What are the next steps for upstream participants ?
1 . Understanding the extent of the PIA ’ s application . The PIA has immediate effect – but there is grandfathering and the extent of its particular application depends on the upstream interest held . For the grant of any new PPLs , PMls or renewal of existing OPLs / OMLs , then the entire PIA applies . For existing OPLs / OMLs , their terms continue unchanged and only specific parts of the PIA apply ( which excludes the new fiscal terms ), until such leases are converted to the PIA regime . Understanding what from the PIA is relevant now , and what will become so in the future , will be an important first step .
2 . What actions must be taken now to comply with the new PIA requirements . The PIA introduces many new actions that upstream operators must comply with ( even if they hold unconverted OPLs / OMLs ). Some require action now , others have a transitional period for compliance . The two most significant requirements are the creation and funding of host community development trusts ( which will entail planning and community engagement ) and which must be done within 12 months ; and the opening of abandonment escrow accounts and preparation of abandonment plans ( but where no clear deadline is apparent ).
4 . Separation and segregation of activities . For upstream companies that undertake activities within the PIA ’ s scope of “ midstream ” operations , then there will need to be restructuring of assets and contracts and such midstream activities may require the grant of licences / permits from the new midstream Authority .
About Bracewell
Bracewell is a leading international law firm that specialises in the energy sector . Bracewell ’ s London office is dedicated to the energy sector , with a focus on upstream oil and gas .
Bracewell ’ s London team has deep and current experience of developing and financing oil and gas projects in Nigeria , along with considerable upstream M & A experience , and has advised on numerous Nigerian upstream related disputes and arbitrations . We are immersed in the unique issues and challenges for oil and gas companies operating in Nigeria .
For more information , please contact Adam Blythe or Catherine Todd .
3 . To convert or not convert ? Existing OML / OPL holders should evaluate the extent of the improved PIA fiscal terms to their licence interests and whether to seek early “ conversion ”. This should be assessed against the consequences of conversion , including acreage relinquishment and the release of Government-related claims and proceedings . Early voluntary conversion appears to be time limited – available until 9 March 2023 ( 18 months from PIA effectiveness ). Otherwise , conversion happens on lease renewal .
Key Contacts
Adam Blythe Partner London
Catherine Todd Associate London bracewell . com