An Evaluation of the New Legal Framework for the Negotiated Participation of the Federal Government in Oil Blocks

In February 2019, the President, in his capacity as the Minister of Petroleum Resources, made the Oil Block Allocations to Companies (Back-In-Rights) Regulations (New Regulations) which revoked the Deep Water Block Allocation to Companies (Back-in-Rights) Regulations of 2003 (Old Regulations). Until the revocation, the Old Regulations restricted the Federal Government’s back-in right to Oil Prospecting Licences (OPL) and Oil Mining Leases (OML) awarded only for deep water blocks.

However, the New Regulations cast a wide net over all OPLs and OMLs, whether onshore, shallow or in deep water, thereby entitling the Federal Government to participate in any venture to which an OPL or OML relates. This right may be exercised by the Federal Government when an applicant is applying for the award of an OPL or OML, conversion of an OPL or renewal of an OPL or OML.

The New Regulations set out an elaborate procedure for the exercise of the back-in right including a negotiation process as required by Paragraph 35(a) of the First Schedule to the Petroleum Act. The Minister of Petroleum Resources has an obligation to invite the applicant to a negotiation meeting after giving the applicant at least 14 days’ notice of the date, time and venue of the meeting.

Within the rubric of negotiations to be had between the Minister of Petroleum Resources and an applicant, the New Regulations permit the applicant to recover Proven Costs that are eligible for recovery.

Our newsletter evaluates the new legal framework for the negotiated participation of the Federal Government in oil blocks.