Given Nigeria's position as a leading oil producer, the transportation of crude oil from the country is a key component of the international oil supply chain. The shock that greeted the recent ban of a number of vessels from trading in the country was therefore understandable.(1) The vessels have since been re-admitted under the condition that they comply with the law. In the interests of due diligence and risk management, vessel owners and parties with interests in ships operating in Nigeria should be properly acquainted with the relevant regulations.
The government's most serious concern regarding the transportation of crude oil in recent years has been theft. The Crude Oil (Transportation and Shipment) Regulation was designed to ensure that all crude oil being transported through the country is clearly traceable.
Except with prior authorisation, within the limits of operational practice or when loading from two or more terminals in Nigeria, no ship or tanker may carry dead freight. Dead freight evidently facilitates 'topping' (ie, the additional loading of crude oil in any available space on the ship after the nominated quantity has been loaded at a designated terminal), which in turn facilitates the theft of crude oil under the cover of lawful trade. Topping is expressly prohibited and may not be undertaken by any ship or tanker within or outside any loading terminal in Nigeria.
The regulation places a premium on the verification of ships' tank capacity by the appropriate government authority. False declaration of capacity or alteration of capacity-related documentation is deemed as non-compliance. Ballast tanks must be used solely for the carriage of ballast water; crude oil may not be carried in any tank or receptacle not designated and designed for that purpose.
Documentation is crucial and no ship may depart from a loading terminal without full documentation from Customs and other relevant government agencies. This ensures that the cargo's route can be clearly identified and verified at all times. For the same reason, loading or transshipment must be clearly authorised and must not take place outside locations approved for that purpose.
Other important regulations relate to environmental protection in the course of the transportation of crude oil:
- The Merchant Shipping (Prevention of Oil Pollution) Regulations set out procedures and regulations to prevent pollution of the marine environment, including prohibitions and regulations regarding the discharge of oil or oily mixtures into the sea, and record-keeping requirements for ship machinery and cargo operations;
- The Merchant Shipping (Liability and Compensation) Regulations require adequate insurance coverage at all times; and
- The Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention) Regulations provide for an incident response framework.
Where crude oil is being transported within Nigeria, vessels must comply with the Coastal and Inland Shipping (Cabotage) Act as it relates 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 permits).
For further information on this topic please contact Emeka Akabogu at Akabogu & Associates by telephone (+23 41 790 5831) or email (firstname.lastname@example.org). The Akabogu & Associates website can be accessed at www.akabogulaw.com.
(1) For further details see "Vessels banned from lifting crude oil: legal implications".
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.