Acquiring an Oil and Gas asset in Nigeria is subject to a variety of rigorous rules, the main purpose of which is to prevent fraud and general malpractice. A potential investor in the oil and gas industry, intending to acquire an oil and gas asset within Nigeria would be granted an interest in either an Oil Prospecting Licence (OPL) or an Oil Mining Lease (OML), both of which would be subject to conditions stipulated by the Federal Government.
The award of oil and gas assets has evolved from the discretionary grants by incumbent Head of states to the practice of open bids aimed at achieving greater transparency. To ensure this is achieved, laws and regulations are provided, of which predominantly the Petroleum Act (PA) could be referred to as the Grundnorm of the Oil and Gas industry.
The Petroleum Act (PA)
The Petroleum Act (PA) enables the Nigerian Government through the Department of Petroleum Resources (DPR) to regulate the industry by virtue of the powers conferred upon the Minister of Petroleum Resources (MPR). It is further to this authority that the DPR monitors concession holders and effectively controls the petroleum industry.
It has been highly debated in previous years, the proper procedure for assigning an interest in an oil and gas asset. The issue in contention is focused on when ministers’ consent would be required for assigning an interest to a prospective investor. In such circumstances, upon notifying the DPR of any proposed change in the ownership interest within a concession, it may either result in requiring the Ministers consent or an outright refusal of such proposal.
The First (1st) schedule of the Petroleum Act (PA) makes specific provision for assigning an interest in an Oil Mining Lease (OML) or Oil Prospecting Licence (OPL). Any proposed transfer/assignment of an interest in a concession granted would require the Minister of Petroleum Resources (MPR) consent. Therefore before there is an assignment or operations undertaken within a concession, it is mandatory that governmental assent is sought in accordance with paragraph 14 of the First Schedule to the Petroleum Act.
Paragraph 14 provides as follows:-
“Without the prior consent of the Minister, the holder of an Oil Mining Lease (OML) or an Oil Prospecting Licence (OPL) shall not assign his licence or lease, or any right, power, interest therein or there under.”
Notwithstanding the above, the issue regarding ministerial consent for an assignment becomes contentious when referring to the transfer of shares in a company i.e. corporate restructuring. Deciding whether minister’s consent would be required in such situation is to determine if there has ultimately been a change in ownership of the company. This can be referred to as determining if there is a change in control either direct or indirect to the holder of the oil and gas asset.
It has been previously assumed, that any corporate restructuring of a holder of an upstream asset has been said not to ordinarily trigger the requirement for Minister’s consent. However it should be noted that where corporate restructuring gives rise to a change in control of the holder of the oil and gas asset, it could be viewed as an indirect change in ownership, and therefore would require Ministers consent.
Change in Control
The phrase change in control is not specifically provided for under the Petroleum Act. However the essence of a change in control is contemplated under the Petroleum (Drilling and Production) Regulations (PDPR), which uses the term ‘takeover’ introduced by Regulation 4 (b), which provides as follows:-
“Application for the assignment or takeover of an oil prospecting licence or oil mining lease (or of an interest in the same) shall be made to the Minister in writing and accompanied by the prescribed fees at the discretion of the Minister; and the applicant shall furnish in respect of the assignment or takeover, all such information as is required to be furnished in the case of an applicant for a new licence or lease.”
The term takeover is not defined in the PDPR, but under the Investments and Securities Act (ISA), a ‘takeover’ is defined as “the acquisition by one company of sufficient shares in another company to give the acquiring company control over that other company”. This definition would suggest that a takeover only occurs where the quantum of shares acquired by one company in another, is of such amount as to constitute a change in control and thereby bring the transaction within the definition of a takeover under the ISA.
It should be noted that the current position with regards to acquiring ministers’ consent when it comes to any form of corporate restructuring has been stated by the highly recognised 2012 Federal High Court decision in the case between Moni Pulo vs Brass & 7 Ors where it was confirmed that a corporate restructure by an OPL or OML holder will have the effect of a transfer or takeover and will require ministers consent irrespective of the quantum of shares being transferred.
Criteria for Granting Approval
Notwithstanding the above, it should be noted that it is not all situations whereby consent will be granted. The Minister of Petroleum Resources may refuse to grant consent to an assignment unless:-
i. The proposed assignee is of good reputation, or is a member of a group of companies of good reputation, or is owned by a company or companies of good reputation;
ii. There is likely to be available to the proposed assignee(from his own resources or through other companies in the group of which he is a member, or otherwise) sufficient technical knowledge and experience and sufficient financial resources to enable him to effectually carry out a programme satisfactory to the Minister in respect of operations under the license or lease which is to be assigned; and
iii. The proposed Assignee is in all other respects acceptable to the Federal Government.
In conclusion, from the above it is clear that ministerial consent/approval to an assignment of interest is an important aspect of acquiring an interest in a concession.
Therefore, it should also be noted that, failure to acquire such consent or approval would result in revocation. This authority given to the minister is a right reserved under the Petroleum Act. Paragraph 23 and 24 of the First Schedule to the Petroleum Act highlights amongst others, that the Minister may revoke any Oil Prospecting Licence or Oil Mining Licence if the licences or lessee fails to comply with any provisions of the PA or any regulations or direction given hereunder or is not fulfilling his obligations under the special conditions of his licence of lease.
*Etin Giwa Osagie is a lawyer and consultant with extensive experience in oil and gas and energy related matters.