INTRODUCTION:

When President Muhammadu Buhari signed the Petroleum Industry Act, 2021 ("PIA") into law on 16th August 2021, the enthusiasm reverberated across the Petroleum Industry heralding the final birth of the long-awaited legislative landmark. This enthusiasm was not misplaced as the industry definitely required certainty about the direction in which Nigeria would like to take its Petroleum Industry. Despite some fits and starts experienced at the commencement of its implementation of the PIA, a compete overall of the previous legislations left no one in doubt about its intents, objectives, and new direction.1 PIA covers legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry, the Host Community, and other related matters.

As further proof of the desire to provide an efficient and effective governance institutions with clear roles and establish clear framework for a transparent Petroleum Industry, the Nigerian Midstream Development and Downstream Petroleum Regulatory Authority ("NMDPRA" or "the Authority") was established.2 In the quest to give further clarity to the stakeholders in the industry, it is heartening that the NMDPRA unveiled 6 important Petroleum Regulations recently pursuant to its power under the PIA. These regulations are: the Assignment or Transfer of Licence and Permit Regulations; Gas Pricing and Domestic Demand Regulations; Midstream and Downstream Petroleum Operations Regulations; Natural Gas Pipeline Tariff Regulations, Petroleum (Transportation and Shipment) Regulations; and the Petroleum Measurement Regulations.3

Announcing the six regulations, the Chief Executive Officer of the NMDPRA, Engr. Farouk Ahmed happily stated that there are 14 more regulations in the pipeline. Of the six regulations enacted by the NMDPRA in the first batch, we would like to highlight the provisions of, and make short comments on, one of them – Assignment or Transfer of Licence or Permit Regulations, 2023 made pursuant to sections 33 and 227 of the PIA in this article.

OVERVIEW OF THE ASSIGNMENT OR TRANSFER OF LICENCE AND PERMIT REGULATIONS, 2023:

These Regulations are 13 in total and their provisions are highlighted as follows:

Regulation 1 (Objectives) – This seeks to establish a procedure for the Assignment or Transfer of Licence and Permit by Licensees and permit holders. It also prescribes fees for such assignment and transfer and provides sanctions and administrative penalties for failure to comply with the regulations.

Regulation 2 (Applications) – The regulation applies to activities connected with the Assignment or Transfer of Licence and Permit granted by the NMDPRA.

Regulation 3 (Nature of Assignment/Transfer of Licence/Permits) – This covers assignment or transfer of interests through mergers of two or more companies, devolution of shares and interests, acquisition of company or asset, irrespective of whether the acquisition of the shares or interest is by private placement, public listing or testamentary instrument.

Regulation 4 (Change of Name) – While change of name simpliciter does not fall under Assignment or transfer of licence and permit strictly for the purpose of this regulation by sub regulation 4 (3), notwithstanding regulation 4 provides for how the licence and permit holder, which is changing name either due to corporate restructuring or rebranding should notify the Authority, return the old licence or permit and secure new licence or permit in the new name from the Authority.

Regulation 5 (Notification of Intention to Assign/Transfer Licence or permit) – This regulation mandates the transferor to notify the Authority of its intention to undertake assignment or transfer with detailed particulars of the proposed transferee - stating its name(s), address, and contact information, the reason for the transfer, and method of transfer proposed. These will be submitted along with a certified copy of the licence or permit. Sub regulation (3) provides that within 21 days of receipt of the notification, NMDPRA will communicate its decision to the transferor as to whether or not to proceed to the next stage of the transaction. By sub regulation 4, if the transferor does not receive the communication prescribed in sub regulation 3, the transferor may proceed to the next stage. Upon receiving the Authority's communication to proceed or in default of such communication, the transferor shall publish a notice of the application in a format prescribed in the Guidelines of the NMDPRA.

Regulation 6 (Application for Transfer of Licence by Transferee) – The transferee will then apply for the assignment or transfer of the licence or permit to its company with a copy of the title documents duly certified by a Court of competent jurisdiction. Where required, the transferor will also make presentations on its technical and financial capabilities to the NMDPRA, supply other information (where required) and make payment of the prescribed fees. Sub regulation 6 (3) mandates the NMDPRA to conduct its own due diligence on the transferee as well as per its Guidelines.

Regulation 7 (Grant of consent to assign or transfer) – This regulation mandates the NMDPRA to inform the applicant in writing of its consent within 90 days from the date it receives the application and where consent is refused, the applicant may make further representation to NMDPRA within the next 21 days of receiving the decision refusing the consent. Sub regulation 3 provides that where the NMDPRA fails to communicate its consent or refusal of same within the stipulated 90 days, the application shall be deemed granted (consent is deemed granted).

Regulation 8 (Prohibition of Assignment/Transfer Licence or permit without consent) – Regulation 8 clearly and expressly forbids any assignment or transfer of licence or permit or any right or obligation arising from the licence or permit without the prior written consent of NMDPRA.

Regulation 9 (Fees) – The ninth regulation provides for various fees in the schedule to the regulation applicable to the assignment or transfer of licenses or permits in the midstream or downstream of the petroleum operations in Nigeria.

Regulation 10 (Authority to make Guidelines) – This regulation reserves the authority of the NMDPRA to make necessary Guidelines, directives, and notices for the effective implementation of the regulation.

Regulation 11 (Contravention and Administrative Penalties) – Regulation 11 provides for monetary penalties for contraventions or failure to comply with the provisions of the regulations or any directives, or conditions of the licence or permit or where false declarations, or insufficient information was provided. Sub regulation 11 (2a) provides for monetary penalties of USD100,000 for midstream processing facilities, installations, terminals and pipelines per licence or permit; by sub regulation 11 (2b), the sum of USD50,000 for blending facilities and petroleum processing facilities per licence or permit and by sub regulation 11 (2c), the sum of N2,000,000 for oil and gas retail outlet. It should be noted that the monetary penalties are in addition to possible suspension, cancellation or revocation of the licence or permit.

Regulation 12 (Interpretation) – This regulation contains interpretations and meaning(s) of the terms, concepts and words used in the regulation.

Regulation 13 (Citation) – Regulation 13 provides the regulation may be cited as the "Assignment or Transfer of Licence and Permit Regulations, 2023."

COMMENTARY

The NMDPRA has obviously put the benefits of the experience of its predecessor, the Department of Petroleum Resources ("DPR") into advantageous use in making these regulations. The stakeholders will find clear direction from these regulations. Three examples of the mischiefs with the previous statutory instruments hitherto in use for assignment or transfer of licence and permit of petroleum assets in Nigeria, which these regulations seek to cure will suffice here.

(1.) Notification of intention: Regulation 5 mandates the transferor to notify NMDPRA of its intention to undertake assignment or transfer of licence or permit with detailed particulars of the intended transferee at the earliest time possible. This is aimed at curing the paucity of information to the authority about transactions until late hours and its impact on divestment of assets and resultant negative effects on the stakeholders and transaction in the industry.4

(2) Deemed Consent: Regulation 7 (3) provides for deemed consent. Where the Authority fails to communicate its consent or refusal of same within the stipulated 90 days, the application shall be deemed granted. This used to create a major problem as can be seen in the regulator's refusal to communicate consent or rejection to the transferor in the past. This used to have significant dire effect on divestment and acquisition transactions.5 The issues involved in the case of LEKOIL 310 Limited and Afren Investment Oil & Gas (Nig.) Ltd. v. Minister of Petroleum Resources and Optimum Petroleum Development Company Ltd decided by the Federal High Court, Lagos Nigeria and widely reported in the press, was aggravated due to failure of timely communication of the Minister's consent or rejection to the applicant.6 It is gladdening that the regulator pursuant to the PIA has accepted and implemented most of our recommendations as means of resolving some of the commercial issues raised in the author's previous articles.7

(3) Application by the Transferee: Regulation 6 now allows the Transferee to take the driver's seat of the transaction once the consent is actually granted or deemed obtained. The transferee will then apply for the assignment or transfer of the licence or permit to its company with a copy of the title documents as certified by a court of competent jurisdiction. This provision will ensure that the transferor and transferee are more significantly committed to the transaction as against the previous situation where the transferor may drag its feet especially after the transferee has fulfilled its own obligation.8

CONCLUSION.

Implementation is the key to all good legislation. If faithfully implemented by the regulator and all stakeholders, the Assignment or Transfer of Licence and Permit Regulations, 2023 with its very clear provisions, purpose and process, assignment, transfer, and divestment of oil and gas licence and permit in Nigeria will experience better outcome.

We have no doubt that every stakeholder involved in transactions of assignment or transfer, acquisition or divestment of licences and permits will readily welcome and embrace these regulations. The objectives of the PIA are being met gradually but surely and NMDPRA as one of the governance institutions is delivering on its mandates too. With these kinds of regulations, clarity of purpose, process and procedures of assignment or transfer of licence and permit are being properly provided to the stakeholders.

Footnotes

1. See the author's Overview of the PIA at https://www.mondaq.com/nigeria/oil-gas--electricity/1103114/behold-the-brand-new-nigerian-petroleum-industry-act-2021 accessed on 25th March 2023.

2. See section 29 of the PIA.

3. As reported at https://dailytrust.com/nmdpra-unveils-6-petroleum-regulations-drafting-14-others/ accessed on 25th March 2023.

4. One of the major problems identified in our previous article especially with insolvent asset holders is the lack of timely, adequate and effective information to the regulator. See https://www.mondaq.com/nigeria/oil-gas--electricity/855572/case-study-of-an-insolvent-oil-and-gas-asset-holder-in-the-nigerian-petroleum-industry-matters-arising-part-3 accessed on 25th March 2023.

5. Ibid. See also the overview of the background statutory instruments in use pre-PIA at https://www.mondaq.com/nigeria/oil-gas--electricity/855564/insolvency-of-an-oil-and-gas-asset-holder-in-the-nigerian-petroleum-industry-matters-arising-part-1 accessed on 25th March 2023.

6. See the author's review of the case study at https://www.mondaq.com/nigeria/oil-gas--electricity/855572/case-study-of-an-insolvent-oil-and-gas-asset-holder-in-the-nigerian-petroleum-industry-matters-arising-part-3 accessed on 25th March 2023.

7. See https://spaajibade.com/recommendations-for-addressing-identified-issues-in-insolvency-of-an-oil-and-gas-asset-holder-in-the-nigerian-petroleum-industry-part-6-peter-olalere/ Also accessible at https://www.mondaq.com/nigeria/insolvencybankruptcy/862158/recommendations-for-addressing-identified-issues-in-insolvency-of-an-oil-and-gas-asset-holder-in-the-nigerian-petroleum-industry-part-6 accessed on 25th March 2023.

8. Ibid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.