There are different licenses or approvals required to participate in the Nigeria upstream sector. The Nigerian government through the office of the Honourable Minister for Petroleum Resources grants all these licenses, upon the application to the Department of Petroleum Resources in accordance with the Petroleum (Drilling and production) Regulations
The relevant licenses required to participate in the Nigerian petroleum sector include Oil Exploration License, Oil Prospecting License and Oil Mining Lease. Above all these, the government often through other concessions or agreements engages in Farm-Out and Production Sharing Contract with oil companies.
Grant of Oil Mining Lease
The oil mining lease is one of the most important and common licenses required to participate in the petroleum upstream sector. The grant of oil mining lease in Nigeria depends on the holding of oil prospecting license. Every holder of oil prospecting license who has discovered oil in commercial quantities is entitled to the grant of oil mining lease. The licensee must be able to produce a minimum of 10,000 barrel per day of crude oil from the acreages or licensed area.
Functions or Usage of Oil Mining Lease
Oil mining lease enables the lessee, to exclusion of any other one. Prospect, explore, produce and engage in the marketing of the produced oil in specified acreages for a period of 20 years. The oil mining license usually covers 50% of the areas oil prospecting license has been granted for to the licensee, where the remaining 50% area shall be reverted back to the government unless it is less than 250 square km in area.
Conditions and Required Documents to Process Oil Mining Lease
The first and foremost thing to do before applying for oil mining lease in Nigeria is to incorporate a company or have an existing company to use. There are also general conditions any individual company wishing to obtain an oil mining lease must comply with or satisfy before making such application. By and large, the conditions and other required documents for processing an oil mining in Nigeria lease include the followings:
It is worthy of note that any companies who wish to mine oil in Nigeria are eligible to apply for the oil mining lease, provided they can satisfy the requirements stipulated for obtainment of the mining lease. However, Nigerian’s local content policy pursuant to the provisions of the Nigerian Oil & Gas Industry Content Development Act of 2010, which limits the participation of foreigners in the Nigeria oil and gas sector. Pursuant to the provisions of the Act, a foreign entity operating in Nigerian petroleum sectors must have recourse to a local development.
Finally, oil mining lease usually valid up to 20 years when issued. It takes within 3 to 6 months for a mining lease to be processed and it can only be granted to the holder of oil prospecting license. Unless with the consent of petroleum minister, an oil mining lease cannot be transferred by any means from one party or company to another. The oil mining lease may be renewed subject to the fulfilment of the requisite conditions in accordance with the Petroleum (Drilling and Production) Regulation. And where a company failed to renew its oil mining lease for more than 3 years consecutively, the future application for renewal may be treated as a new application.
Written by Oil & Gas Law Department at Resolution Law Firm, Nigeria