Addressing Residual Liability and Insolvency in Disused Oil and Gas Infrastructure Left in Place: The Cases of Brazil, Nigeria, and Trinidad and Tobago

Abstract

This article analyses the decmmissining framewrk fr il and gas infrastructures in Brazil, Nigeria, and Trinidad and Tbag. It examines whether the existing prvisins in each cuntry are able t guarantee that the gvernment and, by extensin taxpayers, d nt bear the csts f decmmissining and, the cnsequences f inslvency n residual liabilities. An additinal mtivatin fr this examinatin is the nging Crnavirus Disease 2019 (COVID-19), a pandemic with significant adverse impacts n the il and gas industry. A likely cnsequence f the ecnmic devastatin frm this is the inslvency f any party with decmmissining bligatins. The article argues that the prvisins f the Brazil petrleum legislatin n the reversin f abandned installatins t the gvernment culd imply that taxpayers have t bear the residual liabilities withut any cmpensatin frm the cncerned cncessinaires r cntractrs. It als argues that the prvisins f the Petrleum Law t the effect that ‘the reversin f facilities des nt entail any expense whatsever fr the Brazilian gvernment ’des nt certainly translate t pecuniary cmpensatin t the latter fr assuming the future residual liabilities frm abandned installatins. The Nigerian and the Trinidad &Tbag Decmmissining Framewrk als suffer the latter risk f the gvernment bearing the residual liabilities fr such disused installatins. In Nigeria, the framewrk is silent n wh bears the residual liabilities fr disused installatins. Hwever, it is argued that the prvisins f the Prductin Sharing Cntracts n the transfer f wnership t the Nigerian gvernment implies that they wuld have t bear eventual liabilities fr such disused installatins. Even in cases where the licensee r cntractr may bear the burden f residual liabilities, the prblem f future inslvency and cessatin f such cmpanies may entail that taxpayers bear the burden f residual liabilities. The article cncludes with key recmmendatins n hw t address the identified gaps using lessns frm best practices such as United Kingdm, Nrway and United States f America. One f such prpsals is n the allcatin f liability where there is a transfer f interest. Anther is fr jint and several r at least secndary liability f respnsible parties even after decmmissining activities are ver; a recmmended prvisin t this effect is als prvided. The third recmmendatin is n hw time-cnstrained residual liability can be used alngside lump sum payments t limit the State's financial expsure fr decmmissining csts.