"The PIB has not yet been passed into law and has brought a significant amount of uncertainty to the industry which is deferring investment. From an investment perspective, it may be more prudent to invest based on existing law. Companies that decide to wait until the PIB is passed before investing may eventually find that they have lost potential substantial returns as a result of not taking any step forward while waiting."
Can you give a brief overview of ACAS-Law and the services you provide to the African oil industry?
SA: The firm comprises of four separate practice groups: The Energy and Project Finance Group is involved in core oil and gas transactions covering the value chain, power, mining, and other related corporate and commercial transactions. The Corporate and Commercial Group deals with activities such as mergers and acquisitions, banking and finance, intellectual property, tax, real estate, foreign investment, telecommunication, privatisation, capital markets, employment law, transport, and infrastructure, and immigration. The Shipping and Dispute Resolution Group deals with admiralty and maritime transactions, international trade, aviation, insurance, commercial litigation and alternative dispute resolution. The fourth group is ADCAX Nominees Limited; the arm of the firm that provides dedicated service in relation to company secretarial, corporate governance and compliance matters for our clients.
Can you elaborate on the current legal framework surrounding the oil and gas industry in Nigeria?
SA: Nigeria’s oil and gas industry operates under two main laws: the Petroleum Act and the Petroleum Profits Tax Act (PPTA). In addition to the two main laws, there are a number of other laws and subsidiary legislations which govern the various elements of the oil and gas industry including everything from environmental impact to local content. In 2000, the Nigerian government established the Oil and Gas Implementation Committee (OGIC), which had the mandate to identify how to privatize the industry. I had the privilege of being on that committee and, over the course of the committee’s deliberations, the mandate of the OGIC evolved. The OGIC ended up reviewing the legal and regulatory framework for the entire industry and produced a draft of a new law which later became the PIB. The PIB has not yet been passed into law and has brought a significant amount of uncertainty to the industry which is deferring investment. From an investment perspective, it may be more prudent to invest based on existing law. Companies that decide to wait until the PIB is passed before investing may eventually find that they have lost potential substantial returns as a result of not taking any step forward while waiting. The existing law and the drafts of the new bill provide some direction and give us an idea of the worst-case scenario, so the economics of investments can be based on these and then modified in due course.
How can the PIGB improve the oil and gas industry?
SA: Passing the Petroleum Industry Governance Bill (PIGB) will bring about more certainty and stability, and improve the industry by boosting investor confidence and assurances in the oil and gas industry. The PIGB deals exclusively with the governance and institutional framework of the industry, and is the first phase of what was expected to be a piecemeal implementation of the PIB through manageable segments. It was however refused presidential assent recently.
RP: While there are outstanding issues that need to be resolved, we consider the PIGB an earnest effort to address crucial issues that plaque the industry, such as regulatory overlaps and inefficiencies in the operation of our national oil company (the NNPC).
Can you give insights into the licensing process and local content regulations?
JU: Nigeria has a Nigerian Oil and Gas Industry Content Development Act (or Local Content Act), which requires that first consideration is given to Nigerian companies, goods, and services in the Nigerian oil and gas industry, and prescribes a minimum Nigerian content for any project to be executed in this industry. While the law contemplates strict compliance, full implementation is not always feasible. In this regard, the Minister of Petroleum Resources is empowered to grant waivers under the Local Content Act and consider/allow for foreign involvement (in a manner that would otherwise be prohibited under the Local Content Act) where there is inadequate indigenous capacity, and subject to the demonstration of a commitment to upscale the existing capacity in-country.
It has been mentioned that 2020 is the year of natural gas in Nigeria. Is there a legal framework to support natural gas?
RP: There is an existing framework which contains a significant amount of incentives for the development of natural gas projects and gas production. Presently incentives for gas development are contained in the Companies Income Tax Act (as amended), however it appears that these incentives have failed to encourage the much-needed capital investments to accelerate development in the sector. The liberalization of gas prices should be encouraged and based on willing buyer/willing seller market indices and a cost-reflective of electricity tariffs which will incentivize development as well as implementation of domestic supply obligations.
To what extent is corruption present in the oil and gas industry and how is it stalling industry growth?
SA: Corruption is hampering business and stalling the growth of the Nigerian economy so the government understands the importance of eradicating it. Although there has been some progress made in this regard, more deliberate effort needs to be made to stamp it out. There is also a need to deploy more resources to safeguard oil and gas installations and discourage the sabotage and/or vandalization of these installations.
RP: The problem is not necessarily due to an absence of legislation. The challenge remains enforcement. The effort to enforce is also hampered by the fact that a number of these problems are intersectional and often feature social, environmental and political factors which require bespoke solutions which Nigeria is still in the process of developing.
What is ACAS-Law’s vision for the future?
KLO: ACAS-Law is on a journey to become known as the best corporate commercial law firm in Nigeria and the wider sub-saharan African region. Our vision is to be known and recognized for providing practical and tailored solutions to complex legal problems within the shortest possible turnaround time. We therefore strive to continue growing and aim to be a recognized brand internationally.