Introduction
The Petroleum Industry Act 2021 (“PIA”), signed into law in August 2021, marked a significant reform of Nigeria’s petroleum sector. Repealing the Petroleum Act of 1969, the PIA introduced a comprehensive legal, governance, regulatory, and fiscal framework for the industry. Notably, the PIA introduced the requirement for specified petroleum industry operators to establish a Host Communities Development Trust (HCDT), aiming to enhance peaceful and harmonious co-existence between licensees or lessees and their host communities within the petroleum-producing areas and to aid the prosperity and the development of the economic and social infrastructure of these communities.
However, the rights granted to host communities under the PIA are not without limits. The PIA does not grant host communities a role in the decision-making processes of oil companies, particularly regarding divestment of shares or assignment of Oil Mining Leases (OMLs). This limitation was affirmed by the Federal High Court of Nigeria, Port Harcourt Judicial Division, in two similar rulings delivered on 15 November 2024, by the Hon. Justice S. Dalyop Pam in Suit No: FHC/PH/CS/123/2022- Prince Barrister Opunabo Bourdillon Ekine & 5 Ors (For themselves & on behalf of members of OML 25 Host/Impacted Communities) v. The Shell Petroleum Development Company of Nigeria Limited & 2 Ors and in Suit No. FHC/PH/CS/124/2022 Chief Biokpomabo C.J.O. Ndewari & 3 Ors (For themselves & on behalf of members of OML 23 Host/Impacted Communities) v. The Shell Petroleum Development Company (SPDC) & 2 Ors.
The facts of the cases
In Suit No: FHC/PH/CS/123/2022, the Plaintiffs, suing for themselves, and on behalf of the Belema, Ofoinama, and Oko-ama communities within the Kula Kingdom (otherwise referred to as the OML 25 Host/Impacted Communities) in Akuku Toru Local Government Area of Rivers State, Nigeria, filed an action against The Shell Petroleum Development Company of Nigeria Limited (“SPDC”), Belema Oil Producing Limited, and the Attorney General of the Federation (“AGF”) seeking inter alia, to restrain SPDC from divesting its interests in OML 25 without the consent and participation of the Plaintiffs, who are the landlords and host community of OML 25. Their contention was that SPDC’s decision to divest its interests in OML 25 without consulting the affected host communities is an attempt to circumvent the host communities’ right under the PIA, as (in their view) the PIA prohibits SPDC, as operator of the OML, from assigning or divesting its shares in OML 25 without the participation of the host communities.
The Plaintiffs also contended that they were entitled to 35% of the bid amount for OML 25 as host communities and insisted that the lease should only be sold to a company, such as the 2nd Defendant, Belema Oil Producing Limited, that understands local sensitivities and can address the community’s concerns. The Plaintiffs also sought declaratory and injunctive reliefs compelling the AGF, the Federal Ministry of Petroleum Resources, the Nigerian Upstream Regulatory Commission and the Nigerian National Petroleum Company Limited to withhold regulatory approval for SPDC’s divestment to any bidder other than Belema Oil Producing Limited.
Similarly, in Suit No FHC/PH/CS/124/2022, the Plaintiffs instituted the action on behalf of the Soku communities, (otherwise referred to as the OML 23 host communities) in Akuku Toru Local Government Area of Rivers State seeking similar reliefs as Suit No: FHC/PH/CS/123/2022.
Click Here to Download the Full Publication
