The petroleum industry is an international business concern that is usually governed by certain standards to regulate its various operations. The Federal Government of Nigeria recognizes this fact and, through appropriate agencies, has passed over 100 principal and subsidiary pieces of legislation to deal with all aspects of Nigerian oil and gas industry.
They further explain the industry’s transactions scope of operation, responsibility to the government, consumers and Nigerians in particular and the international community at large. Private enterprise laws confer powers on individuals and corporate bodies to operate business as prescribed by the authorities and in line with the laws guiding such enterprises for mutual benefit.
The Nigerian oil and gas Laws are a system of standards and rules on corporate conduct that impose well defined obligations, penalties and corresponding rights regarding the continuity of such businesses in the country. Such legislation affecting the oil and gas industry in Nigeria are not static; they are either amended or promulgated as the government deem fit in the context of the complex political, social ethnic and religious environment development survival and independence of the country.
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Successive governments have cause to promulgate appropriate laws to take care of their changing priorities, goals and aspiration as dictated by both local and international politics.
The diverse nature of the oil and gas industry operations necessitates appropriate enactment to regulate every activity relating to the hydrocarbon oil reserves and its derivatives.
The oil and gas industry in Nigeria is undoubtedly going through serious crisis, due partly to a sharp reaction by the oil producing communities, which suffer grievous hardships resulting from the operations of the laws governing the sector. The various attempts to suppress these people through the gun have failed woefully. The only option clearly available to the key players in the industry (the government and the oil producing/serving companies) is to adopt fair and equitable laws as a framework for the exploitation of the oil and gas resources in Nigeria.
However, this work is organized in five chapters with Chapter one, providing the approach and theoretical framework of the study.
The chapter two, surveys the meaning of petroleum, participation of state/joint ventures agreements, production sharing contracts/risk service contract and ownership of oil by investigating the Britain, Venezuela and some other OPEC countries, and pre and post in-dependence constitutional and statutory arrangements on ownership of petroleum in Nigeria. Chapter three provides a brief analysis of the major provisions of some the existing legal framework for the regulation of Nigerian oil and gas industry.
Chapter five, deals with the observations, recommendations, and lastly the conclusion.
1.1 Background of the Study
The diverse nature of the oil and gas industry operations necessitates appropriate enactment to regulate every activity relating to hydrocarbon oil reserves and its derivations.
The oil and gas industry in Nigeria is undoubtedly going through serious crisis, due partly to a sharp reaction by the oil producing communities, which suffer grievous hardships resulting from the operations of the laws governing the sector. The various attempts to suppress these people through the gun have failed woefully.
The only option clearly available to the key players in the industry (the government and the oil producing/service companies) is to adopt fair and equitable laws as framework for the exploitation of the oil and gas resources in Nigeria.
An examination of Nigerian oil and gas statutes would reveal that the major constituents of the laws that touch upon the exploration and production of petroleum date back to the Mineral Oil Act of 19143 which was promulgated to regulate the right to search for, win, and mine mineral oils4. This means that the exploration of petroleum in Nigeria is regulated by laws.
The earliest attempt at legislating on oil in Nigeria was the Oil Mineral Ordinance of 1990, which after the amalgamation of the north and south became operational in the entire country. The 1990 Ordinance was followed by Mineral Oil Regulation Ordinance of 1907. These legislations laid down the basic framework for other subsequent legislations governing oil contractual relationship between the Nigeria government and multinational oil companies in Nigeria.
Currently, the Nigeria oil and gas industry is primarily regulated by the Petroleum Act and the Petroleum Drilling and Production Regulations5. In addition there are other laws that are directly or indirectly relevant to the oil industry in Nigeria. This work mostly is based on the examination of laws under the oil and gas industry in Nigeria. As stated above, there are enormous in that each or some of these laws were enacted to cover a particular area or field under petroleum industry.
However, the first part is to fill the gap, the previous researchers did not cover on the issue of ownership and control of natural resources and the laws therein.
Secondly, it will be clear to everyone who will find time to go through this work on the need to enact new laws, in the area of exploration, exploitation and production in our petroleum industry. This is because the present standard is too poor to compare its OPEC member countries.
There is also task to put up harsh measures on the area of environmental pollution in oil producing communities, as resulting from the reckless activities of oil production companies.
There is also an outstanding task, to examine seriously some of the present legislations under fiscal system, which has affected the income the federal government is generating in its petroleum industry like other countries in OPEC.
1.2 Statement of the Problems
Since the late 1980s, the Niger Delta region of Nigeria has become the venue for mobilization and protests by littoral states on the one hand and oil bearing communities and civil society groups6 on the other hand.
They are protesting not only against ownership and control of oil and gas7 and the distribution of its benefits, but also challenging policies and practices that disadvantage the region, destroy its environment8 and impoverish its people.
The purposes of this study are four fold. Our first task is to attempt an overview of the issue of ownership of oil and gas in Nigeria. The second task is to investigate if the principles of law and contemporary legislation/enactment on oil and gas industry in Nigeria have been complied with to promote the exploitation, exploration and production in the industry.
Out third task is to examine whether the principles of law and contemporary development in our municipal environmental Law have been applied to protect the environment and safeguard the environmental rights of individuals, communities and the society in the Nigeria’s Niger- Delta.
In spite of its contribution to national wealth, the Niger-Delta is the poorest in terms of economic and infrastructural development9. This has given rise to the emergence of NGOs and civil society groups demanding equity in the distribution of oil wealth.10
Accordingly, our final task is to review the aims and objectives of petroleum industry bill (PIB), and its fiscal system under the petroleum industry in Nigeria.11
1.3 Research Questions
In relation to the first task, the question to ask is as between the Federal government, littoral states and oil bearing communities, who is vested with the ownership of oil and gas in Nigeria? This inquiry has become necessary following agitations by littoral states/oil bearing communities that they and not the Federal Government are vested with ownership of oil and gas located onshore and offshore in the territorial sea and continental shelf on Nigeria.12
For the second task, the question to ask is whether enacted legislations for the regulation of activities in Nigeria oil and gas industry are of standard to promote exploitation, exploration and production and also mitigate the long lasting crisis in petroleum industry?
Another related question is how have the various problems associated with petroleum development been addressed in the Niger- Delta? Our aim is to see how effective have the laws been in addressing environmental issues and protection of the interest of oil and gas host communities.
The question to ask for the third task is, if the principles of law and existing legislations are of quality to protect the environmental needs within the oil production communities?13
Finally, in relation to the fourth task, the question to ask is, is the PIB and new fiscal system14 as proposed by Petroleum Industry Bill (PIB),one of the harshest in the world or that it will halt investment as alleged by the international oil companies in Nigeria. And also if the powers of minister of petroleum resources, as proposed by the Petroleum Industry Bill (PIB), is of excessive as seriously argued by the legislators15.
1.4 Objectives of the Study
Studies conducted on petroleum development in Nigeria have concentrated on the pros and cons of ownership of petroleum resources. There are also many studies on sustainable development of natural resources in the Niger- Delta.
However, very few writers have gone beyond these pros and cons to examine the legal framework for the regulation of oil and gas industry. More also, few work has been written on the place of the new petroleum industry Bill, especially on the institutional regulatory framework. This is what this study intends to accomplish.
Etiferentse,16 Frynas17, Ahmad Khan,18 Kachukwu,19 Akpan,20 and Omoregbe21 have all made very brilliant and excellent contributions. Kachukwu, for instance, he has given a broad overview of the relevant legal issue in the Nigeria’s oil and gas sector and various legislations that relate to them.
Omoyola22 and Worika23 have both given very insightful, literate and succinct analysis of environmental Laws and policy of petroleum development and compensation.
One very significant contribution to the ongoing bathymetrical mappings of the littoral states of Nigeria is the work of Mobolaji, Aluko24, on the bathymetric data of the 200 meters Isobaths of the littorals tastes. It shows the main sites of onshore production wells and offshore blocks in Nigeria’s deep and ultra deep waters.
The brilliant contributions of M. Ng’s Ang’a, S. Nichols and Monahan I.V.,25 on the deliration of seaward limits of a coastal Marine protected area are very useful as guide in the identification of resources and the legal boundaries for hydrocarbons and natural gas.
The present work is to do a proper examination on the legal framework under oil and gas industry in Nigeria, inclusive of the petroleum industry bill, 2012 and co-ordinate all these strategies within an overall orientation to provide a way forward to the lingering crisis in the Nigerian Petroleum Industry.
1.5 Significance of the Study
Concerns about environmental consequences of petroleum development in the Niger Delta has brought to the take, the necessity of examining the relationship between exploration and exploitation of the country’s natural resources and the management of the environment for economic development.
There is also a rising need/demands to put to standard the fiscal system of the Nigeria oil and gas industry. The present work is significant not only because it reviews environmental, fiscal system policies and programmes put in place to promote petroleum development, but because it goes ahead to design/discuss legal and institutional framework, which if put in place, will reduce the tensions in the region to the barest minimum.
1.6 Scope of the Study
The petroleum industry is an international business concern that is usually governed by certain standards to regulate its various operations. The federal government of Nigeria recognizes this fact and, through appropriate agencies, has passed over 100 principal and subsidiary pieces of legislation to deal with all aspects of the Nigerian oil and gas industry.
Mostly, our study would concentrate only on Nigeria petroleum industry. But it is an undiluted truth as asserted above or earlier that petroleum industry is an international business, therefore we must of course while discussing some concepts which has international notification, make reference to other legal and institutional framework outside Nigeria. Such must include the provisions/resolution of these international bodies/institutions United Nations (UN) and Organization of Petroleum Exporting Countries (OPEC).
Certainly, there will be a comparison of the petroleum industry bill of oil and gas industry in Nigeria with room to examine Laws of that country as related to the petroleum industry.
1.7 Limitations of the Study
Legislation affecting the oil and gas industry in Nigeria are not static; they are either amended or promulgated as the government deems fit in the context of the complex political, socio-ethnic and religious environment and the overall techno-economic development, survival and independence of the country.
Successive governments have cause to promulgate appropriate laws to take care of their changing priorities, goals and aspirations as dictated by both local and international politics.
It is quite obvious that all these laws and regulations are not found in single/particular petroleum (consolidated) Act, our school library and many others libraries has not been up to date with the laws relating to petroleum industry in Nigeria, it really limited my research for this work.
Secondly, because of the nature of work and my financial capacity, it really affected me a lot to make research for the study of this work.
Thirdly, time factor also limited my research for this works, because at first, we were given from 29th April, topic approval date to 31st May as last date for submission of the complete work, although it was later not followed, but still no clear date for submission was given.
1.8 Research Methodology
The approach to be adopted in this study is historical, comparative and analytical. Nigeria’s long history of oil and gas operations coupled with the marginalization of oil producing communities makes the historical approach a preferred option.
The comparative approach is a derivative of the need to draw from the experience in other need to draw from the experience in other jurisdictions such as Britain, USA and other OPEC member countries.
The account is also analytical in its critical examination as well as appraisal of the emerging issues and trends. It also adopts a multidisciplinary approach which sees to draw from the principles and rules of international environmental law, petroleum and law of the sea.
It is equally prescriptive as it recommends equity in the distribution of oil wealth through dividend transfers as one panacea of solving the Niger Delta crisis.
The debate on the seaward, limit of littoral states26 and resource control in Nigeria has gone on for a long time and is unlikely to end any time soon. Many papers, articles and policy briefs have been written on this subject, both supporting and rejecting the idea of extending littoral states seaward reach to the continental shelf. Many expected the 200 meters isobaths granted littoral states to finally address the issue. This was not to be.
To date, this debate has not been conducted in a constructive manner. The venues range from public speeches, newspapers, articles and conference proceedings to articles in learned Journals.
These articles and texts are found in diverse sources which make it difficult for scholars in this field, students, practitioners or policy makers to study all proposals together.
So far, there has been no comprehensive text on the tripartite relationship between the laws of tax in petroleum, environmental law and oil and gas operations which the interested researcher or decision maker could turn to.
This work is intended to fill that gap. The work draws on the findings of the current debate and elaborates the issues further in the light of the emerging trends.
Definition of Terms, Concepts and Historical Background
In this chapter (literature review) we critical review most of the terms which most of the nature of our work one must in one point or the other come across, and for a knowledge/understanding we decided to create the literature of it. Some of these essential terms include the Meaning of Petroleum, Participation/Joint venture Agreements, Production sharing Contracts and Risk Service Contract, Farm out/ Marginal field. In brief, according to section 15(1) of the Principal Act (Petroleum Act)1, it defined it as a “mineral oil, in its natural state before refined or treated, excluding water and other foreign substances.
More also, it is an undiluted truth that one of most lingering issues in Niger-Delta and Nigeria petroleum industry as a whole is the issue of ownership and control of natural resources2.
However, there are various legal authorities both national and international on who rest the total ownership of state natural resources3. This work also review, the Nigeria position on natural resources, theories/methods ownership of natural resource, history and scope of state ownership of natural resources in nigeria4, and also the problems of ownership and control of natural resources in Nigeria5, which was not treated without bringing out solutions to the problems, one from the United Nations and finally from the Organization of Petroleum Exporting Countries (OPEC).6 Serious attention was given on the concepts of oil and gas7, more like the previous writers on this area.
2.1 Meaning of Petroleum
Petroleum is commonly a compound composed of hydrogen and carbon. It is commonly called a hydrocarbon. It can exist in gaseous, liquid or solid form. If found in solid form, it is either coal, shale, tar sands or bitumen. In its liquid form, it is referred to as, crude oil. Crude oil is hydrocarbon which is mainly referred to by many as petroleum, but the name petroleum actually covers other types of hydrocarbons8. The word “petroleum” derives from the Latin word, petra (rock, stone),and Ollium (oil). Petroleum, in literal sense, therefore, is rock oil or stone oil. It has some qualities of “Oxygen, Nitrogen, and sulphour as impurities. Petroleum is found in sedimentary soft porous rock under the ground which could be deep oceans, seas or under sandy or mangrove environment or vegetation. The S.15(1)9, defined it as “mineral oil” in its natural state before it is refined or treated, excluding water and other foreign substances”.
2.2 Participation and Joint Venture Agreements
Participation agreements as the name denotes refers to the practice of a country participating in the development of its hydrocarbon resources with the foreign oil companies. As new form of petroleum development arrangement, it was perceived as response to the need felt by Nigeria and other oil exporting countries in the late 60s and 70s to share in ownership of and control over operation in their oil industries. Given that complete control exercised by the early concessionaire was based on their ownership of petroleum under traditional concessions. State participation was thus, perceived by these countries as corollary to state ownership of petroleum deposits.
The first case of state participation in the international petroleum operation dates back to 1914, in that year. The British Government acquired a controlling share interest (about 56 percent) in Anglo-Persian oil company (now British Petroleum Company). Similarly post World War II oil agreements in the Middle East provided for government equity participation in the forms of either joint venture or optional participation conditioned on discovery of commercial petroleum deposits. The adoption by OPEC of resolution 90 at its conference in 168 calling on member countries to actively participation in existing oil concession in their states added scourers to the member states to comply with such resolution. Since then, state participation as a policy aimed at sharing ownership and control over exploitation of petroleum resource has been adopted by many counties.10
Nigeria joined the membership of OPEC in July 1971, that same year, the Nigeria National Oil Corporation (NNOC) the forerunner of the present day Nigeria National Petroleum Corporation (NNPC)11 was established. In brief, it can be stress that the desiderata of the government for establishing the (NNOC), was for it to engage in industry. This is premised on the argument that the government could receive, in addition to tax and royalties, dividends proportionate to its interest in the venture. Thus following its membership of OPEC and the formation of the NNOC in the same year, thing began to change Nigeria, along with other OPEC member countries, at the same time. Sought to actively participate and eventually exercise control over their oil industries.12
The first participation arrangement effected by Nigeria was with SAFERAP (now ELF) in 197 Government acquired 35 percent participation interest in ELF’s operation in Nigeria after Civil War. In October of the same year its option to acquire 331/3% interest in AFIP’s operation was implemented. The decision in 1971 to take active part in the oil industry was prompted by two OPEC Resolution; the first Resolution was passed in June 1968, which embodied a policy statement calling for renegotiating of concession arrangement between members state and MNOCS and the second Resolution in 1971 re-emphasized that members should takes steps to acquire 20 percent participation interest by 1981. The first OPEC Resolution, which urged participation by government state in the oil production operations in old concession clearly state as follows:
Where provision for Government participation under any of the concessions-holding company under any of the present petroleum contracts has not been made, the Government may acquire a reasonable participation (not equity shares) on the ground of the principle of changing circumstances13.
In keeping with OPEC resolution participation, government increased its participation interest from 51 to 55 and then to 60 percent in 1972, 1974 and 1979 respectively. As a result, today in all the ten joint venture agreements operating in the country, government via in the agency of NNPC has 60 percent interest. The most recent joint venture agreement in the Nigeria Petroleum industry, however, is that between NNPC on the one hand and SHELL, AGIP AND GULF on the other, which was signed in policy measures are geared towards affecting Nigeria’s active participation in the oil industry and ensuring that the government derives maximum benefits from its petroleum, resources.14 As a result, the policy of making participation agreement is formally embodied in the petroleum decree 1969 (as amended) in 1979 15.
2.2.1 The Equity Share Participation Agreement
This refers to the one in which the government is a shareholder in the joint venture company, and is entitled to dividends to the extent of its equity interest in that company. This arrangement requires the formation of a separate legal entity in the form of a joint stock company by the two partners. Such a company is usually neutral of the parents and management board, representing is based on parties’ participation interest. Most companies that fall within such classification of participation agreement in Nigeria are the oil service companies in which the NNPC owns 36 percent equity shares therein.
Example of such oil service companies include: Board of Nigeria, Ltd. Baroid Drilling and Chemical Products Nigeria Ltd., Dresser Nigeria Ltd., Baker Nigeria Ltd., to name but a few. Other companies in which NNPC has equity holding are Liquefied Natural Gas Limited (LNG). Hanson Ltd., Calson Bermuda Ltd. and national Engineering and Technical Company Ltd., (NETCO).16
2.2.2 Non- Equity Share Participation Agreement
Under this form of arrangement, the government participation in the ownership and authorized operation and shares in kind in the crude oil and other products. That is to say that government does not own shares or stocks in the joint venture operator company and is not entitle to dividend from the company. The most common o this kind of arrangements is the formation of a working association between a MNOC and a host country without the creation of a new and separate company. Both agree to hold jointly all rights and interests under the joint venture agreement and meet expenses in proportion to their participation interests. In Nigeria, this form of arrangements exists between NNPC and (1) SHELL, (2) MOBIL, (3) GULF, (4) ELF, (5) TEXACO AND CHEVRON AND (7) PAN OCEAN COMPANY in which the NNPC has 60 percent non-equity participation interests.17
Generally, the nature of the operations of these non-equity and equity participation agreements are the same in that in both cases, NNPC acts as the non-operating partner. It has a say only in the management through its board representative who see to it that government policies are dully carried out. Thus one can say that the basic difference between the two lies in the fact that on the one side, the government has equity share holdings, on the other, it has only a participatory right to share in the operation of the agreement.
In assessing these agreements, three points may be made. First although participation agreement are perceived by host countries as vehicle for exerting control over the exploitation of their hydrocarbons, the reality of the situation is that participation or equity ownership does not mean control for these countries. In practice, it only helps to boost the political image of the host government for real control with the MNOC, because the country lacks the technical know-how and management skill to effectively project government’s interest. Despite the majority equity position of the host country in the joint venture, the effective powers are in hand of the MNOC. Because as operators they are in charge of exportation, maintenance programmes, supplies of equipment, the employment of expertise and all operational matters. For instance, in the case of Nigeria, even though the NNPC has a built-in majority on all the boards of the joint venture companies, the fact that all proposal emanate from the operators leaves no doubt that the letter’s representatives may have a fore-knowledge of such proposal and readily approve of them. Since the Nigeria representatives do not have the same foreknowledge because of their distance from the operational management of the joint “venture plus their lack of knowledge in oil matters, the likelihood is that they will go to approve it without full grasp of its implications.
In addition by leaving all technical and economic matters including, programme, etc. to the operators, it builds no foundation for NNPC to acquire skills for operation. In a sense, with the agreements limiting Nigeria’s involving in managerial task to the exclusion of operation matters, attainment of independent operational capacity is being frustrated. As one commentator remarked in respect of a similar subject, “…that unless the host country has the skill and expertise, the control is rather political’.18
Secondly, the nation that by concluding joint participation agreements a host country will enhance its revenue earning position merits some comment. This hypothesis is founded on the premise that under participation agreements, the government could receive in the venture. For example, if the government 60 percent equity interests the operation it takes an equivalent divided while at the same receiving the normal tax plus any dues payable under fiscal laws. However, it has been argued by Ogunlami, in his work or, the ‘Nigeria Petroleum Taxation’ that this may not be always true because for instance, a 50 percent divided may not bring more revenue than 50 percent tax.19 This, he maintains is so because all cost and expenses including interest on loans, debt and investment funds are deducted before dividends are paid but not before tax. As a result, a government having contributed its share of investment and other necessary payments can suffer a proportionate loss in the event of the joint venture company or joint venture agreement were, at the beginning, more favourable to the host countries compared with the traditional concession regime, they have not remained static. Because of the changed circumstance and the improved bargaining position of some host countries (notably OPEC producers), many adjust disparities as they arise under the earlier agreements. It is in the light of this too that Nigeria negotiated new kinds of petroleum development countries, vic, Production sharing and risk service countries, which are the subject for our discussion in the ensuring paragraphs.
2.3 Production Sharing Contracts/ Risk Service Contract
This type of contract originated in Indonesia in 1960s when it was first used in the agriculture sector, and then the oil industry. Since then it has become very popular in the oil industries the world over. It refers essentially to arrangement where the MNOC and the host governments share the output of the operation in predetermine proportions. This contract is regarded by some writers as being a substantial departure from the concession and joint venture regimes in that host government is theoretically the undisputed owner of the petroleum.20 The MNOCs are engaged as contractors to perform certain specified task in return for as fee in kind. One other distinguishing feature of the Production-sharing contract is that the government receives revenue from the beginning of Production Company. Under the contract, Ashland is to provide all the technical and financial requirements unit oil is discovered in commercial quantity. But in case no oil is found, the company (Ashland) bears all the risk. Ashland is in charge of management and operations. The contract’s duration is for an initial term of 20 years. Like most contractual agreement between NNPC and MNOCs, the contract with Ashland contains provisions on employment training of technology to local personnel. Such training is regarded as an essential component the process of acquiring and absorbing oil technology. All the expenses of training of Nigeria personnel under the contract are included in the production.
The Nigeria experience with the production sharing contract has however been singularly unsuccessful. The contract from the start has attracted a lot of adverse comments. One of such criticism came from the Crude Oil State Tribunal, which was set up in 1980 to investigate an alleged lost of N 2.8 billion from the accounts of NNPC with the Middle Bank in London between1978-79. The tribunal found no sum missing/nevertheless, it was highly critical of the contract. It described the clause on the sharing of oil between NNPC and Ashland as being “too lop-sided in favour of Ashland”.21 It posited that after the Ashland Company has taken its 50 percent for amortization of its investments and operating expense, what remains therefore is hardly anything to go for Nigeria. As a result of this, the tribunal state that the contract “certainly has no benefits whatsoever to the NNPC and hence concluded that the NNPC can therefore ill-afford to continue this contract a day longer”22
However subsequent inquiries since have indicated that the Tribunal had not obtained the full facts, and hand therefore been too harsh in its conclusion. It is thought that the Tribunal was probably led to believe that 55 percent of the total production was assigned to tax oil, with only 5 percent to the production split.23 Again others opine that the split between the two parties was 27.5 percent and also Nigeria through the FBIR receives at least 60 percent of the total crude oil production.
The difficulty has been blamed on the looseness of the drafting of the contract, which differs from the production sharing contracts founds in order counties such as Indonesia, Libya, Egypt, and Peru. Thus the Tribunal’s contract than Nigeria has meant that to date this remains the only contract of its kind in Nigeria.
The Risk Service Contract (Herein called service contract) is a variant of the production-sharing contract. The only exception between two is that the duration of the service contract, is shorter and the operator or contractor under a service contract has no till to oil production as exists under a production-sharing contract. That is it undertakes the exploration as production at its own risk. The main characteristic features of the service that MNOC provides the technical services and risk capital for petroleum operations in return for remuneration in cash or kind. The risk service contracts, currently operating in Nigeria, were designed as improvements on the production sharing arrangements. In 1979, the government entered into eleven service contract with ELF, AGIP has been operational while the others were unsuccessful discovering oil.24
The service contract between NNPC and AGIP (AFRICA) Ltd., was formally entered in to on September 24th, 1979. The initial exploration period is three years. Under the contract, NNPC retains title and ownership of all data obtained from the operation conducted by AGIUP. AGIP also has the right to take crude oil produced from the contract area equivalent in value to the total payments due to it from NNPC as its remuneration. The contract spells out that NNPC is the sole owner of all petroleum and any hydrocarbons produced from the service contract. It also carries detailed provision for the rendering of accounts of the operations conducted by AGIP. Provision for the employment and training of Nigeria who will later take over the operation of the oil industry are contained in the NNPC/AGIP contract.25
From the foreign, one may express the view that the Risk service contract seems to be the most progressive of all the contractual forms currently in operation in Nigeria. As compared to the traditional concession, production-sharing contract or joint venture, risk service contract makes it possible for the state to received higher financial return. The short of the contract might be another contributory factor. The three or five years duration compared with the pre 1969 old concession granted for over forty years and twenty years under production sharing contract enables a state to resume its ownership interest of contracted areas in much shorter period.
Another good aspect of the service contract is that it is limited to just one prospecting block at a time. This will restrict a MNOC’s activities to just a single thereby encouraging it to explore the area quickly. Worthy of mention too are the provision on insurance policies in the contract. Such policies are with respect to equipment, materials as well as the costs associated with pollution control.
In spite of the widespread accolade the service contract received and hopes it has raised for a complete control and 100 percent benefit to Nigeria, it may still not have fulfilled that goal. By leaving management and operation solely in the hand of the MNOC’s (contractors), it amounts to an implied investor ownership of mineral resource reminiscent of the old concession regime, which it wanted to avoid. A study of all these contracts, however, indicate that transfer of control from MNOC’s to host government is assured not so much by recourse to sophisticate contractual forms as by effective supervision of operations. Similarly, where the supervisor authority lacks the requisite technical financial and managerial skill, such supervision tends to be ineffective and government control becomes largely illusory. Thus the meaningful way out for NNPC is to intensify efforts and see that the clauses on “Nigerianisation” and transfer to technology is effectively implemented so that when commercial production start NNPC may take over operations in the shortest possible time.26
2.4 Marginal Field/Farm Out
Another contractual arrangement which involves the indigenous companies is the grant of marginal field. Many small oil fields discovered by multinational oil companies under concession may not have been put into production by the companies as a matter of fact. The reason may be due to the field having high and low reserves, field has been left un-produced for a considerable length of time, low gravity and high viscosity, economic and technical criteria used to classify such fields, and insignificant discovery which made the field incapable of commercial production.26a
In some cases, the fields are of marginal economics in that potential production from the field the minimum percentage of profit margin which any project is estimated to attain before the company may fall into the category of marginal field by reasons of declining productivity. Similarly, a given profit margin may not be high enough for investment by a multinational oil company, but it may attractive to a small oil company with small size, management, no refinery, and with small overhead.
The pressure for the development of marginal fields in recent times stems from the entry by many small unpopular oil companies, i.e., the independents into the exploration and production phases of the Nigerian petroleum industry and the policy of the federal government on the enhancement of the national reserve and the encouragement of indigenous oil companies to participate in the upstream sector of the petroleum industry. As such, both the federal government and some indigenous companies felt that since such fields can be profitably produced by small indigenous companies with considerably lower overheads, they should farmed out to indigenous companies which have the necessary expertise rather than left un-attended to.
Farm out means an agreement between the holder of oil mining lease and a third party which permits the third party to explore, prospect, win, work, and carry away any petroleum encountered in a specified area during the validity of the lease.
This policy began in 1989 during the regime of the military president, General Ibrahim Babangida when certain prospects were specifically reserved for Nigerian entrepreneurship. The concessions granted under this policy were those that were relatively easy to exploit based on seismic data and other information.
It should be noted that (in accordance with guidelines to farm out the operation of marginal fields issued by the government through the department of petroleum resources), un-produced discoveries in open leases do not qualify for farm out as they would constitute part of the whole average that would be awarded in a new licensing round, so as to further encourage exploration activities in such leases.27 many of the marginal fields are jointly owned by parties to various joint operating agreements pursuant to which the fields were discovered. Accordingly, assignment of interest contemplated under a farm our agreement, carries. Interest, net profit, or overriding royalty agreement which must be made with each co-owner as a party to the extent of its undivided percentage field in the license or lease comparing the marginal field in question. The assignment cannot be validly made by the operator of the joint venture in to capacity as operator.
Furthermore, prior approval in writing by the minister is a pre-requisite to a void assignment under the agreement the area of the license or lease to be assigned must be clearly demarcated in such a way that the joint operations will not interfere with the agreements for the development of the marginal fields.
2.5 The Concept of Oil and Gas
It is shown in the work that petroleum, in one form or another, has been used since ancient times, and is now important across society, including in economy, politics and technology. The rise in importance was mostly due to the invention of the internal combustion engine, the rise in commercial aviation and the increasing use of plastic.
As long as 5000 years ago, people were already using crude oil as a resource for the purposes.28 They were also aware of natural gas. It was just that they did not know how to use it. They did not dig for oil either. The quantities seeping through to the surface of the earth were sufficient.29
In one of the earliest civilization-Mesopotamia-bitumen, or Asphact, was used for construction purposes. The ancient Greeks and Romans used petroleum as a lubricant and for sealing.30
Natural History of Oil
Petroleum is a naturally occurring liquid found in rock formations. It consists of a complex mixture of hydrocarbons of various molecular weights plus other organic compounds. It is generally accepted that oil is formed mostly from the carbon rich remains of ancient plankton after exposure to hear and pressure in the Earth’s crust over hundreds of millions of years overtime, the decayed residue was covered by layers of mud and silt, sinking further down into the earth crust and preserved there between hot and preserved layers gradually transforming into oil reservoir.
Petroleum in an unreformed state has been utilized by humans for over 5000 years. In fact, the consensus of opinion is that oil predates man. This, oil in general has been used since early human history, to keep fires ablaze and also for warfare.
Ancient Persian language tablets indicate the medical and lighting uses of petroleum in the upper elections of their society. Ancient china was also known to burn skimmed oil for light.
An early petroleum industry was established in the 8th century when the streets of Baghadd were packed with far directed from petroleum through destructive distillation. In the 9th century, oil fields were exploited in the area around modern Baku, Azerbaijan, to produce naphtha. These fields were described by AI-masudi in the 10th century, by Marco polo in the 13th century who described the output of those oil wells as hundreds of ship loads. Again, petroleum was distilled by AI-RAZ in the 9th century, producing chemicals such as Kerosene in the alembic, which he used in the oil lamp industry.31
The importance of petroleum in the world economy evolved slowly, with whale oil used for lighting into the 19th century and wood and coal used for heating and cooking well into the 20th century. A petroleum industry emerged in North America in Canada and the United States of America. 32
The industrial revolution generated an increasing need for energy which was fueled mainly by coal, with other sources including whale oil. However, it was discovered that kerosene could be extracted from crude oil and used as a light and heating fuel. Petroleum was in great demand and by the twentieth century had become the most valuable commodity traded on the world market.
Imperilment Russia’s output of oil, at the turn of the 20th century, accounted for half of the world production and dominated international market. Their output was almost entirely from the Aspherson Peninsular.
By 1884, nearly 200 small refineries operated in the suburbs of Baku. As a side effect of these early developments, the Apsheron peninsula emerged the world oldest legacy of oil production and environmental negligence. In 1818, Ludrie Nobel and his Branobel Company revolutionaries oil transport by commissioning the first oil tanker and launching it on the Caspian sea.
The first modern oil refineries were built by Ignacy, Lukasiewicz near justo,33 poland from 1854-1856. These were initially small as demand for refined fuel was limited the referred products were used in artificial asphalt, machine oil and lubricants, in addition to Luka-siewirs kerosene lamp. As Kerosene lamps gained popularity, the refining industry grew in the area.
The first large soil refinery was opened at Romania, in 1856. The first oil drilling in the United States began in 1859, when oil was successfully drilled in Titusville Pennsylvania.
In the first quarter of the 20th century, the United States of America overtook Russia as the world’s largest producer of oil. By the 1920’s oil fields had been established in many countries including Canada, Poland, Sweden, the Ukraine, the United States and Venezuela. In the early 1930s, the Texas Company developed the first mobile steel barge for drilling in the brackish costal area of the Persian Gulf.
In 1937, pure oil company34 and its partner superior oil company used a fixed platform to develop a field in 14 feet of water, one mile offshore of Calcasien parish, Louisiana.
After the world- war II ended, the countries of the middle- East took the lead in production from the united states of. Oil was discovered in a great many places in the middle-East Arabian Peninsula, beneath the Caspian seas, beneath what would become the nations of Iraq, Kuwait, the United Arab emirate, and others. This marked the begging of middle -Eastern petroleum’s ascent to its current domination of the global petroleum markets.
Lastly, the organization of petroleum exporting countries (OPEC) was founded in 1960 by Iran, Iraq, Kuwait, Saudi-Arabia and Venezuela primarily in retaliation for price cuts made by the oil companies.35 At that time, most oil wells were owned by petroleum companies who had been granted concessions by the nations on whose territory the wells lay. These companies paid only attraction of their proceeds to the countries.
When prices dropped, the oil producing nations lost a grant deal of money. OPEC was organized to raise and stabilize the price of crude oil.
By regulating the amount of oil produced, the price could theoretically be maintained artificially high increasing revenue for these nations. Of course, the price too high could encourage less energy consumption, the recovery of otherwise marginal reserves, or both. So setting out production and pricing became an intricate balancing act.
History of Natural Gas
Although naturally occurring gas has been known since ancient times, its commercial use is relatively recent. In about 1000 BC, the famous oracte at Delphion Mount Parnassus in ancient Greece was built where natural gas seeped from the ground in a flame. Around 500 BC, the Chinese started using crude bamboo pipelines to transport gas that seeped to the surface and to use it to boil sea water to get drinkable water. However, the first commercialized natural gas occurred in Britain. Around 1785, the British used natural gas produced from coal to light houses and streets. In 18 1B, Baltimore, Maryland used this type of manufactured natural gas to become the first city in the United States to light its streets gas.36
Again naturally occurring natural gas was discovered and identified in America as early as 1626, when French explorers discovered natives igniting gas that were seeping into and around late Eric. In 1825, William Hart dry the first successful natural gas well in the United States, in Fredonia, New York. Eventually, the Fredonia Gas Light Company was formed becoming the first American natural gas distribution company.
In 1836, the city of Philadelphia created the first municipally owned natural gas distribution company. During most of the 19th century national gas was used almost exclusively as a source of light, but in 1885, robber Bunsen’s invention of what is now known as the Bunsen burner open vast new opportunities to use natural gas. Once effective pipelines began to be built in the 20th century, the use of natural gas expanded to home heating and cooking appliances such as waster, heaters and even ranges, manufacturing and processing plants, and boilers to generate electricity.
Today, natural gas is a vital component of the world’s supply of energy. It is one of the cleanest, safest and most useful of all energy sources.
2.6 History of the Nigerian oil and Gas Industry
The search for crude oil began in Nigeria as far back as 1908, when a German company the Nigerian Bitumen corporation explored for oil in the Araromi area between Ijeby Ode in the present Ogun state and Okifipupa in the present Ondo state. This pioneering effort was terminated at the outbreak of hostility between Britain and Germany in the first world- war in 1914, given the fact the Nigeria was under the territorial control of the United Kingdom, and Germany’s loss of the war, the German Company’s Operations were not resumed after the war.
Consequently, the British colonial administration enacted the Mineral oil Ordinance No 17 of 1914 to regulate the right to search for win, and work mineral oil rights in the area. The Law provided that:
No lease or license shall be granted except to a British company registered in Great Britain or in a British colony having its principal place of businesses within her majesty’s dominion, he chairman and the managing Director (if any) and the majority of the order directors of which are British subjects.37
This discriminatory legislation had a very adverse effect on the development o the oil sector as it discouraged competition from outside Britain when it was manifestly clear that British companies lacked the requisite capital and manpower for exploration of the vast reserves in Nigeria.
Oil-prospecting activities are resumed in Nigeria in 1973, when shell D’Arcy, an Anglo-dutch consortium and subsidiary of the Royal Dutch shell group, obtained an oil exploration license covering the entire country. This initial monopoly gave shell D’ARcy , the forerunner of the Shell Petroleum Development Company of Nigeria (SPDC) the leading position, which the present day SPDC Maintains over the other oil majors of the exploration and production (E&P) companies operating in Nigeria today. The operations of the company were interrupted by the Second World War, but were resumed in 1947 culminating in the spotting of the first exploratory well (Ihuo) in Eastern Nigeria in September, 1951.38
However, it was not until 1956 that oil was discovered in commercial quantities at Oloibiri near Port Harcourt in the present day Bayelsa State. The year of 1958 witnessed the first export of Nigeria crude to Europe, when production clicked 5,000 barrels per day (bpd).
The quantity doubted the following year. By the mid-sixties, production had gone past the 500,000 bpd mark and the other foreign oil companies had rushed in to secure exploration acreage.39 The exploration rights, which were formerly granted to shell alone, were now extended to the newcomers’ in line with the government’s policy of increasing the pace of exploration in the country. There was a steady increase in Nigeria’s oil production 0.90 million b/d in 1970 to 2.9 million b/d in 1992, and it reached a peak of 2.4 million b/d in 1979. The steady increase in oil product on fetched Nigeria the position of the major oil producer, and she has grown to become the sixth-largest oil-producing country within OPEC.
The earlier-mentioned increase in the number of active oil companies existing petroleum (oil and gas) laws.
The trail structure of the Mineral oils ordinance of 1914 with its amendments could not sustain the modern pressure and trends in the industry.
Therefore an attempt to produce a detailed and comprehensive law for the grant of rights to search for and win oil in Nigeria and the conditions connected therewith was made in the promulgation of the Petroleum Act 1969 and the Petroleum (Drilling and Regulations 1969).
Government’s awareness the importance of oil in the national economy culminated not only in the enactment of laws but also in direct involvement in oil exploration and exploitation. Government’s interest in petroleum was further awakened when it gradually replaced agricultural products as the main export commodity. In order to strengthen and establish government control in the industry, the Nigerian National oil Corporation was established in 1971 by Act No 18. This metamorphosed into Nigerian National Petroleum Corporation NNPC established by Act No. 33 of 1997.
2.7 Ownership and Control of Natural Sources
In quite a number of develop and developing countries of different and differing legal and constitutional cultures, the ownership of all or some natural resources is vested in the state by law. In some such countries, especially amongst the developing countries, the natural resources yields appreciate fractions of the natural income. In all cases of state ownership, the underlining principle or philosophy is or normally ought to be, for the state to property harness the natural resources for the benefit of the guaranty of the people in the particular country.40
Incidentally, in underdeveloped or developing political cultures, political maturity and social fairness are not hallmarks of statecraft. Governance and management of public property are often characterized by nepotism, sectionalism and outright meanness. Tribes and sections of the people in power enjoy state attention and prime proportions of public funds white the other tribes and sections are often left in neglect. It is so even if much of the national wealth derives from or is produced from those other tribes or sections. The men of power who ensure for themselves and their families in exhaustible wealth embezzle much of what is not spent on the favoured tribe(s) or sections.41
It almost always happens that foreign investors in such countries, especially in Nigeria indirectly, even if unwittingly, hide behind and take sides with the government since the relevant concessions are normally grant them by the government in the first place. The effect is that the investors are held in contempt by the neglected areas especial I the natural resources derive from those neglect areas. When the neglected people rise in struggle against the government” it is for all intents and purposes a struggle against the investors. In many cases the investors incur untold but avoidable loss in the people’s struggle to right the wrong of the government. The investors, guilty or innocent of misconducts, suffer for the injustice engendered and practiced by the government. Nigeria is a country of about 250 nations/tribes and suffers the twin burdens of political and economic underdevelopment. It suffers in remarkable proportions the problems of nepotism, sectionalism; tribalism and crude chauvinism based on language differences, in the exercise of state power. These have been worsened over the decades by unmitigated militarization of the society.42
This is very often manifested in brazen arrogant abuse of state power in favour of sectional and personal interests and the traumatisation of all of all or almost all principles of civility, polish and social justice.
Meanwhile, the state ownership of natural resources had been a legal prescription even before the country’s independence in 1990. before independence, protests against the ownership of natural resources by the colonial British government formed part of the larger campaign for poetical independence, the position seemed to have been accepted or acquiesced in by the generosity of Nigerians but for a few (sometimes strident) criticisms here and there. Indeed many Nigerians. Including the owners of the lands in or on which the natural resources occur, have generally placed a lot of confidence and hope in the idea of a fair and just Nigerian state.
It has however dawned on Nigerians in recent years much more than ever that the little power mongering cabal in Nigeria, which has been mainly wasteful abused and raped such collective confidence of Nigerians. Nigerians of all creeds and language groups (especially of the south and the middle Belt) have therefore seriously questioned the desirability of maintaining the present political and economic structure of the country including the state ownership of natural resources. It has been particularly with respect to oil and gas which account for well over 90% of the country’s income.
These questions, which came to a head after the invalidation of the June, 1993 presidential election results, have nearly even red to the breaking up of the country into different countries.43 To avert this, even the north revised the imperative of a political power shift to the south.
This work seeks to examine the issues involved in state ownership of natural resources like oil and gas in different countries. This is done with a view to showing that may have similar circumstances in the exercise of control and ownership over their natural resources, now. It examines the price that foreign investors have paid and are paying for being perceived as partners of the Federal government in the neglect of the natural resources yielding parts of the country. It is hoped that discussion will also be instructive for raters and citizens of even those other countries (especially third world countries) where the underlying philosophy of state ownership of natural resources may currently be handled more in abuse and breach, and for foreign investors who operates in those environments. The idea is for investors, armed with this necessary information, to reposition themselves in the social psyche of the people through appropriate action to avoid such losses.
The topic first examines the importance of natural resources to the Nigerian state and tracts the history of state ownership of natural resources in the country. It examined the three theories or methods of ownership of natural and social-political developments and perspectives in control of natural resources.
2.7.1 Nigeria and Natural Resources
Nigeria is abundantly blessed with such natural resources as oil and gas, coal, bauxite, gold, germs tones, copper, iron etc. the resources are spread across the different parts of the country especially the south.
Petroleum (oil and gas) occurs mostly in the Niger Delta, which spans across the South-South geopolitical zone as well as some part of the South- East and the South –West. Since the 1970 oil revenue has constituted over 90% of the country’s national annual income.44
The petroleum industry constitutes in practically every way the most important sector of the economy at the present time. It practically controls life and business in Nigeria, and since successive governments have rather persisted in paying more of lip service to economic reengineering, it (petroleum) promises to retain such importance in the foreseeable future.45 The petroleum yielding parts of the country have therefore appropriately been described as the goose that lay the golden eggs, the providers of the economic and financial muscle on which the very idea of a Nigeria state completely rests46.
Local mining began, in Enugu in the southeast very much early in the last country. Between then and the 1960s coal was a major export commodity that earned a lot of income for the country. Coal made Nigeria rich in those days and is still capable of earning tremendous income for her if not that following the oil boom of the early 1970s coals like other sources of incomes was neglected.
The country has gold reserves in the southwest and middle Belt zones. It has bauxite, copper and iron in the other regions. Gold, Bauxite, copper etc, are yet to be exploited in a serious commercial quality while the mining of iron ore is mired by corruption and in necessary political calculations and considerations47.
The country hardly makes industrial exports. Except for the period of the first Republic (1960-1966) when agricultural produce earned a bulk of national income she has indeed depended on income from natural resources to meet her national financial obligations within and without her borders. The bulk for the money that some thieving rulers and other economic rodents have stolen over the years has come from those natural resources. So also the funds used to maintain such awesome state instruments, defence, law and order but which are often early turned into rulers as the late General Sani Abacha and the present. They include such things as the state security service.
The natural resources the ownership of which will be discussed are liquid and solid minerals. Farm produce and such other things as cocoa, palm produce, groundnut etc, are not included. Such things are subjects of private ownership and are rather product of efforts in farming.
2.7.2 Theories/ Methods of Ownership of Natural Resources
There are three discernible pattern or theories of Ownership of natural resources across countries.48 On is complete state Ownership while the second is the vesting of complete ownership rights in the individual landowner. The third is a hybrid of the first two, whereby the state owns the resources to an extent but reserves some rights in the individual.
The idea, theory or pattern of state ownership seems to be dominant. Under the Venezuela mining Law 1944 as amended, all mines, sea beds and mineral deposits are public utilities under the country’s constitution and can only be exploited under concession granted by the government. Its petroleum Laws more categorically place property in all petroleum, in its natural state in the hands of the country, and prohibit any mining without a concession or permit.
In Mexico, the 1917 constitution makes the state the sole owner of sub-soils i.e “all minerals or substances which is veins, ledges, masses or pockets, form deposits of a nature distinct from the components of the earth itself, such as… petroleum and all solid, liquid and gaseous hydrocarbons, solid minerals fuels”.
Article 27 paragraph 26 makes the country ownership of such deposits” inalienable and imprescriptibly” meaning that though under the same article the country “has had, and has, the right to transfer title thereof to private persons, thereby constituting private property” no investor, individual or corporate, indigenous or foreign, can at quire the title to any of the country’s natural resources49.
The Petroleum Act, 1985 of Norway vests sovereign rights over sub-sea natural resources in the state.
The 1997 defunct Soviet Union Constitution50 vested ownership of the land, its minerals, water, forests, rails, factories etc in the state, in the traditional totalitarian communist fashion. The 1992 Russian Law on subsurface Resources Decree and art 72 of the current Russian constitution also have the same effect even though communism has been jettisoned.
The Zambian Mines and Minerals Act51 and the 1978 minerals Act of Botswana each have provisions vesting the minerals in the state. In the USA, ownership varies from state to state but Alska is the only one that completely disentitles the individuals landowner. In Argentina, Law 24, 145 or 1992 entrust the state with authority and indeed the only available legislative competence to deal with hydrocarbon deposits.
Section 2 of the petroleum (Exploration and Production) Act, 1991, declares state ownership over all petroleum in Nambia. The same pattern holds for the other major natural resources of that country such as diamonds, copper and lead.
In the UK, when in 1917 there was a move to vest ownership of petroleum in the crown it was stoutly resisted on the ground that the idea of private ownership of property, including petroleum, had become so established as not to be upset. The government solved the problem by a more or less wise devise. It enacted the petroleum production Act of 1918, which ex facie set out to address some competitive drilling problems and waste.
It provided that nobody might undertake any search for or boring for oil within the territory unless the person or company was acting on behalf of the government. In the 1930s, favourable nationalistic favour flowing probably from the experience of the First World War had thawed the opposition and the government was able to pass the Petroleum Production Act, 1934. The latter Act vested ownership of Petroleum in the British crown this was extended to Northern Ireland in 1964 by the Petroleum Act of that year.
As already stated, this theory rests on the premise that the state would home the natural resources for the common good of all citizens. The government ploughs back the proceeds of the exploitation of the natural resources into the provision of social amenities, equitable development of the different segments of the country and execution of the common enterprise of state.
This is a very trite principle not normally found worth repeating in statutory form in most countries or in fact any country. It is clearly stated or in fact any country. It is clearly stated in the Directives of the European parliament and of the council52 to the effect that the exclusive right to prospects, explore and exploit hydrocarbons belongs unprincipled to the state and is to be exercised with the aim of serving public interest.
Under the second theory of natural resources ownership the individual landowner owns the resources found under, in or upon his land. The popular theory of law, quicquid platatur solo, solo cedit (which runs across, practically all Jurisdictions, of all constitutional models, except totalitarian communist or social states) that he who owns their land owns what is on it is allowed to run its full course. This is operated in are states of Tocas, Tennessee, Mississippi and Ohio of the USA. Of course, as is the case with all other property rights, the individual owner is bound by the rules that forbid unlawful use or enjoyment of property. There is also the qualification on the right put on by the rule of capture. As amplified in the old English case of Action V. Bundeu53 the rule is o the effect that the owner of a land through which water flows in a subterraneous course (A) has no right or interest in it such as to enable him maintain an action against another landowner (B) who, in carrying on mining operations in his own landing the usual manner, draws way the water from A’s land and lays A’s well dry. In the context of petroleum it implies that petroleum cannot be owned in because of its migratory nature i.e since a land owner may, in drilling and exploiting a well on his land, draw out not only the petroleum under that land but also those under adjoining kinds. This is so because no one can determine a definite, permanent and inviolable boundary for those substances underground.
It was applied in the USA case of Bernard v. Monongahela, where a prayer for an injunction to prohibit drilling by the owner of an adjacent and was refused. The court reasoned that considering the nature of hydrocarbons, the court would not be able to determine the extent or nature of draining from the plaintiff land. This ownership theory also obtains in Canada and Australia Nigerian courts are likely to follow this trend if the matter arises before them.
The third ownership theory reserves some of the ownership rights for the state while allowing the individual some rights in the natural resources. The us states of Pennsylvania and California have one form of quantified ownership arrangement or the other.
2.7.3 History/Scope of State Ownership of Natural Resources in Nigeria
Before the advent of colonialism and the modern state structure, ownership of lands and resources in, on or order that land vested in the individual, the extended family or the community. If an individual owned a piece of land he also owned and could exploit every useful or profitable thing in, under or on the land54.
Streams, rivers and water course were generally considered capable of being owned by individuals or even extended families and normally belonged to the community. Each indigene or authorized foreign resident could exploit the resources of such waters.
The advent of colonialism introduced the idea of complete state ownership. Even before mooting the idea at home in 1917 :55 the British (colonial) government hand in 1889 enshrined it in the Nigerian petroleum ordinance of that year and in the Mining Regulation, Ordinance of 1907. Later, the oil minerals ordinance 1914 was enacted56 if vested ownership of minerals oils in the British crown in the ordinance is now referred to as the Oil Minerals Act, 1914. The two earlier statues of 1889, and 1907, are very often not referred to by commentators or Nigerian petroleum law because of the difficulty in sighting those legislations now it is believed that the 1889 Ordinance is what 1918 the Petroleum Act was enacted and in 1946 as the Minerals Act57 was enacted. Presently constituted it provides at S. 3 thus.
(1) the entire property in and control of all minerals, in, under or upon any lands in Nigeria, and of all rivers, streams and water courses throughout Nigeria, is and shall be vested in the state, save in so fares such rights may in any case have been limited by any express grant made before the commencement of this Act
(2) Except as in this art provided no parson shall prospect or mine on any lands in Nigeria or divert or impound water for the purpose of mining operations.58
In 1950, the oil mineral (Amendment) Act introduced a Section 10 into the 1914, by virtue of which state ownership was extended to oil under submarine areas of the country’s territorial waters.
In 1959 this was further extended to such submarine areas of other waters that the federal legislature might decide to legislate upon in the future with respect to mines and minerals.
In 1969 the Petroleum Act59 replaced the 1914 ordinance. At 8.1 the new Act now provides that the “entire ownership and control of all petroleum in, under or upon any lands to which this section applies shall be vested in the state” subsection(2) makes the provision applicable to all lands (including land covered by water) that is in Nigeria or forms part of the continental shelf. Section is defines petroleum to includes mineral oil (crude oil) and gas. This legislation was made during the civil war of 1967-1970. It removed petroleum recourses from the principle of derivation60 thereby take away from petroleum yielding parts of the country the right to some percentage of the income from petroleum.
The matter was taken further by S. 40(3) of the 1979 Constitution (S. 42(3) 1089 Constitution and 47(3) of the 1995 Draft Constitution) which is now S. 43(3) of the 1999 Constitution and provides;
Notwithstanding the foregoing provisions of this section, the entire property in and control of all minerals, minerals oils and natural gas in, under or upon any land in Nigeria or in, under or upon the territorial zone of Nigeria shall vest in the Government of the federation and shall be managed in such manner as may be prescribed by the Nigeria Assembly.61
Both the petroleum Act and the constitution have been silent on the surface rights, which were preserved for the landowners by the 1946 Act. This should ordinarily have serious legal implications.
However, when the provisions are read together with the Land Use Act62 which requires the payment of compensation for crops on land even differently from compensation for the land itself it seems quite obvious to that extent that surface rights still vest in the landowner. A landowner in this context is now the holder of an actual or deemed right of occupancy, whether evidenced by a certificate of occupancy or a right of occupancy certificate.
The country’s Exclusive Economic Zone, under S. 1(1),63 that area of the sea extending from the external limits of the territorial waters water of Nigeria to 200 Nautical miles from the baselines from which the breadth of the territorial waters is measured.
When the figure 200 nautical miles is converted on the USA conversion rate of I USA nautical mile = 1.853 kilometers, a figure of 370.65km is arrived at, which is the figure prescribed by the United Nations conference on the Law of sea aforesaid.
A necessary corollary of this state ownership and control of these resources is that nobody can carefully engage in the exploitation of nay of them unless he is granted or given a licence or concession by the Federal Government64. The Federal Government, which stands between investors and the owners of the land on which the resources occur, grants those investors-foreign and local-the rights of operation.
The meaning of all this is that whatever may turn in the Nigerian law, ownership and control of natural resources up to the offshore deposits vests in the state.
2.7.4 Problems of Ownership/Control of Natural Resources in Nigeria
In Nigerian, the Federal Government allocates rights in natural resources such as mineral oil through concessions. Under the petroleum Act of 1969 65 concessions are granted to Nigerians who wish to explore, prospect for and mine oil in Nigeria. The Act defines the rights to licences, and describes the rights to mining as a lease. The licenses created contractual relations between the federal government or the Nigerian National Petroleum Corporation (NNPC), its agency, on the one hand and the concessionaire on the other.
Concession agreements are agreements are agreements between host countries and international oil companies, with the host countries conceding a large area of land to the company to explore for natural resources, and if discovered, to produce, market and transport the oil and gas. Concession agreements are normally for periods ranging from forty and ninety-nine years on the average66. The concessionaire is not only a foreigner but a powerful economic giant whose assets in some instances are bigger than those the host state.
A concession strictly speaking is in fact not a license.67 It is not also a treaty because the concessionaire is to a state68. Although it is a contract, it is an unusual type of contract. It is an agreement between a state and usually a foreign company. The parties normally exclude disputes arising from the contract form the jurisdiction of the courts of the territorial sovereign and may subject the law to govern the concession to the municipal law of a third party, or to general principles of Law69. The contract is concession because the host country being a subject of international law and exercising sovereignty over the mineral oil resources, concedes a right to a legal inferior, the concessionaire, to do or refrain from doing certain acts within its territory as understood in international law and exercising sovereignty over the mineral oil resources, concedes a right to or legal inferior, the concessionaire, to do or refrain from doing certain acts within its territory as understood in international Law.
The effect of the general Assembly Resolution 1803 of 1962 70 notwithstanding, the concept of permanent sovereignty over natural resources form a strictly legal point of view is a circumlocution. In international law, states have sovereignty over their mineral oil resources. Implied in the concept of sovereignty is precisely the ability to dispose of the mineral oil resources through concessions, if need be, to whomever the state so desires. This is part of the indices of sovereignty. It connotes the opposite of the resolution i.e. ability to dispose of its minerals oil resources permanently. Not to be able to do so, is a negation and not an assertion sovereignty.71 It then means that a concession contract which passes over ownership of mineral oil resources in a state for an indefinite duration or for a given period of time, does so legally and the parties are apparently subject to the contract. A contract between a company such as the N.N.P.C and a government binds the company and the state (not this or that government) since in international law, a government is an agent of state. Besides, it has been argued, that the General Assembly Resolution cannot be law, and being binding, the host state cannot rely on it72.
Furthermore, permanent sovereignty is invested not on states as such but on “people” and “Nations73”. The resolution assumes that governments are agents of the people whether elected or not. It follows what the government has no mandate to alienate in any permanent from the mineral oil resources of the people. The question of ownership of the resources must first be determined because the people’s sovereignty that is exercise per-supposes ownership of the resources.
As has already been said international law vests ownership of mineral oil resources on the states not on the people who are mere objects not subjects of the law. The resolution has however invested the “people and Nations” with a peculiar type of ownership. There is thus a new dual ownership of mineral oil resource is not vested in the people, but on the state, which being sovereignty according to international Law can divest itself of some or all its rights over its mineral oil resources. The resolution assumes that governments are agents of the people whether elected or not. It follow that the government has no mandate to alienate in any permanent from the mineral oil resources of the people .The question of ownership the resources must first be determined because the people’s sovereignty that is exercised presupposes ownership of the resources.
As has already been said international law vests ownership of mineral oil resources on the states not on the people who are mere states not on the people who are mere objects not subjects of the law. The resolution has however invested the “people and Nations” with a peculiar type of ownership. There is thus a new dual ownership over mineral oil resources. The first is the state which is derived from international law, the second is the “peoples and Nations” which is derived from the general assembly Resolutions. Nigeria’s practice conforms with the international law rather than the provisions of the 1962 Resolutions on permanent sovereignty. In Nigeria’s municipal Law ownership of mineral oil resource is not vested in the people, but on the state, which being sovereignty according to international Law can divest itself of some or all its rights over its mineral oil resources.
The whole concept of permanent sovereignty is suggestive of the inability of the local sovereign to force a fundamental change in the concession because the concessionaire is a foreigner. On the face of it, it will be very difficult to convince anyone that shell petroleum Development company; Mobil producing; gulf oil company; Texaco Oversea; Elf; Agip; e.t.c are Nigerian nationals simply because they have prefixed the word “Nigeria before or after their names.
It is of paramount importance to be clear on the real nationality of these companies because that would determine the application or non-application of rules of international law. As has been point out nationality is the sole basis of diplomatic protection in International Law74.If these companies are Nigerian nationals then they would have no Embassies; High commission or consults to protect them from serious violations of their property rights by the Nigerians state.
If however their Nigerians, international law scinnds, and municipal Law would govern their operations to the exclusion of rules of international law. As a matter of fact, no single Nigerian, whether private or government own a single share in any or the soil mining companies operating in Nigeria.
On the issue of dispute resolution in respect of dispute arising between host country and foreign companies, it is painful to note that foreign oil companies often insist on removing their disputes form the territory of the host state for determination by the parties it is viewed that the tribunals is a negation of the sovereignty of the host state75.
This is an attempt by the investor to tie the hands of the host state form tampering with the property rights of the oil investors.
*Solutions to the Problems: (a) The Role of The United Nations Organization (UNO)
The strangling hold by the developed nations on the natural resources of developing countries led to serious struggle, which were spearheaded by Africa, Arabian and Asian countries.
Their efforts paid off on 2nd December, 1953 when the united Nations General Assembly, at its 7th session, adopted Resolution 626 (vii), affirming the right of the peoples freely to use and exploit their natural wealth and resources76.
Similarly, the problem associated with concession was addressed by the national Assembly through the introduction of the concept of permanent sovereignty over natural resources. The major breakthrough in this regard was achieved by the passage of the General Assembly resolution 1803(1), (2) & (3)77 in 1962. The resolution thus asserts that peoples and nations have permanent sovereignty over their mineral resources and that oil concession contracts must promote the economic development of the host state, that the operations of the companies especially as regards their profits must now be governed by municipal Law of the host state and by international law; that expropriation is a right of states in international law, and when exercised must be accompanied with payment of adequate compensation; by dispute arising from adequacy or otherwise of compensation should again be settled by the municipal law of the host state and by international law78. This concept of permanent sovereignty has become entrenched in international relations by various other resolutions of the General Assembly that if can be said to partake of a new international economic order.
In addition, resolution 2158 (xx i) of 1966 :79 stipulates in clear terms that the activities of foreign capital must conform to the interest of development of the host country and host country is to participate actively in the management of such enterprises.
The main object of these resolutions resolution was to encourage underdeveloped countries to use their own natural resources as a solid foundation for their independent economic development, and to present their depletion by the action of the other states particularly the developed ones.
Many developing countries appreciated the provisions of the above resolutions by demanding equity sharing participation in the enterprises using foreign capitals in the exploitations of their natural resources. For example Nigeria acquired initial 331/3% equity in Agip, Phillip Petroleum Company and 35% equity in some of the major oil companies operating in Nigeria with a view to participating in the management of such enterprises.
Her Arabian counterparts, in response to Organization of petroleum Exporting to countries (OPEC) directives, acquired initial 255 equity in the oil companies in their countries which enabled them to participate in the management of the enterprises.
(b) The Role of the Organization of Petroleum Exporting Countries (OPEC)
The origin of the organization of petroleum exporting Countries (OPEC) dates back to 1949. At the inspiration of Venezuela, the first consultative meeting of the oil-producing Nations met to discuss the need for closer communication the actual formation of the organization did not take place until September, 1960, in Saghded, Iraq in response to the oil companies? Further reduction of the Middle East posted prices for crude oil from $0.18 to $0.14. It is significant to note that the five oil-producing states (Venezuela, Iran, Saudi-Arabia, Kuwait and Iraq) that participated at the 1949 crucial meeting were later to be foundation members of OPEC. Its membership has since risen to 13, with Qatar, Indonesia. Libya, Abu- Dhabi, Algeria, Ecuador, and Gabon, joining later. Ecuador withdraws its membership in 1964.80
OPEC was formed as a result of the unilateral cuts in the posted Tax reference price of crude oil by the main companies in 1959 and 1960.81 At the time oil industry was almost vertically integrated, the major multinational oil corporations, controlling every stage of the process form exploration to transportation, refining and retail, marketing.82
It is against this background that OPEC was formed in 1960 as a permanent, intergovernmental Organization to secure the interests of its members in the oil industry, to co-ordinate and unity the petroleum polices of member countries, and to safeguard their interest; to devise ways and means of ensuring stable prices in the market; to secure a steady income for the producing countries; and on efficient, economic and regular supply of petroleum to consuming countries, and a fair return on their capital to those investing in the industry.83
OPEC like Ollius International Organizations such as the United Nations, play a major role to save developing nations like Nigeria from the petroleum created under the old regime of concessions.
It is significant to note that under the old regime of concessions, the concessionaire enjoyed near-monopoly right over the oil resources and in source instance claimed ownership of the concession area. The concessionaire this competed with the government as regards ownership of minerals resources and he area, which he concession was granted. Where in some instances concession was given for example 70 years, the concessionaire relied on the sanctity of contract in refusing renegotiation, or unilateral aeration of the contract. The regime of municipal Law of contract afforded the concessionaire a formidable protection whilst the government seemed bound by a contract given out by previous regimes and which has now become after to the nation’s economic development.
OPEC in response to appeals from the affected states provided solutions to the problem in its attempt to rescue the mineral producing states out of this economic bondage Nigeria, like all member nations of OPEC is being assisted by the organization to participate in the ownership and management of foreign oil companies operating in member territories. The organization as it were, transferred power from the oil companies to itself84 apart from that, it has minimized divided rule the oil producing countries. The new dimensions in world oil prices and politics emboldened OPEC member countries into stiffening their demands for active participation in the oil and allied industries.
Also OPEC, approach to the issue of how to achieve participation with foreign multinational companies without an open bench of the concession contract deserves commendation. Thus the guideline developed by OPEC had urged members to achieve a minimum of 25% participation by 1973 and 51% by 1982. Through participation, OPEC envisaged a greater control by members of the product the behaviour of the foreign multinational, and with consequent transfers of technology. OPEC’s approach is founded on the recognition that ownership without control eroded the economic sovereignty of the host state.
OPEC’s Major area of trial and success is in the field of quota and price. The resolutions affect not only the internal programmes of its members but also their municipal Laws. It is the duty of the state members to ensure however that the resolutions of OPEC prevail in their municipal laws. Skeptics had imagined in the 70s that the question of posted price for crude oil would break OPEC, but events have proved them false sooth Sayers. As has been observed oil is a major revenue earner for members, and an uncontrolled price determination would play into the hands of consumers states. OPEC has since inception institutionalized a system of “posted” prices which have brought more revenue to the coffers of its member. It is also responsible for terminating the payment of royalties as a credit against income tax liability. The higher taxes which members now enjoy are also traceable to OPEC.85
Firstly, in this study we observed that in Nigeria oil and gas, and other Natural Resources based on the statutory authority both national and international as already discussed in detail above are completely owned by the state parties (i.e as regards to members of OPEC) and Federal Government if it is a country, to the actually objective in this field. This is because in this study we were able to discover that there are some other countries in the world which does not have absolute ownership over its natural resources.
Secondly, this study as we have repeatedly stated is on the examination of the legal framework for the regulation of oil and gas industry in Nigeria, and during the course of study of this research topic we also observed that the oil producing communities in Nigeria Niger Delta has not been favoured by Federal Government in issuance of licenses and lesses to the Nigerian marginal fields. The Nigerian Government instead of assisting communities who are the owners of these natural resources, and has remain perpetual victims to environmental degradation cum pollution, rather prefer indigenous company on the reason that it was based on who has the capital to stand it.
Most of these indigenous companies with such required capital are owned by some of our public servant leasing it to themselves for personal enrichment, without considering these communities God have enriched them with these gifts.
Thirdly, we also observed during the this study that existing laws regulating the Nigeria Petroleum Industry though not completely poor to standard, but lack some factor like, proper closure of room for corruption in the industry, poor implementation, environmental sustainability principles cum protection and out dated fiscal system.
Finally, under Petroleum Industry Bill, we see the document as a good example of professional drafting. It leaves little or no room for manipulation, partisan or exploitative interpretation. Its main strengths include the forthright tackling of the long-testering community affairs, unequivocal specifications on the local content development (regarding men and material), and clear provisions for environmental restoration and conversation.
When passed into law, it would constitute an easily adaptable temperate for use in near or far future, for addressing potential issues in the exploration for, and exploitation of other earth materials resources. Wherever located within Nigeria and her territorial waters, that may in due course surge into prominence, as is predictable for some solid minerals.
It has been rightly observed that any research may be useful in providing new forms of enlightenment about the subject matter, but it would not be of real value without proposing specific ideas as solutions to the problems discussed.1
In keeping with the need to propose solution to the identified problems, the following recommendations indicated above, the following recommendation made. First in view of the recommended repeal of the Petroleum Act, the law that shall govern the oil and gas industry must recognize and affirm the community ownership of resources, or otherwise create an institution through which Funds can be release to these communities independently from Federal and State Governments. Accordingly, the provisions of the deep offshore and inland basin production sharing contracts Act2 should be reviewed to reflect the interest of the various parties that are involved in oil and gas production (federal, state and local Government producing companies and the communities).
There is no question that certain off related statutes, especially the Land Use Act3, have contributed immensely to the near crisis situation in the Nigeria Delta region Before its promulgation 1978, there was no evidence of any serious against the government and oil company activities notwithstanding that the Petroleum Act vested the entire ownership of oil in the Federal Government.
The pre-existing land tenure (customary land law) enabled the local people to participate to a certain degree in petroleum operations. The Land Use Act ended this important position. More than this, the Act has brought about a denial of compensation to persons as a result of oil operations. So the Act operates unfairly on the local people, compelling protests especially from person who have lost their means of livelihood as a result of oil operations. Accordingly, in order to end the protests, it is highly advisable to repeal that the Act which the people consider obnoxious and oppressive, and this is hereby recommended, it is further recommended that in the interim, until the said laws are repealed the oil and gas royalties should be paid to the such-producing communities. Gas flaring should be completely prohibited. The various operating companies should be made to adopt and implement technology I force in the other jurisdictions where they operate without flaming gas. The Gas Re- injection Act and subsidiary regulations made there under should be repealed accordingly. Henceforth, submission of a viable scheme for gas utilization must be a condition precedent to the grant or renewal of licenses or leases to any oil and gas- producing company seeking to continue or commence operation in the region. In the interim, the gas flare penalties should hence forth be paid to the respective communities where the “criminal but state condoned” act is perpetrated. This is the only equitable treatment one could reasonably expect to have while gas flaring persists.
It is an undiluted truth that most of the points recommended above have taken care in the proposed Petroleum Industry Bill, where in the proposed petroleum industry bill, where the bill has a clear list of some of enactment to be consolidated into one single legislation. But still, following the poor move shown or expressed by the National Assembly over this bill, we cannot wait and fold our hand and allowed these injustices and environmental degradation to continue.
We call for an interim legislation by the Federal Government through the national assembly to address these issues pending when the controversial Petroleum Industry Bill will become a Law in Nigeria.
Still on Petroleum Industry Bill, we recommend to the Federal Executive Council and the National Assembly through a proper research and study cum examination of this bill(Petroleum Industry Bill) the following; (a)That the Nigerian Geological survey Agency, a parastatal of the Ministry of Mines and Steel Development is the organ of the Federal Government of Nigeria charged with the acquisition, collation packaging, achieving, administration, dispensing of global data for multifarious developmental and academic/research purposes. The new law should provide that the agency be availed of all subsurface data acquired by petroleum companies operating in all the acreages covering the inland basis.
(b) The Nigerian Mining and Geosciences Society (NMGS), and Nigerian Association of Petroleum Explorationists (NAPE) are two professional associations whose memberships consist of geologists, geophysicists, geochemists, petroleum and mining engineers, practicing in the Upstream Petroleum Industry.
It is strongly recommended that these two geosciences associations be represented on the Board of the Upstream petroleum Regulatory Agency.
Indeed, by the Council of Nigerian Mining Engineers in Nigeria except he is registered by the council. Registered mining engineers and geoscientists are all embers of the NMGS.
(c) Under part III, section 204 of the Bill: Abandonment, decommissioning and Disporal, a part of the provisions should stipulate that extra care must be taken to ensure that after a well has been decommissioned, there is no chance, due to depressurization, that the oil rises in the well to pollute the ground water. Should such pollution occur any time after the decommissioning, the responsible operating company shall be called to repair the damage. In the event that the said company has left Nigeria, the Upstream Petroleum Inspectorate shall have the responsibility of making good the damage.
(d) The new act should make specific provision on a terminal date for gas flaring and venting. We recommend/suggest not more than one year from the effective date of the Act. Penalty for violations should be the current market price of gas flared places 25%. Where a company is fined for a third time, the chief executive of the company should in addition to the penalty be sentenced to six months imprisonment without the option of fine.
At the outset, the study attempted to find out as between the Federal Government and the littoral oil producing states, who owns not only the land but also oil and gas located onshore and in the beds of the territorial sea and the continental shelf of Nigeria.
It sought to carry out this task by analyzing the various customary, legislative and constitutional provisions relevant to the subject. There is little doubt that as the law stands today, ownership over hand as well as oil and gas located both onshore and offshore is vested in the Federal Government of Nigeria.
Oil production in Nigeria started about fifty years ago many years after the search for it began. Since this time there has been consistent growth in the operation and the laws. Because all the companies operating in Nigeria at the initial stage were foreign, the establishment of the National Oil Company was meant to improve Nigeria’s interest in oil exploration in the country. Also the utilization of natural gas changed the lands /scope of the industry in Nigeria with major steps being taken to through the liquefied natural gas project.
A number of statutes have bee made to regulate the petroleum exploration in Nigeria form the colonial period. It is seen however, that the laws at the time were discriminatory against the indigenous peoples of Nigeria in whose places these oil were found. These provisions similarly made discovery of oil exclusive reserve of the British companies and therefore delayed discovery of oil in commercial quantity in the country as only the companies of British origin were licensed to conduct exploration activities in the country. Since the enactment of the Petroleum Act there have been fundamental changes by the vesting of the ownership of petroleum found in Nigerian in the state.
There are some deficiencies in some issues that affect the industry which has called for a reform in statutory regulations.
The result is the introduction of the Petroleum Industry Bill still under consideration in the National Assembly.
The fact that petroleum is capable of being owned is a truism. It is only the form in which it can be owed that has generated a variety of opinions form experts each of the theories is subject to peculiar circumstances of the country and the governments who are responsible for the management of the national resources of that particular country. From a general view oil is capable of absolute ownership while on the other hand it may be said that it is not capable of absolute ownership because of its unstable character.
The vesting of ownership of petroleum and natural gas in the state as demonstrate under certain Nigerian statutes have a far reaching effect on the rights of the citizens. It is an exercise of domanial right over the resources in the state.
The government assumes full and total control to the exclusion of any other person. While this may be a desirous position when viewed from the point that mineral resources explored would be jointly used for the over all benefit of the entire country, it is to be noticed that the communities and clans that have direct linkage to the land in which these resources are four are more often neglected in the sharing of the income from these resources.
Traditional concession being the earliest type of concession was able to assist the international companies to ride brought shod on the oil producing countries who are usually wildling and ready to hand over large areas of land to the companies for exploration often for a long period of time. Under this system also the terms of contract were mere favouable to the oil companies and their parent countries.
However with the changing times and awareness by the oil producing countries, concession began to include more favourable terms under the modern concession, which often come in different modes.
Petroleum Production Contracts are discussed in this work highlighting their various features. These arrangements are meant to apply to production of oil in the countries, most of which are not advanced in technology to engage in direct production of oil by themselves. This is also due to the fact that oil production requires huge sums of money that mostly only the international oil companies supported by their home countries are able to finance.
Apart from the production contacts the participation agreements depict the quest of the country to have some level of control on the oil production. In Nigeria like many other oil producing countries, NNPC is the vehicle by which the country engages in oil production with the international oil companies. The objectives of the parties are of paramount consideration in determining which type of participation agreement to enter into. Each of the licences and lesses have certain elements common in them. The holder of an oil prospecting licence after making the necessary prospecting activities monthly on the surface of the ground, proceeds to apply for the oil exploration licence and then the oil mining lease. Each of these licences or lease is granted subject to the fulfillment of the requirements laid down by law.
The study advocates the establishment of ‘Fund’ with a set of rules and principles such as the prudent investor rule, insulation form political pressures and accountability to the public. The fund which should be independent of the governor, and the legislature, should be politically neutral. The people must be given an opportunity to participate in policy development and management of the fund.
We advocate direct and equal distribution of dividend paid form the fund to all citizens of the Niger Delta region. This will not only raise the incomes of many rural families, but would give each citizen a stake in oil revenue and thus give them an incentive to oppose empty treasury syndrome.
The present state of the Niger Delta environment is evident of the inability of both the government and the industry to effectively handle environmental problems. This calls for an enhanced and formalized role for NGOS and civil society in environmental governance through a strategic partnership involving through a strategic partnership involving the government, the industry and the civil society.Furthermore, the various environmental, oil and gas laws and regulations have been identified as the root cause of the current environmental problems in the region. This study actually x-ray aims and objectives introduced by the Petroleum Industry Bill, which focused much on settling the lingering crisis is Nigerian Petroleum Industry. The introduction of the PIB is a step in the right direction that the Bill will come out of the National Assembly legislative process the way or as it was set in by the president of Nigeria. Stakeholder input and world-wide best practices are expected to guide the National Assembly in passing a petroleum industry legislation that meets the demands of this century and also satisfies the strategic interest of the nation. Our expectation is that they National Assembly will treat the Bill as urgent and very important and ensure that it is passed and take effect before the end of 2013.
1 Ikein, T.A., The Impacts of Oil on a Developing Country; the Case of Nigeria, 1st ed, New York
university press, 19990) at p.179.
2 Deep Offshore and Inland Basin Production Sharing Contracts Act cap D3 IFN 2010.
3 Land Use Act Cap L.5 LFN 2010.
 However, over 100 primary and subsidiary Laws and legislations passed by the successive governments in Nigeria have now been consolidated into 16 standard Laws in the Petroleum Industry Bill (“PIB”) now awaiting ratification, before the National Assembly.
 Elsevier E.I., The Petroleum Handbook, 6th ed., (Netherland; Shell International Petroleum Ltd, 1993) PP. 5-8.
3 Mineral Oil Act Cap P.120 1914.
4 Duru, Onyekachi Wisdom, History of Oil and Gas, [www document] URL http://www.ssrn.org visited 03-06-2012.
5 Ademuyi D.H., “Ownership and control of Natural Resources”, Vol. 2 , (2004), Nigerian Bar Journal, PP. 419 – 422, p. 423
6 Ajomo M.A., “Ownership of Oil and the Land Use Act” Vol.2 (1982) Nigerian Current Law Review, PP. 330-339.
7 Ibid. P. 340.
8 Worika I.L., “Environmental Law and Policy of Petroleum Development”, Vol.3, (2003), Anpez Centre for Environment and Development, P. 23.
9 Etiserentse, G., Nigerian Petroleum Law, 2nd (Benin; Dedrew Publishers, 2004), P.35.
10 Ike, O., The Lingering Crisis in Nigeria’s Niger-Delta and Suggestion for a Peaceful Resolution, http://www.cddorg.uk/resources/workingchapter/nigerdeltaCng.htm visited 08-10-2011.
11 Petroleum Industry Bill, 20012 http://www.nnrs.org visited 23-03-2013.
12 Atsegbua L., Oil and Gas in Nigeria, Theory and Practice, 2nd ed., (Benin; New Era Publishers,2004) P.45.
13 UNEP and E&P Forum, “Guidelines on Environmental Management in Oil Exploration and Production” Vol.5(1997), E&P Forum, P.5
14 Petroleum Industry Bill,2012.
15 Ibid, Part II.
16 Efikerentse G.K., Nigeria Petroleum Law, 1st ed., (Lagos; Macmillan, 1985), P.43.
17 Frynas, G.M., Oil in Nigeria: Conflict and Litigation between Oil Companies and Villages Communities,
2nd ed., (London; Transaction Publishers, 2000), P. 9.
18 Ahmand K. S., Nigeria: The Political Economic of Oil, 1st ed., (London; Oxford University Press, 1994),
19 Akpan, G. S. “Nigeria’s LNG Problems and Prospects” vol.70, (1997) . G. T. L. R. P. 264
20 Omoregbe, Y. “The Question of the Ownership of Natural gas in Nigeria” Vol.3, (1988/89) , O. G. L. R.
21 Omotola, J. A, “Environmental Laws in Nigeria including Compensation” Vol.2,(1990) (Lagos: Faculty
of Law, University of Lagos), p.23.
22 Abiama G., The Challenges of Democracy and Natural Resources Management for Sustainable
Development, http://www.earthrights.net visited 03-07-2010.
23 Aluko, M. E. On the Resource Control Battle: From Dichotomy to Quartonomy, from Isopatial to Isobaths in Nigeria, http://www.ngex.com/personalities/voices/mweozi903baluko.html, visited 26-08-2010.
24 N’ang’a, S. M., S. N. Nichols and D. Monahan, The Role of Bathymetry data in marine Cadastre: Lesson
from the Proposed Muequash marine Protected areas , htt://www.thsoa.org/hy03/9a 1.pdf visited 27.06.07
25 N’ang’a, S. M., S. N. Nichols and D. Monahan The Role of Bathymetry data in marine Cadastre: Lesson
from the proposed Muequash marine protected areas, htt://www.thsoa.org/hy03/9a 1.pdf visited 27.06.07
26 Attorney General of the Federation v. Attorney General of Abia State &35 ors (2002) vol4.,FWLR, (Prt.102) P.1
1 Petroleum Act Cap P.10 LFN 2010.
2 Section 44 (3) of 1999 Constitution of Federal Republic of Nigeria (as amended).
3 Sections 1,2&3 of the Exclusive Economic Zone, Cap.116 LFN 2010.
4 Chukuermerie A.I., New Dimension in Commercial and Oil & Gas Law,1st e.d., (Port Harcourt, Law House Books,
2007) PP. 684 -704.
5 Ademuyi D.H., ‘’Ownership and Control of Natural Resources’’, vol.2 N0.4(2004) Nigerian Bar Journal.
Vol. 2 No. 4 (2004), pp. 419 – 422, p. 423.
6 Nwankwo G.O., OPEC and Nigeria: To be or not to be, 1st ed., (:Lagos; African University Press,1983),
7 Duru, Onyekachi Wisdom, History of Oil and Gas [www document] URL http://www.ssrn.org visited 10-
8 Mgbolu K.A., Petroleum Act, with some basic concept in oil and gas law in Nigeria, 1st e.d., (Abakaliki;
Wiilyrose & Applied Publishing Co., 2011), PP.51&52.
9 Petroleum Act Cap P.10 LFN 2010.
10 Obi C.I., “ The Impact of Oil on Nigeria Revenue Allocation System ; Problems and Prospects for
National Reconstruction ,in Federalism and Political Restructuring in Nigeria”, Vol. 1 (1998), Spectrum
11 See Gidado M. M. “A look at the Legal and Management Structures of the Newly, Commercialized
NNPC”, Vol. 3.(1994) UMLJ, P.3.
12 Aja C.O., Should Nigeria Quit OPEC? 1st ed.,(Abakaliki, Itua Press, 2003), PP.1-9.
13 OPEC, Resolution XVI, 90 of June25, 1986 OPEC Resolution Vol. 2. P. 12
14 Kemper K., “The Concept of Permanent Sovereignty and its Impacts on Mining Contracts”, Vol.
2(1982), Mining Journal Books, P.31.
15 See Section 34(a) of the Petroleum Act Cap 350 LFN 1969, Now Cap P. 10 LFN 2010.
16 See Gidado M. M. Petroleum Development Contracts with Multinational Oil Cooperation.
17 Gidado M.M.,”The Legal Framework for Energy Resources Development in Nigeria”, University of
Maiduguri Law Journal, Vol.7(2004), pp.159-164.
18 Zakariya I. S. “State Petroleum Companies”, Vol.12(1998) JWTL at P. 28.
19 Focus on the Nigeria oil Industries. Unpublished Ph. D. Thesis-UNIVERSITY Warwick, England, 1992
20 See Ogunlami, G. K. N., An Analysis of Nigerian Petroleum Profits Taxation, htt://www.ssrn.org, visited
21 See The Report of the Tribunal of Enquiry into Crude Oil Sales,1978, Federal Government Press Lagos
22 Subroto. Business Times, Tueday September 23, 1990, p.14.
23 Omorogbe, U., “Legal Frame Work for Petroleum Production in Nigeria, Vol.5(1987), JENRI, p. 283
24 Etikerentse, K.G., Nigeria Petroleum Law,1st ed., (PortHarcourt,Macmillian,1985), p.4.
25 See NNPC/AFIP Risk Service Contract Clause 8 (9)
26 Kupolokun F., (2006), “Challenges and Future Prospects of Oil and Gas Industry”, The Guardian,
Lagos, Wednesday, may 31, 2006.
26a Mogbolu A.K., Petroleum Act, with some other basic concepts in oil and gas law in Nigeria 1st
(Abakaliki; Willyrose& Appled Publising Co., 2011), P. 51.
27 Mgbolu K.A., op. cit, P.52
28 Olisa M., Nigerian Petroleum Law and Practice, 1st ed., (Lagos: Jonia Ventures Ltd., 1978), P.67.
29 Olisa M., op. cit, P.68.
30 Oilsa M., op. cit, P.71.
31 Akintola R., Oil In Nigeria –A Study In Political Economy of Development, 2nd ed., (Lagos: Macmillan
Publishers Ltd., 1978) P. 34.
32 Akintola R., op. cit p36.
33 Duru, Onyekachi Wisdom., History of Oil and Gas [www document] URL http://www.ssrn.org visited
34 Now part of Chevron Corporation
35 Membership also includes Qatar 1961, Indonesia& Libya 1962, Abul Dhabi 1967, Algeria1969,Nigeria
1971 and Ecuador 1973.
36 Diamond L., Building a System of Comprehensive Accountability to Control Corruption.
http:www.stanford.edu/idiamond/papers.html visited 20-03-2011.
37 Section 6(1) of the Mineral Oil Ordinance N0. 17 of 1914.
38 Ajomo M.A., “Law and Changing Policy in Nigeria’s Oil Industry”, Vol.2(1987), University of Lagos
39 This was made possible by the repeal in 1925 of the said Restrictive and Prohibitive Section 6(1) (9) of
the Mineral Oil Ordinance.
40 Section. 1(1) Minerals and Mining Act 1999 cap M12, Laws of the federation of Nigeria, 2004 (formerly
Minerals and Mining Decree No. 34 of 1999) Now Cap 162 LFN 2010., stated that all minerals are held
by the federal Government “for and on behalf of the people of Nigeria”.
41 Sometimes a Head of State is Sectoral times richer than the entire country through such embezzlement.
This was the relationship of poor democratic republic of Congo and President Sese Sekou. While
Nigerian weaned in absorcate poverty and a debilitating debt burden the late Head of State Gen. Sanni
Abacha was bleeding the courtly through corruption and stashing away millions in foreign currents, in
foreign bank accounts. Since his death his family is said to have returned well over & 10 bn dollars to
state coffers following a shallow probe which may not even have covered up to one tenth of the man’s
42 For 52 years that Nigeria has been independent, she has suffered unmitigated military dictatorship for
about 30 of those years. Even the present civilian government manifested serious military and dictatorial
tendencies in the first four years. The country in several respects still has a military hangover.
43 The only other things that has, after the civilian war, had a negative impact on the peace and unity of the country as much as or almost as the Annulment of the 1993 Presidential Elections was the recently defeated constitutional amendment calculated to secure a third form for President Obasanjo. It is instructive that both events just like many other thing that have plagued Nigeria, nay Africa, were traceable to the I. selfish and indeed evil sit-tight ambition of some people in power.
44 For instance in 1988 oil exports earned US & 6,319m while non-oil earned only US & 612.7m. See table 1 in E.U. Olisadebe, the Management of Nigeria’s Balance of payments under the Structural Adjustment programme: Problems and Prospects in CBN’s Financial Rev. Vol. 31 no 4. Dec. 1993 P. 351. 364.
45 Omorogbe Y., ”The Legal Framework for Oil Production in Nigeria”, Vol.2(1986), Journal of Economic
and Resources Law, P.10.
46 If with the enormous sums Nigeria earns form oil revenue (including a completely unanticipated & 12bm
Windfull during the gulf crisis of 1991), and another substantial windfall ins 2001) the country is as poor as she is (the 16th Poorest country in the world), Mainly due to economic mismanagement, it is fearful to imagine what would have been her experience if she did not have oil and gas resources. It is reasonable to wonder if by now there would indeed still have remand any corporate entity called Nigeria. It may well be however that if the oil boom and inn accountable military regimes did not occur. The country would not have experienced the level of ignorant leadership or rulership, corruption, impunity and management with which she has been afflicted since the 1970s.
47 See Tell Newsmagazine of June 4, 1998.
48 Ajomo M.A. “Ownership of Oil and the Land Use Act” Vol.2(1982), Nigeria Current Law Review, P.331.
49 This is also notwithstanding the fact that under the same article, ‘private property shall not be expropriated except for reasons of public use and subject of payment of indemnity”. Subsection (1) of the article equally provides that only Mexicans have “the right to acquire ownership of lands” etc.
50 Article 11 of Soviet Union Constitution.
51 Mines and Mineral Act No.32 of 1996.
52 Hydrocarbon Licensing Directive 94/22/Ec(1994) QTL 1640/3.
53 Bernard v. Monongahela(1918) 12m & W 324: 152 ER 1223.
54 Eshingbayi Eleko V. Government of Southern Nigeria (1931 ) AC. 662.
55 I.e preparatory to the enactment of the Petroleum Act, 1918.
56 This was reenacted as the Petroleum Act of 1918 or provided the material for the later.
57 Mineral Act Cap. 226 law of the Federation of Nigeria 1990, repeated by the Minerals and Mining Act Cap 162 LFN 2010.
58 The Act, including the Section, had been amended or extended severally between 1946 and 1990, by such Legislations as Act No. 2of 1948, of 1954, 13and of 1956, 1 and 76 of 1955, 120 of 1957, and 4 and 52 of 1958.
59 Petroleum Act Cap. P.10, Laws of the Federations of Nigeria, 2004. Formerly the Petroleum Decree No 51 of 1969. Now Cap P.10 LFN 2010.
60 I.e the federal revenue sharing formula by which the people from whose place a particular revenue devices is given a proportion of the revenue while the other governments of the Federation share the rest with the federating units. This is what the Niger Delta people are asking for with respect to oil and gas resources.
61 Under the military regimes a country of military people constituted themselves into the executive and legislature thereby assuming the role of the National Assembly under the section. The over bearing right of the federal government to all natural resources in line with the constitutional provision was recently affirmed in the celebrated case of Attorney General of the Federation v. Attorney General of Abia State & 35 Ors [2 002] FWLR (pt.102) 1.
62 Land Use Act Cap. L5, Laws of the Federation of Nigeria, 2010.
63 Exclusive Economic Zone, Cap. E17 LFN 2010.
64 See S. 2 Petroleum Act Cap P.10 LFN 2010 and S. 16 and 164 Nigerian Mining Corporation Act cap 317 Laws of the Federation of Nigeria,2010.
65 Supplement of Official Gazette N0. 62 Vol. 56,1969.
66 For Instance Nigerian Shell Company was granted concessionary rights in respect of the entire mainland of Nigeria in 1938.
67 For Instance Nigerian shell Company was granted concessionary rights in respect of the entire mainland of Nigeria in 1938.
68 Cattan H. The Law of oil concessions in the Middle East and North Africa (1976) P. ix.
69 Chukwuemrie A.I., New Dimension in Commercial and Oil & Gas in Nigeria, 1st ed.,(Port Harcourt: Law House,2004), p.653.
70 General Assembly Resolution 1803(xvii)21st Session Supp. No.17 (1962).
71 Uchegbu A.U., The Doctrine of Permanent Sovereignty over Natural Resources. Processing’s of the
National workshop on petroleum Law, Department of Jurisprudence and International Law, University of
Lagos (1981) p.18.
72 Sloan, “The Binding Force of a Recommendation of the General Assembly of the united Nations”. Vol. 25 British Year Book of International law. (Byil) (1948) P. 1; see also Fitzmaurice, the Law and procedure of the ICJ 1951-1954, 34 BYIL (1958) C/F Bowett, the law of international institution, Steven (1975) p. 28; Murghraby m. permanent sovereignty of the Middle East oil concussed (1966) p. 161.
73 Subsequent Resolutions referred to States, see for example the Resolution 3171, 1973 p. 328.
74 Akinsanya A., the Expropriation of multinational property in the third world, Praeger (1980) P. 101, it is observed that Nigerian citizens do not own any equity, shares in any foreign-oconed oil producing companies in Nigeria today inspired of the Nigerian enterprises promotion Act,
75 Theodoropoulos C. “The Role of Arbitration in settlement of oil an divestment Disputes”, vol. 1(1984) Proceedings of the National Workshop on Petroleum Law, Department of Jurisprudence and International law, University of Lagos, P. 18.
76 Starke J.G., Introduction to International Law ,8th Ed.,(London; Butterworths,1984), P. 121.
77 General Assembly Resolution 1803 (xvii) iii, 17th Session Supp. No. 17 (1962)
78 General Assembly Resolution 2259 (xi) at the 23th Session, December, 1966.
79 General Assembly Resolution 2159 (xxi) at the 25th Session, December 1966.
80 Akinbobola, A., Should Nigeria be in OPEC? 1st ed.(Lagos;,Nigeria Institute of Internaitnal Affairs, 1979), P.I.
81 Suboro. Business Times,. Monday September 17,1990, P. 11.
82 Suboro. Business Times,. Monday September 17,1990, P.12 .
83 Ibid p. 13S
84 Okeke C.N., The Theory and Practice of International Law in Nigeria(Enugu, Fourth Dimension
Publishers,1968), P. 54.
85 Aja C.O., Should Nigeria Quit OPEC? 1st ed.,(Abakaliki; Itua Press, 2003), P.9.
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