Legal Appraisal of the Nigerian Upstream Petroleum Unitization Regulations (NUPUR) 2023

Abstract

Unitization is the process whereby parties come together in agreement to jointly develop a common reservoir that
straddles across tracts, thereby minimizing production costs and creating efficiency generally. Unitization came into
place to prevent the old system of capture, which encouraged competitive drilling, where parties were in a haste to
capture more resources than the other, given that one party could tap from such oil from the adjoining reservoir of
another party and divert it into their own reservoir and still own such diverted oil.This article has successfully
discovered the loopholes which defunct regulations on unitization: The Petroleum (Drilling and Production)
Regulation 1969, particularly at section 48 and The Guidelines for Unitization in Nigeria issued by the Department
of Petroleum Resources 2008 (revised in 2019. These defunct regulations failed to provide important aspects of
unitization namely; cross-border unitization, dispute mechanisms, allocation mechanisms, brown-brown fields,
determination and redetermination, unit operators, relinquishment of interest by operators etc. which led to delayed
unitization agreements. Due to these numerous loopholes, the Nigerian Upstream Petroleum Unitization
Regulations (NUPUR) 2023 was enacted by the Nigerian Upstream Petroleum Regulatory Commission(NUPRC),
the regulation provided for key issues that were not covered by the defunct regulation such as the notification of
hydrocarbon reservoirs, cross-border unitization, determination of brown-brown fields, modification of unitization
agreements, recognizance of straddling and non-straddling reservoirs, completion of PUA`s and UUOA`s and
remuneration of consultants. However, even though the current enacted regulation tackled some issues, it failed to
provide for the benchmark for determination and redetermination,created ambiguities, failed to provide a
generalized system on how assets, interest and production costs will be shared among the license or lease holders, it
was also silent on dispute mechanisms which may arise and finally it failed to give specific guidance on the
complexities of multi-party agreements.This article investigates why Nigeria has few executed unitization
agreements, which is a major challenge in the production of petroleum. It also makes a comparative analysis of
unitization in Nigeria with other countries and suggested possible ways in which there can be more executed
unitization agreements.