Among other outcomes, the Petroleum Industry Act 2021 (the “PIA”), has triggered a transition from discretionary reliance on contractual frameworks (such as memoranda of understanding) to regulate the relationship between host communities and upstream petroleum operators, to mandatory compliance with a statutory and regulatory framework that outlines the rights and obligations of upstream petroleum operators in relation to their host communities.

This unfolding legislative framework seeks to ensure that, on an ongoing basis, host communities of oil and gas companies are guaranteed direct benefits from petroleum operations, and thus, foster regulated and sustained development of such communities. To this end, the PIA requires upstream operators to incorporate trusts to be funded, managed, and administered for and on behalf of communities situated in or around their respective areas of operations. It also sets out broad requirements for the governance of such trusts through board of trustees, management committee, and advisory committees, while empowering the Nigerian Upstream Petroleum Regulatory Commission (the “Commission”) to regulate and oversee the development of host communities in the manner contemplated by the PIA.

Acting pursuant to the powers vested in it by the PIA, the Commission has now issued the Nigeria Upstream Petroleum Host Communities Development Regulations, 2022 (the “Regulations”) on 23 June 2022. The Regulations reinforce and clarify the provisions of the PIA, and are applicable to holders of a license or lease engaged in upstream petroleum operations (including holders of interest in oil mining leases and oil prospecting licenses). They also set out stringent penalties for failure to comply with the provisions thereof.

A more in depth look at the provisions of the Regulations can be found in our article using the link below.

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