‘An Oil Company Can Transfer its Assets in any Manner even Where Bidding is Utilised’
The oil and gas sector is unarguably Nigeria's economic mainstay. The focus on this sector is understandable, given the various complex multi-million dollar International transactions involved. However, when disputes arise from these transactions, intrica
The recent fall in oil prices has resulted in a 28.05% drop in Nigeria’s revenue thereby shifting the focus of stakeholders to alternative sources of energy. Can you assess the current legal framework for renewable energy in Nigeria?
In discussing any legal framework, it is useful to understand the grounds on which the scaffolding or structure stands. This thus leads me first to a consideration of statistics on our oil revenue – in a period where elephants are contending on the veracity of these numbers and basis of computation. But leaving that important issue aside, given its beyond the narrow scope here, one finds according to statistics released by the CBN Governor, that between Jun.30, 2014 and Dec.31, 2014 the price of Bonny Light declined by 50.7%, dropping from $112.78/b to $55.57/b and between Dec.31,2014 and Jan.23,2015, it recorded a decline of 15%, dropping from $55.57 /b to $42.22/b. In the premises, the search for alternative sources cannot be overemphasised considering the current dynamics of the domestic and international markets for energy production feedstock and output.
Undoubtedly, Nigeria is blessed, by the Maker of all things, with varied renewable energy resources including sunlight, wind, rain, tides, and biofuel. Advances in technology on terrestrial and extra-terrestrial study are also such that there indeed may be more of renewable sources that will come to market soon. Without any sarcasm, our governments have, with bad education and value systems, assisted us in becoming creators of mountains of debris and waste, which if well harnessed, as in other societies, could be used to generate much needed energy for this well endowed society of energetic people.
The volatility of energy supply and pricing as well as global concerns around climate change, with increased urgency for countries to become more environmentally clean and friendly and to promote the use of cleaner energy sources, are major factors, which our leaders claim, is steering the government towards a serious consideration of alternative energy sources apart from fossil-fuel. In addition, the need to improve the exploitation of other indigenous resources as well as the benefit of diversifying the countries sources of wealth has been reflected in various policy developments as well as legislation made in recent times.
1. In terms of the current legal framework for renewable energy, the fact is that it is very much in its infancy, even embryonic. Speaking as if I was skilled in the sciences, I would dare this is a matter that takes root in constitutional provisions on legislative powers as to the environment and power. From that soil will grow legislative ideas, perhaps fertilised with developed concepts abroad conformed to local circumstances. Going by the recent appeal decision by that most respected Judge Abiru JCA in the case of HELIOS v KADUNA STATE, based in the main on earlier cases on the subject like AG LAGOS v AG FEDERATION (regarding town planning) and AG ONDO v AG FEDERATION (regarding corruption), the final say on this matter will lie with the National Assembly, with probable powers for states and local governments in the process. This will be as far as environmental laws are concerned and it seems to me that this will be a major tributary of the waters renewable energy will flow, the other being no lesser a tributary than the electricity industry laws and regulations. But as, is well known, twin tributaries are fed by lesser bodies of water and this will be the case with renewable energy going by the way a whole panoply of laws are thrown at new subjects in the country.
Interestingly, being largely driven by federal legislative and executive powers, the Federal Government has kicked started this process with its initiative on Renewable Energy Programme under the aegis of the Federal Ministry of Environment. This is targeted at stimulating the renewable energy sector to attract capital and to encourage the development of renewable energy technologies in Nigeria. Statistics in developing countries show that renewable energy projects can be a direct and an indirect contributor to poverty alleviation as it improves employment as well as provides the energy needed for businesses to thrive.
The last few years have witnessed huge investments in the Nigerian electricity sector, though a huge portion of these investments have been in relation to gas fired power plants. However, there are a number of potential investors who are looking to generate electricity through renewable energy sources in different parts of Nigeria. Electricity supply by means of renewable energy is a regulated activity in the Nigerian Electric Supply Industry – which is generally regulated by the Electric Power Sector Reform Act 2005 (Act), Market Rules, and Regulations made by the Nigerian Electricity Regulatory Commission (NERC) in exercise of its powers under the Act.
Of significance, in this regard, is the fact that NERC is working out a robust feed-in-tariff that will allow participants in the renewable energy space to recover generation costs over a period of time. This is because it is recognised that a special regime needs to apply to the renewable generation participants to guarantee profitability other than the Multi Year Tariff Order which currently guides electricity tariffs in Nigeria.
There is, however, a lot that still needs to be done in the area of renewable energy and it is hoped that the industry would witness some innovative legislations in the near future. What is critical is reviewing how one body rather than a raft of bodies are permitted to regulate the sector, so as not to strangulate it with its umbilical cord while still in the womb of incubation. Today, apart from NERC and NESERA (the environmental sector regulator); others will rear their heads in a bid to have a hand in the pie of regulation as a means of taxation, as opposed to true public safety measures (the wont of many an agency today). Town planners; state land use regulators; the new emerging, but I dare say unnecessary regulators beyond NERC and such bodies should be expected to have a leg in the game.
Nigeria has been described as “gas province with a drop of oil”. What reforms should be introduced to the gas regulatory framework to enable us effectively harness our natural gas potential?
As you have pointed out, Nigeria has incredible gas potential, boasting nearly 200 trillion cubic feet of natural gas; the 7th largest natural gas deposit in the world. The implication of these statistics is that we have nearly 3-times more natural gas than we do crude. We also have quite a broad framework of gas legislation, in broad legal terms. These include the Associated Gas Acts, the Gas Master Plan and Pricing Policy, the National Domestic Gas Supply and Pricing Regulations (Policy Regulations) in addition to the more general statutes like the Petroleum Act and the PPT Act. However, as with many other pieces of Nigerian legislation, great deficiency appears to exist in implementation of the law – which in effect defeats statutory intent.
There are a few modifications to our modus operandi which may bolster the viability of our gas sector. As it stands, the fiscal policy of the oil sector is being applied to the gas sector and this is inapposite because of the fact that the level of infrastructural development in both sectors is in uneven. The playing field can thus not be described as level; neither is the expertise in either field the same. Too much lip service is given to the gas master plan, and we seem to be running down the same runway of disrepair on which we took-off on our oil policy. It is perhaps apt to say that we have too many layers of regulations that at times conflict, but perhaps most important is that what we need is first competence of both the public and civil servants charged with the administration and control of the sector; second is sincerity of purpose and third is recognition that the root of all evil is the ungainly love of money. In sum, what we need urgently is simply good public administration.
The enactment of the Nigerian Content Act and establishment of the Nigerian Content Management Board has increased the participation of indigenous oil companies in the oil and gas industry. Despite this development