Exposé: The Complexities of Obtaining Licenses in the Oil and Gas Sector in Nigeria (Part II)
Oil exploration in Nigeria is a complex process governed by various laws, regulations, and license requirements. Below is a comprehensive list of licenses and permits required for oil exploration in Nigeria, along with details about each.
1. Registration of the Company with the Corporate Affairs Commission (CAC).
Purpose: Grants the oil company legal standing to operate in Nigeria and creates a separate legal entity, distinct from its owners or shareholders, which can sue and be sued.
Regulating Body: Corporate Affairs Commission (CAC)
Validity: Registering a company with CAC is essential for establishing a legitimate and credible business in Nigeria.
2. License to Operate (Petroleum Exploration License - PEL)
Purpose: Grants the licensee the right to explore for oil and gas in a specified area.
Regulating Body: Nigerian Upstream Regulatory Commission (NURC).
Validity: Typically granted for 3 years, renewable subject to fulfilling specific requirements.
3. Oil Mining Lease (OML)/Petroleum Mining Lease (PML)
Purpose: Required to conduct oil mining activities in designated areas after successful exploration.
Regulating Body: Nigerian Upstream Petroleum Regulatory Commission. (NURC).
Validity: Usually granted for 20 years and can be renewed for an additional 20 years.
4. Environmental Impact Assessment (EIA)
Purpose: Required to assess the potential environmental impact of oil exploration activities.
Regulating Body: Federal Ministry of Environment.
An EIA should be prepared and submitted for approval before exploration to ensure compliance with environmental standards.
5. Community Development Agreement (CDA)
Purpose: A legally binding agreement with local communities outlining the oil company's obligations to the host communities.
Regulating Body: This is not mandatory but is recommended by the NURC.
Details: It often includes provisions for social investments, environmental safety, and compensation for any adverse impacts.
6. Production Sharing Contract (PSC)
Purpose: A contractual agreement between the government and the oil company that shares production from oil fields.
Regulating Body: Federal Government of Nigeria through the Nigerian National Petroleum Corporation (NNPC).
Details: The PSC outlines the terms of oil production, including the division of revenue, responsibilities, and cost recovery mechanisms.
7. Rights of First Refusal (ROFR)
Purpose: This right allows existing license holders to match third-party offers to buy stakes in licensed areas.
Regulating Body: This is mainly governed by contractual terms between parties.
8. Assignment of Lease/License
Purpose: To transfer interest or ownership of an existing license or lease to another entity.
Regulating Body: NURC requires permission for assignment and must satisfy certain conditions.
9. Approval for Drilling and Production Activities
Purpose: Necessary before starting drilling and production operations.
Regulating Body: NURC, with input from the Department of Petroleum Resources (DPR).
Details: Approval depends on compliance with regulations and submission of detailed operational plans.
10. Customs and Import Permit
Purpose: Imported equipment and materials necessary for exploration and production must be allowed or granted access.
Regulating Body: Nigerian Customs Service.
Details: Companies must comply with local content laws and regulations to promote domestic participation.
11. Tax Incentives and Registration
Purpose: Registration with the Federal Inland Revenue Service (FIRS) for tax matters.
Details: Oil companies are subject to various taxes, including Petroleum Profits Tax, Value Added Tax, and others that may apply.
Conclusion
This document does not provide a complete list of all the licenses required for oil and gas exploration in Nigeria; instead, it focuses on the essential licenses necessary for the industry. Each of these licenses and permits ensures that organisations involved in oil exploration comply with local laws, protect the environment, and engage responsibly with local communities. The application process can be complex and often requires extensive documentation and proof of technical capabilities. Therefore, companies should work closely with legal and regulatory experts knowledgeable about the Nigerian oil and gas sector to effectively navigate this landscape.