Abdulhaleem Sunusi, a lawyer based in Lagos, has raised concerns over the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) attempting to become the sole signatory to the Frontier Exploration Fund Escrow Account.
In a petition addressed to the Chief of Staff to the President, Sunusi voiced his objections, also highlighting that the Frontier Basin Exploration Administration Regulations of 2023 released by NUPRC, which grant sole signatory rights to the commission, contradict the Petroleum Industry Act (PIA) concerning frontier acreage exploration.
Sunusi expressed that these regulations could lead to legal issues, particularly regarding the roles and prerogatives of NNPC Limited in the context of frontier basin activities.
He stated, “The said provision in the PIA is underscored by a number of fundamental principles established.”
These principles include the responsibility of NNPC Limited to allocate 30% of profit oil and gas from contracts into a dedicated escrow account for frontier acreage development, the establishment of this escrow account, NNPC Limited’s authority to use the funds for exploration and development within the frontier acreages, and the requirement that fund utilization follows the appropriation process overseen by the National Assembly.
Regrettably, the Frontier Basins Exploration Administration Regulations of 2023 released by NUPRC introduce several disconcerting contradictions that challenge these fundamental principles laid out in the PIA. Under the new regulations, NUPRC intends to gain unilateral control over the management of the fund and the escrow account.
They aim to involve third parties in fund utilization, award contracts to external entities, disburse funds from the escrow account, and gain exclusive signatory authority over the account. Pertinent excerpts from the Regulations include:
Regulation 6(a): Sole Administration of Escrow Account by NUPRC, designating NUPRC as the sole fund administrator for the Escrow Account.
Regulation 7(3): Sole Authority of NUPRC for Fund Disbursement, requiring funds to be released solely upon NUPRC’s written request to the Account Bank for Escrow Account withdrawals.
Regulation 7(8): Escrow Account Agreement, where NUPRC proposes to enter into an Escrow Account Agreement with an Escrow Account Holder.
Regulation 9(1a): NUPRC’s Power to Utilize Escrow Funds, authorizing NUPRC to use funds from the Escrow Account for specific activities, including promotion, press releases, conferences, and road shows.
Regulations 11 & 12: Frontier Committee Formation, establishing a Frontier Committee responsible for the development and execution of the Frontier Basin Exploration and Development Plan, financial proposals, contractor selection, and performance evaluation, conspicuously excluding NNPC Limited.
Regulation 15: Augmented Conditions for NNPC Limited’s Engagement, introducing conditions that may restrict NNPC Limited’s participation in drilling/testing operations, potentially curtailing its role.
Regulation 17: Conditional Payment for NNPC Limited, limiting payment from the Escrow Account to NNPC Limited for activities only upon contract with NUPRC.
Regulation 18(1): Extended NUPRC Authority, expanding NUPRC’s jurisdiction to encompass third-party involvement in frontier basin activities, paralleling NNPC Limited’s pre-existing responsibilities in this regard.
Sunusi’s petition questions the alignment of these regulations with the core principles of the PIA’s frontier basin provisions.