Nigeria: Legal Compliance For Transporting Crude Oil In Nigeria
With Nigeria’s position as a leading oil producing country, the transportation of crude oil from the country is a basic and foundational component of the international oil supply chain. The shock that greeted the ban of a number of vessels from trading in the country some time ago was therefore understandable. On the back of their subsequent unbanning and conditions put in place for compliance with local law, due diligence and risk management will require that vessel owners and parties with interest in ships operating in Nigeria are properly acquainted with relevant rules.
The most serious concern of the Nigerian government in relation to the movement of crude oil in the last couple of years has been oil theft. The Crude Oil (Transportation and Shipment) Regulations was designed with the purpose of ensuring a clear trail of all crude oil traversing the country. Except with prior authorisation, within the limits of operational practice or when loading from two or more terminals within Nigeria, no ship or tanker is allowed to carry dead freight. Dead freight evidently makes ‘topping’ easier, which facilitates, stealing of crude oil using the cover of lawful trade. ‘Topping’, which refers to additional loading of crude oil in any available space on the ship after loading the nominated quantity at any designated terminal is expressly prohibited and shall not be undertaken, demanded or received by any ship or tanker within or outside any loading terminal in Nigeria.
The Regulations place a premium on verification of tank capacity of ships by the appropriate government authority. False declaration of capacity or alteration of documentary information relating to the capacity is deemed as non-compliance. Ballast tanks are required to be used solely for carriage of ballast water, not crude oil, which should equally not be carried in any other tank or receptacle except those designated, and designed for that purpose.
Documentation is crucial at all times, and no ship is allowed to depart from a loading terminal without full documentation particularly from the Nigerian Customs Service and other relevant agencies of government. This ensures that the trail of the cargo can be clearly seen and verified at all times. For the same reason, loading or transhipment must be on clear authorisation and should not be outside locations approved for that purpose.
Other regulations are also important relating to marine environmental protection in the course of crude oil carriage. The Merchant Shipping (Prevention of Oil Pollution) Regulations sets out procedures and regulations to avoid pollution of the marine environment and includes prohibiting or regulating discharge of oil or oily mixtures into the sea, record-keeping for ship machinery and oil tanker cargo operations amongst many others. Adequate insurance cover is required present at all times in line with the provisions of the Merchant Shipping (Liability and Compensation) Regulations while an incident response framework is provided for under the Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention) Regulations.
Where the crude oil is being transported within Nigeria, the relevant vessels must comply with the Coastal and Inland Shipping (Cabotage) Act provisions relating to ownership, registration and manning in addition to similar rules under the Nigerian Content Management and Development Board Act. The tax status of the vessel is crucial, as fully imported vessels are subject to duty as opposed to those with temporary importation permit.
