Regulating the Black Gold

AllAfrica |

One hundred and six years after the commencement of petroleum exploration in Nigeria, and over half a century of commercial exploitation, the Nigerian upstream oil and gas legal and regulatory infrastructure remains in a state of flux with the decade long reform enshrined in the much-awaited enactment of the Petroleum Industry Bill. The critical gap in the existing legal regime essentially lies in the failure of legislation, policy and contracts to entrench the sustainable development principle. Thus, this important book represents an opportunity for key stakeholders in the onshore and offshore oil industry such as government, international oil companies (IOCs), host communities and civil society to ensure that the legislative reform process as well as corporate and community conduct is carried out in line with the recommendations established in this work.

There is no doubt that sustainable development is a critical factor in achieving an efficient and functional regulatory framework that integrates the needs of present and future generations. Dr Fabian Ajogwu SAN and Dr Oscar Liam are thus correct to investigate sustainable development at the international, regional and national level in line with its impact on environmental aspects of petroleum exploration and management. The book is lucidly written and thus easily accessible to an audience of lawyers, judges, oil and gas practitioners and students. The work uses academic and professional literature to illustrate its arguments which are further underpinned by a comparative methodology approach that allow the authors to cite cogent examples from diverse upstream jurisdictions in the UK, US, Middle East and South America.

The objectives of the book are quite ambitious as it seeks to examine the concept of sustainable development; utilise sustainable development as a regulatory tool or strategy; provide alternative options to ensure sustainable upstream oil and gas operations; and integrate sustainable development into regulatory and business processes in the Niger Delta. All this is apart from substantial recommendations aimed at transforming the Niger Delta landscape from conflict and crisis into economic growth and development. Dr Ajogwu SAN and Dr Liam have been quite successful in amplifying an holistic approach that truly addresses the interconnection between sustainable development and Nigerian petroleum industry. So rather than an examination of the individual chapters, the reviewer will instead highlight the most salient points of the book.

At the global level, the book addresses the international and regional network of conventions, treaties and instruments that provide environmental protection and thus impact upstream oil and gas operations. The 1972 Stockholm Declaration, 1992 Rio Declaration, United Nations Framework Convention on Climate Change, Kyoto Protocol, Agenda 21, IMO Guidelines, African Charter etc provide hard and soft law that are essential to sustainable upstream operations. Unfortunately, as the authors rightly point out, the soft underbelly of transnational law is that it is ad hoc, fragmented and not legally binding in Nigeria as the sovereignty of the nation insulates it from effective international oversight. To the reviewer, this is not necessarily a bad thing, as state sovereignty has to be the starting point in the comity of nations.

Moving to the national stage, the book correctly recognises that there has to be a "cradle to grave" approach in enshrining sustainability. It reviews exploration, prospecting, development and decommissioning. Hence the importance of licences and leases in setting the stage for the activities of oil producers. Also, the decommissioning process ensures that the industry restores the environment at the end of operations. The work emphasises the obligation on the Nigerian government to institute a national legal and institutional regime founded on sustainable development. While the authors also ensure that IOCs are held accountable for the polluted environment of the Niger Delta, perhaps less attention is placed on the future role of indigenous companies which are increasingly taking over acreage in the onshore arena.

The authors demonstrate significant knowledge and understanding in their review of the sustainable development principle, both theoretically and its practical application to Nigerian upstream operations. Also addressed is the precautionary principle, environmental impact assessment (EIA), polluter pays principle, inter-generational equity, public participation and access to justice for environmental concerns. These are undoubtedly robust principles and concepts that underpin a well designed national regulatory framework. As the authors rightly observe, it would be difficult for these relatively recent principles and concepts to be reflected in a national regime with some laws dating from 1956, 1967 and 1969.

Another strength of the study is the detailed emphasis on the role of Niger Delta Citizens in integrating sustainable development into petroleum operations. There is recognition that the extant top-down approach to problems within the region has not been completely successful. Initiating a bottom-top approach is highly commendable in a highly centralised Nigeria. Clearly, development is impossible in a situation where there is sabotage of oil and gas equipment, kidnapping of oil workers, and other criminal acts. The importance of a strategic partnership between government, international community, civil society and indigenous communities is agreeably highlighted. If communities embrace dialogue, judicial mechanisms, active participation and present a united front, then institutions such as the Niger Delta Development Commission, Niger Delta Regional Development Master Plan and Ministry of Niger Delta Affairs will yield positive and sustainable results.

Furthermore, the authors call for a paradigm shift towards sustainable oil and gas exploration and production is particularly poignant in view of ongoing industry reforms. I strongly agree that there is an urgent need to review the extant legal and regulatory regime to ensure it aligns with sustainable development. As Dr Ajogwu SAN and Dr Liam note, the use of guidance or explanatory notes in oil and gas environmental statutes will be helpful in integrating sustainable development. Also notable, is the authors treatment of Nigerian local content as a potential engine for sustainable development. Furthermore, the resolution of oil and gas environmental disputes is practically reviewed through case law, locus standi, pre-action notice and an examination of notable hurdles to access to justice.

Undoubtedly, this book is a significant contribution to legal literature as a pioneering investigation into a sustainable legal and regulatory petroleum regime. In this type of work, the authors cannot include every minor detail, but instead there is a proper focus on the main legal and policy instruments that can deliver sustainable development. The authors achieved this and more, and l warmly congratulate them. That said, there are minor criticisms of the work that must be noted. On the technical side, one observes that Tables 1-3 were not numbered, and there is no list of tables in the table of contents. Also, the table of contents properly identifies Parts 1 and 2, while Parts 3 and 4 are omitted. Other referencing issues include a few inconsistent internet citations such as footnotes 170 and 175 on p. 189; and the segmentation of footnotes into individual chapters as opposed to a sequential numbering throughout the book. It is conceded however, that the numbering of footnotes is a matter of style.

Aside the minor quibble, the books general treatment of upstream oil and gas contracts could have been more robust. As a practitioners tool, perhaps the authors should have engaged "real life" Nigerian joint venture contracts, joint operating agreements, risk service and production sharing contracts. Arguably, too much reliance was placed on AIPN Model agreements to the detriment of a focused Nigerian narrative. Of course, this is not to discount the value of international transaction models. Similarly, the authors discussion of the provisions of the Petroleum Industry Bill was always going to be tricky in view of the many versions and long delay. The 2012 PIB currently before the National Assembly is the relevant document. This particular bill does not include the incorporated joint venture regime mentioned on pp. 63-64, though no one can predict the final outcome of the proposed law.

Finally, the few criticisms above, should not detract attention from the hard work and scholarship that produced this important text. It is my view that Petroleum Law and Sustainable Development will not only be useful in Nigeria, but also in oil and gas producing nations yet to integrate sustainable development into their laws, policies, strategies and regulatory processes. The book is thus highly recommended to all.

Dr Ayoade is a Senior Lecturer at the Faculty of Law, University of Lagos

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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