NUPRC threatens to revoke defaulters’ license over remittance of 3% host community fees

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BY FESTUS OKOROMADU

The management of the Nigerian Upstream Petroleum Regulatory Commission has threatened to revoke the licenses of oil companies operating in the country that fail to remit the statutory fees governed by Section 235 of the Petroleum Industry Act , 2021, by the end of September.

The quoted Act compels oil companies operating in the country to make an annual contribution of an amount equal to 3% of its actual annual operating expenditure of the preceding financial year to the applicable host communities’ development trust fund.

The Commission in a statement at the weekend advised defaulting operators to do the needful by fulfilling their obligations and remitting the outstanding arrears without further delay, adding that it might be compelled by emerging circumstances to fully apply the law.

Emphasizing its obligation in this regard, the Commission stated that relevant section states that, “Unless as otherwise provided for in this Act, failure by any holder of a license 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 license.”

The warning was coming on the heels of agitation by host communities in the oil and gas producing areas of the Niger Delta region over the delay by industry operators in remitting the statutory fees.

The statement issued by the management of the Commission read in part, “The attention of management of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has been drawn to the agitation by host communities in the oil and gas producing areas of the Niger Delta region over the delay by industry settlors/operators in remitting the statutory fees governed by Section 235 of the Petroleum Industry Act (PIA), 2021.

“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.”

While calling on agitators to trust the Commission to act on their behalf, it warned of the negative implication of agitation on attracting foreign investment.

“The Commission is fully aware of the implications of this development if allowed to fester. The agitation might frustrate the Commission’s efforts at up-scaling 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 stabilizing the value of the Naira and attaining the much-desired rebound in our national economy and improving our macro-economic status.”

While acknowledging the statutory provision of the PIA regarding the annual contribution of operators in the industry, under Section 240 (2) of the PIA, 2021, the statement quoted it thus: “Each settlor, where applicable through the operator, shall make an annual contribution to the applicable host communities development trust fund of an amount equal to 3% of its actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities for which the applicable host communities development trust fund was established.”

NUPRC noted that 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 settlors into compliance.”

On how it had ensured peace in the region, NUPRC said, “Recently, the Commission passed the Host Community Regulation and organized a mass sensitization programme, emphasizing the responsibility of settlers in host communities under the PIA, 2021. Unfortunately, this has been neglected by those concerned, thereby stoking avoidable agitations.”

It added that, “The settlers are therefore required to perform their obligation, to commence remittance of the statutory 3% 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.

“Although the ultimate regulatory sanction as enshrined in Section 238 of the PIA is the revocation of assets, the Commission has 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. It rather chose to draw a balance and be strategic in the implementation of the provisions of the law.”