The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has issued a warning to oil and gas operators, indicating its intention to revoke their licenses if they fail to remit the mandated three percent to host communities in the Niger Delta region by the end of September 2023.
The management of the NUPRC expressed concern over the persistent delay by operators in fulfilling their statutory obligations as outlined in Section 235 of the Petroleum Industry Act, 2021. The Commission emphasized the serious consequences of operators’ non-compliance, highlighting that it could disrupt upstream operations in the affected areas.
In a statement titled “3% to Oil Communities: Operators Should Fulfil Obligations Without Further Delay,” the Commission acknowledged the host communities’ agitation and their patience regarding this issue, especially since the PIA replaced the Global Memorandum of Understanding and the Memorandum of Understanding with a new Host Community Development Trust Fund.
The statement further noted the potential implications of continued non-compliance, including hindering efforts to attract foreign investment, stabilize the national economy, and enhance the value of the Naira.
The Commission stated, “Given the implications of allowing continued default on sustained peaceful operations and the eventual effect on national oil and gas output, the Commission will be minded to activate its regulatory powers in line with the provisions of the Act as stated above, to bring defaulting and recalcitrant settlers into compliance.”
The Commission also emphasized that remitting the statutory contribution, which was intended to benefit host communities, had become a source of frustration for the rightful beneficiaries. It noted that actions stemming from this frustration could impact upstream operations within affected host communities.
While the ultimate regulatory sanction, as specified in Section 238 of the PIA, is the revocation of assets, the Commission expressed its intention to balance the application of the law strategically to avoid negative impacts on production levels and government revenue.
The relevant section in the PIA states, “Unless as otherwise provided for in this Act, failure by any holder of a licence or lease governed by this Act to comply with its obligations under this Chapter, after having been informed of such failure in writing by the Commission or Authority as the case may be, may be grounds for revocation of the applicable licence.”
The statement concluded by warning defaulting operators (settlers) to fulfil their obligations and remit outstanding arrears without further delay, as the Commission may be compelled to fully apply the law if defaults persist beyond September 2023, which could result in the revocation of their licenses.
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