The Petroleum Industry Bill 20122 (Part one)

on   /   in For the record 8:41 pm   /   Comments

The  Petroleum Industry  Bill 20122

A BILL  FOR  AN ACT TO PROVIDE FOR THE ESTABLISHMENT OF A LEGAL, FISCAL AND REGULATORY FRAMEWORK FOR THE PETROLEUM INDUSTRY IN  NIGERIA AND FOR OTHER RELATED MATTERS
Commencement
ENACTED by the National Assembly of the Federal Republic of Nigeria as follows:

PART I
OBJECTIVES
1.       Objectives
The objectives of this Act are to –
(a) create a conducive business environment  for petroleum operations;
(b) enhance exploration and exploitation of petroleum resources in Nigeria for the
benefit of the Nigerian people;
(c) optimize domestic gas supplies, particularly for power generation and
industrial development;
(d) establish a progressive fiscal framework that encourages further investment in
the petroleum industry while optimising revenues accruing to the Government;
(e) establish commercially oriented and profit driven oil and gas entities;
(f) deregulate and liberalise the downstream petroleum sector;
(g) create efficient and effective regulatory agencies;
(h) promote transparency and openness in the administration of the petroleum
resources of Nigeria;
(i) promote  the development of Nigerian content in the petroleum industry;
(j) protect health, safety and the environment in the course of petroleum
operations; and 13
(k) attain such other objectives to promote a viable and sustainable petroleum
industry in Nigeria.

2.  Ownership of petroleum resources
The entire property and control of all petroleum in, under or upon any lands within
Nigeria, its territorial waters, or which forms part of its Continental Shelf and the
Exclusive Economic Zone, is vested in the Government of the Federation.

3.   Management of petroleum resources
The management and allocation of petroleum resources and their derivatives in
Nigeria shall be conducted strictly in accordance with the principles of good
governance, transparency and sustainable development of Nigeria by providing for-
(a)   an orderly, fair and competitive system;
(b)  clear and effective legal and institutional frameworks for organising petroleum
operations; and
(c)  a fiscal regime that offers fair returns on investments while optimising benefits  to
the  Nigerian people.

4.   Transparency and good governance
In  performing their functions and achieving their objectives under this Act, the
agencies  and  companies established pursuant to this Act  shall be  bound by  the
Nigerian Extractive Industries Transparency Initiative Act.

PART II
INSTITUTIONS
A.      THE MINISTER

5.   Role of the the Minister
The Minister of Petroleum Resources shall be responsible for the co-ordination of the
activities of the petroleum industry and shall exercise general supervision over all
operations and all institutions in the industry.

6.   Functions and powers of the Minister
(1)  The Minister shall-
(a)  be responsible for the formulation, determination and monitoring of
Government policy for the petroleum industry in Nigeria; 14
(b)  exercise general supervisory functions over the affairs and operations of
the petroleum industry;
(c)  report developments in the petroleum industry to the Federal Executive
Council;
(d)  advise the Government on all matters pertaining to the petroleum  industry;
(e)  represent Nigeria at meetings of international organisations that are
primarily concerned with the petroleum industry;
(f)  negotiate and execute international petroleum  treaties and agreements
with other sovereign countries, international organizations and other similar
bodies on behalf of the Government;
(g)  upon the advice of  the Inspectorate, grant, amend, renew, extend or
revoke upstream petroleum  licences and leases pursuant to the provisions
of this  Act;
(h)  upon the advice of the Agency, grant, amend, renew, extend or revoke
downstream petroleum licences for gas transportation pipeline, gas
distribution networks, refineries, LNG and GTL plants, petrochemical plants
and gas exports

(i)  advise the President on the appointments of the chief executives of the
Upstream  Petroleum Inspectorate, Downstream Petroleum Regulatory
Agency, the National Oil Company, the Asset Management Corporation
and any other Government agency or corporate entity established or to be
established pursuant to this Act;

(j)   have access at all times to areas or rights of way covered by existing
licences, leases, permits and authorisations or any related offices or
buildings, and all installations to which this Act applies, for the purpose of
inspecting operations conducted and accessing information available
therein, and enforcing the provisions of this Act and any regulations made
under this Act; and
()
(k) do all such other things as are incidental and necessary to the performance
of the functions of the Minister under this Act.
(2)    The Minister may in writing delegate to any other person or institution any power
or function conferred on him by or under this Act except the power to make
orders and regulations. 15

7.   Rights of pre-emption
(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 otherwise dealt with under any license or lease granted under this Act
(2)  The provisions of the First Schedule to this Act shall have effect in relation to the
right referred to in subsection (1) of this section.
(3)  Any person, who without reasonable excuse, the burden of proof of which shall
lie on the person, fails to comply with a requisition made by or on behalf of the
Minister under paragraphs 1, 2 or 7 of the First Schedule to this Act, or fails to
conform or to obey a direction issued by the Minister under paragraph 8 of the
First Schedule to this Act, commits an offence and is liable on conviction to a fine
not exceeding N2,500,000.00.

(4)  Any person who obstructs or interferes with the Minister, his servants or agents
in the exercise of the powers conferred on the Minister under paragraph 8 of the
First Schedule to this Act commits an offence and is liable on conviction e to a
fine not exceeding N 5,000,000 or to imprisonment for a period not exceeding
two years, or to both.

8.   Regulations
(1)  The Minister may, or on the advice of any of the agencies established under
this Act and subject to the provisions of subsections (2) and (3) of this section,
make regulations necessary to give proper effect to the provisions of this Act.
(2)  The Minister shall, prior to making any regulation under this Act, conduct an
inquiry in the manner specified in subsection (4) of this section on the subject
matter of the proposed regulations.

(3)  The Minister shall, in making any regulation take into consideration the findings
of the inquiry under subsection (2) of this section.
(4)  Subject to subsection (2) of this section, when the Minister decides to hold a
public inquiry, he shall publish in at least two national newspapers, notice of
(a)  the fact that he is holding the inquiry;
(b)  invitation to members of the public to participate in the public inquiry;
(c)  the venue and period during which the inquiry is to be held;
(c)  the nature of the matter to which the inquiry relates;

(d)  the matters that the Minister would like the submissions to deal with; 16
(e)  the form in which members of the public are to make submissions to the
Minister on the subject matter of the inquiry;
(f)  the period of public notice for the commencement of the public inquiry
which shall not be less than twenty-one days; and
(g)  the address or addresses to which the submissions may be sent.

(5)   The Minister may not publish at the same time or in the same manner the notice
of all matters referred to in subsection (4) of this section.
(6)  Notwithstanding the provision of subsection (2) of this section, the Minister may,
due to the exigency of the circumstances, make any regulation without
conducting an inquiry, where he deems it necessary to do so.

(7)  Any regulation made pursuant to sub-section (6) of this section shall be valid for
no longer than twelve months with effect from its commencement date, unless it
is confirmed after a public inquiry.

B.      PETROLEUM TECHNICAL BUREAU
9.   Establishment of the Petroleum Technical Bureau
(1)  There is established under this Act, the Petroleum Technical Bureau (in this Act
referred to as “the Bureau”) as a special unit in the office of the Minister.
(2)  The Bureau shall consist of professionals with expertise in the upstream and
downstream sectors of the petroleum industry as the Minister may from time to
time deem appropriate for the effective discharge of the functions of the Bureau.
(3) The Bureau shall in addition to its other duties, carry out  the functions of the
former Frontier Exploration Services of NNPC
10.   The functions of the Bureau

The functions of the Bureau shall be, working in conjunction with   other departments
of the Ministry to –
(a)  provide technical and professional support to the Minister on matters relating to
the petroleum industry;
(b)  assist the Minister in the formulation and development of strategies to implement
Government policy on the petroleum industry;
(c)  assist  the Minister in monitoring the implementation of Government policy on the
petroleum industry;  17
(d)  identify opportunities and increase information about the petroleum resources
base within all frontier acreages in Nigeria;
(e)  develop exploration strategies and portfolio management for the exploration of
unassigned frontier acreages in Nigeria;
(f) undertake studies, analyse and evaluate all unassigned frontier acreages in
Nigeria;
(g) undertake activities to stimulate the interest of local and international oil and gas
companies in exploration of the frontier basins of Nigeria to increase Nigeria’s
petroleum resources; and
(h)  perform such other functions as the Minister may from time to time direct, in
accordance with the provisions of this Act.
11.  Staff of the Bureau, etc
(1)    The  staff  of the Bureau shall be selected for appointment through a transparent
recruitment process.
(2)  The remuneration and conditions of service of the staff of the Bureau shall be at
a level sufficient to attract qualified professionals within the petroleum industry
and shall take into account:
(a)  the specialised nature of work to be performed by such staff;
(b)  the need to ensure financial sufficiency of the Bureau; and
(c)  the salaries paid in the private sector to individuals with equivalent
responsibilities, expertise and skills.
12.  Pensions
(1)  Employment in the Bureau shall be subject to the provisions of the Pensions
Reform Act and officers and employees of the Bureau shall be entitled to pension
and other retirement benefits as prescribed under the Pensions Reform Act.
(2)  Subsection (1) of this section shall not prohibit the Bureau from appointing a
person to any office on terms that preclude the grant of a pension or other
retirement benefits in respect of that office.
C.      UPSTREAM PETROLEUM INSPECTORATE   18
13.  Establishment of the Upstream Petroleum Inspectorate
(1)  There is established under this Act the Upstream Petroleum Inspectorate (“the
Inspectorate”) as a body corporate with perpetual succession and a common
seal and which may sue or be sued in its corporate name.
(2)  The Inspectorate shall have power to –
(a)  enter into contracts and incur obligations;
(b)  acquire, hold, mortgage, purchase and deal with property, whether movable
or immovable, real or personal; and
(c)  do all such things as are necessary for or incidental to the carrying out of its
functions and duties under this Act.
(3)  The Inspectorate shall be vested with the assets and liabilities relating to the
upstream petroleum sector functions hitherto vested in the Department of
Petroleum Resources of the Ministry.
(4)  The Inspectorate shall be structured into departments, as its Board, with the
approval of the Minister, may from time to time deem appropriate for the effective
discharge of its functions under this Act.
14.  Objectives of the Inspectorate
(1)  The Inspectorate shall –
(a)  promote the efficient, safe, effective and sustainable infrastructural
development of the upstream sector of the petroleum industry;
(b)  promote the healthy, safe and efficient conduct of all upstream petroleum
operations;
(c)  regulate all technical aspects of the upstream petroleum sector;
(d) regulate commercial activities within the upstream petroleum sector  as may
be designated by the Minister;
(e)  determine and ensure the implementation and maintenance of technical
standards and specifications applicable to the upstream petroleum sector;
(f)  execute Government policies for the upstream petroleum sector assigned
to it by the Minister;
(g)  facilitate an enabling environment  for  investments in the upstream
petroleum sector; and 19
(h)  implement such other objectives consistent with the objectives of this Act as
may be determined from time to time by the Minister.
15.  Functions of the Inspectorate
(1)  The Inspectorate shall in collaboration with other relevant government agencies,
where applicable –
(a)  administer and enforce policies, laws and regulations relating to all aspects
of upstream petroleum operations which are assigned to it under any law;
(b)  ensure and enforce compliance with the terms and conditions of all leases,
licences, permits and authorisations issued or in respect of upstream
petroleum operations;
(c)  set and enforce approved standards for design, procurement, construction,
operation and maintenance for all plant, installations and facilities pertaining
to upstream petroleum operations;
(d)  ensure adherence to national and applicable international environmental
and other technical standards by  all persons involved in upstream
petroleum operations;
(e) establish,  monitor, regulate and enforce health and safety measures
relating to all aspects of upstream petroleum operations;
(f)  keep registers of all leases, licences, permits, and other authorizations
issued by the Inspectorate or granted by the Minister for upstream
petroleum operations, and any renewals, amendments, extensions,
suspensions and revocations thereof;
(g)  carry out enquiries, tests, audits or investigations and take such steps as
may be necessary to monitor the activities of the holders of leases,
licences, permits and other authorizations to secure and enforce
compliance with the terms and conditions thereof;
(h)  publish reports and statistics on the upstream petroleum sector;
(i)  develop and publish tariffs and prices relating to third party access to
upstream petroleum facilities from time to time;
(j)  validate and certify the evaluation of national hydrocarbon reserves;
(k)  maintain a petroleum industry data bank comprising all data acquired by or
required to be given to the Inspectorate in the exercise of its statutory
functions; 20
(l) ensure accurate calibration and certification of equipment used for fiscal
measures for upstream petroleum operations;
(m)  issue licences or permits and any other authorizations necessary for all
activities connected with, but not limited to the following:
(i)  seismic;
(ii)  drilling; and
(iii)  design and construction of all facilities for upstream petroleum
operations.
(n)     manage and administer all upstream petroleum data for all unallocated
acreage;
(o)  with the prior approval the Minister, conduct  bid rounds for the award of
petroleum prospecting licences and petroleum mining leases pursuant to
the provisions of this Act ;
(p)  approve the  concept of the overall design for all field development
programmes in the upstream petroleum sector including infrastructure
optimisation;
(q)  with the approval of the Minister, allocate petroleum production quotas;
(r)   develop cost benchmarks for upstream petroleum operations performance;
(s)  compute, assess and ensure payment of  royalties, rentals, fees, and other
charges for upstream petroleum operations as stipulated in this Act and
regulations made pursuant to this Act; and
(t)
(u)  liaise with the Service on cost deductions relating to the taxation of
upstream petroleum operations undertaken by companies, other than
companies in petroleum arrangements with the National Oil Company or
the Nigeria Petroleum Asset Management Company, under the relevant
provisions of this Act and any other law in force.
16.  Powers of the Inspectorate
In carrying out its functions under this Act, the Inspectorate shall have power to –
(a) modify, extend, renew, suspend and revoke any licence or permit issued by it
pursuant to the provisions of this Act; 21
(b)  advise the Minister on the issuance, amendment or repealof any regulations
relevant to the upstream petroleum sector and the functions of the Inspectorate
under this Act;
(c)  monitor and  enforce the application of its tariff and pricing  framework for third
party access to facilities in the upstream petroleum sector in accordance with the
provisions of this Act;
(d)  request and obtain any information or any document concerning licensed
activities in the upstream petroleum sector from any licensee, lessee or permit
holder whether or not it contains business secrets;
(e)  subject to section 174 of this Act, where it considers it to be in the public interest

(i)  publish information relating to upstream petroleum operations provided by
licensees, lessees and permit holders; and
(ii)  require licensees, lessees and permit holders to publish certain information
relating to upstream petroleum operations;
(f)  enforce relevant licence, lease or permit conditions and the specific requirements
of this Act;
(g) institute legal proceedings against any licensee, lessee or permit holder for
failure to comply with licence, lease or permit conditions or other ‘requirements
of this Act;
(h)  enforce the provisions of any enactments or regulations applicable to upstream
petroleum operations made prior to the commencement of this Act; and
(i)  enforce the provisions of any regulations referring to or formerly administered by
the Department of Petroleum Resources of the Ministry;

17.  Board of the Inspectorate
(1)  There shall be for the  Inspectorate a Board (in this Act referred to as “the
Board”), responsible for the administration of the affairs and business of the
Inspectorate.
(2)  The Board shall consist of the following members appointed by the President on
the recommendation of the Minister:
(a)  a Chairman, who shall be a person of high integrity and substantial
professional experience;
(b)  the Director-General of the Inspectorate;   22
(c)  two Directors of the Inspectorate;
(d)  two representatives  of the Ministry each not lower than the rank of a
director;
(e)  a representative of the Federal Ministry of Finance, not lower than the rank
of a director;
(f)  a representative of the National Union of Petroleum and Natural Gas
Workers  (NUPENG);
(g)  a representative of the  Petroleum and Natural Gas Senior Staff Association
(PENGASSAN); and
(h)  three other  persons   who shall be of high integrity and substantial
professional experience.
(3)  The persons appointed in paragraph (a) and (h) of subsection (2) of this section
shall hold office for a term of four years in the first instance which term may be
renewed for another term  of four years only, on such terms and conditions as
may be specified in the letter of appointment.
(4)  Appointments to the Board in respect of persons appointed pursuant to
paragraphs (a), (f), (g) and (h) of subsection (2) of this section shall be on part-
time basis.

(5)  The proceedings of the Board and other ancillary matters shall be in accordance
with the provisions of the Second Schedule to this Act.
(6)  Subject to subsection (5) of this section, the Board shall have the power to make
standing orders for the regulation of its proceedings and meetings and acts of the
Board shall be deemed to be acts of the Inspectorate.
(7)  The conflict of interest provisions contained in the Second Schedule to this Act
shall apply to all members of the Board.
18.  Functions of the Board.
The Board shall ensure that the Inspectorate performs its statutory functions under this
Act by –
(a) providing general guidelines for  the  carrying out  of  the functions of the
Inspectorate;
(b) reviewing and approving the strategic plans of the Inspectorate;
(c) determining the terms and conditions of service of employees of the
Inspectorate; 23
(d) subject to the approval of the Minister, structuring the Inspectorate into such
number of departments as it deems fit for the effective discharge of the functions
of the Inspectorate; and
(e) carrying out such other acts or things which in the opinion of the  Board are
necessary to ensure the efficient performance of the functions of the Inspectorate
under this Act or as may be delegated to the Inspectorate by the Minister.
19.  Remuneration of members of the Board
Members of the Board shall be paid from the Fund of the Inspectorate such
remuneration and allowances, in accordance with the guidelines as may be specified
by Government from time to time.
20.  Removal of a member of  the Board
A member of the Board may be suspended, or removed from office by the President if
the member –
(a)  is found to have been unqualified for appointment as a member of the Board
pursuant to section 17(2)(a) and (h)  of this Act or is in breach of section 25 of
this Act after his appointment;
(b)  has demonstrated inability to effectively perform the duties of the office;
(c)  has been absent from five consecutive meetings of the Board without the
consent of the Chairman or when the Chairman is involved without the consent
of the Minister except good reason is shown for such absence;
(d)  is guilty of serious misconduct ;
(e)  in the case of a person possessed of professional qualifications, is disqualified or
suspended from practising his profession in any part of the world by an order of a
competent authority; or
(f)  is in a breach of the conflict of interest provision  set out in the Second Schedule
to this Act.

21.  Resignation of a member of the Board
A member of the Board may resign his appointment by giving three months written
notice addressed to the President through the Minister.
22.      Vacancy on the Board
(1)  A vacancy on the Board shall occur if a member of the Board—
(a)  dies; 24
(b)  is removed from office in accordance with section 20  of this Act;
(c)  resigns from office; or
(d)  completes his tenure of office.
(2)  A vacancy on the Board shall be filled by the appointment of another person to
the vacant office by the President in accordance with section   17 (2) of this Act,
as soon as is reasonably practicable after the occurrence of such vacancy.

23.  The Director-General and Directors
(1) There shall be for the Inspectorate a Director-General; and such other Directors
as may be approved by the Minister.
(2) The persons to be appointed Director-General and the Directors shall have
extensive technical or professional knowledge of the petroleum industry  with a
minimum of ten years experience at management level and shall be selected
through a transparent merit-based recruitment process.
(3) The Director-General shall be the chief executive and accounting officer of the
Inspectorate responsible for the day-to-day  running of the affairs of the
Inspectorate with the support of the Directors.
(4) The Director-General and the Directors shall perform such other functions as the
Board may determine from time to time.
24.  Tenure, remuneration and conditions of service of the Director-General
and the Directors
(1)  The Director-General shall serve for a term of four years from the date of his
appointment at the expiration of which the President may renew his term for a
further period of four years and no more and on such terms and conditions as
may be specified in the letter of appointment.
(2)  The remuneration and conditions of service of the Director-General and Directors
shall be at a level sufficient to attract qualified professionals within the petroleum
industry.

25.  Disqualification
A person shall not be appointed as Director-General or Director of the Inspectorate
unless the person –
(a)  is a Nigerian citizen;
(b)  has not, in terms of the laws in force in any country: 25
(i)   been adjudged or declared bankrupt or insolvent;
(ii)  made an assignment  to, or arrangement or composition with his creditors
which has not been rescinded or set aside;
(iii)  been declared to be of unsound mind;
(iv)  been convicted of an offence involving fraud or dishonesty; or
(v)  been disqualified or suspended from practising his profession  by the order
of a competent authority made in respect of him personally.
26.  Removal of the Director General and Directors from office
The President may remove the Director-General or a Director from office if –
(a)   he commits an act of gross misconduct;
(b)   he has demonstrated inability to effectively perform the duties of the office;
(c)   the President is satisfied that it is not in the interest of the Inspectorate or the
public that the Director General or a Director should continue in office.

27.  Secretary
(1) The Board shall appoint a Secretary for the Inspectorate.
(2) The Secretary shall report to the Director-General of the Inspectorate and shall
be responsible for:
(a)   making arrangements for Board meetings and preparing the agenda and
minutes of such meetings;
(b)   communicating the decisions of the Board to the Board members;
(c)   keeping corporate records of the Board;
(d)   arranging for payment of fees and allowances of meetings and all other
matters affecting members of the Board; and
(e)   any other duties affecting the Inspectorate assigned to him, by the
Chairman or the Director-General of the Inspectorate.
(2)  The Secretary shall be a lawyer with a minimum of ten years post qualification
experience. 26
28.  Other staff, etc
(1)   The  Board may appoint for the Inspectorate such number of  persons as
employees of the Inspectorate as it may deem necessary.
(2)  The employment of the Inspectorate’s staff, including the Secretary, shall be
subject to such terms and conditions as may from time to time be stipulated by
the Board and contained in the respective employment contracts.
(3)  The Board shall determine and review from time to time, the remuneration and
allowances, payable to the Inspectorate’s staff.
(4)  The Board shall make staff regulations generally relating to the conditions of
service of its employees, and in particular, but without prejudice to the generality
of the foregoing, such regulations may provide for –
(a)  the appointment, promotion, dismissal and discipline of employees;
(b)  appeals by the employees against dismissal or other disciplinary measures;
and
(c)  the grant of pensions, gratuities and other retirement allowances to the
employees;
(5)  Staff of the Inspectorate shall be public officers as defined in the Constitution of
the Federal Republic of Nigeria, 1999.
(6)  For the purpose of this section, appointment shall include secondment, transfer
and contract appointments.

29.  Specific provisions on conditions of service
The conditions of service of staff of the Inspectorate shall be at a level sufficient to
attract qualified professionals within the petroleum industry and shall take into
account:
(a)  the specialised nature of work to be performed by the staff;
(b)  the need to ensure financial prudence of the Inspectorate; and
(c)  the salaries paid in the private sector to individuals with equivalent
responsibilities, expertise and skills.
30.  Pensions
(1)   Employment in the Inspectorate shall be subject to the provisions of the
Pensions Reform Act and officers and employees of the Inspectorate shall be 27
entitled to pension and other retirement benefits as prescribed under the
Pensions Reform Act.
(2)   Nothing in  Subsection (1) of this section shall prohibit the Inspectorate from
appointing a person to any office on terms that preclude the grant of a pension or
other retirement benefits in respect of that office.
(3)  Subject to the Pensions Reform Act, and notwithstanding the provisions of this
section, the Inspectorate shall continue to fulfil all obligations in respect of
pensions schemes to which the Department of Petroleum Resources of the
Ministry was obliged in respect of its employees overseeing upstream petroleum
operations, prior to the transfer of assets and liabilities to the Inspectorate.
31.  Financial provisions
(1)  The Inspectorate shall not later than 30th September or such other date to be
determined by the Ministry of Finance in each financial year, prepare and present
through the Ministry   for appropriation, a statement of estimated income and
expenditure for the following financial year.
(2)  Notwithstanding the provisions of subsection (1) of this section, the Inspectorate
may also, in any financial year, submit supplementary or adjusted statements of
estimated income and expenditure for appropriation.
(3)  The financial year of the Inspectorate shall be a period of twelve calendar
months commencing on the 1st of January in each year.
32.  Funding
(1)  The Inspectorate shall establish and maintain a fund (‘the Fund’) from which all
expenditures incurred by the Inspectorate shall be defrayed.
(2)  The Fund shall comprise monies derived from the following sources:
(a)  such moneys as may be appropriated to the Inspectorate from time to time
by the National Assembly;
(b)  fees charged for services rendered to holders of upstream licences, permits
or other authorizations;
(c)  income derived from publications produced by the Inspectorate and from
reviews of environmental impact assessment reports and environmental
evaluation reports and other related activities;
(d)  fees for services rendered to non-petroleum producing companies and
service companies and for other services performed generally;
(e)  gifts, loans, grants in aid; and28
(f)  fees charged for sale of  data acquired by the Inspectorate.
(3)  The Inspectorate shall apply the proceeds of the Fund established pursuant to
subsection (1) of this section:
(a)  to meet the administrative and operating costs of the Inspectorate;
(b)   to provide for the payment of   salaries, wages, fees or other remuneration
or allowances, pensions and other retirement benefits payable to staff or
employees of the Inspectorate;
(c)  for the maintenance of property acquired by, or vested in the Inspectorate;
(d)  for purposes of investment, as prescribed by the Trustee Investments Act,
or any other relevant legislation subject to the approval of the Minister; and
(e)  generally in connection with the carrying out of any of its functions under
this Act.
(4)  The Inspectorate shall ensure that all monies accruing from upstream leases,
bonuses, lease renewal fees, assignment fees and concession rentals charged
under this Act or any subsidiary legislation or regulation made pursuant to this
Act are paid into the Federation Account .
(5)  For any particular year, if monies accruing  to the Fund  from appropriation
established pursuant to subsection (2) of this section, have not been fully applied
for the purposes pursuant to subsection (3) of this section, such monies  shall be
paid into the Consolidated Revenue Fund.
33.  Power to accept gifts
(1)  The Inspectorate may accept gifts of money or other property upon such terms
and conditions as may be specified by the person or organisation making the gift
provided such gifts are not inconsistent with the objectives and functions of the
Inspectorate under this Act.
(2)  Nothing in subsection (1) of this section or in this Act shall be construed to allow
any member of the Board or staff of the Inspectorate to accept gifts for their
personal use.
34.  Accounts and audit
The Inspectorate shall keep proper accounts of its income and expenditure in respect
of each financial year and shall cause its accounts to be audited within six months
after the end of each year by auditors appointed by the Inspectorate from a list and in
accordance with the guidelines supplied by the Auditor-General for the Federation. 29
35.  Mid-year and annual reports
(1)  The Inspectorate shall submit to the  Minister, a mid-year report of its operations
and finances not later than 31st August of each year and an annual report of its
operations, performance and audited financial report of the preceding year not
later than 31st May of the following year.
(2)  A summary of the annual report and audited financial report of the Inspectorate
shall be published on the website of the Inspectorate for public notice not later
than 31st of July of each year.
36.  Exemption from income tax
(1)  The provisions of any enactment relating to the taxation of companies or trust
funds shall not apply to the Inspectorate.
(2)  Where contributions to the Fund of the Inspectorate are made by a person
subject to tax under the provisions of any law in force in Nigeria, all such
contributions shall be tax deductible.
37.  Limitation of suits against the Inspectorate, etc
(1) Subject to the provisions of this Act, the provisions of the Public Officers
Protection Act shall apply in relation to any suit instituted against the
Inspectorate, Director General, an officer or employee of the Inspectorate.
(2)  No suit shall lie against the Inspectorate, the Director General or any other officer
or employee of the Inspectorate for any act done in pursuance or execution of
this Act or any other law or enactment, or of any public duty or authority in
respect of any alleged neglect or default in the execution of this Act or any other
law or enactment, duty or authority, or be instituted in any court unless it is
commenced—
(a)  within three months next after the act, neglect or default complained of; or
(b)   in the case of a continuation of damage or injury, within 6 months next after
the ceasing thereof.
(3)  No suit shall be commenced against the Inspectorate, the Director General or
any official or employee of the Inspectorate before the expiration of a period of
one month after written notice of the intention to commence the suit shall have
been served on the Inspectorate by the intending plaintiff or his agent.
(4)  The notice referred to in subsection (3) of this section shall clearly and explicitly
state the cause of action, the particulars of the claim, the name and address of
the intending plaintiff and the relief which he claims. 30
38.  Service of court processes on the Inspectorate
A notice, summons or other document required or authorised to be served on the
Inspectorate under the provisions of this Act or any other law or enactment may be
served by delivering it to the office of the Director General of the Inspectorate or any of
its Directors.
39.  Restriction on execution against the Inspectorate’s property
(1)  In any action or suit against the Inspectorate, no execution or attachment of its
physical property shall be issued. Any judgment against the Inspectorate may be
enforced through garnishee proceedings provided that not less than three
months’ notice of the intention to commence the garnishee proceedings shall
have been given to the Inspectorate.
(2)  Any sum of money which may by the judgment of any court be awarded against
the Inspectorate shall, subject to any direction given by the court where no notice
of appeal against the judgment has been given, be paid from the Fund  of the
Inspectorate.
40.  Special powers
The Inspectorate shall have power to investigate any person or organisation in relation
to any of its functions or powers under this Act and in order to ascertain any violation
of the provisions of this Act.
41.  Special Investigation Unit
(1)  For the effective conduct of its functions, the Inspectorate shall have a Special
Investigation Unit.
(2)  The Special Investigation Unit or an officer authorised on its behalf shall have
powers, with respect to matters under the authority of the Inspectorate in this Act,
to:
(a)  investigate acts which may  constitute offences under this Act;
(b)  collaborate with other government agencies and persons in relation to the
detection or prosecution of offences under this Act;
(c)  keep  surveillance on oil and gas installations, premises and vessels where
it has reason to believe that illegal petroleum operations are going on;
(d)  enter and search any premises or carrier including vehicles or any other
instrumentalities whatsoever which is reasonably believed to be connected
with the commission of an offence;  31
(e)  seize any item or substance which is reasonably believed to have been
used in the commission of an offence under this Act.
(f)  arrest without warrant any person who is found committing any offence
under this Act or any regulations made under this Act and hand over any
person so arrested to a police officer immediately; and
(g)  In conjunction with the Nigerian Police and other relevant law enforcement
agencies arrest with a warrant obtained from a judicial officer, any person
reasonably believed to have committed an offence under this Act;
42.  Indemnity of Board and employees
(1)  Every member of the Board and every employee of the Inspectorate shall be
indemnified out of the assets of the Inspectorate against any liability incurred in
defending any proceeding against the Inspectorate, whether civil or criminal, if
such proceedings are brought against the person in the person’s capacity as a
member of the Board or employee.
(2)  Notwithstanding the provisions of subsection (1) of this section, the Inspectorate
shall not indemnify any member of the Board or employee of the Inspectorate for
any liability incurred as a result of the wilful negligence of the member or
employee, as the case may be, or conduct or acts which such person knew or
ought to have known to be unlawful.

D.      DOWNSTREAM PETROLEUM REGULATORY AGENCY
43.  Establishment of the Downstream Petroleum Regulatory Agency
(1)  There is established  under this Act the Downstream Petroleum Regulatory
Agency (“the Agency”) a body corporate with perpetual succession, a common
seal and which may sue or be sued in its corporate name.
(2)  The Agency shall have power to –
(a)  enter into contracts and incur obligations;
(b)  acquire, hold, mortgage, purchase and deal with property, whether movable
or immovable, real or personal; and
(c)  do all such things as are necessary for or incidental to the carrying out of its
functions and duties under this Act.  32
(3)  The assets and liabilities relating to the downstream petroleum sector functions
hither to perform by the Department of Petroleum Resources of the Ministry and
the Petroleum Products Pricing and Regulatory Agency shall be vested in the
Agency.
(4)  The Agency shall be structured into departments as its Board, with the approval
of the Minister, may from time to time deem appropriate for the effective
discharge of its functions.
44.  Objectives of the Agency
The objectives of the Agency are to –
(a)  promote the efficient, safe, effective and sustainable infrastructural development
of the downstream sector of the petroleum industry;
(b)  promote the healthy, safe and efficient conduct of all downstream petroleum
operations;
(c)  regulate all technical aspects of the downstream petroleum sector;
(d) regulate commercial activities within the downstream sector as designated by the
Minister;
(e)  promote the efficient development of transportation infrastructure for crude oil to
downstream facilities, gas and petroleum products;
(f)  determine and ensure the implementation and maintenance of technical
standards and specifications applicable to the downstream petroleum sector;
(g)  execute Government policies for the downstream petroleum sector  as may be
assigned  by the Minister;
(h)  facilitate an enabling environment  for investments in the downstream petroleum
sector; and
(i)  pursue such other objectives consistent with the objectives of this Act as may be
determined from time to time by the Minister.
45.  Functions of the Agency
(1)  The functions of the Agency in collaboration of other relevant Government
institutions where applicable are to:
(a)  administer and enforce policies, laws and regulations relating to all aspects
of downstream petroleum operations as may be  assigned to it by law;   33
(b)  ensure and enforce compliance with the terms and conditions of all
licences, permits and authorizations issued in respect of downstream
petroleum operations;
(c)  set and enforce approved standards for design, procurement, construction,
operation and maintenance for all plant, installations and facilities pertaining
to downstream petroleum operations;
(d)  ensure adherence to national and applicable international environmental
standards by  all persons involved in downstream petroleum operations;
(e) establish, monitor and regulate health and safety measures relating to  all
aspects of downstream petroleum operations;
(f)  keep registers of all licences, permits, and other authorizations issued by
the Agency or granted by the Minister for downstream petroleum
operations, and any renewals, amendments, suspensions and revocations
thereof;
(g)  carry out enquiries, tests, audits or investigations and take such steps as
may be necessary to monitor the activities of the holders of licences,
permits and other authorizations  and  to secure and enforce compliance
with the terms and conditions thereof;
(h)  publish reports and statistics on the downstream petroleum sector;
(i)  issue, and renew licences, permits or other authorizations,  and  modify,
amend, extend, suspend, review, cancel and reissue, revoke or terminate
such licences,  permits or other authorizations;
(j)  regulate the activities of the downstream petroleum sector in Nigeria in a
non-discriminatory and transparent manner;
(k)  set cost benchmarks for downstream petroleum operations;
(l)  regulate bulk storage, transportation and transmission and set rules for the
common carrier systems  for crude oil,    gas  and  petroleum  products  in
downstream petroleum sector;
(m)  promote sustainable infrastructural development in the downstream
petroleum sector;
(n)  promote competition and private sector participation in the downstream
petroleum sectors;
(o)  facilitate the satisfaction of all economic and strategic demands for
downstream gas; 34
(p)  monitor and enforce the actual application of tariff and pricing framework as
specified  by regulation ;
(q) monitor market behaviour including the development and maintenance of
competitive markets in addition to the regulation of tariffs in the downstream
petroleum sectors;
(r)  arrest situations of abuse of dominant power and restrictive business
practices in the downstream petroleum sector;
(s)  establish  and implement  appropriate dispute settlement mechanisms
relating to  parties engaged in downstream petroleum operations as may be
prescribed by regulations;
(t) inspect measurement equipment and any other facilities for downstream
petroleum operations and ensure compliance with safety standards as
prescribed by regulation ;
(u)  issue clean certificates of inspection at the oil terminals to exporters of
crude oil upon satisfaction that the requirements as to quality and quantity
have been complied with;
(v)  facilitate the supply of gas to the strategic sectors, in accordance with the
approved national gas pricing framework;
(w)   issue, and renew downstream licences or permits or authorizations,  and
modify, amend, extend, suspend, review, cancel and reissue, revoke or
terminate such licences or permits or authorizations and the licences or
permits or authorizations shall be for activities connected with but not
limited to the following:
(i)  downstream gas distribution;
(ii)  petroleum products;
(iii)  storage;
(iv)  retail outlets;
(v)  transportation; and
(vi)  design and construction of all facilities including those for gas and
petrochemicals;
(vii)  establish  the  methodology for calculating  the fair market value of
petroleum products as may be prescribed by regulations;  35
(viii) regulate bulk storage and distribution and   implement rules for
petroleum products, petroleum product pipelines and regional storage
depots as may be prescribed by regulations; and
(ix) promote security of fuel supply in the downstream petroleum sector;
(x)   subject to the approval of the Minister, develop  and implement market rules
for trading in wholesale gas supplies to downstream gas distributors;
(y)  implement consumer protection measures in accordance with the provisions
of this Act;
(z) undertake consultation with customers, licensees and industry participants
where necessary;
(aa)  promote and protect the interests of consumers;
(ab)  promote the principles of sustainable resource and infrastructural
development through the efficient supply and use of downstream gas and
other petroleum products;
(ac)  regulate and ensure the supply, distribution, marketing and retail of
petroleum products as may be prescribed by regulations;
(ad)  administer and monitor the national operating and strategic stocks of
petroleum products as set by the Minister;
(ae)  monitor and ensure the quality and process of conversion or blending of
whatever material by whatever method to fuels, bio-fuels or derivatives for
automotive use in Nigeria; as may be prescribed by regulations; and
(af)  do such other things as are necessary and expedient for the effective and
full discharge of any of its functions under this Act.
46.  Powers of the Agency
In carrying out its functions under this Act, the Agency shall have power to –
(a)   modify, extend, renew, suspend and revoke any licence or permit issued by it
pursuant to the provisions of this Act ;
(b)   monitor and  enforce the application of its tariff and pricing  framework for third
party access to facilities in the upstream petroleum sector in accordance with the
provisions of this Act;
(c)  subject to section  174 of this Act request and obtain any information or any
document concerning licensed activities in the downstream petroleum sector
from any licensee or permit holder whether or not  it contains business secrets; 36
(d)  where it considers it to be in the public interest:
(i)  publish information relating to downstream petroleum operations provided
by licensees and permit holders;
(ii)  require licensees and permit holders to publish certain information relating
to downstream petroleum operations;
(e)   impose and enforce relevant licence or permit conditions and  enforce the
specific requirements of this Act;
(f)   institute legal proceedings against any licensee, lessee or permit holder for
failure to comply with licence or permit conditions or other requirements of this
Act;
(g)  enforce the provisions of any enactments or regulations applicable to  downstream
petroleum operations made prior to the commencement of this Act; and
(h)  to enforce the provisions  of  any regulations hitherto administered by the
Department of Petroleum Resources of the Ministry in the downstream sector.
47.  Board of the Agency
(1)  There shall be for  the Agency, a Board (in this Act referred to as “the Board”),
responsible for the administration of the affairs and business of the Agency.
(2)  The Board shall consist of the following members appointed by the President on
the recommendation of the Minister:
(a)  the Chairman, who shall be a person of high integrity  and  ,    substantial
professional experience;
(b)  the Director-General of the Agency;
(c)  two Directors of the Agency;
(d)  two representatives from the Ministry of Petroleum Resources each  not
below the rank of a director;
(e)   a representative of the Federal Ministry of Finance, not below the rank of a
director;
(f)  a representative of the National Union of Petroleum and Natural Gas
Workers (NUPENG);
(g)  a representative of the  Petroleum and Natural Gas Senior Staff Association
(PENGASSAN); and 37
(h)  three other  persons   who shall be of high integrity and substantial
professional experience.
(3)  The persons appointed in paragraph (a) and (h) of subsection (2) of this section
shall hold office for a term of four years in the first instance which term may be
renewed for another term  of four years only, on such terms and conditions as
may be specified in the letter of appointment.
(4)  Appointments to the Board in respect of persons appointed pursuant to
paragraphs (a), (f), (g) and (h) of subsection (2) of this section shall be on part-
time basis.
(5)  The proceedings of the Board of the Agency and other ancillary matters shall be
in accordance with the provisions of the Second Schedule to this Act.
(6)  Subject to subsection (5) of this section, the Board shall have the power to make
standing orders for the regulation of its proceedings and meetings and acts of the
Board shall be deemed to be acts of the Agency.
(7)  The conflict of interest provisions contained in the Second Schedule to this Act
shall apply to all members of the Board.
48.  Functions of the Board.
The Board shall ensure that the Agency performs its statutory functions under this Act
by –
(a) providing general guidelines related to the functions of the Agency;
(b) reviewing and approving the strategic plans of the Agency;
(c) determining the terms and conditions of service of employees of the Agency;
(d) subject to the approval of the Minister, structuring the Agency into such number
of departments as it deems fit for the effective discharge of the functions of the
Agency; and
(e) carrying out such other acts or things which in the opinion of the Directors are
necessary to ensure the efficient performance of the Agency under this Act or as
may be delegated to the Agency by the Minister.
49.  Remuneration of members of the Board
Members of the Board shall be paid from the Fund of the Agency such remuneration
and allowances  as may be specified by the Government from time to time  by
guidelines issued by the Government. 38
50.  Removal of a member of  the Board
A member of the Board may be suspended, or removed from office by the President if
the member –
(a)  is found to have been unqualified for appointment as a member of the Board
pursuant to  paragraphs (a) and (h) of section 47(2) of this Act or is in breach of
section 56 of this Act  after his appointment;
(b)  has demonstrated inability to effectively perform the duties of his office;
(c)  has been absent from five consecutive meetings of the Board without the
consent of the Chairman and where the Chairman is involved without the
consent of the Minister except  for  good reason is shown for such absence;
(d)  is guilty of serious misconduct ;
(e)  in the case of a person possessed of professional qualifications, he is
disqualified or suspended from practicing his profession in any part of the world
by an order of a competent authority; or
(f)  is in  breach of the conflict of interest rules set out in the Second Schedule to this
Act.
51.  Resignation of a member of  the Board
A member of the Board may resign his appointment by giving three months written
notice addressed to the President through the Minister.
52.  Vacancy on the Board
(1)  A vacancy on the Board shall occur if a member of the Board—
(a)  dies;
(b)  is removed from office in accordance with section 51 of this Act;
(c)  resigns from office; or
(d)  completes his tenure of office.
(2)  A vacancy on the Board shall be filled by the appointment of another person to
the vacant office by the President in accordance with section 48 of this Act, as
soon as is reasonably practicable after the occurrence of such vacancy. 39
53.  The Director-General and Directors
(1) There shall be for the Agency a Director-General and such other Directors as
may be approved by the Minister.
(2) The persons to be appointed Director-General and the Directors shall have
extensive technical or professional knowledge of the petroleum industry with a
minimum of ten years experience at management level and shall be selected
through a transparent merit-based recruitment process.
(3) The Director-General shall be the chief executive and accounting officer of the
Agency responsible for the day-to-day running of the affairs of the Agency with
the support of the Directors.
(4) The Director-General and the Directors shall perform such other functions as the
Board may determine from time to time.
54.  Tenure, remuneration and conditions of service of the Director-General
and  Directors
(1)  The Director-General shall serve for a term of four years from the date of his
appointment at the expiration of which the President may renew his term for a
further period of four years and no more and on such terms and conditions as
may be specified in his letter of appointment.
(2)  The remuneration and conditions of service of the Director-General shall be at a
level sufficient to attract qualified professionals within the petroleum industry.
(3) The conflict of interest provisions contained in the Second Schedule to this Act
shall apply to all members of the Board.
55.  Disqualification
A person shall not be appointed as Director-General or Director of the Agency unless
the person –
(a)  is a Nigerian citizen;
(b)  has not, in terms of the laws in force in any country-
(i)  been adjudged or declared bankrupt or insolvent;
(ii)  made an assignment to, or arrangement or composition with his creditors
which has not been rescinded or set aside;
(iii)  been declared to be of unsound mind;
(iv)  been convicted of an offence involving fraud or dishonesty; or 40
(v)  been disqualified or suspended from practising his profession in  any part of
the world  by the order of a competent authority made in respect of him
personally.
56.  Removal of  a member of the Board,  the Director General and  Directors
from office

    Print       Email