Guardian

THE Senate panel on petroleum resources that worked on the Petroleum Industry Bill (PIB), has recommended new system of acreage management, licensing lease, to improve management of oil resources in the country.

Under the proposal, the National Petroleum Inspectorate, which the new law seeks to establish, will adopt a national grid system for petroleum acreage management and “the basic unit shall be a parcel of two by two kilometres, subject to adjustment zones and the national boundary, in which case, a parcel shall be the part of the parcel in the adjustment zone or on Nigerian territory.”

The clause also says that the grid system shall also be used for the definition of licence and lease areas. “The grid system shall for the definition of license and lease areas, relinquishments, bid procedures, identification of well locations, petroleum conservation measures and such other regulatory and acreage management procedures as are applicable in the opinion of the Inspectorate.”

On classification of licences and leases, the proposed law says: “There shall be the following licences or leases- a licence to be known as petroleum exploration licence to carry out exploration on a non-exclusive basis; a licence to be known as petroleum prospecting licence to prospect for petroleum; and a lease to be known as petroleum mining lease, to search for, win, work carry away and dispose of petroleum”.

Clause 197 defines the process of issuance of licence and lease saying: “In accordance with the provisions of this Act and with respect to acreage vested in the commission and subject to the approval of the president, the minister on the recommendation of the commission, may grant a petroleum prospecting licence or petroleum mining lease and where the commission decides to grant such licence or lease, [a] it shall be to the winning bidder pursuant to bid process prescribed in section 214, provided the bid winner has complied with all requirements specified in the bid process.”

On the issue of confidentiality clause, section 198, which the Senate panel included, says: “Subject to the provision in subsection [3] of this section of this Act or the provisions of any other relevant law, confidentiality clauses or other clauses contained within any licences, leases, agreements or contracts for upstream petroleum operations that are for the purpose of preventing access to information and documents by third parties in respect of any payments of [a] royalties and [b] fees and bonuses of whatever sort, shall be null, void and of no effect’’

The bill restricts a petroleum exploration licence to a period of three years. “A petroleum exploration licence shall be for not more than three years and shall not include any right or option to win, get, work, store, carry away, transport, export or otherwise treat petroleum discovered in or under the said area.”

The bill defines the duration and area of petroleum prospecting licence in clause 200, saying “a petroleum prospecting licence shall be with respect to onshore and shallow water areas, for a duration of not more than seven years, consisting of an initial period of three years, a renewal of two years and a possibility for appraisal of any discoveries until the termination of the licence or such later period as may be granted by the Inspectorate.”

This would be subject to due representation of lease and the initial petroleum prospecting licence area shall not be more than 500 square kilometres and not to be one parcel and with respect to deep water areas and inland basins for a duration of not more than 10 years.”

It will consist of “an initial period of five years, a renewal of three years and a possibility for appraisal of any discoveries until the termination of the licence and the initial petroleum prospecting licence area shall not be more than 1000 square kilometres and not less than one parcel.”

Clause 207 of the bill approved by the Senate panel requires all existing and future petroleum mining leasees to comply with the new and future gas obligations in the country. “All existing and future mining leasees shall comply with the domestic gas supply obligations during such periods that the Inspectorate has determined that lessees shall supply the domestic market for such periods of time and in such manner as the Inspectorate may determine’’.

It added that where petroleum mining is not productive within five years from the date it was granted, it would be revoked.