Oil and Gas Management – Second Assignment

“The Prospects, Challenges, Gains and Opportunities

– An analysis of the environmental policies, models
and strategies in your country’s oil and gas sector”

Emmanuel Olayinka Adeboye

R2205D14535270

Oil and Gas Management (33298)

UEL-SG-7300-33298

Date: October 7, 2022

1. Introduction

Nigeria has seen notable increases in operational activity in her oil and gas exploration and

production, refining, and product marketing for more than 40 years. This is an attestation to the

fact that anytime environmental issues are mentioned in Nigeria, what comes to mind is the

energy industry, particularly the oil and gas. The oil and gas sector produce over ninety percent

of Nigeria's revenue and can be held accountable for a sizable share of the country's

environmental challenges, predominantly in the Niger Delta region, where the majority of the

country's oil is processed. The Niger Delta region has greatly aided the socioeconomic growth of

the rest of the country, particularly in terms of, availability of employment possibilities, foreign

exchange revenues, development in education, and revenue for the development of other sectors

of the economy. The euphemism, “crude oil is to the Nigerian economy as the Nile is to Egypt”

aptly describes the significance of this non-renewable resource to our country. However, behind

the gleaming veneer of financial gains, the sector has caused major health and environmental

pollution concerns for the country as a whole, and for the host communities where most of the oil

is produced. For instance, a track record of oil spills, gas flaring, a lack of policies and

regulations for the environment, corruption, and absence of government cooperation under

previous administrations have all contributed to the serious environmental devastation that oil

development in the Niger Delta region has brought about.

The myriad of environmental rules and programmes in the oil and gas sector in Nigeria have

progressed at about the same proportion as the industry itself. Subsequently, in terms of

guidelines and targeted outcomes in addressing the industry's environmental consequences,

environmental policies and strategies in Nigeria's oil and gas company have advanced ahead of

those in other sectors. Given this knowledge, there is a reasoning that environmental strategies
and policies for the Nigerian oil and gas industry would be highly developed and sophisticated

enough to achieve the set-out goals that served as the basis for their conception. Nevertheless,

the case is different, as the Nigeria's oil and gas sector is presently the most challenged of all

sectors in the country. The unquestionably contentious issues related to the industry's negative

environmental problems can scarcely ever be fully expressed in writing. The environmental

effects of these actions have alarmed the primary stakeholders, particularly host communities,

regulatory agencies, as well as the oil companies. Communities' violent protests are the most

visible manifestation of their opposition to the widespread contamination of the environment

caused by the activities of oil and gas firms.

Therefore, several control policies and programmes have been formulated by the government to

address environmental issues with relation to the activities of the oil and gas sector. However,

whether the mitigating measures are being implemented properly and successfully is unclear.

Thus, the objectives of this paper are to critically evaluate the prospects, challenges, gains and

opportunities in the Nigeria’s oil and gas sector while analyzing the environmental policies,

models and strategies of the Nigeria’s oil and gas sector.

2. Environmental Policies & Models in Nigerian Oil & Gas Industry

There were no formal frameworks or enforcement regulation for environmental safety in place

prior to the 1987 toxic waste dump in Delta State's Koko town. The Harmful Waste Decree 42 of

1988 was issued by the Federal Government in response to the Koko toxic waste incident, which

permitted the creation of the Federal Environmental Protection Agency (FEPA) (FEPA Act,

1988). Following this was the National Policy on Environment (FEPA, 1989), which outlined the
objectives of preserving and protecting environmental quality, serenity, and wellbeing for

present and future generations. However, prior to the FEPA Act, the Petroleum Act of 1969 was

a critical statutory instrument that oversaw pollution control regulations in gas and oil activities.

The guidelines were developed in compliance with relevant sections of the Petroleum Act of

1969, which allowed the Minister of Petroleum Resources the ability to develop guidelines to

avoid waterway and atmospheric contamination.

The Environmental Impact Assessment (EIA) Act of 1992 was enacted by the Federal Republic

of Nigeria, which is the main piece of legislation governing EIA for proposed projects in Nigeria

and directly implements the resolutions of the 1992 United Nations Conference on Environment

and Development held in Rio de Janeiro, Brazil. According to the Act, any action that has the

potential to have a major negative impact on the environment must first be evaluated before a

final decision is made or authorization is granted. FEPA and other pertinent divisions from other

government ministries were combined to establish the Federal Ministry of Environment in 1999.

The National Environmental Standards and Regulations Enforcement Agency (NESREA) was

founded as a division of the Federal Ministry of Environment (NESREA Act, 2007, which

repealed the FEPA Act, in order to further efficiently enforce environmental laws, standards, and

regulations throughout the nation. The NESREA Act demonstrates unequivocally that Nigeria

has modern, comprehensive laws that should promote sustainable growth.

Then came the Local Content Act (LCA) 2010, which was enacted to increase the participation

of Nigerians not only in the oil and gas sector, but also in the service sectors and upstream of the

Nigerian energy industry, as well as regulatory support services in the sector (Obozuwa,2010).

The 2010 law aimed, among other things, to address the country's then-extremely low

concentration of Nigerian content in the gas and oil sector; establish a regulatory structure to
supervise and enforce compliance by industry stakeholders; and domesticate a larger portion of

oil and gas exploration and production operations within the country. This transformed Nigeria's

environmental policies and plans to reflect the key actions in the act. The conceptual framework

that applies to national environmental plans based on these laws specifies that particular actions

directed at environmental problem areas and all economic sectors are required for the enactment

of the environmental National Policy. The creation of some important "environmental

mechanisms" and institutional organs for the general Nigerian environment and the oil and gas

industry in particular has been facilitated by these policies and initiatives. The Environmental

Impact Assessment (EIA) Decree No. 86 of 1992 is the most notable of these "environmental

instruments" for Nigeria’s oil and gas sector, as well as other business sectors in the nation.

Some of these "environmental instruments" include the EA, EER, EMP, ESI, EMP, PIA, BLS,

EER, Clean up and Remediation of crude oil affected locations, etc.

The latest is the Petroleum Industry Bill (PIB) 2021, which aims to create a legal, governance,

regulatory, and budgetary framework for the Nigerian petroleum industry as well as the

development of host communities. The main aim is to foster long-term success in host

communities, provide instant economic and social benefits, to foster harmonious relationship. An

excerpt from the bill relating to environmental issues states that all licensees or oil companies

must make a financial contribution to an Environmental Remediation Fund for the rehabilitation

or management of negative environmental impact related to the license or lease as a condition for

the award of a license or lease and prior to the approval of the environmental management plan.

The magnitude of the oil and gas activity and the extent of environmental risk will influence the

financial commitments to be made. Only when the licensed operator is unable to carry out the
rehabilitation or management of any negative environmental effect will the regulator apply the

Fund to the rehabilitation, remediation, or management of any negative environmental impact.

3. Challenges of Environmental Policies and Strategies in Nigeria

In Nigeria, environmental strategy and policy implementation is currently beset by distinctive

obstacles that straddle logical , cultural, and socioeconomic boundaries. Some of the challenges

are highlighted below:

- Conflict of Roles and Authority Overlap: According to UNEP (2011), based on the ogoniland

assessment report, a lack of resources within key agencies and conflicting powers and duties

among ministries had a significant impact on environmental management on the ground,

particularly enforcement. Likewise, Adegoroye, (1994) reported that there are two different

categories of role conflicts: Conflicts between the federal, state, local, and environmental-

related ministries, and agencies. This first part addresses the chain of power and the

delineation of allocated duties. The other is mostly concerned with how agencies and federal

ministries dealing with environmental resources and/or challenges look to handle comparable

jobs. NOSDRA, NESREA, DPR, and occasionally Urban and Town Planning Ministries,

Offices, and Agencies in the oil and gas industry are always at odds over this comparable

overlap. Because of extensive overlap in environmental policy activities across multiple

agencies, the implementation process is typically time-consuming and costly owing to

unneeded duplication of resources. A solution to this challenge demands additional, efficient

simplification of the roles and functions of these agencies in terms of levels of control and

authority. Another problem is the scarcity of environmental statistical data. The vast majority

of essential stakeholders in this industry, mainly local populations situated where crude oil
 and gas are produced, generally are unaware of the environmental regulations and guidelines

that govern the oil and gas industry.

- Administrative Difficulties: Further concern with the current condition of Nigeria's oil and

gas industry's environmental plans and policies is administrative hurdles; as demonstrated by

the EFO, setbacks in release of funds for executing environmental processes contribute to the

acceleration of environmental problems. This is because hydrocarbon wastes, like most other

environmental risks, remain extremely reactive, with some of their toxic components staying

in the environment for years. The UNEP's 2011 report on the environmental assessment of

Ogoniland provides an empirical example, noting that due to the region's extreme rainwater,

any postponement in initiating cleanup of an oil spill results in oil contamination, through

farmland, and almost all the water channels. Despite many cleanup efforts, the study showed

extensive contamination at a spot, Ejama-Ebubu in Eleme local government area, forty years

following the occurrence of an oil spill in the area. As a result, if the affected areas are not

swiftly contained with the contaminants removed, the effects will gradually spread to other

areas. To guarantee that environmental policies and strategies are properly implemented, an

improved course of action that can considerably reduce such setbacks would be tremendously

useful.

- Financial Constraints: Environmental management tools are very expensive to deploy and are

hindered by regulations or standards which are considered excessive and redundant.

Examples include EIA, EER, EMP, PIA, remediation, and others. Logistics costs for multiple

agencies involved in monitoring and inspections of such operations, as well as scientific

investigation expenditures, are substantial contributors to this. For instance, one monitoring
 exercise in the oil and gas industry for a remediation project has to include representatives

from NOSDRA, DPR, the Consulting Firm, appropriate state agencies, and the company

responsible for polluting the environment as a matter of implicit policy. Without doubt, this

is a clear instance of duplication of effort and unwarranted increase of environmental

expenses.

- Lack of Compensation: The areas affected by the oil disaster are severely lacking in

compensation arrangements. It is crucial to clarify that there is no system for compensation

for oil spill damages because different individuals, states, and communities frequently

receive varying amounts of compensation from the operating firms. The operating firms

occasionally pay compensation following decades of effects, protests, protracted delays, and

several lawsuits, but sometimes no compensation is ever paid. The compensation for oil

spills and pollution for impacted areas does not have a unified system. On the other hand,

there is a legislative or regulatory requirement that is based on the Land Use Act that

provides compensation for impacted communities. According to the rule, compensation must

be paid for land purchased and acquired for oil mining pipeline purposes

without mitigating the effects of the process. This is one of the reasons why an oil spill

compensation scheme is scarcely ever mentioned in any one document. Because of its strong

dependence on the trade sector that favours oil producers, it is recognized that the

compensation plan used in relation to environmental damages and other connected

consequences from oil and gas industry operations is insufficient. Furthermore, there is a lack

of transparency in Nigeria's compensation mechanisms because there is no law that covers all

losses resulting from oil and gas operations. The populations harmed by these oil spills are
 further rendered helpless in their bitterness as a result. The writings of Babawale (2013),

Mustapha & Ayodele (2017), Jack-Osimiri (2011), and Elum et al. (2016) provide evidence

for this. Environmental and social unhappiness are also somewhat influenced by the fact that

residents of communities fight oil and gas companies in court about how, when, and why

compensation should be given.

4. Gains of the of the Environmental Policies in the Nigerian Oil & Gas Sector

Nigeria's ecosystem has profited considerably from the development of environmental

regulations and efforts for the oil and gas sector, notably after 1988. The first big advantage that

the creation of environmental legislation and policies have given to the gas and crude oil industry

is a considerable rise in environmental awareness, predominantly among local communities

where the oil and gas is produced. The local communities are the ones most affected from the ill

impacts of oil contamination and largely unaware of their legal choices. The policies highlighted

the main issues and point to the operators as the party responsible for the harm inflicted on the

environment from their operations. This viewpoint is backed by the Ebomhe (1998) report,

which stated that in 1990, FEPA elected to impose a five-year embargo on implementing its

provisions, while detailed environmental regulations and guidelines were still being developed at

the time in our laws. In the interim, the action was intended to build and implement a public

awareness campaign, providing businesses time to submit comments on draft rules and change

and align their production methods and processes with FEPA's standards and recommendations.

When the five-year term expired in 1995, FEPA began utilizing its inspectorate and compliance

monitoring section to examine and implement its guidelines, regulations, and standards.
A second advantage is that Nigeria's present environmental objectives and legislation serve as a

critical incentive for enticing international investment. This is supported by Ebomhe's (1998)

statement that "certainty is one of the attributes of outstanding legislation. Any likely investor

would naturally be attracted to an environmental strategy and policy that is plainly

communicated, thorough, and specific in stating the obligations and likely penalties in the event

of failure to comply. Nigeria's environmental guidelines and techniques are undeniably forward-

thinking, even though the situation is not yet ideal.

Thirdly, the policies provided a platform for resolving disagreements among the different

industry players. When mediation and arbitration prove unproductive in issues resolution, over

negative environmental consequences, both the operator and the oil-producing communities have

reasons for lawsuit at the first instance. A peculiar case is the United Nations Environment

Programme's (UNEP) (2011) examination of the Ogoni oil pollution crisis. According to the

study, the environmental disaster caused by hydrocarbon exploration was one of the worst ever.

The fourth benefit of environmental rules in the oil and gas industry is better

execution/enforcement capacity. The aiding environmental strategies, policies, and legal

instruments have essentially progressed from the outset of FEPA, as the general (unified) agency

entrusted with preservation of the environment in Nigeria, to the current days of NOSDRA

created by Act No.15 of 2006 and NESREA created by Acts No. 12 of 2007. The two bodies

have transformed into more equipped institutions in enacting environmental policies and laws

within the Nigerian oil and gas system. Adegoroye (1994) noted that the Decree founding the

Agency specifically grants it the authority to create and recommend national guidelines,

measures, and standards for noise level, atmospheric protection, water quality, gaseous

emissions, air quality, and effluent limits, to monitor and regulate hazardous materials, and to
supervise and compel conformance. The Statute further provided the Agency with significant

enforcement legal authority, including the ability to enter without a warrant, search for evidence,

confiscate it, and make arrests. Anyone found culpable will face harsh consequences, including a

fine and/or jail time.

5. Prospects & Opportunities of the Environmental Policies in the Nigerian Oil & Gas

Sector

The significance of sustainable environmental management demands governance structures in

which the legal, regulatory, and institutional needs of environmental management may be further

enhanced. We have a good prospect and opportunity if the relevant stakeholders come together

with enthusiasm. This is a testament to the fact on July 1, 2021, Nigeria's Senate finally and

formally passed the PIB which was signed into law by President Buhari a month later after

several failed attempts by various administrations to sign it into law due to sectional interest,

politics and other vices. The primary goal of the bill is to foster long-term success in host

communities, give instant economic and social benefits, and stimulate harmonious relationship.

Another factor is the heightened worldwide awareness of the consequences of poor

environmental conditions. This aids in the development of local staff and expertise, which in turn

promotes the execution of predominantly domestic environmental policies and initiatives.

6. Conclusion

Despite the plethora of regulations regarding the environment, natural resources, and the harmful

effects of oil and gas extraction, challenges and opportunities would still exist in the industry.
Addressing the challenges of environmental policies and strategies will undoubtedly aid in fast-

tracking the advancement of these strategies as a significant instrument for growth and control in

the oil and gas industry. This is especially true in light of the planned full implementation of the

PIB which was recently signed into law in Nigeria.

This article also emphasized the pertinent deficiencies that contribute to why the operators and

host communities did not appreciate the current legislation. Overlaps in policy objectives,

implementation strategies, corruption, inconsistencies, and the absence of a reward system have

been demonstrated to exist.

The document also promotes the necessity for repeated engagement of oil-producing

communities, operators, and communities harmed by oil spills regarding the optimum method of

compensation. Having evaluated the current approach/process, which lacks a scientific

foundation and/or the consensus of the community. A quick environmental response approach

allowed by a policy that explicitly states how, who, and when the response should be

commenced will also undoubtedly contribute to a decrease in the industry's environmental and

health concerns.
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