AN EXAMINATION OF THE LEGAL FRAMEWORK FOR THE MARKETING OF PETROLEUM PRODUCTS IN THE DOWNSTREAM SECTOR OF THE OIL AND GAS INDUSTRY IN NIGERIA


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TABLE OF CONTENTS

Title Page
Table of Cases
Table of Statutes
Subsidiary Legislations
List of Abbreviations
Abstract
Table of Contents

CHAPTER ONE: GENERAL INTRODUCTION
1.1       Background of the Study
1.2       Statement of Problems
1.3       Aim and Objectives
1.4       Scope and limitations of Research
1.5       Research Methodology
1.6       Literature Review
1.7       Justification/Significance of Research
1.8       Organizational Layout

CHAPTER TWO: CONCEPTUAL CLARIFICATION OF KEY TERMS AND HISTORICAL DEVELOPMENT
2.1       Introduction
2.2       Definition of Key Terms
2.3       The Development of Oil and Gas Industry in Nigeria
2.4       Ownership Theories of Oil and Gas
2.5       Concessionary Arrangements
2.5.1    The Traditional Concession
2.5.2    The Modern Concession
2.6       Petroleum Contracts
2.6.1    Licences
2.6.2    Lease
2.7       Statutory Contracts
2.8       Non-Statutory Contracts
2.9       Obligations Under Petroleum Contracts
2.9.1    Obligations Arising After Termination/Surrender
2.10     Natural Gas and Its Utilization

CHAPTER THREE: THE LEGAL FRAMEWORK FOR PETROLEUM PRODUCTS MARKETING
3.1       Introduction
3.2       The Petroleum Act
3.3       The Petroleum Equalization Fund Act
3.4       The Oil Pipelines Act
3.5       Petroleum Refining Regulations
3.5.1    Application for Licence to Construct a Refinery
3.6       Rules and Regulations of the Department of Petroleum Resources (DPR) in Petroleum Marketing
3.6.1   Procedure and Conditions For Granting Approval for the Construction of a Petrol Station
3.6.2    Department of Petroleum Resources Guidelines on Importation of Petroleum Products into Nigeria
3.6.3    Guidelines for Granting Approval for the Operation of a Petrol Filling Station
3.7       Special Tribunal (Miscellaneous Offences) Decree No. 21 1984 (Amended By Decree No. 20 1994)
3.8       The Petroleum Production and Distribution (Anti-Sabotage) Act
3.9       Conclusion

CHAPTER FOUR: OIL MARKETERS AND THEIR OPERATIONS
4.1       Introduction
4.2       The Nigerian National Petroleum Corporation (NNPC)
4.3       The Pipelines and Product Marketing Company (PPMC)
4.4       MRS Oil Nigeria Plc (Formerly Texaco Nigeria Plc)
4.5       Mobil Oil Nigeria
4.6       Conoil Plc (Formerly National Oil and Chemicals Marketing Company Plc).
4.7       Oando Nigeria Plc.
4.8       Forte Oil Plc (Formerly African Petroleum)
4.9       Total Nigeria Plc (Formerly Total Finaelf)
4.10     The Independent Petroleum Marketers Association of Nigeria (IPMAN)
4.11     The Department Of Petroleum Resources
4.12     Concluding Critique

CHAPTER FIVE: DOWNSTREAM OIL AND GAS ACTIVITIES
5.1       Introduction
5.2       Downstream Operation and Licences
5.2.a    Oil Refinery Licence
5.2.b    Oil Pipeline Licence
5.3       Petroleum Refineries and Petroleum Products Infrastructure in Nigeria
5.3.1    Natural Gas
5.4       Refineries
5.5       Petroleum Depot/Tank Farm/Oil Terminal
5.6       Transportation of Crude Oil and Its By-Products
5.6.1    Pipelines
5.6.1.a Types of Pipelines in the Oil and Gas Industry in Nigeria
5.6.1.b Pipeline Vandalism
5.6.1.c Effects of Vandalization
5.6.2    Other Modes of Transportation
5.6.2.a Oil Marine Tankers and Barges
5.6.2.b Motor Vehicle Trucks
5.6.2.c Rail Tank Car
5.6.3    Ancillary Aid to Products Transport
5.7       Supply of Petroleum Products
5.8       Role of Government in Downstream Activity

CHAPTER SIX: INVESTMENT, PRICING AND TAXATION IN THE DOWNSTREAM SECTOR
6.1       Introduction
6.2       Financing Investments in the Downstream Sector
6.3       Legal/Economic Barriers To Entry Into Petroleum Marketing
6.4       Petroleum Products Taxation
6.5       Government Policy on Petroleum Product Pricing
6.5.1    Supply and Pricing of Petroleum Products Under a Deregulation Regime
6.5.2    The Concept of Deregulation
6.6       The Uniform Products Pricing
6.7       Conclusion

CHAPTER SEVEN: SUMMARY, FINDINGS AND RECOMMENDATIONS
7.1       Summary
7.2       Findings
7.3       Recommendations
            BIBLIOGRAPHY
            APPENDIX



ABSTRACT

Hitherto, to many, the concept of oil and gas was limited to the search for, work and win crude oil. So, for many decades, nations only concerned themselves with upstream petroleum activities. The availability of crude oil determines the extent of relevance a nation commanded at the global scene. This fact is amplified by the role Nigeria played in the struggle to rid Africa of colonial vestiges. The marketing of petroleum products (downstream sector activities) is therefore brought to the fore of the national petroleum industry. The issues of oil and gas in Nigeria are very topical and sensitive. The products of oil and gas are present in every home in Nigeria. Arising from this, the government became very much involved in the supply and distribution of its product. Various laws, including the Petroleum Equalization Fund (Act) Instituted as a result of the problems associated with the petroleum distribution, were put in place to govern the petroleum industry. However, there appear to be inconsistencies between these laws and what actually obtains. This research principally adopted a doctrinal research methodology which relied on existing statutes, subsidiary legislation and literature on petroleum products marketing. It analyzed the issues and drew inferences which culminated in the findings. This dissertation found that the legal framework for the regulation of the downstream sector of the petroleum industry is not robust and comprehensive; that there is conflict of functions between the Petroleum Minister and the Petroleum Products Pricing and Regulatory Agency. This is with respect to the fixing of the prices petroleum products. This conflicting function does not make for improvement of effective pricing of petroleum products as it does not allow market forces to determine the price; that the functions of government regulatory agencies such as the Nigerian National Petroleum Corporation (NNPC), the Department of Petroleum Resources (DPR), the Petroleum Products Marketing Company (PPMC) and the Petroleum Products Pricing and Regulatory Agency (PPPRA) are overlapping and therefore work at cross purposes; that the Petroleum Equalization Fund put in place for the sole purpose of unifying the pump prices of petroleum products across the country is ineffective, fraught with corruption and has resulted in waste of financial resources; and that government involvement in downstream activities makes law enforcement weak and ineffective. This research therefore recommended a restructuring and reforming of the legal framework and regulatory bodies for the Nigerian Petroleum Industry through the passage of the Petroleum Industry Bill (PIB); existing laws should be reviewed for effective regulation with the roles of government agencies clearly defined; that the Petroleum Equalization Fund be repealed; and that government should exit participating in the downstream sector (through the Nigerian National Petroleum Corporation) and only be a regulator.




CHAPTER ONE

GENERAL INTRODUCTION

1.1       Background of the Study


Oil and Gas activities date back to the colonial era1 in respect of Lagos colony. However, an examination of Nigerian statutes will reveal that the major constituents of the laws which appertain to exploration and exploitation of petroleum are traceable to the Mineral Oils Act of 1914 - the year that the Southern and Northern Protectorates were amalgamated. During the currency of this 1914 Act, grants were given to search for, work and win mineral oils2. This aspect of the law3 did not develop in any great measure until the later part of 1950 to 1960 decade when the active search for oil in the country was stepped up.

The exploration and production activities (hereinafter referred to as „upstream operations‟) dominated the petroleum landscape with a reasonable percentage of what was produced being carried away through export by the international oil companies as dictated then by the traditional concessions. These concessions granted by the colonial masters to the colonial oil companies did not seek to enrich Nigeria from the sale of the produced petroleum as, upon production, the petroleum belonged to the International Oil Companies (IOCs). It was.....

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