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20 Jan

OIL AND GAS 1.2A OWNERSHIP (INTRODUCTION AND PRINCIPLES)

OWNERSHIP OF OIL AND GAS.

Ownership has been described by Tobi J.C.A in Abraham V Olorunfunmi as the greatest legal interest in a thing… the power to use, alter, destroy, assign without the consent of another[1]. Because of the economic importance of petroleum, it is important to ascertain who owns the petroleum found in a place.

Initially, the International Oil Companies exercised rights that amounted to sovereign ownership over the petroleum of host states[2]. However, with the various conventions, treaties, the establishment of OPEC, and the Independence of host states, state participation began to gain prominence.

Section 44(3) of the 1999 Constitution, Section 1 Minerals Act, 1 Petroleum Act, Section 2 of the PIB, vest the ownership of all petroleum (and minerals) found in Nigeria, its territorial waters, continental shelf and Exclusive Economic Zone (EEZ) in the FG.

THE OWNERSHIP THEORIES IN THE OIL AND GAS INDUSTRY.

These are principles underlying the ownership of oil and gas.

Absolute Ownership Theory: Here, the landowner has title over oil found under his land. Mr Landlord can lose this right where the oil under his land migrates to another person’s land[3]. Under this theory, the landowner can drain as much as possible provide he complies with good oil practice. Practiced in some parts of Texas, Colorado, Pennsylvania…

Qualified Ownership Theory: Here, the landlord does not own oil found under his land in situ-Kelly V Ohio Oil. What he should do is; capture and extract as much petroleum as possible-State V Ohio Oil. He can then exercise ownership over the oil that has been captured, extracted and reduced into possession. He can sink as many wells as possible[4] subject to legislations and good practices-Frost Johnson Lumber Co V Sailing Herrs. In Barnard V Monongahela Natural Gas, the plaintiff alleged that his neighbour drained oil from the oil reservoir under his land the court held that his remedy was to sink his own well and drill. This theory is applied in parts of California, Indiana, Oklahoma, Louisiana…

The Domainal System: Here ownership is vested in the sovereign state where the resource is found. This theory is applied in many states like Nigeria as can be seen in Section 44(3) of the 1999 constitution, Section 1 Petroleum Act, Section 1 EEZ Act, Section 1 Minerals Act Section 2 PIB (all vesting ownership in the Federal Government). Professor Sagay dislikes this system and alleges that it only benefits the rich. Professor Agomo on the other hand prefers FG control considering the huge financial, economic, political and legislative manpower and resources needed in the industry. Most international instruments also follow this theory by vesting ownership in the sovereign state where the oil is found.

The Non-Ownership Theory: posits that since petroleum is fugacious, it cannot be owned. The court recognised the fugacious nature of petroleum in Westmoreland and Cambria Natural Gas Co V Dewitt, and noted that petroleum is wild and migratory. Under this theory is a person has the right to enter upon land and remove oil from it. Whoever removes the oil owns it-Wells V Cabbot Oil and Gas Corporation.

Islamic Perspective: Oil and gas is a gift from God for communal benefit.

 

[1] This definition would obviously be subject to various exceptions and limitations. Like Nuisance, the rule in Rylands V Fletcher, the Land Use Act, trespass, negligence and so on.

[2] Usually by the grant of concessions for the exploration of choice areas.

[3] Yes, oil is fugacious and can migrate to neighbouring land.

[4] To enable him extract as much gas as possible.

Isochukwu

Quite eccentric really

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