Over the years, Nigeria’s oil and gas industry has experienced a wave of divestments, as several international oil companies step back from certain assets, creating more space for indigenous players, particularly in the upstream sector. In the same vein, indigenous companies have been known to assign or transfer part of their interests in oil and gas assets, largely due to the fact that developing and operating these assets require significant technical expertise and financial strength, resources that only a few indigenous players possess.
Assignments, therefore, are not new to Nigeria’s oil and gas story. They have long been a way for exploration and production (“E&P”) companies to balance financial risk, spread technical responsibility, or exit projects that no longer align with their strategic focus. What has changed, however, is the rulebook governing how these assignments are made.
The Petroleum Industry Act (“PIA”, the “Act”) has redefined the legal and regulatory framework for assignments across the upstream, midstream, and downstream sectors. To give effect to the Act, the sector’s regulatory bodies, the Nigerian Upstream Petroleum Regulatory Commission (the “Commission”) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the “Authority”), have issued detailed regulations on various matters. These regulations spell out the types of transactions that require regulatory consent, the procedure for obtaining such consent, and the legal consequences of non-compliance. In simple terms, they set the rules of engagement for any investor looking to enter, exit, or expand within the industry.
In this article, we highlight what investors must know about the upstream and midstream/downstream assignment framework under the PIA and the commercial risks they carry.
