NUPRC Threatens to Revoke Licenses of Defaulting Oil Coys on 3% Host Communities Fund

Emmanuel Addeh in Abuja

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) yesterday called on oil and gas industry operators to immediately begin the remittance of the statutory three per cent to host communities.

The Gbenga Komolafe-led organisation stated that it was aware of the agitation by host communities in the oil and gas producing areas of the Niger Delta region over the delay by settlors/operators in remitting the statutory fees as prescribed by Section 235 of the Petroleum Industry Act (PIA).

“Clearly, the commission understands and shares in the sentiments and particularly the patience of the host communities on this issue, especially as the PIA had suspended the Global Memorandum of Understanding (GMoU) and the Memorandum of Understanding (MOU), replacing both provisions with a new Host Community Development Trust Fund.

“The commission is fully aware of the implications of this development if allowed to fester. The agitation might frustrate the commission’s efforts at upscaling the drive for higher foreign exchange and attracting Foreign Direct Investment (FDI) into the country.

“Incidentally and quite unfortunately, it is also capable of truncating efforts at stabilising the value of the Naira, attaining the much-desired rebound in our national economy and improving our macro-economic status,” a statement by the regulator said.

The law states that each settler, where applicable, shall make an annual contribution to the applicable host communities of an amount equal to three per cent of its actual annual operating expenditure of the preceding financial year in the upstream petroleum operations.

According to the upstream regulator, given the implications of allowing continued default on sustained peaceful operations and the eventual effect on national oil and gas output, the commission will activate its regulatory powers in line with the provisions to bring defaulting and recalcitrant settlors into compliance.

The commission had recently passed the Host Community Regulation and organised a mass sensitisation programme, emphasising the responsibility of settlors in host communities under the PIA, 2021.

“Unfortunately, those concerned have neglected this, thereby stoking avoidable agitations. The settlors are, therefore, required to perform their obligation to commence remittance of the statutory three per cent contribution.

“The commission notes that remittance of the statutory contribution, which should have served as succour to the host communities, has sadly become a source of pain to the lawful beneficiaries.

“This has now given impetus to actions that might affect smooth upstream operations within affected host communities, a situation that could have been addressed through routine social inclusion,” the NUPRC added.

Although the ultimate regulatory sanction, as enshrined in Section 238 of the PIA is the revocation of assets, the commission said it had been careful not to compound the already low level of investment and divestment rate and further impact negatively on production levels and the federation revenue.

Rather, it stated that it chose to draw a balance and has been strategic in implementing the provisions of the law.  

It therefore rehashed the part of the law which states that failure by any holder of a licence or lease to comply with its obligations, 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 commission stated that defaulting operators are advised to do the needful by fulfilling their obligations and remitting the outstanding arrears without further delay, as the commission might be compelled by emerging circumstances to fully apply the law.

“Notice is hereby served that in a situation where defaults are not remedied by the end of September 2023, the Commission would have no option but to revoke the licence of the defaulting settler/operator,” it added