In this post we will be looking at the nature of Assignment or Transfer of License and Permit Regulations 2023, Fees and Penalties with Failure to comply with any provisions of these Regulations.
INTRODUCTION
On September 1, 2020, the Department of Petroleum Resources (“DPR”) issued the Guidelines and Procedures for Obtaining DPR Approval for Transfer of Licences, Rights or Interests in the Downstream Sector of the Nigerian Oil and Gas Industry (”Guidelines and Procedures”). These Guidelines and Procedures flashed a beam of light over commercial transactions or projects that have the potential to alter the ownership or control of the Licence to Operate (”LTO”) midstream or downstream assets.
Prior to the issuance of the Guidelines and Procedures, except interests in pipelines, transactions or projects involving the transfer of licences, interests, and rights in the midstream and downstream sectors of the Nigerian oil and gas industry were not subjected to such level of scrutiny by the DPR.
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The Petroleum Industry Act (PIA) empowers the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the Authority / NMDPRA) to issue licenses and permits for the transportation and storage of crude oil (midstream), and the conversion of crude oil into finished products (downstream) to licence or permit holders (Regulated Entity in the Nigerian oil and gas industry.
The Nature of Assignment or Transfer of License and Permit Regulations 2023
The NMDPRA, pursuant to its powers under the PIA issued the Assignment or Transfer of Licence and Permit Regulations (the Regulations) effective from 27 February 2023. The Regulations were issued pursuant to Section 117 (1) of the PIA which provides that the holder of a midstream or downstream license or permit shall not transfer its license or permit or any rights or obligation arising therefrom without the prior written consent of the Authority.
Objectives: The objectives of these Regulations are:
• to establish the manner in which a holder of a licence or permit may transfer or assign a licence or permit granted by the Authority for Midstream and Downstream operations pursuant to section 117 of the Petroleum Industry Act, 2021.
• to prescribe fees for such assignment or transfer.
• to provide applicable penalties for failure to comply with these Regulations.
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Generally, a holder of a licence or permit shall not, without the prior written consent of the Authority, assign or transfer its licence or permit or any right or obligation arising from the licence or permit to any company.
Subject to Regulation 2, an assignment or transfer of licence or permit shall include, but not limited to:
• Assignment or transfer by exchange or transfer of shares.
• Assignment or transfer by private placement or public listing.
• Assignment or transfer by merger.
• Assignment or transfer by acquisition.
• Assignment or transfer to a company in a group of which the Assignor is a member and is to be made for the purpose of reorganization in order to achieve greater efficiency and to acquire
• resources for more effective petroleum operations.
• Assignment or transfer to a new company.
• Assignment or transfer by reason of devolution of ownership of shares or interest in ownership of shares by operation of law or testamentary device.
• change of name by a company arising from a corporate restructuring or rebranding without involving a Merger, Acquisition, Takeover, new company or change in ownership or control of a company shall not require an assignment or transfer of licence or permit application.
• A holder of licence or permit under this Regulation shall however, apply for new licence(s) or permit(s) for its facility or facilities in its new name as a change in name invalidates any licence or permit in the previous name of the company.
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Assignment, transfer, and application of licence
1. A holder of a licence or permit for Midstream and Downstream facilities shall notify the Authority prior to the assignment or transfer of its licence or permit.
2. The holder of licence or permit shall:
. state the reason(s) and the method for the conduct of the assignment or transfer, and the possible technical and economic value such assignment or transfer;
• not proceed with any process incidental to the assignment or transfer of licence or permit, including making announcements, advertisements, publications or press releases, in respect of the assignment or transfer, without the prior consent of the Authority;
• In the case of a public company, publish a notice of the application in the form and manner prescribed by the Authority;
• provide original of its Valid licence or permit; and provide or submit any other information and documents stipulated in the guidelines.
3. the Authority shall respond within ten working days from date of receipt of the notification, failing which the holder of licence or permit may proceed to the next stage of the transaction. After notification to the Authority, and upon the completion of the transaction, an applicant shall:
• apply for an assignment or transfer of the licence or permit to its company;
• submit a copy of the title documents which shall be certified by a court of competent jurisdiction.
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• where required, make presentation to the Authority as to the technical and financial capability and experience of the applicant to operate such facility; and provide any other information as may be directed by the Authority
• The Applicant shall pay application and processing fees as prescribed in these Regulations.
• The Authority shall inform the applicant in writing its consent or refusal of the application within sixty (60) days from the date the application was received by the Authority; and
• Where the Authority refuses the grant of an application, it shall inform the
• applicant in writing the reason for the refusal and the applicant may further
• represent the application within the validity period of the licence.
• Upon the grant of approval for the assignment or transfer of the licence or permit by the Authority, the Authority shall notify the applicant in writing subject to any approval or transaction fees and additional conditions to be prescribed by the Authority.
• Where the Authority does not approve or refuse an application and fails to communicate its decision to an applicant within sixty days, the application shall be deemed approved.
• After the grant of approval and upon the fulfilment of any additional conditions stipulated by the Authority, the applicant shall apply for a new licence or permit in its own name in accordance with the provisions of the Midstream and Downstream Petroleum Operations Regulations, the guidelines made thereto and other relevant laws.
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Fees and Penalties with Failure to comply with any provisions of these Regulations.
The fees in the schedule to these regulations shall be applicable to the assignment and transfer of licenses and permits in midstream and downstream petroleum operations in Nigeria. For Penalties: Any person who:
• Fails to comply with any provisions of these Regulations or any directives given or condition of any permit or licence issued under these Regulations; or
• Makes a false declaration to the Authority or wilfully furnishes information so required which is in any respect false or insufficient.
Is liable to a penalty of not more than One Hundred Thousand United States Dollars ($100,000.00) or its equivalent in Naira issued by the Authority and in addition any permit, licence or authorisation granted to that person may be suspended, cancelled, or terminated.
For oil and gas retail outlets, #2000,000 per licence or permit and in addition, any permit, licence or autorisation granted that person may be suspended, cancelled or revoked.