A CRITICAL ANALYSIS OF THE REGULATORY REGIMES OF THE PETROLEUM INDUSTRY IN NIGERIA

A CRITICAL ANALYSIS OF THE REGULATORY REGIMES OF THE PETROLEUM INDUSTRY IN NIGERIA

CHAPTER ONE
GENERAL INTRODUCTION
1.1 Background to the Study
The Petroleum Industry is currently the largest  critical analysis of the regulatory regimes of the petroleum industry in Nigeria and the major generator of Gross Domestic Product (GDP) in the country which accounts for 80% contribution to the Nigerian economy. Nigeria‟s budget in a fiscal year is largely sourced from the Petroleum Industry.
Oil was discovered in Nigeria in 1956 at Oloibiri2 after half a century of exploration. The discovery was made by Shell-BP, who was at that time the sole concessionaire of oil exploration licence in Nigeria. Upon the said discovery, Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing approximately 5,100 barrel per day (bpd) . After 1960, exploration rights in onshore and offshore areas adjoining the Niger Delta were extended to other foreign companies. In 1965 the exploration field was discovered by Shell in shallow waters of Warri. In 1970, which saw the end of the civil war coincided with the rise in the world oil price, and Nigeria was able to reap instant riches from its oil production.
Consequent upon discovery of crude oil in Nigeria, and the increasing growth in the petroleum activities in the industry, there was the need by Federal Government to enthrone a legal and institutional framework by way of a regulatory regime that will regulate the petroleum industry. The effect of this led to the enactments regulatory laws in the industry and regulatory institutions respectively in order to ensure transparency, accountability and effective service delivery in the industry for the benefits of all Nigerians.
However, Nigeria operates a command and control regulatory framework in the petroleum industry . This type of regulation was prevalent in the United States and Britain during the 1970s and 1980s . Under this type of regulatory framework, regulators are deemed to be acting in the public interest. This work focuses on the extant public regulatory regime petroleum industry in Nigeria. Generally, factors, such as red-tape, over-regulation and regulatory capture, amongst others, are some reasons militating against a command and control regulatory regime . This work will therefore attempt to examine the state-oriented or public regulatory framework in petroleum industry in Nigeria, and the fundamental ills afflicting the industry.

1.2 Statement of the Research Problem
1. With the exceptions of the Nigerian Oil and Gas Local Content Development Act and Nigerian Extractive Industry Transparency
Initiative Act which were enacted in 2007 and 2010 respectively (although they are not the principal legislations on petroleum industry), the first comprehensive principal legislation on petroleum industry that repealed the 1914 Mineral Oils Act dates as far back as 1968 . Other legislation includes NNPC Act which came into being in 1978, while the Profit Tax Act had been in existence since 1958 even before the commencement of Petroleum Act in 1968. In view of this, the principal laws regulating the petroleum industry are for all intent and purpose obsolete in nature and the current legal framework in the industry can no longer sustain the industry due to technological advancement in the industry and this has led to ineffective implementations of the said laws due to the lacunas they provide in comparison with the current realities obtainable in the industry.
2. The petroleum industry is bedeviled by a poor sanction regime by virtue of the type and the nature of sanctions provided in the laws regulating the industry. This has led to environmental degradation, pollution of air, water and endangering of life and properties due to petroleum industry activities by the oil companies in the areas they operate. The company‟s operational actions or inactions due to a poor sanction regime has led to a lot restiveness in host communities which has hampered operations and at the end has affected the Nigerian economy as a whole.
3. The regulatory regime in the petroleum industry is also challenged by the fact that there seem to be excessive administrative powers granted to the Minister under the Petroleum Act which has in recent past led to misuse and abuse of office and has encouraged nepotism and
corruption in the industry thereby leading to lack of accountability and transparency in the use of public funds for the good of all Nigerians.
4. Fusion of Corporate Governance in the regulatory regime of the petroleum industry is yet another problem that has been identified in the industry. Most of the corporate powers in the petroleum industry
are centered around the Minister of Petroleum or his office. This fusion of corporate powers has led to a number of beauracratic bottle neck in the industry thereby by slowing down decision making.
5. Overlap of oversight functions among the regulatory institutions of the petroleum industry and weak enforcement of the extant laws by these
institutions.
After reviewing the background study and the statement of problems which this work intends to solve, it is pertinent to specify in a specific manner the research questions which this work seeks to answer. They are follows;
1. What are the problems associated with the effective implementation of the laws regulating the petroleum industry in Nigeria?
2. Why are the regulatory institutions weak in carrying out their statutory functions?
3. What will be the status of Petroleum Industry Governance Bill and how does it intend to usher in a new legal regime if eventually passed into law?
4. How can all the problems indentified in the work be solved?

A CRITICAL ANALYSIS OF THE REGULATORY REGIMES OF THE PETROLEUM INDUSTRY IN NIGERIA