OGEL Special Issue on “Oil and Gas Law and Policy in West Africa” – Editorial

Article from: OGEL 1 (2017), in Editorial

Editorial

The guest editors are pleased and honoured to serve as editors of this OGEL special issue focusing on Oil and Gas Law and Policy in West Africa.

Notwithstanding the slump in international oil market prices in the past couple of years and its attendant effects in the budgeting and trade balances of major producing countries globally, the Sub-Saharan Africa region has witnessed a surge in oil and gas activity within the past decade. The region currently holds around 7% of world conventional oil resources and 6% of world natural gas reserves, while also accounting for nearly 30% of global oil and gas discoveries made in the last five to eight years.[1] In the same context, the West African sub-region has had significant share of the burgeoning activity with developments such as the oil and gas discoveries in the pre-salt Kwanza Basin in Angola, the Keta-Togo-Benin Basin in Nigeria, the Jubilee discovery in Ghana, etc. Between 1990 and 2012 there has also been an increase in gas production (especially associated gas) which potentially positions the region and its increasing number of ‘resource-rich’ countries as an important contributor in the global energy supply and demand dynamics.[2]

However, it should be noted that being classified as ‘resource-rich’ and a ‘petroleum producer’ does not automatically translate into secure and affordable energy supply and access for these countries and the region as a whole. As will be seen in the papers comprising this Special Issue, challenges relating the legal and institutional inefficiencies, inconclusive structural reforms and consequential legal uncertainties, insecurity and conflict, limited regional cooperation and cross-border resource and infrastructural development have significantly hindered the economic utility potential of the region’s hydrocarbon resources. These challenges directly or indirectly limit the development of domestic energy markets and regional integration which is required for reliable and affordable energy supply and consequently enhancement of economic growth and standard of living.

As a worthwhile policy thrust in the development and utilisation of petroleum resources in the West African context, it should be reiterated that:

“…the concept of security of supply implies an understanding of the importance of energy resources because they are vital for the functioning of the economy and the development and well-being of the people. It implies the understanding that energy security is important because the inability of a state to have access to all the energy required must be avoided as much as possible. It implies an understanding of the fact that the primary importance of an energy resource lies in that fact, and secondarily in its monetary factor as a commodity from which revenue may be derived. For poor [developing] countries, this is an obscure issue, and there is often the temptation to treat oil and natural gas primarily as foreign exchange earners, with inadequate attention being given to domestic energy [access and supply] needs…”[3]

Amongst the resource-rich developing countries in West Africa, the general trend has been to invite international investors (sometimes in collaboration with local entrepreneurs) to develop petroleum resources primarily for export and as a foreign exchange earner. For instance, although gas production in the sub-region is currently about five times higher than it was in 2000, most of the gas has been used in LNG export projects. Nigeria now has six LNG trains,[4] while Equatorial Guinea and Angola joined the ranks of global LNG exporters in 2007 and 2013 respectively. As these trends continue, it should be emphasised that developing the required domestic or regional supply networks, affiliated gas gathering and processing infrastructure, as well as effective domestic markets and pricing, are equally if not more crucial given the current dynamics and outlook of international energy markets.

At the regional level, the Economic Community of West African States (ECOWAS) seem to have been instrumental in the development of cooperative efforts and pooling of resources. Although such efforts have been inadequate, and more can still be done regarding institutional and infrastructural developments. According to the African Development Bank (AfDB) “[d]espite a number of initiatives, energy cooperation remains limited…[e]nergy interconnection programmes aim to pool various energy markets in order to cut costs, equalise loads and increase stability through expanded market size. They include…the West African Gas Pipeline connecting Benin, Ghana, Nigeria and Togo; and the Benin-Ghana-Nigeria-Togo electricity interconnection…”[5]

This OGEL Special Issue on Oil and Gas Law and Policy in West Africa comprises of twelve interesting articles addressing most of the issues mentioned above and other critical law and policy matters in specific West African countries. The Special Issue features the following:

(i) Legal Framework for the Implementation of ECOWAS Energy Programmes: The Energy Protocol, WAPP Agreement and WAGP Treaty by Dr. Michael C. Ogwezzy.[6] This paper points out the critical challenges facing the governments of Economic Community of West African States (ECOWAS) Member States in resolving various energy security challenges they face as a region and domestically. ECOWAS Member States adopted the ECOWAS Energy Protocol in 2003, and after that two major energy projects were developed to address regional energy security and economic integration. Thus, the author examines the effectiveness of the legal framework developed for these energy programmes i.e. the ECOWAS Energy Protocol, West African Power Pool (WAPP) Agreement, and West African Gas Pipeline (WAGP) Treaty.

(ii) The Tort of Negligence and Environmental Justice in the Nigerian Niger Delta by Dr. Paul Tamuno.[7] This paper addressed the knotty issues surrounding claims for ‘Environmental Justice’ by host communities in the Nigerian hydrocarbon rich Niger-Delta through the national and international judicial institutions. It focuses on the reliance of the common law ‘tort of negligence’ doctrine by various claimants, the rationale for such reliance and how effective this has been over the years. Interestingly, there was a recent report about an upcoming court decision in London relating to whether an International Oil Company operating in Nigeria can face trial in the UK over oil spill allegations which occurred in the Nigerian Niger Delta.

(iii) Resolving the Implications of Maritime Boundary and Delimitation Disputes on Oil and Gas Industry Growth and Development in the West African sub-region: The Way Forward by Godswill Agbaitoro and Etta Ojong-Okongor.[8] This paper considers the implications of maritime boundary and delimitation disputes on oil and gas industry growth and development in West Africa. The authors identify relevant maritime boundary disputes and examines the applicable international law principles in this regard. The paper recommends the Joint Development Agreement (JDA) framework as an alternative legal and contractual mechanism for resolving the considered regional and cross-border disputes. The central argument made by the authors is that the use of this alternative legal mechanism will ensure that States involved in maritime boundary and delimitation disputes reach some form of compromise that will ultimately allow the peaceful development of hydrocarbon resources in areas shrouded in overlapping maritime boundary claims.

(iv) Environmental Regulation in the Upstream Oil and Gas Industry: Is Ghana Prepared for Offshore Oil Pollution? by Ohenewaa Boateng Newman (Mrs.). ^[9] Following the fairly recent upsurge in oil and gas operations in Ghana (especially offshore), this paper examines the Ghanaian petroleum industry’s legal framework, especially in relation to offshore oil pollution. The discussion is carried out in the backdrop of a broader consideration of the relevant legal and regulatory developments in Brazil and the US pre and post-Macondo incident. The paper extensively considers Ghana’s legal and regulatory preparedness for an offshore petroleum pollution incident such as the Macondo blowout. Notably, the issues discussed in the paper can also be considered in the light of the various Nigerian Niger-Delta pollution episodes which have led to recurring claims and counter-claims between host communities, the government and licensed private operators. Such issues are worth noting and addressing as more resource-rich countries in the region become more involved with foreign oil and gas companies in the medium to long-term.

(v) Promoting a Favourable Investment Climate through the Rule of Law and Global Energy Governance: The International Energy Charter and West African Oil and Gas Developments by Natasha A. Georgiou.[10] This paper clearly highlights the expansion and relevance of the Energy Charter Process and International Energy Charter (IEC) framework to developing economies and regions within Africa, and especially considering recent oil and gas developments in West African countries. The paper confirms that ECOWAS as a regional body generally welcomes the IEC framework, while several individual countries have formally signed up for its adoption and implementation. It also notes the framework’s importance and potential role in the transnational and regional efforts to improve the legal and institutional architecture in which energy and other economic activities are undertaken. Especially, towards the mobilisation of the required foreign investments for achieving universal access to energy and energy security.

(vi) Local Content and the Marginal Fields Programme: Challenges for Indigenous Participation in the Nigerian Oil Industry by Elimma C. Ezeani and Chinwe Nwuke.[11] This paper examines the effectiveness of the two main regulatory and policy initiatives of the Nigerian Federal Government for enhancing indigenous participation in the petroleum industry. Despite varying levels of successes and challenges, laudable initiatives such as the Marginal Fields Programme (MFP) has been instrumental in facilitating the acquisition of marginal field licenses by Nigerians and Nigerian owned companies. Such marginal fields would have been left undeveloped by IOCs with oil mining leases who considered the reserves in situ as too small or uncommercial. The local content law and policy, on the other hand, is fashioned around similar initiatives in countries like Norway and Brazil. It primarily aims at advancing the development of Nigerian skills, technical capacities and local entrepreneurship opportunities in the petroleum industry.

(vii) Understanding the Nigerian Petroleum Industry Governance Bill 2016 by Donna Obaseki-Ogunnaike. [12] The author succinctly points out the impact of long-standing and inconclusive petroleum industry reforms in Nigeria within the past thirteen to fifteen years. The lingering legal and regulatory uncertainties have been exacerbated by insecurities in the Niger Delta region and plummeting international oil prices, thereby causing a significant slowdown in industry investments and developments in the past couple of years. The current Federal Government of Nigeria administration have recently adopted a strategic approach to the industry’s reform process by splitting the Petroleum Industry Bill (PIB) into four bills namely: The Petroleum Industry Governance Bill (PIGB), the Fiscal Regime Bill, the Upstream and Midstream Administration Bill, and the Petroleum Revenue Bill. There is also a recent publication of consultation drafts of the National Petroleum Policy and National Gas Policy while hinting on the introduction of a separate Petroleum Industry Reform Bill (PIRB). The PIGB is the only bill that is currently before the National Assembly. Consequently, this commentary provides an overview of its salient provisions.

(viii) The financial securities for decommissioning of offshore installations in Nigeria: a review of the legal and contractual regime by Ngozi Chinwa Ole.[13] This paper examines the international, national, contractual and proposed national framework for decommissioning of oil and gas installations in Nigeria. It primarily argues that the framework for guaranteeing the availability of funds for decommissioning of offshore oil installations in Nigeria is inadequate and not comprehensive enough. The author states that there are currently about 170 offshore oil and gas installations in Nigeria and would eventually require decommissioning. Such future decommissioning will surely test the robustness of the legal and contractual framework relating to the provision of financial securities. The author concludes that the existing legal and contractual framework is not adequate to the extent that does not effectively protect the Nigerian government from eventual decommissioning liabilities when the time comes.

(ix) The Determinants of autogas demand among Taxi Drivers in Ghana by Tetteh Elizabeth Narkie, Ishmael Ackah and Shafic Suleman.[14] The aim of this paper was to carry out an empirical analysis and study of the factors that drives the increasing use of Liquefied Petroleum Gas (LPG) or autogas by taxi drivers in Ghana. Apparently, following the commercial discovery of oil and gas in 2007 in Ghana there was increasing awareness relating to the benefits of gas utilisation. Consequently, the use of LPG for residential and domestic purposes became subsidised by the Government. There is also the increasing trend by commercial car users like Taxi drivers to convert diesel or petrol engine cars to LPG/autogas engines. From the surveys and studies carried out mainly in the Yilo Krobo Municipality, 71% of the drivers now use LPG fueled cars, and the main reason for their choice was the relative affordability compared to other traditional alternatives like petrol and diesel. According to the authors, the drivers were less aware or concerned about the effect of emissions from the alternative fuels. Thus, they recommended a more robust policy and regulatory framework dealing with LPG and gas utilisation in Ghana.

(x) Turning towards a joint development agreement in the midst of disputes and uncertainties over international maritime boundaries: Nigeria-Cameroon dispute as a case study by Eddy Wifa, Mark Amakoromo and Ibiateli Johnson-Ogbo.[15] This paper outlines and considers the international legal framework and principles relating to maritime boundary delimitation. It critically evaluates the conflicts and uncertainties associated with maritime boundary disputes despite the prevalence of both statutory and judicial interventions aimed at resolving them. It further considers the possibility of turning towards a Joint Development Agreement (JDA) as a provisional measure to resolve such situation. Notably, the paper focuses on the maritime boundary dispute between Nigeria and Cameroon over the Bakassi Peninsula as a case study. It argues that the relevant conflicts and uncertainties over the boundary dispute between both countries would have been avoided if a JDA had been utilised at the early stages of the dispute. The authors hoped that the case study scenario will serve as an example to other countries embroiled in conflict over their maritime boundaries, encouraging them to consider the use of a JDA in the midst of disputes and uncertainties over maritime boundaries.

(xi) Petroleum contracts between foreign private investors and host developing countries: a new approach to negotiating by Chris Adomako-Kwakye.[16] This paper focuses on the upstream petroleum law, policy and contractual framework in Ghana. It critically examines the model petroleum agreement between Ghana and the licensed foreign companies. It considers whether Ghana secured an arrangement that will benefit the country and economy and how the relevant legal framework can be instrumental to negotiating more effective deals going forward. The paper argues that if right decisions regarding exploitation of natural resources are made today, it could positively affect the prosperity of present and future generations. The author also opines that host developing countries should not only be interested in royalty and tax revenues when seeking to develop petroleum resources but in adding value to their natural resources.

(xii) Regulatory and Policy Issues for Natural Gas Supply to Power Markets: Examining the Energy Supply Crisis in Nigeria by Tade Oyewunmi. This paper highlights the ‘energy supply crisis’ in Nigeria which is often and blamed on inadequacy of gas supply to about 85% of installed electricity generation capacity. The Nigerian gas supply dilemma largely relates to the inadequacy and inefficiency of investments in critical domestic gas infrastructure. The perennial gas supply conundrum is also exacerbated by several years of regulatory uncertainties and opacity in the domestic gas market, as well as institutional misalignments between the gas supply and power industries. Accordingly, the paper considers the nexus between the shortages in gas supply for power generation and the apparent institutional inefficiencies in the Nigerian gas-to-power value chain. It highlights the relevant principles of economic regulation and pro-liberalisation paradigms of regulation for gas supply to power markets. Notably, the discussion is carried out with the backdrop of ‘how’ and ‘if’ such principles or regulatory approaches have worked effectively in jurisdictions like the US and UK.

* Professor Yinka Omorogbe a Nabo Graham Douglas Distinguished Professor of the Nigerian Institute of Advanced Legal Studies. Tade Oyewunmi of the Centre for Climate Change, Energy and Environmental Law, UEF, Finland and Adepetun Caxton Martins Agbor & Segun, Lagos, Nigeria.

[1] International Energy Agency (IEA), ‘African Energy Outlook: A focus on prospects in Sub-Saharan Africa’ (IEA Publications, 2014) 1 – 242; US Energy Information Administration (US EIA). ‘International Energy Outlook 2016: with Projections to 2040’ May 2016, (IEO2016)) 1 – 290.

[2] As at 2013, Nigeria, Equatorial Guinea and Gabon all in West Africa accounted for over 52% of total crude oil production in Sub-Saharan Africa, whilst Nigeria, Equatorial Guinea and Ivory Coast all in West Africa accounted for over 83% of total natural gas production in Sub-Saharan Africa. Following the discovery of the Jubilee field in Ghana in 2007, the international petroleum industry began to pay more attention to the relatively under-explored basins stretching from Mauritania to the Nigerian Niger Delta. Licensed acreages have doubled generally while technical discoveries are being made in Liberia, Sierra Leone and Côte d’Ivoire etc. See the IEA (n1) ibid; US EIA report on ‘Oil and Natural Gas in Sub-Saharan Africa’ 2013.

[3] Yinka Omorogbe, ‘Regional and National Frameworks for Energy Security in Africa (Ch. 5)’ in Barry Barton et al (eds), Energy Security: Managing Risk in a Dynamic Legal and Regulatory Environment (Oxford University Press, 2004) 121 – 141.

[4] Even though about 75% to 80% of the nation’s installed power generation capacity depend on affordable and reliable gas supply often do not receive the required volumes due to inadequacy of domestic infrastructure and lingering inefficiencies in the economic regulation of gas supply to power. See Oyewunmi, Tade, ‘Examining the legal and regulatory framework for domestic gas utilization and power generation in Nigeria’ (2014) 7(6) The Journal of World Energy Law & Business 538.

[5] AfDB, ‘African Economic Outlook 2015 – Thematic Edition’ (AfDB/OECD/UNDP) 1 – 224. 63 – 64.

[6] Senior Lecturer, Department of Jurisprudence and International Law, Sub-Dean, Faculty of Law, Adekunle Ajasin University, Akungba-Akoko, Ondo State. Nigeria.

[7] Dr. Tamuno is a lecturer at the Faculty of Law, University of Port Harcourt, Nigeria.

[8] Godswill Agbaitoro, LLM (Aberdeen), LLB (Madonna), B.L (Nigerian Law School). He is a member of the Nigerian Bar Association (NBA) and Association of International Petroleum Negotiators (AIPN): Etta Ojong-Okongor, LLM (Aberdeen), LLB (Madonna), B.L (Nigerian Law School).

[9] Ohenewaa Boateng Newman (Mrs.) LL.B, Q.C.L, LLM, Assistant Lecturer and Academic Counsellor, University of Education, Winneba-Ghana.

[10] Natasha A. Georgiou is a PhD. Candidate at the University of Reading (UK), where she is completing her thesis on energy regulation in international trade. Natasha has been undertaking research on global energy governance at the Energy Charter Secretariat (Brussels) and is currently actively involved in the Secretariat’s outreach and expansion activities pursuant to an Internship as the African Correspondent and Coordinator.

[11] Elimma C. Ezeani LLB, BL, LLM, PhD. Fellow HEA. Lecturer in Law, Robert Gordon University Aberdeen, Scotland, UK; Chinwe Nwuke LLB, BL, LLM.

[12] Donna Obaseki-Ogunnaike is a Partner in the Law Firm Adepetun Caxton-Martins Agbor & Segun (ACAS-Law), Lagos, Nigeria, where she specializes in oil and gas las as well as energy and project finance with 15 years of experience in Nigerian oil and gas law.

[13] Ngozi Chinwa Ole is a PhD Researcher in the University of Aberdeen, Scotland, UK.

[14] Tetteh Elizabeth Narkie Ghana Education Service, Yilo Krobo Senior High School, Somanya; Ishmael Ackah Africa Centre for Energy Policy, Accra and Oil and Gas Institute, University of Cape Coast; and Shafic Suleman University of Cape Coast – Cape Coast – Ghana Institute for Oil and Gas Studies.

[15] Eddy Wifa is a doctoral researcher at the University of Aberdeen, UK and also a member of the Nigerian Bar Association (NBA), International Bar Association (IBA), and Association of International Petroleum Negotiators (AIPN); Mark Amakoromo LL.B., LL.M (Aberdeen) is a Lecturer in the Faculty of Law, the Niger Delta University, Bayelsa State, Nigeria, Ibiateli Johnson Ogbo LL.B., B.L, LL.M (Swansea) is a legal practitioner with the law firm of Amachree and Wonodi, Nigeria.

[16] Chris Adomako-Kwakye B.A. (HONS), B.L. GHANA, LL.M (BRISTOL, U.K.), Lecturer, Faculty of Law, K.N.U.ST.