On July 12, the Federal Executive Council approved a $21m contract for the construction of a metering system for all crude oil flow stations in Nigeria.
The contract awarded would be for 180 days (six months), and the move would allow the country to meter about 187 flow stations.
Shortly after the news of the contract award broke, contentions arose between the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Shippers’ Council over which agency has the statutory powers to implement a Cargo Tracking Scheme for Nigeria’s upstream petroleum industry.
While the NUPRC had awarded a contract to P-Lyne Energy Limited for the provision of pre-field development studies for Advanced Crude Oil Cargo Declaration, Antaser Nigeria Limited on the other hand had raised objections claiming that the contract awarded to P-Lyne is a duplication of the crude-oil-export tracking component of the contract awarded to it by the Nigerian Shippers Council. Antaser is, therefore, challenging the award of the crude oil advance cargo monitoring contract to P-Lyne by the Commission.
The purpose of this article is to examine the provisions of the law as regards the powers of NSC and NUPRC to award and implement the contract under contention and to provide a guide on how the issue can be amicably resolved.
In addressing this issue, it is important to point out that the powers of a government agency to perform an act are conferred by its enabling law, and a statutory body cannot act outside the scope of its powers as set out by its enabling law.
Where an agency acts beyond or outside the power granted by the enabling instrument, its acts or decision will be declared ultra vires, as an ultra vires act does not have any binding effect in the eyes of the law.
This ultra vires principle, according to legal experts, is a cornerstone of administrative law.
The Petroleum Industry Act, which was signed into law in 2021 by former President Muhammadu Buhari is one of the most audacious attempts that overhauled the petroleum sector in Nigeria.
The PIA provides a legal, governance, regulatory, and fiscal framework for the Nigerian Petroleum Industry. Instructively, the core objectives of the Commission as set out by section 6 of the Petroleum Industry Act, 2021 include ensuring that upstream petroleum operations are carried out in a manner to minimize waste and achieve optimal government revenues; determining, administering and ensuring the implementation of practices applicable to upstream petroleum operations according to good international petroleum industry practices; and implement government policies for upstream petroleum operations.
The Act also gave the NUPRC the power to ensure the implementation of national policies for upstream petroleum operations; and implement such other policies and objectives as are consistent with the provisions of the Act.
Under section 7 of the PIA, the Commission’s technical regulatory functions include enforcing, administering and implementing laws, regulations and policies relating to upstream petroleum operations; ensuring compliance with applicable national and international petroleum industry policies, standards and practices for upstream petroleum operations; issue certificates of quality and quantity to exporters of crude oil, natural gas and petroleum products from integrated operations and crude oil export terminals and to monitor and regulate the operations of crude oil export terminals, including responsibility for weights and measures at the crude oil export terminals; and perform such other function as may be necessary to give effect to the provisions of this Act.
The Commission is also empowered under section 10 of the PIA to enforce the provisions of any regulation made for upstream petroleum operations, and enactments for the upstream petroleum industry made before the coming into force of this Act and any regulations made under powers given under them.
The PIA thus makes it manifestly clear in several of its provisions (including sections 6, 7 and 10 captured above) that the NUPRC is to enforce, administer and implement laws, regulations and policies over any matter concerning upstream petroleum operations, including those provided under laws or enactments in force before the coming into force of the PIA.
On the other hand, the Nigerian Shippers’ Council based on the provisions of the PIA has no capacity or power to enforce, administer and implement laws, regulations and policies over any matter concerning upstream petroleum operations, or to enter into contracts granting any entity such rights.
The NSC was established by the Nigeria Shippers’ Council Act, Cap N133 Act, Cap N133, Laws of the Federation of Nigeria 2004 (NSC Act). Section 3 of the NSC Act, sets out the functions of the NSC, and these are to provide a forum for the protection of the interest of shippers on matters affecting the shipment of imports and exports to and from Nigeria; provide a forum for consultation between Conference and non-Conference Lines, tramp-owners, the Nigerian Ports Authority and the Government of the Federation on matters of common interest; encourage the formation of shippers’ associations all over Nigeria; and liaise with the appropriate arms of the Government of the Federation and other organisations in assessing the stability and adequacy of existing services and make appropriate recommendations in that behalf.
The Act also empowers Nigeria’s Shippers Council to advise the Government of the Federation through the Minister on matters relating to the structure of freight rates, availability and adequacy of shipping space, frequency of sailings, terms of shipment, class and quality of vessels, port charges and facilities and other related matters; negotiate and enter into agreements with Conference Lines, and non-Conference Lines, ship-owners, the Nigerian Ports Authority and any other bodies on matters affecting the interests of shippers; consider the problems faced by shippers with regards to coastal transport, inland waterways transport and matters relating generally to the transportation of goods by water and advise Government on possible solutions thereto; promote and encourage the study of and research into problems affecting shippers in Nigeria; arrange, from time to time, seminars and conferences on any matter relating to its functions; and carry out such other activities as are conducive to the discharge of its functions under this Act.
It is instructive to state that where there is a conflict between two laws covering the same subject matter, one specific and the other general, the specific provision of the law prevails.
This principle, according to legal experts was well enunciated by the court in the case of N.D.I.C. v. Governing Council, I.T. F. The court held further that the import of a law that is made to govern a specific scope is that, that specific scope is taken out of the ambit of the general law. Similarly, in Ezeadukwa v. Maduka, the court held that where there are two enabling laws, one specific and the other general, the specific one should be invoked because the court is entitled to presume that the specific legislation was intended to govern the matter.
Thus, even if the NSC Act had made any provisions concerning petroleum matters, the provisions of the PIA, being a specific law regulating the petroleum sector will prevail over the provisions of the NSC Act. In this particular case, however, no powers to regulate the petroleum sector were conferred on the NSC under its enabling Act.
A Senior Advocate of Nigeria, Chikaosolu Ojukwu gave credence to this when he said in an interview the Shippers Council usurped the powers of the NUPRC when it awarded the Crude Oil Cargo Declaration Contract to Antaser Nigeria Limited.
He said any act by the NSC concerning the administration or implementation of any policy of government or contract about the petroleum sector is an illegal action.
Quoting Section 25 of the PIA, he stated that any decision that will affect upstream production like crude, then such decision no matter which agency is involved, should go back to the NUPRC for approval.
He said, “The Shippers Council that awarded the first contract usurped the power of the NUPRC because the issue of crude oil is a major responsibility of the commission. So, it is wrong to take out crude oil monitoring from a regulatory agency that is in charge of it and give it to someone else.
“The NUPRC is the Commission that has the mandate to issue any regulation in charge of crude monitoring whether it is Advanced Crude monitoring or Declaration. Section 25 of the PIA states that any decision that will affect upstream production like crude, that decision no matter which agency, should go back to the NUPRC. So that contract with the Shippers Council could be deemed as an unlawful contract, and no action can arise from an illegal action in law.”
The Advance Cargo Declaration Contract awarded to P-Lyne is an initiative of the Commission to properly and effectively fulfil its responsibility of hydrocarbon accounting and the establishment of an effective and efficient process that addresses the challenges of illegal exports of crude oil, crude oil theft and other criminal activities currently plaguing the upstream petroleum industry, and such can only be administered by the NUPRC, being the sole agency vested with the oversight of the upstream sector, and implementation of any government policies relating thereto.
The Advanced Cargo Declaration Solution contract is to establish a robust system for the declaration and tracking of crude oil transportation and export from Nigeria, to monitor and account for the movement of crude oil within Nigeria from production to delivery points, and to prevent disruptions, theft, and under-declaration of crude oil within Nigeria and at export terminals.
It is also targeted to establish a comprehensive database and control centre for monitoring and tracking crude oil exports from Nigeria, ensure that only certified production related to upstream crude oil operations are exported from Nigeria, and ensure accurate accountability of hydrocarbons for calculating crude oil revenue accruable to the government.
From the foregoing, there is nothing in the NSC Act that confers power or authority on the NSC to oversee any aspect of the Nigerian petroleum sector (whether upstream, midstream or downstream) or to implement government policies in regard thereto.
Section 3(f) of the NSC Act (which is the sub-section that confers contractual capabilities on the NSC on shipping matters) appears to be limited to matters affecting the interests of shippers. There is no scenario where the monitoring and tracking of crude oil exports can be said to be a matter affecting the interest of shippers.
As it is a fundamental principle of law that a statutory body cannot act outside the scope of its powers as set out by its enabling law, any act by the NSC with the administration or implementation of any policy of government or contract with the petroleum sector is ultra vires the NSC and is void ab initio, regardless of when it was entered into.
In the same vein, a contract will be unenforceable if the parties cannot enter into it. Thus, any contract between Antaser and the NSC on any matter outside the scope of the NSC’s powers or objects is void ab initio and Antaser will not be able to rely on it.
Antaser needs to thoroughly review the provisions of the NSC Act for proper guidance on what the NSC may contract in respect thereof.