Senate Probes Oil, Gas Exploration Contracts

Senate Probes Oil, Gas Exploration Contracts
Senate President Ahmad Ibrahim Lawan

Senate Probes Oil, Gas Exploration Contracts


The Senate on Wednesday mandated its Committee on Petroleum Resources (Upstream) to conduct a comprehensive review of the relevant laws in Nigeria’s oil and gas sector and determine the level of compliance by the oil firms to the laws.

The law in focus are the Production Sharing Contracts, the Joint Venture Contracts, and the arrangements governing abandonment, decommissioning, and remediation.

It also directed all oil and gas companies to give account of their budget performances to the Committee on Petroleum (Upstream) so as to determine their level of compliance with the relevant laws.

The resolution was sequel to the consideration of a motion, ‘The need to investigate the degree of enforcement of abandonment and decommissioning obligations in oil and gas exploration contracts’, sponsored by Senator Gershom Bassey.

Leading the debate on the motion, Bassey said that abandonment and decommissioning costs were those associated with` the physical removal and disposal of obsolete oil installations at the end of their operational life and the restoration of the environment to the state it was before exploitation.

He said the United Nations Convention on the Law of the Seas Art. 60(3), Geneva Convention Article 5(5), the Oslo and Paris Convention for the Protection of Marine Environment, the 1967 Territorial Water Act and 1969 Petroleum Act, all have provisions for mandatory abandonment and decommissioning for oil companies.

Bassey noted that budgetary provisions were approved for oil companies in their yearly budgets as contained in the JV/PSC clauses for abandonment and decommissioning.

He said such allocations were scarcely utilised by oil companies operating in the country for their purposes.

The lawmaker stated that the provisions for decommissioning and restoration were recognised even if the decommissioning was expected to be performed much later.

He added that most of the oil companies operating in Nigeria failed to restore exploited sites after the expiration of their lease as witnessed in the Niger Delta region.

Bassey said, “At the point of transfer of interest by one oil company to another, there is lack of clarity in many instances with regards to financial liability for abandonment and decommissioning, thereby causing untold hardship to the host communities.”

Contributing to the motion, Senator Stella Oduah said the global best practices whenever there was decommissioning was ensuring proper clean-up to avoid land degradation and other environmental hazards that often caused problems for the people.


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