Senate probes oil and gas exploration contracts

By Ikechukwu Okaforadi

Senate has mandated its Committee on Petroleum Resources (Upstream), to conduct a comprehensive review of the relevant laws; product sharing contracts ( PSC) and Joint venture contracts ( JVC) .
It also directed the Committee to review arrangements governing abandonment, decommissioning, remediation and investigate degree of compliance with these laws by oil companies operating in Nigeria.
The Upper legislative chamber further mandated the Committee to ensure that all oil and gas companies account of their budget performances so as to determine their level of compliance with the relevant laws .
These were sequel to the consideration of a motion, “The need to investigate the degree of enforcement of abandonment and decommissioning obligations in oil and gas exploration contracts”, yesterday by Senator Gershom Bassey (PDP Cross River South) and co-sponsored by seven other lawmakers during plenary.
Leading debate on the motion, Senator Bassey said that abandonment and decommissioning costs are those associated with the physical removal and disposal of obsolete oil installations at the end of their operational life and the restoration of the environment to the state it was before exploitation.
According to him, the United Nations Convention on the Law of the Seas Art. 60(3), Geneva Convention Article 5(5), the Oslo and Paris Convention for the Protection of Marine Environment, the 1967 Territorial Water Act and 1969 Petroleum Act, all have provisions for mandatory abandonment and decommissioning for oil companies.
Bassey noted that “budgetary provisions are approved for oil companies in their yearly budgets as contained in the JV/PSC clauses for abandonment and decommissioning, but such allocations are scarcely utilized by oil companies operating in the country for its purpose.”
He added that the provisions for decommissioning and restoration are recognised even if the decommissioning is expected to be performed much later.
The lawmaker further pointed out that most of the oil companies operating in Nigeria fail to restore exploited sites after the expiration of their lease as witnessed in the Niger Delta region.
Bassey also expressed concern that “at the point of transfer of interest by one oil company to another, there is lack of clarity in many instances with regards to financial liability for abandonment and decommissioning thereby causing untold hardship to the host community.”