PETROLEUM ACT

PETROLEUM ACT

ARRANGEMENT OF SECTIONS

SECTION

1. Vesting of petroleum in the State, etc.

2. Oil e xploration licences, oil prospecting licences and oil mining leases.

3. Refineries.

4. Control of petroleum products.

5. Offences in connection with the distribution of petroleum products.

6. Price control.

7. Rights of pre-emption.

8. Power and duties of public officers.

9. Regulations.

10. Discharge of obligation to make payments.

11. Settlement of disputes by arbitration.

12. Delegation of powers.

13. Offences.

14. Repeals, amendments, transitional and savings provisions.

15. Interpretation.

16. Short title and commencement.

SCHEDULES

FIRST SCHEDULE

Oil exploration licences. oil prospecting licences and oil mining leases

SECOND SCHEDULE

Rights of pre-emption

THIRD SCHEDULE

Repeals

FOURTH SCHEDULE

Transitional and savings provisions

An Ac t to pr ovi de for the e xpl or ati on of petrole um fr om the terri tori al wate rs and the c ontinental shel f of Nigeri a and to vest the ownershi p of, and all on-

shore and off-shore re ve nue fr om pe tr ole um resources deri vable there fr om in

the Fe der al Gover nment and for all othe r matters inci de ntal there to.

[27th November, 1969]

[Commencement.]

1. Vesti ng of petr ole um in the State

(1) 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.

(2) This section applies to all land (including land covered by water) which-

(a) is in Nigeria; or

(b) is under the territorial waters of Nigeria; or

(c) forms part of the continental shelfs; or

[1998 No. 22.]

(d) forms part of the Exclusive Economic Zone of Nigeria.

(3) In this section references to “territorial waters” are references to the expression as defined in the Territorial Waters Act.

[Cap. T5.]

2. Oil e xpl or ati on licences, oil pr os pec ting lice nces and oil mi ning le ases

(1) Subject to this Act, the Minister may grant-

(a) a licence, to be known as an oil exploration licence, to explore for petroleum;

(b) a licence, to be known as an oil prospecting licence, to prospect for petroleum; and

(c) a lease, to be known as an oil mining lease, to search for, win, work, carry away and dispose of petroleum.

(2) A licence or lease under this section may be granted only to a company incorpo- rated in Nigeria under the Companies and Allied Matters Act or any corresponding law.

[Cap. C20.]

(3) The provisions of the First Schedule to this Act shall, in so far as they are applica- ble, have effect in relation to licences and leases granted under this section.

[First Schedule.]

3. Re fineries

(l) No refinery shall be constructed or operated in Nigeria without a licence granted by the Minister.

(2) Licences granted under this section shall be in the prescribed form and shall be subject to the prescribed terms and conditions or, where no form is prescribed or no terms or conditions are prescribed, in such form or subject to such terms and conditions as may be decided or imposed by the Minister.

(3) There shall be charged in respect of every licence granted under this section such application fees and such other fees as may be prescribed.

(4) The provisions of this section are additional to the provisions of the Hydrocarbon Oil Refineries Act.

[Cap. H5.]

4. Control of petroleum products

(1) Subject to this section, no person shall import, store, sell or distribute any petro- leum products in Nigeria without a licence granted by the Minister.

(2) Subsection (1) of this section shall not apply in respect to-

(a) the storage, sale or distribution of not more than 500 litres of kerosene, and such other categories of petroleum products as may be exempted from the ap- plication of subsection (1) of this section by the Minister by order published in the Federal Gazette;

(b) storage of petroleum products undertaken otherwise than in connection with the importation, sale or distribution of petroleum products.

(3)Licences granted by the Minister under this section shall be subject to the pre- scribed terms and conditions where no form is prescribed or no terms or conditions are prescribed, in such form and on such terms and conditions as may be decided or imposed by the Minister.

(4) There shall be charged in respect of every licence granted under this section ap- plication fees and such other fees as may be prescribed.

(5) The Minister may by order published in the Federal Gazette delegate the power to grant licences under this section to such persons or authorities in a State as he may deem fit.

(6) Any person who does, without the appropriate licence, any act for which a licence is required under this section shall be guilty of an offence and shall be liable on convic- tion to imprisonment for two years or a fine of N2,OOO or both, and, in addition, the

petroleum products in respect of which the offence was committed shall be forfeited.

5. Offences in connection with the distribution of petroleum products

(1) If any oil marketing company in pursuance of any agreement or arrangement between it and any other oil marketing company borrows any petroleum products from any other oil marketing company and fails to return to that company an equivalent quan- tity of the petroleum products borrowed within two weeks of the date on which the petroleum products were borrowed, the first-named oil marketing company shall be guilty of an offence and on conviction shall be liable to a fine of N100 per metric ton of the petroleum products concerned.

(2) If any oil marketing company at any time registers only unpumpable stock in re- spect of petroleum products stored in its depot at Apapa, Lagos, that company shall be guilty of an offence and shall on conviction be liable to a fine of N5, 000 for each day during which only unpumpable stock is registered.

(3) In this section, “oil mark eti ng c ompany” means any company in respect of which a marketer’s licence has been granted by the Minister under section 4 of this Act.

6. Price c ontr ol

(1) The Minister may by order published in the Federal Gazette fix the prices at which petroleum products or any particular class or classes thereof may be sold in Ni- geria or in any particular part or parts thereof.

(2) The Minister may by notice in writing require any person appearing to him to have or to be likely to have access to information which is relevant to the fixing of any

prices of the kind mentioned in subsection (1) of this section to supply that information to the Minister, and any person so required shall be legally bound to use his best endeavours to supply the information accordingly.

7. Rig hts of pre -e m pti on

(1) In the event of a state of national emergency or war the Minister shall have the right of pre-emption of all petroleum and petroleum products obtained, marketed or other- wise dealt with under any licence or lease granted under this Act.

[1998 No. 22.]

(2) The provisions of the Second Schedule to this Act shall have effect in relation to the right mentioned in subsection (1) of this section.

[Second Schedule.]

(3) Any person who, without reasonable excuse (the burden of proof of which shall lie on him), fails to comply with a requisition made by or on behalf of the Minister under paragraph 1, 2 or 7 of the Second Schedule to this Act, or fails to conform to or obey a direction issued by the Minister under paragraph 8 of the Second Schedule to this Act, shall be guilty of an offence and on conviction shall be liable to a fine not exceeding N2,000

[Second Schedule.]

(4) Any person who obstructs or interferes with the Minister or his servants or agents in the exercise of the powers conferred on the Minister by paragraph 8 of the Second Schedule to this Act shall be guilty of an offence and on conviction shall be liable to a tine not exceeding N200 or to imprisonment for a period not exceeding six months, or to both.

(5) The Minister may, for the purpose of subsection (1) of this section, advise the President to declare a state of national emergency if the Minister is satisfied that, as a result of the low level of availability of petroleum and petroleum products-

Ca) there is an actual breakdown of public order and public safety in the Federation or any part thereof; or

(b) there is a clear and present danger of actual breakdown of public order or pub- lic safety in the Federation or any part thereof.

[1998 No. 22.]

(6) The President may, on receiving the advice of the Minister under subsection (5) of this section, declare a state of national emergency under the provisions of the Consti- tution of the Federal Republic of Nigeria 1999 for the purpose of subsection (1) of this section, if he is satisfied that it is necessary to do so.

[Cap. C23. 1998 No. 22.]

8. Po wers and duties of public officers

(1) The Minister-

(a) shall exercise general supervision over all operations carried on under licences and leases granted under this Act;

(b) shall report annually to the Federal Government on the progress of the oil in- dustry in Nigeria;

(c) shall have access at all times to the areas covered by oil exploration licences, oil prospecting licences and oil mining leases, and to all refineries and instal- lations which are subject to this Act, for the purpose of inspecting the opera- tions conducted therein and enforcing the provisions of this Act and any regu- lations made thereunder and the conditions of any licences or leases granted under this Act or under any corresponding law for the time being in force in Nigeria;

(d) may arrest without warrant any person whom he finds committing, or whom he reasonably suspects of having committed, any offence under this Act or any regulations made thereunder, and shall hand over any person so arrested to a police officer with as little delay as possible;

(e) may by notice in writing require the holder of a licence or lease granted under this Act or any contractor working for the holder (or any servant or agent of the holder or the contractor) to appear before him at a reasonable time and place to give such information as he may require about the operations being conducted under the licence or lease, and every person so required to appear shall be legally bound to comply with the notice and give the information;

(f) may direct in writing that operations under a licence or lease granted under this Act shall be suspended in any area until arrangements have been made which in his opinion are necessary to prevent danger to life or property;

(g) may direct in writing the suspension of any operations which in his opinion are not being conducted in accordance with good oil field practice; and

(h) may direct in writing the suspension of any operations where in his opinion a contravention of this Act or any regulations made thereunder has been or may have been or is likely to be committed.

(2) The Director of Geological Survey shall have access at all times to the areas cov- ered by oil exploration licences, oil prospecting licences and oil mining leases for the purpose of inspecting geophysical and geological operation therein.

9. Reg ul ati ons

(1)The Minister may make regulations-

(a) prescribing anything requiring to be prescribed for the purposes of this Act;

(b) providing generally for matters relating to licences and leases granted under this Act and operations carried on thereunder, including-

(i) safe working;

(ii) the conservation of petroleum resources;

(iii) the prevention of pollution of water courses and the atmosphere;

(iv) the making of reports and returns (including the reporting of acci- dents);

(v) inquiries into accidents;

(vi) the keeping and inspection of records, books, statistics, accounts and plans;

(vii) the measurement of production; and

(viii) the measurement of crude oil delivered to refineries;

(c) regulating the construction, maintenance and operation of installations used in pursuance of this Act;

(d) regulating refineries and refining operations, and, where two or more refineries are in operation, specifying-

(i) the proportion or quantity of crude oil to be supplied to each refinery;

(ii) the share of each refinery in the total market; and

(iii) the prices of refinery products;

(e) regulating the importation, handling, storage and distribution of petroleum, petroleum products and other flammable oils and liquids, and in particular (without prejudice to the generality of the t’oregoing)-

(i) prohibiting the importation or exportation of petroleum or petroleum products except at specified ports or places;

(ii) prescribing the notice to be given (and the person by whom the same shall be given) on the arrival at a port of a ship carrying petroleum or petroleum products as cargo;

(iii) defining dangerous petroleum and dangerous petroleum products, pre- scribing anchorages for ships carrying dangerous petroleum or danger- ous petroleum products as cargo and requiring those ships to proceed to and remain at those anchorages;

(iv) regulating the loading, unloading, transport within a port, landing, trans-shipment and shipment of petroleum and petroleum products;

(v) providing for the licensing of lighters and other craft to carry petroleum and petroleum products within a port;

(vi) prescribing conditions and restrictions to be imposed upon vessels ar- riving at a port after having carried petroleum, petroleum products, dangerous petroleum or dangerous petroleum products;

(vii) providing for the examination and testing of petroleum and petroleum products, and prescribing the tests to be applied to ascertain its flash- point and the method of applying those tests; and

(viii) subject to subsection (2) of this section, regulating the transport of pe- troleum and petroleum products, prescribing the quantity of petroleum and petroleum products which may be carried in any vessel, cart, truck, railway wagon or other vehicle, the manner in which they shall be stored when being so carried, the receptacles in which they shall be contained when being so carried and the quantities to be contained in those receptacles, and providing for the search and inspection of any such vessel, cart, truck, railway wagon or other vehicle;

(f) conferring or imposing on public officers for the purposes of this Act powers and duties additional to those conferred or imposed by section 8 of this Act;

(g) where paragraph (a) of this subsection does not apply; prescribing-

(i) forms to be used for the purposes of this Act; and

(ii) fees to be charged in connection with the operation of this Act (in- cluding, without prejudice to the generality of the foregoing, fees for the giving of any permission by the Minister and for the supplying of any document or other material, the carrying out of any examination and the doing of any other thing by him); and

(h) providing for such other matters as in his opinion may be necessary or desir- able in order to give proper effect to this Act.

(2) Regulations made under subsection (1) (e) (viii) of this section shall apply only where petroleum or petroleum products are being transported-

(a) on the waters mentioned in item 36 (a) and (b) of Part 1 of the Second Schedule to the Constitution of the Federal Republic of Nigeria 1999; or

[Second Schedule. Cap. C23.]

(b) by railway or transport ancillary thereto; or

(c) on trunk roads within the meaning of item 62 of that Part of that Schedule.

10. Discharge of obligation to make payments

An obligation to pay any fees, rent, royalty, premium or other sum imposed by or un- der this Act shall be discharged if, and only if, the payment is made within the time pro- vided by or under this Act (or, where no time is so provided, within a reasonable time) to the Minister or his duly authorised representative.

11. Settlement of’disputes by ar bitration

(1)Where by any provision of this Act or any regulations made thereunder a question or dispute is to be settled by arbitration, the question or dispute shall be settled in accor- dance with the law relating to arbitration in the appropriate State and the provision shall be treated as a submission to arbitration for the purposes of that law.

(2) In this section “the appropriate State” means the State agreed by all parties to a question or dispute to be appropriate in the circumstances or, if there is no such agree- ment, the Federal Capital Territory, Abuja.

12. Deleg ati on of po wers

(1) The Minister may by writing under his hand delegate to another person any power conferred on him by or under this Act except the power to make orders and regulations.

(2) The Minister or the Director of Geological Survey may by writing under his hand delegate any power conferred on him by or under this Act to another public officer.

13. Offences

(1) Any person who interferes with or obstructs the holder of a licence or lease granted under section 2 of this Act (or his servants or agents) in the exercise of any rights, power or liberty conferred by the licence or lease shall be guilty of an offence and on conviction shall be liable to a tine not exceeding N200 or to imprisonment for a period not exceeding six months, or to both.

(2) Any person who-

(a) constructs or operates a refinery in Nigeria without a licence granted under section 3 of this Act; or

(b) in any land to which section 1 of this Act applies-

(i) explores for petroleum without an oil e xploration licence; or

(ii) prospects for petroleum without an oil prospecting licence; or

(iii) wins or works petroleum otherwise than in pursuance of a licence or lease granted under this Act; or

(iv)does, without the appropriate licence, any act for which a licence is required under any regulations made under this Act,

shall be guilty of an offence and shall be liable on conviction to a tine not exceeding N 2,000.

(3) Any person who contravenes any provision of an order made under section 6 of this Act shall be guilty of an offence and on conviction shall be liable to a tine not ex- ceeding N 2,000.

(4) Where a person is convicted of an offence under subsection (2) or (3) of this sec- tion in respect of any petroleum or petroleum products, then, in addition to any penalty imposed under the subsection in question, the convicting court may-

(a) order the petroleum or petroleum products to be forfeited; or

(b) order that person to pay to the Minister the value of the petroleum or petro- leum products.

14. Re pe als, ame ndme nts, tr ansiti onal and savi ngs pr ovisions

(1) The enactments specified in the Third Schedule to this Act are hereby repealed to the extent therein specified.

[Third Schedule.]

(2) The reference to petroleum licence in section 140 (1) and (2) of the Minerals and Mining Act shall be construed as including a reference to this Act.

[Cap. MI2.]

(3) The transitional and savings provisions in the Fourth Schedule to this Act shall have effect notwithstanding any other provision of this Act.

[Fourth Schedule.]

15. Inter pr e tati on

(1) In this Act, unless the context otherwise requires-

“bar r el ” means a barrel of 42 United States gallons;

“c onti ne ntal shel f’ means the sea bed and subsoil of those submarine areas adjacent to the coast of Nigeria the surface of which lies at a depth no greater than 200 metres (or, where its natural resources are capable of exploitation, at any depth) below the surface of the sea, excluding so much of those areas as lies below the territorial waters of Nigeria;

“c r ude oil ” means oil in its natural state before it has been refined or treated (ex- cluding water and other foreign substances);

“e x pl or e ” in relation to petroleum, means to make a preliminary search by surface geological and geophysical methods, including aerial surveys but excluding drilling be- low 91.44 metres;

” Mi nister ” means the Minister of Petroleum Resources;

“natur al g as” means gas obtained from boreholes and wells and consisting primarily of hydrocarbons;

“pe tr ole um” means mineral oil (or any related hydrocarbon) or natural gas as it exists in its natural state in strata, and does not include coal or bituminous shales or other stratified deposits from which oil can be extracted by destructive distillation;

“pe tr ole um pr o duc ts ” includes motor spirit, gas oil, diesel oil, automotive gas oil, fuel oil, aviation fuel, kerosene, liquefied petroleum gases and any lubrication oil or grease or other lubricant;

“pr os pe c t” in relation to petroleum, means search for by all geological and geophysi- cal methods, including drilling and seismic operations;

“r e fi ne r y” means petroleum refinery;

“r e nt” includes any annual or other periodic charge made in respect of a licence granted under section 2 of this Act;

“S tate ” e xcept in section 1 of this Act, means a State of the Federation.

(2) References in this Act to the Director of Geological Survey are references to the persons for the time being holding, acting in or performing the functions of the offices so designated in the public service of the Federation as defined in the Constitution of the Federal Republic Nigeria 1999.

[Cap. C23.]

16. S hor t ti tle and c omme nce me nt

(1) This Act may be cited as the Petroleum Act.

(2) This Act, except section 6 and the Second Schedule thereof, shall come into force on 27 November 1969.

FIRST SCHEDULE

[Section 2 (3).]

OIL EXPLORATION LICENCES, OIL PROSPECTING LICENCES AND OIL MINING LEASES

Oil exploration licences

1. An oil exploration licence shall apply to the area specified therein which may be any area on which a premium has not been placed by the Minister, and shall authorise the licensee to undertake exploration for petroleum in the area of the licence, excluding land in respect of

which the grant of an oil prospecting licence or oil mining lease has been approved by the Minister and land in respect of which an oil prospecting licence or oil mining lease is in force.

2. An oil exploration licence shall not confer any exclusive rights over the area of the li- cence, and the grant of an oil exploration licence in respect of any area shall not preclude the grant of another oil e xploration licence or of an oil prospecting licence or oil mining lease over the same area or any part thereof.

3. An oil exploration licence shall terminate on 31 December next following the date on which it was granted, but the licensee shall have an option to renew the licence for one further year if-

(a) he has fulfilled in respect of the licence, all obligations imposed upon him by this Act or otherwise;

(b) the Minister is satisfied with work done and the reports submitted by the licen- see in pursuance of the licence; and

(c) an application for renewal has been made at least three months before the date of expiry of the licence.

4. An oil exploration licence shall not confer any right to the grant of an oil prospecting li- cence or an oil mining lease.

Oil prospecting licences

5. The holder of an oil prospecting licence shall have the exclusive right to explore and pros- pect for petroleum within the area of his licence.

6. The duration of an oil prospecting licence shall be determined by the Minister, but shall not exceed five years (including any periods of renewal).

7. The holder of an oil prospecting licence may carry away and dispose of petroleum won during prospecting operations, subject to the fulfilment of obligations imposed upon him by or under this Act (including any special terms or conditions imposed under paragraph 34 of this Schedule) or by the Petroleum Profits Tax Act or any other law imposing taxation in respect of petroleum.

Oil mining leases

8. An oil mining lease may be granted only to the holder of an oil prospecting licence who has-

(a) satisfied all the conditions imposed on the licence or otherwise imposed on him by this Act; and

(b) discovered oil in commercial quantities.

9. For the purposes of paragraph 8 of this Schedule, oil shall be deemed to have been discov- ered in commercial quantities by the holder of an oil prospecting licence if the Minister, upon evidence adduced by the licensee, is satisfied that the licensee is capable of producing at least 10,000 barrels per day of crude oil from the licensed area.

10. The term of an oil mining lease shall not exceed twenty years, but may be renewed in accordance with this Act.

11. Subject to this Act and any special terms or conditions imposed under paragraph 34 of this Schedule, the lessee of an oil mining lease shall have the exclusive right within the leased area to conduct exploration and prospecting operations and to win, get, work, store, carry away, transport, export or otherwise treat petroleum discovered in or under the leased area.

12. (1) Ten years after the grant of an oil mining lease, one half of the area of the lease shall be relinquished.

(2) Paragraph 18 of this Schedule shall apply to the relinquished area.

13.(1) The lessee of an oil mining lease shall be entitled to apply in writing to the Minister, not less than twelve months before the expiration of the lease, for a renewal of the lease either in respect of the whole of the leased area or any particular part thereof; and the renewal shall be granted if the lessee has paid all rent and royalties due and has otherwise performed all his obligations under the lease.

(2) Paragraph 12 of this Schedule shall not apply in relation to a lease which has been renewed under this paragraph.

Assignments

14. Without the prior consent of the Minister, the holder of an oil prospecting licence or an oil mining lease shall not assign his licence or lease, or any right, power or interest therein or thereunder.

15. The prescribed fee shall be paid on an application for an assignment under paragraph 14 of this Schedule and the Minister’s consent for the assignment may be given on payment of such other fee or such premium, or both, and upon such terms, as he may decide:

Provided that the Minister may wai ve payment of that other fee or that premium, or

both,

if he is satisfied that the assignment is to be made to a company in a group of which the as- signor is a member, and is to be made for the purpose of re-organisation in order to achieve greater efficiency and to acquire resources for more effective petroleum operations.

16. The Minister shall not give his consent to an assignment unless he is satisfied that-

(a) the proposed assignee is of good reputation, or is a member of a group of com- panies of good reputation, or is owned by a company or companies of good reputation;

(b) there is likely to be available to the proposed assignee (from his own resources or through other companies in the group of which he is a member, or other- wise) sufficient technical knowledge and experience and sufficient financial re- sources to enable him to effectually carry out a programme satisfactory to the

Minister in respect of operations under the licence or lease which is to be as- signed; and

(c) the proposed assignee is in all other respects acceptable to the Federal Gov- ernment.

Farm-out

17. (1) The holder of an oil mining lease may, with the consent of and on such terms and conditions as may be approved by the President, farm out any marginal field which lies within the leased area.

[1996 No. 23.]

(2) The President may cause the farm-out of a marginal field if the marginal field has been left unattended for a period of not less than ten years from the date of the first discovery of the marginal field.

[1996 No. 23.]

(3) The President shall not give his consent to a farm-out or cause the farm-out of a marginal field unless he is satisfied-

(a) that it is in the public interest so to do, and, in addition, in the case of a non- producing marginal field, that the marginal field has been left unattended for an unreasonable time, not being less than ten years; and

(b) that the parties to the farm-out are in all respects acceptable to the Federal Government.

[1996 No. 23.]

(4) For the purposes of this paragraph-

“farm-out” means an agreement between the holder of an oil mining lease and a third party which permits the third party to explore, prospect, win, work and carry away any petro- leum encountered in a specified area during the validity of the lease;

“marginal field” means such field as the President may, from time to time, identify as a marginal field.

[1996 No. 23.]

Terminations

18. (1) The holder of an oil prospecting licence or oil mining lease may, at any time, termi- nate his licence or lease by giving to the Minister not less than three months’ notice in writing to that effect.

(2) Where notice is given under this paragraph, no rent paid shall be refundable, and the termination shall otherwise be without prejudice to any obligation or liability imposed by or incurred under the licence or lease before the effective date of termination.

19. (l) Without prejudice to paragraph 12 of this Schedule, the holder of an oil prospecting licence or oil mining lease shall be entitled at any lime on giving three months’ notice in writing to the Minister to surrender the licence or lease in respect of any particular part of the licensed or leased area.

(2) Paragraphs 19 to 22 of this Schedule shall apply where a surrender is made under this paragraph.

20. The shape and size of the area to be retained and of the area to be relinquished shall be approved by the Minister.

21. Subject to the provisions of all the relevant laws and on such terms and conditions as may be approved by the Minister, the licensee or lessee shall be entitled to such way-leaves for the laying, operation and maintenance of pipelines, telephones and the like through or across the surrendered area or areas as he may reasonably require-

(a) for the carrying on of operations under the licence or lease; or

(b) for inter-communication and passage between retained areas (and, in the case of licences or leases in the continental shelf, between retained areas and on- shore lands),

and any such way-leaves shall form part or be included in the calculation of the amount of the retained areas.

22. There shall be reserved to the Minister over the retained part such way-leaves, easements or other rights as in his opinion are necessary or desirable for the laying, operation and main- tenance of pipelines, telephone lines and power-lines; and any way-leaves or other rights so reserved shall enure for the benefit of any person or body to whom the Minister may subse- quently grant the same to the extent that he may so grant them.

23. No rent paid shall be refundable, but the surrender shall otherwise be without prejudice to any obligation or liability imposed by or incurred under the licence or lease before the ef-

(a) the licensee or lessee makes no or no sufficient explanation; or

(b) does not rectify the matter complained of within the specified period, the Minister may revoke the licence or lease.

fective date of surrender.

Revocations

24. (1) The Minister may revoke any oil prospecting licence or oil mining lease if the licen- see or lessee becomes controlled directly or indirectly by a citizen of, or subject of, or a com- pany incorporated in, any country which is-

(a) a country other than the licensee’s or lessee’s country of origin; and

(b) a country the laws of which do not permit citizens of Nigeria or Nigerian com- panies to acquire, hold and operate petroleum concessions on conditions which in the opinion of the Minister are reasonably comparable with the conditions upon which such concessions are granted to subjects of that country.

(2) In this paragraph “Nigerian c ompany” means a company incorporated in Nigeria or a company control1ed directly or indirectly by citizens of Nigeria.

25. (1) The Minister may revoke any oil prospecting licence or oil mining lease if in his opinion the licensee or lessee-

(a) is not conducting operations-

(i) continuously;

(ii) in a vigorous and businesslike manner in accordance with the basic work programme approved for the licensee or lessee; and

(iii) in accordance with good oil field practice; or

[1998 No. 22.]

(b) has failed to comply with any provision of this Act or any regulation or direc- tion given thereunder or is not fulfilling his obligations under the special con- ditions of his licence or lease; or

(c) fails to pay his due rent or royalties, whether or not they have been demanded by the Minister, within the period specified by or in pursuance 01″ this Act; or

(d) has failed to furnish such reports on his operations as the Minister may lawful1y require.

(2) Paragraphs 26 to 30 of this Schedule shall apply where there is revocation under this paragraph.

26. The Minister shall inform the licensee or lessee of the grounds on which the revocation is contemplated and shall invite the licensee or lessee to make any explanation if he so desires.

27. If the Minister is satisfied with the explanation, he may invite the licensee or lessee to rectify the matter complained of within a specified period.

28. If-

29. A notice sent to the last-known address of the licensee or lessee or his legal representa- tive in Nigeria and published in the Federal Gazette shall, for all purposes, be sufficient notice to him of the revocation of the licence or lease.

30. The revocation shall be without prejudice to any liabilities which the licensee or lessee may have incurred, or to any claim against him which may have accrued to the Federal Gov- ernment.

Fees, rents and royalties

31. There shall be paid in respect of licences and leases to which this Schedule applies such

application fees as may be prescribed.

32. There shall be paid in respect of licences and leases to which this Schedule applies such rents as may be prescribed.

33. Royalties shall be paid at the prescribed rates or, where rates are specified in special terms and conditions attached to the relevant licence or lease, at the rates so specified.

General and supplementary

34. Licences and leases to which this Schedule applies shall be in the prescribed form or, where no form is prescribed, in such form as the Minister considers suitable.

35. If he considers it to be in the public interest, the Minister may impose on a licence or lease to which this Schedule applies special terms and conditions not inconsistent with this Act including (without prejudice to the generality of the foregoing) terms and conditions as to-

(a) participation by the Federal Government in the venture to which the licence or lease relates, on terms to be negotiated between the Minister and the applicant for the licence or lease; and

(b) special provisions applying to any natural gas discovered, which provisions shall include-

(i) the right of the Federal Government to take natural gas produced with crude oil by the licensee or lessee free of cost at the f1are or at an agreed cost and without payment of royalty;

(ii) the obligation of the licensee or lessee to obtain the approval of the Federal Government as to the price at which natural gas produced by the licensee or lessee (and not taken by the Federal Government) is sold; and

(iii) a requirement for the payment by the licensee or lessee of royalty on natu- ral gas produced and sold.

36. The holder of an oil prospecting licence or oil mining lease shall-

(a) have a general right to enter and remain on the licensed or leased lands and do such things as are authorised by the licence or lease; and

(b) shall comply with any enactment relating to town or country planning or regu- lating the construction, alteration, repair or demolition of buildings, or provid- ing for similar matters, which affects him in carrying out the operations authorised by the licence or lease.

37. The holder of an oil exploration licence, oil prospecting licence or oil mining lease shall, in addition to any liability for compensation to which he may be subject under any other pro- vision of this Act, be liable to pay fair and adequate compensation for the disturbance of sur- face or other rights to any person who owns or is in lawful occupation of the licensed or leased lands.

38. The holder of an oil mining lease shall ensure that-

(a) within ten years from the grant of his lease-

(i) the number of citizens of Nigeria employed by him in connection with the lease in managerial, professional and supervisory grades (or any corre- sponding grades designated by him in a manner approved by the Minister) shall reach at least 75% of the total number of persons employed by him in those grades; and

(ii) the number of citizens of Nigeria in anyone such grade shall be not less than 60% of the total; and

(b) all skilled, semi-skilled and unskilled workers are citizens of Nigeria.

39. The holder of any licence or lease to which this Schedule applies shall at all times in- demnify and keep harmless the Federal Government, the Minister and every officer in the civil service of the Federation or the States (and their agents) against all actions, costs, charges, claims and demands howsoever which may be made or brought by any third party in relation to any matter or thing done or purported to be done in pursuance of this Act.

40. If any fee, rent or royalty due under this Act is unpaid for a period of one month after the date when it becomes due (whether legally demanded or not), the Minister may, in addition to any other remedies which may be available-

(a) enter into and upon any land, property or premises possessed or occupied by the licensee or lessee in connection with the licence or lease; and

(b) seize and distrain and sell as landlords may do for rents in arrear, any petro- leum, petroleum products, engines, machinery, tools, implements or other ef- fects belonging to the licensee or lessee which may be found in or upon the land, property or premises; and

(c) out of moneys arising from the sale of the distress, retain and payoff the ar- rears of the said fee, rent or royalty and also the costs and expenses incident to

the distress and sale, rendering the surplus (if any) to the licensee or lessee.

41. (1) Failure on the part of the holder of a licence or lease to which this Schedule applies to fulfil any of the terms or conditions of the licence or lease shall not (except as may be otherwise provided for in or in relation to the licence or lease) give the Minister any claim against the licensee or lessee, or be deemed a breach of the licence or lease, if the failure arises from causes beyond the control of the licensee or lessee.

(2) If from any such cause the fulfilment by any such licensee or lessee of any term or condition of his licence or lease or of any provision of this Act is delayed, the period of delay shall be added to the period fixed for the fulfilment of the term or condition.

42. If any question or dispute arises in connection with any licence or lease to which this Schedule applies between the Minister and the licensee or lessee (including a question or dis- pute as to the payment of any fee, rent or royalty), the question or dispute shall be settled by arbitration unless it relates to a matter expressly excluded from arbitration or expressed to be at the discretion of the Minister.

SECOND SCHEDULE

[Section 7 (2).]

Rights of pre-emption

1. The Minister shall have the right to require the holder of any licence or lease granted under this Act (the holder in question being referred to in this Schedule as “the licensee or lessee”)-

(a) to provide for the Federal Government, to the extent of any refinery capacity he

may have in Nigeria, petroleum products complying with specifications given

by the Minister;

(b) to deliver to any person holding a licence to operate a refinery, such quantity and quality of crude oil as may be specified by the Minister to the extent that the licensee or lessee has crude oil of that quantity and quality.

2. The licensee or lessee shall use his best endeavours to increase so far as possible with his existing facilities the supply of petroleum or petroleum products, or both, for the Federal Gov- ernment to the extent required by the Minister.

3. The licensee or lessee shall, with all reasonable expedition and so as to avoid demurrage on the vessels conveying the same, use his best endeavours to deliver all petroleum or petro- leum products purchased by the Minister under his said right of pre-ernption in such quanti- ties, and at such places of shipment or storage in Nigeria, as may be determined by the Min- ister.

4. If a vessel employed to carry petroleum or petroleum products pursuant to paragraph 3 of this Schedule is detained on demurrage at the port of loading, the licensee or lessee shall pay the amount due for demurrage according to the terms of the charter-party or the rates of load- ing previously agreed by the licensee or lessee, unless the delay is due to causes beyond the control of the licensee or lessee.

5. Any dispute which may arise as to whether a delay is due to causes beyond the control of the licensee or lessee shall be settled by agreement between the Minister and the licensee or’ lessee or, in default of agreement, by arbitration.

6. The price to be paid for petroleum or petroleum products taken by the Minister in exercise of his said right of pre-ernption shall be-

(a) the reasonable value at the port of delivery, less discounts to be agreed by both parties; or

(b) if no such agreement has been entered into prior to the exercise of the right of pre-emption, a fair price at the port of delivery to be settled by agreement be- tween the Minister and the licensee or lessee or, in default of agreement, by ar- bitration.

7. To assist in arriving at a fair price for the purposes of paragraph 6 (b) of this Schedule, the licensee or lessee shall, if the Minister so requires-

(a) furnish for his confidential information particulars of the quantities, descrip- tions and prices of petroleum or petroleum products sold to other customers and of charters or contracts entered into for their carriage; and

(b) exhibit original or authenticated copies of the relevant contracts or charter- parties.

8. The Minister may take control of any works, plants or premises of the licensee or lessee; and if he does so, the licensee or lessee and his servants or agents shall conform to and obey all directions issued by the Minister or on his behalf.

9. Reasonable compensation shall be paid to the licensee or lessee for any loss or damage caused to him by reason of the exercise by the Minister of the powers conferred by para- graph 8 of this Schedule.

10. Any compensation payable under paragraph 9 of this Schedule shall be settled by agree- ment between the Minister and the licensee or lessee or, in default of agreement, by arbitra- tion.

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