Insights, Oil and Gas

Oil Licensing Regime Under the Petroleum Industry Act 2021 (Part 2): Petroleum Prospecting Licence

Under the old regime of the Petroleum Act 1969 (PA), upon the grant of an Oil Exploration Licence (OEL) and subsequent discovery of hydrocarbon within the licence area, a licensee who intended to proceed to the next stage of upstream petroleum operations was required to obtain an Oil Prospecting Licence (OPL) from the Minister of Petroleum Resources (the “Minister”). Following the introduction of the Petroleum Industry Act (PIA) in 2021, the OPL is now known as the Petroleum Prospecting Licence (PPL).
We examine below the scope of an OPL vis-à-vis notable changes introduced by the PIA.

SCOPE
An OPL, under the PA, was capable of being granted to any company incorporated in Nigeria. The licence gave the holder (the licensee) the ‘exclusive right’ to explore and prospect for petroleum within the licence area. The licensee was also entitled to carry and dispose petroleum won during prospecting activities, subject to the fulfilment of obligations imposed on him under the PA or by the Petroleum Profits Tax (PPT) Act or any other law imposing taxation in respect of petroleum.

The PIA in contrast grants a holder of a PPL:
1. an exclusive right to drill exploration and appraisal wells; and
2. a nonexclusive right to carry out petroleum exploration operations within the licence area.

That is, under the new regime, the licensee has an exclusive right to carry out prospecting operations and a non-exclusive right to conduct exploration operations. The licensee however, retains the right to carry and dispose of crude oil or natural gas won or extracted during prospecting activities, subject to the fulfilment of obligations imposed by the PIA…

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