LEGAL ISSUES OF OFFSHORE OIL AND GAS EXPLORATION IN NIGERIA AND APPRAISAL
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INTRODUCTION
1.1 Background of the Study
Nigeria is a coastal State of West Africa bordered in the north by the Niger Republic, in the west by Benin Republic, in the East by the Republics of Chad and Cameroons and in the South by the Atlantic Ocean. Until 1 October, 1060 when it became an independent nation, it was a colonial dependency of the United Kingdom; consequently its legal system was based essentially on the British Common Law. Petroleum resources are the main export of Nigeria accounting for about 96% of exports revenues. Nigeria is one of the founding members of the Organization of African Union, now African Union[1] and became a member of the Organization of Petroleum Exporting Countries (OPEC) in 1972 and is the 6th Largest producer of oil in OPEC with proven resources of 35.2 Billion Barrels of crude oil and 159 trillion cubic feet of Natural Gas by 200 estimates.[2]
It goes to saying that Nigeria is one of the oil rich countries not only in Africa, but also within committee of nations of the world. She is a very rich nation and by far the most affluent in Africa.[3]
The production of oil in Nigeria started in 1908 when the German Bitumen Company began exploratory activities. However, it activities were permanently interrupted by the First World War.[4]
Oil prospecting efforts resumed in 1937 when Shell D’ Arcy (the forerunner of Shell Petroleum Development Company of Nigeria) was awarded the sole concession rights covering the whole territory of Nigeria.[5] Their activities were also interrupted by the Second World War, but resumed 1974. In November 1948, Shell D’ Arcy received an Oil Exploration License (OEL) covering all of Nigeria. By 1957 Shell – BP had reduced its acreage to 410, 00sq miles of Oil Prospecting License (OPLS). Out of this acreage, Shell – BP converted nearly 15,000 sq miles into Oil Mineral Leases (OMLS). In 1960, and 1962 returned the residual to the Nigerian government.[6]
Shell – BP, now Shell Petroleum Development Company of Nigeria limited (Shell) discovered large reserves of oil in Oloibiri, Rivers State in 1958. The first commercial consignment of oil was delivered in Europe. Since this development Nigeria has been contributing an average of 2 million barrels of oil per day to the world oil market. In September, 1999 construction of the liquefied natural gas funding with a capacity of processing 397 million cubic feet of gas was completed at Bonny, Commencing the export of liquefied natural gas from Nigeria. As at 2002 estimates Nigeria provides about 502 million cubic feet of gas annually and construction is underway that will increase this figure to about 1.1 billion cubic feet.[7] A considerable amount of production of oil and gas is done onshore but in recent times offshore production has been on the increase with the discovering of substantive reserves of petroleum in the deep offshore areas. By 2002 estimates there are at least 121 offshore installations and structures for Nigeria,[8] some of which side require to be decommissioning at some point in the future. The principal Legislation regulating petroleum activities in Nigeria is the petroleum Act 1969 [9] together with the subsidiary laws made there under. Title to all petroleum in or under the soil or seabed of Nigeria is vested absolutely in the state and production is usually carried out under joint venture agreement or[10] production sharing contracts between the oil company and the state through the Nigeria National Petroleum Corporation.[11] The major operators in the Nigerian oil and gas industry include shell, chevron, Texaco, Exon Mobil, Agip, Total Elf and Avdax Petroleum.
Offshore decommissioning is essentially an international law issue based on the Law of the Sea conventions and regional instruments or convention. These in turn shape the various national regulations on the subject. In jurisdictions like the United Kingdom and the United Sates legal provisions have been developed to regulate offshore decommissioning.[12] In the North Sea region in particular, the Brent spar saga heralded an era of hot debated on the legal obligation of states.[13]
Nevertheless, at present, over 70 international conventions and agreements are directly concerned with protecting the marine environment.[14] However, not one of these legally binding agreements is exclusively devoted to regulating offshore oil development. Some aspects are incorporated in different conventions, especially in conventions that were in principle designed for the transportation of oil by ships.
Furthermore, some important conventions that specifically mention one or several aspects directly related to offshore oil development are:
The Declaration of the United Nations Conference on the Human Environment (1992) Rio Declaration”); The Stockholm Declaration on the Human Environment 1972, The Convention on Biological Diversity 1992; The Johannesburg Declaration on Sustainable Development 2002; International Convention for the Prevention of Pollution of the Sea by Oil ( OILPOL) 1954; The United Nations Convention on the Law of the Sea 82/94 (UNCLOS) PART XII; The Convention on the Prevention of Marine Pollution by Dumping of wastes and other matters (1972) (The Law on dumping Convention); The London Dumping Convention Protocol 1996; The IMO Guidelines and Standards 1989; The Oslo Convention 1972; The Ospar Convention 1992; Convention for Co-operation in the Protection and Development of the Marine and Coastal Environment of the West and Central African Region 1951; The Abidjan Convention; Kuwait Regional Convention for Co-operation on the Protection of the Marine Environment from Pollution 1998 (The Kuwait Convention); Convention on the protection of the Mediterranean Sea against pollution 1976 (The Barcelona Convention) and convention on the protection of the Marine Environment of the Baltic Sea Area 1992 (The Helsinkin convention).
The Stockholm Declaration on the Human Environment was adopted at the United Nation Conference on the Human Environment (also known as the Stockholm Conference). It was an international conference convened by the United Nation in Stockholm, Sweden from June 5-16 1972.[15]
The Declaration identified the various resources of the earth including water, air, land flora and fauna which must be notified for the benefit of both the present and future generation.[16]
Protection of the sea is given particular attention by prohibition of pollution which might cause harm to human health, living resources and marine life.[17]
In particular the discharge of toxic substances or of other substances and the release of heat in such quantities or concentration as to exceed the capacity of the environment to render them harmless must be halted in order to ensure that serious or irreversible damage is not inflicted upon ecosystem.[18]
The Rio Declaration on Environment & Development 1992 had twenty-seven principles, the central concept being “sustainable development” as defined by the Brundtland report.
It begins with a reaffirmation of the principles enshrined in the Stockholm Declaration on Human Environment. It reiterated some existing principles & introduced new ones. In particular, it reinforced principle 21 which placed obligation upon states to ensure that adverse consequences are not caused to others in the exercise of the right to exploit their natural resources.[19]
The Convention on Biological Diversity of 1992. This convention addressed diverse components of biodiversity.[20] It suffices to argue that there is a need for an integrated approach to the protection of biological diversity. It was for this and other reasons that the convention on Biological Diversity was adopted at the Earth summit in Rio de Janeiro, Brazil in June 1992, which came into force in December 1993.[21]
The United Nation Convention on the Law of the sea 82/94 (UNCLOS) represents a powerful addiction to treatises on preservation of marine Environment.[22] It provides a comprehensive legal regime for the world’s sea and oceans.[23] Part x 11 contains provisions that are devoted to protection and preservation of marine environment. In particular section 192 imposed obligations upon states to protect and preserve the marine environment.
Article 208 specifically deals with regulation of pollution from seabed activities. Here states are to adopt Laws and regulation to prevent pollution from seabed activities subject to their jurisdiction. Regulation 21 of Annex 1 of the MARPOL convention specially deals with offshore platforms. It provides that fixed and floating platforms associated with offshore processing of seabed mineral resources must comply with requirement of Annex 1.[24]
Nevertheless, the Imo Guidelines and standards of 1989 provide Guidelines and standards for the removal of offshore installations and structures on the Continental Shelf and in the Exclusive Economic Zone.
The Oslo convention 1992 prohibits the champing of certain listed materials from “ships and aircraft” including fixed or floating platforms.[25] While the Abidjan convention applies to the West African Atlantic Ocean encompassing the offshore oil producers in West & Central Africa. The convention does not prejudice the requirements under the United Nations Convention on the Law of the Sea.[26]
The convention on the protection of the Marine Environment of the Baltic Sea Area 11992 (The Helsinki convention) is considered the strictest of all regional convention dealing with offshore decommissioning.[27]
In the same vein, there are some national Laws regulating offshore petroleum Development in Nigeria. Under the petroleum Act,[28] the Minister is empowered to make regulations including the prevention of pollution of water courses and the atmosphere[29], as well as for regulating the construction, maintenance and operation of installation.[30]
Additionally, there are, oil in Navigable Waters Act (ONWA, 1968); oil in Navigable Waters Regulation (ONWA) 1968; Associated Gas Re-injection Act AGRA) 1979; Federal Environmental protection Agency Act (FEPA Act), 1988; Harmful waste (special criminal provisions Act 1988 (HWSCP) which prohibits the carry, depositing and dumping of harmful waste on Law, territorial waster & waters, relating thereto; Oil & Gas Pipeline Regulations (OGPR), 1995; Environmental Impact Assessment Act (EIA), 1992; Environmental Guidelines & Standards for Petroleum Industry (1991) as revised in 2002 and National Environmental Standard and Regulations Environment Agency Establishment Act WESRIA 2007.
Conclusively, there is need for a comprehensive international convention on offshore units which will present to the International community a consensual regime on all relevant matters which would avoid piecemeal & fractured responses by individual nations & the international community. Principle 22 of the Stockholm Declaration & principles 12 and 13 of the Rio declaration emphasized the international responsibility of states to develop effective international regimes to address transboundary pollution, liability and compensation for environmental damage both within and outside States Jurisdiction.
1.2 Statement of the Problem
The Legal problems emanating from offshore oil and gas exploration in Nigeria are enormous yet it would appear that there is no conscious government policy to articulate these problems. The essence of this research is to highlight these problems and appraise them. Lack of a comprehensive legal framework for offshore oil and gas exploration may result in catastrophic environmental consequences in the nation. There is no legally binding agreement or framework which is exclusively devoted to regulation of offshore exploration in Nigeria. The only provision that is related to the issue is that contained in the oil pipelines Act. It would appear that most discussions on offshore decommissioning revolve around offshore platforms and offshore pipelines are somewhat neglected.
Therefore it is thus obligatory on the part of the Nigeria government to put in place appropriate and comprehensive decommissioning guidelines and rules that address the complex interaction of environment, health and safety, costs of such operation.
Apart from the rules of international Law Nigeria can learn from the experience of other jurisdictions where offshore decommissioning has taken place. The lesson to be drawn from the political and socio-economic controversies that surrounded the Brent spar decommissioning in the UK as well as the “Rigs to Reefs” debate in the United States cannot be ignored.
1.3 Objectives of the Study
The research proposes to identify the following objectives:
- To identify and evaluate the legal issues of offshore oil and gas exploration in Nigeria and appraise them.
- To proffer a new legal framework for the organizations and operations of offshore decommissioning in Nigeria to reflect the changing dynamics of oil and gas operations in the nation.
- To address provisions for penalties, contraventions of relevant policies relating to implementation of offshore legislations in Nigeria.
- To look at the drawbacks and failures of the regulatory bodies in charge of offshore oil and gas exploration in Nigeria.
- To make a contribution to the area of knowledge on the subject matter.
1.4 Research Questions
In relation to this research, the legal research questions are:
- What are the Legal Issues on Offshore oil and gas exploration in Nigeria and their appraisal?
- What is the State of the existing offshore oil and gas laws on exploration of minerals in Nigeria?
- How effective are the Legal framework for offshore oil and gas regulation in the country?
- Why are laws relating to offshore oil and gas exploration of mineral deposit mostly breached and stipulated penalties for contravention never enforced by the relevant agencies?
1.4 Significance of the Study
The research study is to advice the government on the need to formulate a comprehensive legislation on offshore oil and gas exploration activities in the country.
Nevertheless, the study will also educate the government, multinational agencies on the significance of offshore decommissioning and where the responsibility for such decommissioning lies. The study seeks to review the environment institutions and policy standard in Nigeria as regards decommissioning of offshore installations. Through the study the weakness and gaps of the international regulatory framework in decommissioning can be examined.
1.6 Research Methodology
The approach to be adopted in this study is historical, comparative, doctrinal and analytical. Nigeria’s long history of oil and gas exploration and operation coupled with the environmental pollution problems, obsolete legislative framework makes the historical approach as preferred option.
The comparative approach is a derivative of the need to draw from the experience in other jurisdiction such as Australia, and the United States of America. The account is also analytical in its critical examination as well as appraisal of the emerging issues and trends. It also adopts a multidisciplinary approach which seeks to draw from the principles and rules of international environmental law petroleum law and international law of the sea. To this extend both the primary and secondary sources of law materials have been used. Primary sources of research materials in this dissertation include caselaw, statutes, regulations, books, pamphlets, periodicals, magazines, as well as government documents.
Secondary sources in this work will include article from legal websites legal treaties and legal dictionaries, encyclopedia, annual law reports etc.
1.7 Scope of the Study
The Scope of the research is on the legal issues of offshore oil and gas exploration in Nigeria and appraisal. The analyses are further confined to the legal provisions relevant to oil and gas exploration in Nigeria as well as overall legal regulation and institutional framework relating to offshore petroleum developments.
This research work is divided into five chapters. Chapter one is the introduction which they down the background of the study. Chapter two reviews the relevant literature on Nigeria’s Offshore and Gas Exploration. Chapter three discusses offshore oil and gas exploration and its effects on the environment. Chapter four examines globally recognized procedure for decommissioning of offshore oil and gas installations. Chapter five deals with summary, conclusion, recommendation and references
1.8 Definition of Terms
Removal and Decommissioning: The term “Decommissioning” is conspicuously absent in the 1958 Geneva Convention on the continental shelf and the 1982 United Nations Convention on Law of Sea (UNCLOS). Equally, it is not defined in both the 1989 international maritime Organization (IMO) Guidelines and standards and the 1982 Convention for the projection of the Marine Environment of the north – Atlantic (OSPAR) and other regional treaties that deal with marine pollution”.[31] The words “Abandonment” and “Decommissioning” are used interchangeably with references to offshore platform decommissioning. Removal of abandoned offshore platform is generally referred to as abandonment,” decommissioning is more extensive and comprehensive in its application and comparism to the word “abandonment” as used in various treats relevant to offshore installations removal. However, the word “decommissioning” is a preferable term for the description of the process and procedures associated with disposal of installations, as well as site rehabilitation after they are no longer needed.[32]
Meaning of Offshore Installations
As the various convention used terms such as “Installations and structures”, it is important to determine what these terms mean. From the outset these terms likely would include offshore production platform, well leads, storage and loading units. This is apparent because, in the convention on the continental shelf, the “Coastal state is entitled to construct and maintain or operate on the continental shelf, installations
and other devices necessary for its exploration and the exploitation of its national resources.[33] Offshore production platform, well leads and storage and loading unit are all necessary for the exploration and the exploitation of natural resources, so it is apparent that they are “installations and other devices” within the meaning of the convention. Similarly, under the UNCLOS convention, the coastal state if granted the exclusive right to construct (…) installations and structures for the purpose provided for”,34 including, in its exclusive economic zone, for “the purpose of exploring and exploiting, conserving and managing the national resources (…) of the water superadjacent to the seabed and of the seabed and its subsoil”35 and, on its continental shelf “the purpose of exploring (the continental shelf) and exploiting its national resources”.36 Again, offshore production platform, well leads and storage and loading units are all necessary for the exploration and the exploitation of natural resources, so it is apparent that they are “Installations and structures” within the meaning of the convention.
[1] Hamzah BA “International rules on Decommissioning of Offshore Instalslations” some Observations on Marine 2003. 27:339-48. www.ingentaconnect.com/content/els/030859x/2003/ /artoo.40(Assessed on April 9, 2013)
[2] Smith J. “Californian State and commission Rigs – Reefs workshop, Loss Angeles, CA December 3, 1999” http/www.scl.ca.gw/ division- pages/m/RM/Rigs to Reefs htm. (Assessed on April 9, 2013)
[3] “Oil Industry in Nigeria” At en: Wikipedia.org/wik/oil_industry_in Nigeria (assessed on April 10 2013).
[4] World bank stakeholder initiative towards sustainable Decommissioning and closure of oil field and mines. A Toolkit to Assist Government Agencies http://sitersources.worldbank. org/EXIOGMC/Resources/336929 – 1255667423982 decommissioning toolkits full.pdf. (Assessed on April 9, 2013).
[5] Abiye C. O. Amakirir (1997) “Developing an Offshore Installation Decommissioning Policy in Nigeria) oil and gas taxation Reviews 423.
[6] Article by Ayoade Morakinyo Adedayo “Environmental Risk – Decommissioning of Offshore oil platform in Nigeria”. Available at dayoayoade@gmail.com (assessed 20th October, 2013)
[7] Maxwell Alves “Decommissioning Offshore Installations – Legal Aspects”. Proceedings of the Institute of Marine Engineering, Science and Technology, No. B1, 2002, Winner of the Institute’s Stanley Gray. Award for being the most worthy paper read to or published by the institute.
[8] Ibid, at page 72
[9] Charez, Golvala: Upstream Joint Ventures, Bidding and Operating Agreements, in Geoffrey oil and gas: A practical handbook (Globe Law and Business, London 2009) 45-5.
[10] Ibid, at page. 91
[11] Ibid, at page. 92
[12] for example Part IV of the UK Petroleum Act 1998
[13] “Green Peace Brent Spar Protest in the North Sea” At archive greenpeace.org/comms/brent/brent.html (assessed on April 21 2003).
[14] Patin Stainslav, Environmental Impart of the Offshore Oil and Gas Industry (New York: Economitor publishing, 1999).
[15] “United Nations Conference on the Human Environment”. At <Hp://www.coearth.org/article/United – Nations- Conference-on-the-Human- Environment- (UNCHE). Stockholm-Sweden .
[16] Principle 2 of the Stockholm Declaration
[17] Principle 6
[
[18] Principle 7
[19] Principle 2
[20] E.g., convention on International Trade in Enlarged species of world fauna & Flora 1973, Convention on the Conservation of Migratory Species of World Animals 1974, Convention on the Protection of the Natural Resources & Environment of the South Pacific 1986, etc.
[21] “Convention on Biological Diversity”. At <Hp://www.2ncc for un/page- 1365
22 Shaw. M (1998) International Law. U. K. Cambridge University press.
23 Vinogradov. S. et at “International Legal Regime for the Protection of the Marine Environment Against Operational Pollution from Offshore Petroleum Activities “in Gao, Z. (1977) Environment Regulation of oil & Gas. U. K. Kluwer Law International.
- Article 208 (1)
- 5 et at “International Legal Regime for the Protection of the Marine Environment Against Operational Pollution from Offshore Petroleum Activities “in Gao. Z (1977) Environment Regulation of oil & Gas. U. K. Kluwer
- Zuru S. A. (2007) Critical Discourse on Strategic Legal Issues in Natural Resources Law & Policy. Zaria faith printers International. p. 104
- Article 3.3 of the Abidjan Convention
[28] Morakinyo A. A. (2002) “Disused” Offshore Installations & Pipelines: Towards sustainable decommissioning“. Hague Kluwer Law International.
[29] Petroleum Act 1969. CAP P10 Laws of the Federation of Nigeria,2004
30 Section 9 (i) b (ii)
[31] I.M.O Assembly Resolution A672 (16) adopted 19 October 1989, and 32 International legal Materials (ILM) 1993 1072.
[32] A. D. M. Forte (1998), Legal Aspects of Decommissioning – In: D. G. Norman and J. Neilson, Editors, Decommissioning of Offshore Structures, Springer. New York.
[33] Convention on the Continental Shelf, Article 5 (2).
34 Laws of the Sea Convention (UNCLOS) Article 60 (1)
35 Ibid, Article 56 (1)
36 Ibid, Article 77(1). The right to constrict installation and structures on the continental shelf (in Article 80) is applied “Mutatis Murtadis” to the right to construct installation and structures in the exclusive economic zone in Article (60).
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