A MILLENNIAL’S GUIDE TO ENERGY LAW – EPISODE 4 (LAWS GOVERNING TRANSPORTATION OF AND GAS IN NIGERIA)
Transportation of an oil and gas is an important part of the oil supply chain. After exploration, development and production (Upstream stage) there is need for it to move from one location to another either for refining or for distribution to the end users.
Oil since it appears in liquid form is easier to move around unlike Gas. Oil for export is transported to a terminal either by ship vessel or pipelines. If it is to be refined into various forms it can be transported to the various refineries either through pipelines or tankers. These pipeline networks connect several fields which may be linked to refining facilities, terminals for shipping or storage tanks.
Gas on the other hand is a lot difficult to transport, the cost of transportation isn’t an added advantage as well. Gas can be transported either through pipelines or LNG. LNG is a process where the gas is cooled down to a certain level at which it liquefies (Gas in its natural state isn’t liquid) and then transported to a ship and taken to a place where it will turned back into Gas again and used in gaseous form. Pipelines for Gas transportation is the best bet if it is for short distances because as the distance increases, the cost of transporting Gas increases expeditiously. For distances exceeding three thousand miles (3000) miles we use LNG. Nigeria exports its Gas to the European market by LNG.
The Oil Pipelines Act and Oil and Gas Pipelines Regulation govern the operation of petroleum pipelines. The grant of a license is preceded by a survey of the proposed pipeline route, which is conducted with the minister of petroleum’s permission. Section 4 of the Oil Pipelines Act explicitly states that application for a permit to survey the pipeline route is to be made to the Minister of Petroleum resource, who reserves the right to grant or refuse to grant the permit. If the application is accepted, the applicant will be handed a permit after payment of specified fees.
The Survey Permit allows the holder, his officers or agents free entry into the land listed on the permit and allows them to survey and take levels of sand, dig and bore hole into soil or subsoil, to cut and remove trees and other vegetation as may impede the purposes specified in the permit and also to do all other acts necessary to ascertain the suitability of the land for the establishment of oil pipelines or ancillary institutions. This is codified in Section 5(1) Oil Pipeline Act.
After concluding the survey of the route for the pipeline, the holder of the permit will have to apply for a grant of an oil pipeline license for the surveyed route. The minister may grant or refuse the new application. If the application is granted, then he will be issued a license to commence construction of a pipeline after the relevant fees have been paid.
When a third party is interested in a pipeline, he may have access or rights subject to ministerial approval. This approval will be given after the Minister has consulted with the applicants and pipeline owners and is assured that the pipeline can be operated efficiently. The parties will agree to terms of use of the pipeline which the minister may determine.
Oil to be transported across borders is primarily regulated by the contract between the vessel owner and the charterer on interchangeable conditions of international time or voyage charter contracts. A petroleum exporter will also be mandated to obtain export permits issued by the Department of Petroleum Resources (DPR) and the Federal Ministry of Industry, Trade and Investment to export oil or gas.
Before transportation is completed, there is an inspection. The Pre-shipment inspection of Exports Act subjugates exports from Nigeria (including crude oil exports) to inspection by pre-shipment inspection agents. The act also requires exporters of goods, including petroleum products, to open, maintain and operate a foreign currency domiciliary account in Nigeria, into which all export proceeds must be paid.
The Coastal and Inland Shipping (Cabotage) Act restricts the use of foreign vessels for the carriage of goods within coastal territorial inland waters, or any points within the waters of Nigeria’s exclusive economic zone. The act also restricts vessels, tugs or barges that are not beneficially owned by a Nigerian citizen from the carriage of materials or supply services to and from oil rigs, platforms and installations, whether offshore or onshore or within any ports in Nigerian waters.
In recent years, Oil theft and discharge of Oil into the sea when it is in transit has been on a rise. Proper documentation and the promulgation of The Crude Oil Transportation ad Shipment) Regulation ensures that there is a clear trail of all crude oil moved around the country. Except prior authorization is obtained or if it within the limits of operational practice or when loading from two or more terminals within Nigeria, no ship is allowed to carry dead freight. Dead freight allows for “topping” which makes stealing easier under the guise of lawful trade. “Topping” means additional loading of crude oil in any available space on the ship after the nominated quantity has been loaded.
The Merchant Shipping (Prevention of Oil Pollution) Regulation sets out steps to take and laws against pollution of the marine environment.
To read Episode 3, click here.
ABOUT THE WRITER
Karen Okoro is a graduate of Benson Idahosa University and the Nigerian Law School. She is passionate about Energy Law, particularly the Oil and Gas sector. She is also interested in Commercial Law. Karen believes young and prospective lawyers who explore the energy space can be groundbreaking professionals in the field and can help create better policies. Karen enjoys writing and traveling.
