Threatens sanctions against defaulting operators
Oil and gas industry operators in and settlors risk regulatory sanctions, including revocation of operating licences, over delay in remitting the statutory contributions to host communities development funds in the Niger Delta region.
Following agitations by the Host communities over the delay to remit the fees, the regulatory authority in the petroleum sector, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has said that it would not hesitate to activate its regulatory powers to bring defaulting and recalcitrant settlors to compliance.
The Commission has therefore warned that if by the end of this month the defaulting operators fail to remedy the situation, it would hesitate to enforce the provisions of the law on the relevant sanctions.
Under Section 240 (2) of the Petroleum Industry Act (PIA) 2021, operators in the petroleum industry are expected to make a mandatory annual contribution of 3% of their actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities.
The contribution by each settlor would be through the operator to the applicable development trust fund established for the host communities development in line with the provisions of Section 235 of the Petroleum Industry Act (PIA), 2021.
Reacting to the communities agitations, the NUPRC said it appreciates their concerns, particularly their patience over the issue, especially as the PIA had suspended the Global Memorandum of Understanding (GMOU) and the Memorandum of Understanding (MOU), replacing both provisions with a new Host Community Development Trust Fund.
The Commission said it was fully aware of the implications of the development, saying if allowed to fester it might frustrate its efforts at up-scaling the drive for higher foreign exchange earnings through uninterrupted industry operations.
Also, the Commission said the agitations would affect efforts to attract Foreign Direct Investment (FDI) into the country, truncate efforts to stabilise the value of the Naira and attain the much-desired rebound in the national economy and improve the macro-economic status.
“Given the implications of allowing continued default on sustained peaceful operations and the eventual effect on national oil and gas output, the Commission will be minded to activate its regulatory powers, in line with the provisions of the Act as stated above, to bring defaulting and recalcitrant settlors into compliance,” the Commission warned.
Reminding the defaulting operators, the Commission said it recently passed the Host Community Regulation and organised a mass sensitization programme, emphasising the responsibility of settlors in host communities under the PIA, 2021.
It lamented that despite the new regulation, the operators have neglected to discharge their obligations, thereby stoking avoidable agitations.
The settlors, the Commission said, are therefore required to perform their obligations, by commencing the remittance of the statutory 3% contribution to the Host Community Development Fund.
Noting that remittance of the statutory contribution should serve as succour to the host communities, the Commission expressed sadness that it has however become a source of pain to the lawful beneficiaries.
The development, the regulator pointed out, has now given impetus to actions that might affect smooth upstream operations within affected host communities in the region, a situation, it said, could have been addressed through routine social inclusion.
Although it observed that the ultimate regulatory sanction as enshrined in Section 238 of the PIA was the revocation of assets, the Commission said it has been careful not to compound the already low level of investment and divestment rate that could further impact negatively on production levels and the Federation revenue.
Rather the Commission said it has chosen to draw a balance, by being strategic in the implementation of the provisions of the law to avoid worsening the crisis.
The relevant section of the law, the Commission said, states that “Unless as otherwise provided for in this Act, failure by any holder of a licence or lease governed by this Act to comply with its obligations under this Chapter, after having been informed of such failure in writing by the Commission or Authority as the case may be, may be grounds for revocation of the applicable licence.”
Consequently, defaulting operators (settlors) under the PIA 2021 (section 235) are advised to do the needful by fulfilling their obligations and remitting the outstanding arrears without further delay, as the Commission might be compelled by emerging circumstances to fully apply the law.
Therefore, it again notified defaulting operators that if they failed to remedy the situation by the end of September 2023, the Commission would have no option than to revoke the licence of the defaulting settler/operator.
