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West African decommissioning regime still to be tested

A platform located off Angola.
A platform located off Angola.

Nigeria and Angola are coming to terms with the regulatory and legal demands of decommissioning, with scope for knowledge transfer from more mature regions.

The topic is largely untested in West Africa, with no major decommissioning projects having been carried out. But the time is coming, with large infrastructure projects reaching the end of their lifespans.

As part of its recent programme of overhauling its hydrocarbon laws, Angola passed a law on the topic of decommissioning in April 2018. Presidential Decree 91/18 covered decommissioning wells and facilities, requiring operators to provide plans to the Mineral Resources and Petroleum Ministry.

Bracewell partner Adam Blythe said: “As part of Angola’s recent reforms to its petroleum regime, a specific decommissioning law was enacted in 2018, which I think is a first for the region.”

Operators are required to update decommissioning plans every three years and set out when decommissioning funds are to be provided.

Blythe continued: “There have been some disputes in the past over how funds for decommissioning should be held – these can amount to hundreds of millions of dollars – which have now been resolved and requires funds to be held by Sonangol in dedicated escrow accounts with improved transparency. This appears to be a good start for Angola but the regime is largely untested.”

Nigeria’s laws do provide for decommissioning but the specifics are not definitively set out, said Dayo Okusami, partner at Nigeria’s Templars, though there tend to be provisions in contracts.

“Regulations have been set out on decommissioning and abandonment. Is it bulletproof? No – because, in my opinion, the need has not yet been reached,” he said.

“When assets need to be decommissioned there would be more focus on analysis and legislation and shortfalls could be addressed through regulations.”


There is a particular challenge for regulators in Nigeria and Angola. Nigeria’s government has moved strongly to support the passage of the long-delayed Petroleum Industry Bill, promising to have it in law by the end of 2020.

There is no particular clarity about what this version of the bill will contain but previously the government has set out plans to replace the current regulator, the Department of Petroleum Resources (DPR), with two bodies, one to focus on upstream and the other on downstream.

A new regulator – or regulators – would always face challenges in defining its position and strengths. As such, any attempts to extract decisions from the overhauled DPR would be slow going, with the current incarnation of the agency not known for its rapid decision making.

Angola hived off regulatory functions from its state-owned oil company Sonangol, with the Agencia Nacional de Petroleo, Gas e Biocombustiveis officially taking over in June.

While the body has taken some positive steps, launching a licence round for instance, its capacity to oversee new operations such as decommissioning has not been tested.

Some onlookers have warned that Sonangol will not give up its powers without a fight and expansion into a new area may prove to be a point of conflict.


Major projects in West Africa tend to be dominated by foreign majors, which are likely to sell assets down once a certain level of maturity is reached, as can be seen by Shell’s onshore sales in Nigeria.

Blythe said: “This may create challenges: the IOCs have experience and resources about how to carry out these projects, which the Nigerian companies currently lack.”

In the North Sea sales are becoming increasingly sophisticated in terms of how decommissioning liabilities are shared or transferred. This has not yet happened in West Africa and has been “largely overlooked” when it comes to M&A activity, “with the standard approach being that the incoming buyer assumes all liabilities. But this may begin to change,” Blythe said.

There are opportunities for knowledge and expertise to be transferred from mature areas, such as the North Sea or Gulf of Mexico, to West Africa.

One thing for service companies to bear in mind for such work will be local content requirements, Okusami said. “Decommissioning activities are services that are provided and when IOCs give out contracts those are covered by local content needs. There will be an impact on how services are granted.”

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