An overview of the health, safety and environmental regime in Nigeria’s offshore oil and gas sector
As a result of tightening up of the health, safety and environment (HSE) standards applicable to Nigeria’s offshore oil and gas sector, operating companies embarking on new projects in Nigerian waters need to carefully assess the risk and financial burden of these new requirements before committing themselves or their assets to these projects.
The collapse in crude oil prices in 2014, coupled with political and civil unrest in the Niger Delta region (where the vast majority of Nigeria’s oil and gas reserves are located), has led in recent years to a significant decline in oil and gas production and exports from Nigeria.
With oil prices now beginning to stabilise at more economically viable prices and the Nigerian Government taking action to bring peace and stability to the Niger Delta, oil and gas production in Nigeria is beginning to steadily increase. With this projects that had previously been delayed or cancelled are now being resumed and new exploration and development projects are being planned.
For companies looking to participate in these projects it is important to have a full understanding of both the applicable HSE requirements currently in force as well as those in the legislative pipeline. Partly this is needed to ensure compliance with all local regulations but the current requirements may also have an impact on the profitability of any given project.
Health and safety
The main regulations currently in force which govern the health and safety regime for upstream oil and gas projects are the Petroleum Act (Laws of the Federation of Nigeria (LFN)) 2004 (as amended) and the Mineral Oils (Safety) Regulations 1963 (as amended).
The Petroleum Act establishes various health and safety provisions that apply to operations in the offshore oil and gas sector as well as empowering the Minister of Petroleum to make regulations regarding safe working conditions and accident reporting. The Mineral Oils (Safety) Regulations provides for the application of standard safety measures in relation to the handling and utilisation of equipment in oil and gas operations.
The Environmental Impact Assessment Act 1992 (as amended) (the “EIA Act”) is the principal piece of legislation relating to environmental regulation in Nigeria and requires companies to undertake an environmental impact assessment (EIA) before constructing or installing oil and gas facilities in the Nigerian offshore sector. In addition companies are required to set up an environmental management system and conduct annual environmental and safety audits for facilities that are installed or constructed.
Oil facility operations must also comply with a number of international standards, including ISO 14000 (a series of environmental management standards developed and published by the International Organisation for Standardisation (ISO)) and OHSAS 1801 (Occupation Health and Safety Assessment Series) (an internationally applied British standard for occupational health and safety management systems).
In each case, HSE regulations are enforced by a system of permits and approvals, with regulatory officers appointed under the relevant legislation having the power to inspect and where necessary confiscate or seal up facilities that are in breach of the applicable regulations.
An operating company that fails to obtain all the necessary authorisations and permits may be held liable and the company may have to pay all costs associated with the investigation, remedying and subsequent monitoring of the HSE impact on any project. The Minister of Petroleum has powers to revoke any authorisation where a company has failed to comply with applicable laws, including environmental regulations.
The relevant regulatory regime also provides for the imposition of stringent fines for any breach of the HSE regulations as well as requiring the payment of compensation to affected persons. This is in addition to the costs of remedying any environmental damage.
National Petroleum Policy
In response to continued pressure to improve the safety record in Nigeria following a number of “preventable” accidents in recent years, the Federal Executive Council of Nigeria approved a new National Petroleum Policy (the “Policy”) on 19 July 2017. This Policy seeks to address a broad range of issues relating to the sustainable development of the country’s oil and gas resources, including issues relating to health, safety and the environment. This is likely to lead to new and tighter HSE requirements.
As stated in the Policy in relation to HSE issues:
“The current system in Nigeria regarding maintenance, health and safety in the Nigerian petroleum sector is not acceptable. Major safety incidents go without proper investigation and without sufficient responsibilities being apportioned.”
The Policy identifies the need to introduce various measures to ensure robust adherence to HSE requirements, as well as introducing criminal sanctions for individuals found culpable of HSE breaches, including company directors who are found to be grossly negligent in the discharge of their duties.
The extent and speed at which the recommendations set out in the Policy are implemented will of course be the key factor in its success. Given the changing regulatory environment, companies who are currently undertaking oil and gas projects in Nigeria, or are looking to embark on new projects, would be well advised to obtain comprehensive legal and regulatory advice to ensure that all HSE related requirements and authorisations are fulfilled and obtained. The consequences of failing to do so may well be severe.