"The Nigerian Government has made several attempts to make gas utilization a separate component from oil. The delay of the PIB has slowed that down as there is no gas legislation that has clearly set out how to explore, issue licenses, produce and then monetize gas."
Can you give an overview of Udo Udoma & Belo Osagie and highlight aspects that have facilitated company growth over the years?
Udo Udoma & Belo Osagie is a Nigerian corporate and commercial law firm founded in 1983. The founder of the company, Udoma Udo Udoma, was involved in the policy formation and implementation of Nigerian natural oil and gas projects in the early years. The company was involved in the drafting of gas legislation and, when the Nigerian government wanted to draft the Petroleum Industry Bill (PIB), Udo Udoma & Belo Osagie worked with the stakeholders to make presentations to the Federal Executive Council. The company covers the whole spectrum of the industry – upstream, mid-stream, downstream, field development, licenses and regulatory policies. We are involved in gas pipeline infrastructure, gas processing facilities and field development of oil wells.
The company’s growth is due to visionary leadership and excellent partners, as well as a corporate environment that prevents personalization of the practice.
What do you think are the legal turning points of the Nigerian oil and gas industry so far?
The 2000 licensing round in Nigeria was the watershed; the process was transparent and was at international standards. Another turning point is the Deep Offshore and Inland Basin Production Sharing Contract Statute of 2004. This is an agreement between the government concerning how much of the resource each party will receive. This fiscal process helps companies recover their costs early and encourages companies to take risks in exploring the deep offshore basin.
Another milestone was the divestment of the integrated operating centers (IOCs) from onshore and swamp fields. The government tried to compel IOCs to allow indigenous supporters to obtain some of the marginal fields, some of which started producing after the concessions were made. The real game changer for the indigenous industry is the divestment of the IOCs where locals actually acquire these oil fields, as well as the local content legislation for the oil and gas industry that stipulated a number of activities to local communities.
The Nigerian Government has made several attempts to make gas utilization a separate component from oil. The delay of the PIB has slowed that down as there is no gas legislation that has clearly set out how to explore, issue licenses, produce and then monetize gas. The real legislation today is the Petroleum Act which defines petroleum as both crude oil and gas. There is no specific gas legislation in Nigeria and that is the reason why people are clamoring for the Nigerian government to sign the PIB. From 2005 to 2008, the national regulatory board has tried to develop a separate fiscal framework for regulating gas prices in the Nigerian domestic market.
To what extent does local content address host communities in the Niger Delta?
That is a complex issue. Some community leaders have had relationships with international companies promising to provide development to these communities, but unfortunately it has not been implemented. Some of the IOCs claim that they have built hospitals and town halls, but stories differ. The question is what kind of program do you need to put in place to make sure that host communities benefit in terms of infrastructure, management of the environment and the health of the people. Does one have to build hospitals or does one need to involve local communities to ensure that environmental guidelines are adhered to?
Nobody can deny the environmental degradation in the Niger Delta – acid rain, dead fish and the fact that one cannot go through some of the swamp areas at all due to the high toxicity. What is required is for stakeholders to come together to agree what would be an acceptable plan. IOCs are required to contribute a percentage of their profits to the Niger Delta Development Commission Board (NDDC), but the question is whose responsibility is it to administer these funds in such a way that host communities feel the impact of those contributions. The NDDC has complained that it is being starved of funds they are supposed to receive from the government as well.
Do you think the PIB’s clause that 10% of profits have to go to host communities will address this issue?
I do not believe that just giving 10% of profits to the host communities as equity rights in these businesses will solve the problem. Some of the IOCs have said in the past that some of the community leaders are benefitting from these funds. An investment-friendly arrangement has to be put in place to make sure that all the IOCs and local communities have this particular plan implemented physically in their communities. A separate regulatory body should administer these funds.
What is your vision for Udo Udoma & Belo Osagie for next five years?
Udo Udoma is going to continue to be a leading law firm for energy practice in Nigeria. We will work with our clients, businesses and the government to ensure that, in terms of policy development, we encourage friendly policies that will enable business. It does not matter how many natural resources a country has, it needs investment and resources have to be monetized. The company wants to continue supporting stakeholders, influence policy and advise businesses to get those policies implemented.