“If he considers it to be in the public interest, the Minister may impose on a licence or lease to which this Schedule applies special terms and conditions not inconsistent with this Act including (without prejudice to the generality of the foregoing) terms and conditions as to –
(a) participation by the Federal Government in the venture to which the licence or lease relates, on terms to be negotiated, between the Minister and the applicant for the licence or lease……….”
Nigeria is a member of the oil cartel known as Organization of Petroleum Exporting Countries (OPEC). This body was formed in response to the dominant role of the international oil companies in the 1950s. To fight the injustice in the oil industries of the host nations, this body enunciated the principle of participation in its resolution at the XVI conference in 1968. The resolution guides the activities of it members in the oil industry, Nigeria inclusive.
3.2.3 OPEC’s resolution on State participation reads
“Where provision for government participation in the ownership of the concession-holding company under any of the present petroleum contracts has not been made, the government may acquire a reasonable participation on the
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grounds of the principle of changing circumstance. If such provisions have actually been made but avoided by the operators concerned, the rate provided for shall serve as minimum basis for the participation to be acquired”.
This resolution was again reaffirmed in 1971 calling on member states to embark on participation in oil ventures. It is believed by many that this OPEC resolution, as well as the U.N. resolution 1803 on PSNR 1962, to a large extent, influenced the above provision in Schedule 1 of the Petroleum Act 1969.
3.2.4 It can now be fairly stated from the above provisions that the concept or idea of State equity participation in the petroleum industry, is based on the broad principle of public or national interest. This interest involves political and economic expediency.
That is to say that an oil producing State like Nigeria should, as a matter of political and economic development and sustainance, embark on the exploration and production of petroleum resources in partnership with MNOCs, who have the greater wherewithal (capital, skilled manpower and technology).
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4. CONCLUSION
You can see from our discussion in this unit the reasons that have been advanced for State participation in the oil and gas industry. These reasons contain objectives, for example, increased financial dividends and investment opportunities.
While some of them have been achieved through participation in oil ventures, others are yet to be realized. But those achieved or realized can be counted as advantages of State participation.
We also discussed the principle or principles upon which State participation rests. One can also say that the totality of the reasons stated in paragraph 4.1 above make up the broad principle, which we identified as public or national interest. By discussing the principle of State Participation, one is showing that this idea or concept now enjoys legislative approval. In the next unit, we shall discuss the nature and form of State participation in Nigeria.
5. SUMMARY
This unit has focused our attention on the concept of State participation in the petroleum industry, through equity holding. The discussion has shown why States endowed with oil resources, are compelled to engage in the exploration and production operations of such resources. The discussion has also shown that this practice has now been given sufficient recognition by legislation, as contained in paragraph 4.2.2 above.
At the same time, our discussion has revealed that the principle of State participation originated from the resolutions of International bodies, namely OPEC and the United Nations
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6. TUTOR MARKED ASSIGNMENT QUESTION
1.What are reasons for State participation in the oil and gas industry?
2. How far is it correct to state that the idea of State Participation in the petroleum industry is now rooted in legislation.
7. REFERENCE/FURTHER READING
1. Oil and Gas Law in Nigeria: Theory and Practice, – by Lawrence Atsegbua
2. Oil and Gas Law in Nigeria – by Yinka Omorogbe.
3. Nigerian Petroleum Law – by G. Etikerentse.
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MODULE 2
UNIT 2
1. Introduction
2. Objectives
3. Main Content
4. Conclusion
5. Summary
6. Tutor Marked Assignment Questions
7. Reference/Further Reading
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NIGERIAN GOVERNMENT’S PARTICIPATION IN THE PETROLEUM INDUSTRY
1. INTRODUCTION
The second unit of this module focuses on the means or route through which the Nigerian Government realizes its objective in equity participation in the oil and gas industry. Essentially participation is implemented through joint venture agreements between the Nigerian Government agency, N.N.P.C., and the multinational oil companies. Shell Petroleum Development Company of Nigeria Limited, a subsidiary of the multinational Royal Dutch Shell, is a major player and partner in such venture.
S.P.D.C, by virtue of its extensive petroleum operations in Nigeria has joint venture exploration and production agreements with Nigeria’s N.N.P.C.
There are also joint ventures in our oil industry involving other oil companies like Nigeria Agip Oil Company (N.A.O.C) Elf Nigeria Ltd, Mobil Producing Nigeria Unlimited and Chevron Nigeria Limited
2. COURSE OBJECTIVES
At the end of this study unit, I believe the student or reader will be able:
- To identify the form of partnership arrangement between the Nigerian Government and multinational oil companies.
- To understand and appreciate the form of participation arrangement between the Nigerian Government and MNOCs.
- To understand and appreciate the nature and form of join venture oil exploration and production agreements.
- To understand and appreciate the means through which State participation in the petroleum industry is realized.
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3.0 MAIN CONTENT