its natural resources are capable of exploration at any depth) below the surface of the sea, excluding so much of those areas as lies below the territorial waters of Nigeria. This definition has occasioned an intense legal and political dispute between the Federal Government and the five littoral states relating to the sharing of revenue derived from oil production off Nigeria’s shores. (This is discussed in the next chapter (Dispute-

resolution in the Nigerian petroleum industry).

- “Crude oil” means mineral oil in its natural state before it has been refined or treated (excluding water and other foreign substances).

- “Explore” means, in relation to petroleum, to make a preliminary search by surface geological and geophysical methods, including aerial surveys but excluding drilling below three hundred feet.

- “Natural gas” means gas obtained from boreholes and wells.