Nigeria’s Upstream Petroleum Industry’s Contracts: The Hurdles and the Legal Stopgaps

Description

ABSTRACT

Nigeria’s Upstream Petroleum Industry’s Contracts: The Hurdles and the Legal Stopgaps

Olusola Joshua Olujobi*

This study seeks to explore the relevance of renegotiation and stabilisation clauses in the Nigerian petroleum industry’s contracts due to the various inconsistencies in domestic laws to combat inefficiencies in the sector. The aim is to reduce the risk of arbitrary modification or nullification of oil contracts based on national law to enhance contractual security by mitigating risks to promote efficiency through regulatory reforms to strengthen Nigeria’s Petroleum industry’s laws. The work adopts a conceptual approach relying on extant literature with the application of the doctrinal legal research method. The study also makes use of primary and secondary sources of laws such as statutory and judicial authorities. The key finding is the overbearing presence of the Federal Government in the sector and inappropriate pricing of petroleum products which have made the sector unattractive to investors due to excessive regulation by the Federal Government. Indiscriminate annulment of oil contracts in the upstream petroleum sector despite the renewed drive to attract investments into the industry. The research proposes a model for contractual security in Nigeria’s petroleum industry. The research ends with the suggestions based on findings and the need for a sophisticated mixture of regulatory and non-regulatory incentives for investments in the Nigerian petroleum industry. It advocates speedy passage of the pending Petroleum Industry Governance Bill 2017 with mandatory inclusion of exemption clauses in contractual documents to exempt an innocent party from liabilities in the event of unforeseen contingencies beyond the parties. The study further suggests the need for institutional and regulatory reforms to promote healthy competition by integrating and adopting exemption clauses. Stringent enforcement of both the hard and soft laws approaches with emphasis on the need for adoption of arbitration as a mechanism for settlement of contractual oil disputes in the sector. Besides, there is still a broad field of promising avenues for future research. Studying renegotiation and stabilisation clauses in Nigeria’s downstream petroleum industry’s contracts and potential implications are recommended.

Keywords: Petroleum Contracts, Renegotiation, Stabilisation Clauses, Petroleum Industry, Upstream Regulatory Reforms, Nigeria. JEL

Classifications: Q4, Q5, K32, K12, K2, P28, K42.

INTRODUCTION
Crude oil investments have snowballed over the last decades, especially in emerging crude oil production countries unlike in Nigeria where petroleum exploration, production and exploitation contracts have been presently forced to halt because of act of God, frustrations and impracticability of performance.

* PhD. Legal Practitioner, Notary Public, Chartered Arbitrator and Law Lecturer, Business Management Department, Covenant University, Nigeria. Email:

ol*************@co****************.ng











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THE GRAVITAS REVIEW OF BUSINESS & PROPERTY LAW VOL.11 NO.4