What is the 1969 Oil Pipeline Act?

In 1969, Nigeria passed the Oil Pipeline Act which dictates that companies should fork out just ₦20 (₦, or Naira, is the currency of Nigeria - it is subdivided into 100 Kobo) for pipeline survey permissions and ₦200 for an official license. The Act reads as follows: “The applicant for a permit to survey shall pay a fee of ₦20 upon submitting his application, and a fee of ₦50 upon the grant of such permit”. It goes on to stipulate that “The applicant for a licence shall pay a fee of ₦50 upon submitting his application, and a fee of ₦200 upon the grant of such licence.”

An outdated legislation

While at the time it was considered a necessary and positive measure, many of today’s oil industry critics consider the Act to be outdated and detrimental to the national economy. They believe that the Act is draining Nigeria’s economy due to the fact that companies are exploiting requirements that no longer fall into line with the current market state. In fact, according to a recent investigation carried out by BusinessDay, the continuing existence of these obsolete laws and the delay in modernising them is costing Nigeria a huge amount of revenue.   

Calls for review and reform

According to Seye Fadahunsi, Director of Pillar Oil, the Nigerian government needs to review and reform a number of its outdated laws in order to bring the nation up-to-the-minute with the rest of the world. At present, the 1969 Oil Pipeline Act is allowing national revenue to slip through Nigeria’s figurative fingertips.

“Even though current fees are low and good for the companies, it is however not good for the country. We need to keep pace with what happens internationally. The country needs a lot of pipeline renewal every year that would fetch it a lot of revenue,” says Fadahunsi.

Without an official review in the near future, experts maintain that the government stands to lose a significant chunk of revenue. Babajide Soyede, former general manager of Warri Refinery and Petrochemical Company suggests that while the government should not introduce an unreasonable price hike, they should take the necessary steps to bring the fees into line with current market realities. This would benefit the country as a whole without jeopardising the success of its oil companies.

In addition to these loses, the president of Nigeria recently revealed that the country is losing billions in potential revenue due to the theft of oil. Speaking at the Annual Banking and Finance Conference in Abuja, Goodluck Jonathan said the Federal Government has estimated that the country is currently losing between 60,000 and 80,000 barrels of crude oil a day due to theft. You can read more about this here, Nigeria Bemoans Oil Loss through Theft.

Resistance from above

Yet despite the obvious benefits of an Act overview, some Department of Petroleum Resources (DPR) officials maintain that their efforts to instil reform have been met with strong resistance from National Assembly members. According to DPR insiders, this is primarily fuelled by a desire to receive financial incentives before reviewing any old-fashioned Nigerian laws.

A spokesperson from the DPR explains, “You know that we need to provide some money before the legislators would even look at the Act. This is why many of the laws that should have been changed cannot be changed now,” they add.

So what will become of the 1969 Oil Pipeline Act? While a review does appear to be on the horizon, there is still a long way to go before the Act reflects an economy that exists 45 years after its introduction.