Ministerial Consent — Necessary For Change Of Corporate Control Under Oil And Gas Law In Nigeria...Say The Court And The PIB

Introduction:

The principal legislation which regulates the Nigerian oil and gas industry is the Petroleum Act (the PA). The laws and regulations which deal with the grant or acquisition of petroleum interests in Nigeria prescribe certain conditions which must be met prior to the grant or acquisition of such interests. The overriding purpose of these requirements is to ensure government control over petroleum resources and for all interest holders to be acceptable to the government. Consequentially, this enables the government to ensure that petroleum resources are utilised both for the ultimate benefit of the people and in the interest of national security.

It is customary in commercial transactions for companies to acquire or purchase all or majority of the shares in another company or to offer their shares for sale to other companies or individuals. This could result in the change in control of the acquired entity.

In this regard, and particularly with reference to petroleum interests, the PA at paragraph 14 of the First Schedule, provides that a holder of an oil prospecting lease or an oil mining lease shall not assign his licence or lease, or any right, power or interest therein without the prior consent of the Minister for Petroleum Resources (the Minister). In addition to this, the Petroleum (Drilling and Production) Regulations (the Regulations) provide the procedure to be adopted for the application to the Minister for the assignment or takeover of an oil prospecting licence or an oil mining lease or of an interest in either.

The issue of what constitutes an assignment or takeover of a petroleum interest, or whether a violation of the provisions of the PA and the Regulations occurs where a sale and/or transfer of the entire or majority shares in a company - being the holder of an oil mining lease - is effected without the prior consent of the Minister, was recently decided by the Federal High Court in Nigeria.

In the subject case, our firm, Adepetun Caxton-Martins Agbor & Segun, represented the plaintiff who contended that the take over or acquisition of the first defendant's 40% interest in an oil mining lease (in which the plaintiff was holding the 60% stake) by third parties (also sued as co-defendants), by way of a share acquisition through other counterparties, without the prior consent of the Minister violated the provisions of the PA and the Regulations which require such consent.

Facts:

Moni Pulo Limited (Moni Pulo) and Brass Exploration Unlimited (Brass) were both counterparties to a joint operating agreement on Oil Mining Lease 114. By a letter dated...