Extractives Industry Law in Africa

361 Pages·2018·3.69 MB·English

by  Damilola S. Olawuyi

Damilola S. Olawuyi
Extractives
Industry
Law in Africa
Extractives Industry Law in Africa
Damilola S. Olawuyi
Extractives Industry Law
in Africa
Damilola S. Olawuyi
Hamad bin Khalifa University
Doha, Qatar
ISBN 978-3-319-97663-1 ISBN 978-3-319-97664-8 (eBook)
https://doi.org/10.1007/978-3-319-97664-8
Library of Congress Control Number: 2018951220
© Springer Nature Switzerland AG 2018
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To Oluwabunmi, Titilayo, and Oluwatoni
Olawuyi, for their inspiration and support.
Preface
The African continent has for several decades accounted for a significant portion of
the global production and supply of oil, gas and solid minerals. For example,
Nigeria, Libya, Algeria, Egypt and Angola are historical giants in oil production in
Africa, while Kenya, Zimbabwe, South Africa, Ghana, South Sudan, Namibia,
Gabon, Cameroon, Tunisia, Equatorial Guinea, the Democratic Republic of the
Congo and Côte d’Ivoire have attracted significant investment and income from
mineral resources, ranging from gold, bauxite, cobalt, industrial diamond, phos-
phate rock, platinum-group metals, vermiculite and zirconium.
Despite the geological affluence of the continent, resource extraction and produc-
tion in Africa has not fostered corresponding economic, social and environmental
development. Many resource-rich African countries have fallen prey to the resource
curse conundrum, which refers to the dichotomy between Africa’s abundant resource
wealth and the inability of its people to benefit therefrom. Poor resource manage-
ment, lack of transparency and accountability, resource theft, governmental corrup-
tion, environmental pollution, land grabs and forced evictions from ancestral lands,
poor labour conditions and lack of stakeholder engagement, among others, have
exacerbated the cycles of poverty and conflict across the African continent.
To address these questions, several road maps, action plans, declarations, laws
and frameworks have been adopted across Africa, at regional, national, provincial
and municipal levels, to regulate petroleum and solid mineral production, marketing
and distribution. The result has been a proliferation of extractive laws and regula-
tions, to such an extent that one needs a “road map” to work through the legal laby-
rinth, when investing in extraction projects across Africa. The plenitude of sources
makes the task of understanding the contents, scope and the follow-up policy mea-
sures prescribed by these legal instruments daunting and nearly insurmountable,
even to the most zealous investor, student, lawyer, administrator or policymaker.
Furthermore, several African countries have developed separate, and at times
overlapping, legal frameworks for petroleum and solid mineral sectors, making it
difficult to gain a systemic and holistic understanding of the key intersections,
opportunities, volatilities and challenges in the extractive industry value chain,
covering both subsectors. A comparative analysis and evaluation of the African
vii
viii Preface
extractive legal and fiscal regime, in the light of emerging international law norms
on business and human rights, has yet to receive a book-length, exhaustive and rig-
orous exposition and analysis. While earlier scholarships have focused on applica-
ble legal regimes on petroleum, mining or environment, little or no attention has
been paid to the wider extractive industry, specifically the need to reflect emerging
global norms on systemic integration and regulatory coherence in the extractive sec-
tor value chain. This book is an attempt to fill that gap.
This book provides an authoritative exposition of the legal, fiscal and institu-
tional frameworks applicable to the commercial development of petroleum and
mineral resources in Africa. It explores the values, assumptions and guiding prin-
ciples that underpin the extractive industries and explores how questions of resource
ownership and control, human rights risks mitigation, accountability, corporate
social responsibility, environmental justice and participatory development have
been, and could be better, addressed.
Overall, the book aims to enhance an understanding of the nature and scope of
extractive industries in Africa; appraise the general legal and fiscal framework gov-
erning African extractive industries; explore the laws and institutions that address
specific sustainability issues such as gas flaring, spillage, pollution, water pollution,
waste management and environmental health in African extractive industries; foster
an understanding of the unique legal, policy and governance risks and challenges
faced in African extractive industries; provide practical discussions on how corpora-
tions can identify, mitigate and prevent human rights risks when investing in African
extractive industries; and unpack the legal reform processes required across the
African continent to achieve a sustainable and rights-based extractive industry. Also
provided is a discussion of the diverse institutions and structures that influence and
govern the extractive industry.
The book is prepared in a user-friendly style to enhance its utility among its pri-
mary audience, namely students, corporations, investors, environmental and human
rights administrators, advocates, policymakers, judges, international negotiators
and government officials. It interweaves descriptive materials on the state of extant
laws and institutions in the African extractive industries, with analytical evaluations
of how international law could influence and inform thoughts on how best to revital-
ize the underpinning legal and fiscal regime in African extractive industries to make
them more accountable, sustainable and rights-based.
Doha, Qatar Damilola S. Olawuyi
30 June 2018
Acknowledgements
It remains for me to register my profound gratitude to many helping hands, without
whom the publication of this book would not have been possible. First and fore-
most, my thanks and appreciation go to God the Almighty for the successful publi-
cation of this book. Secondly, I appreciate the kind motivation and support of the
President and Founder of Afe Babalola University—Aare Afe Babalola, OFR,
CON, SAN, FNIALS, FCIArb., LL.D—for his unflinching support to me and my
family. Aare Afe Babalola’s journey and global achievements provide reinforcing
pillars and instructive pathways that one could only aspire to follow.
Furthermore, I am especially indebted to everyone at Qatar Foundation and
Hamad Bin Khalifa University, Doha, Qatar, for their exceptional love and support
over the years. I am deeply grateful for research funding and support from the Qatar
National Research Fund, which significantly facilitated the initial framing of this
book. I would also like to extend a word of special gratitude to Umair Dogar, Bolaji
Akintoye and Irene Ekweozoh for providing remarkable and thoughtful research
assistance; and to my assistants Curtis Snow, Moronkeji Kolawole and Tosin
Adewunmi who have all worked tirelessly for the success of this book.
Finally, I would like to thank my dear wife Oluwabunmi and our amazing twin
girls, Titilayo and Oluwatoni, for their love, support and inspiration. Thanks are also
due to my exceptional students whose class contributions and ideas served as timely
seeds that blossomed into this book. I thank you all for your support and kindness,
and I commit this book to your scholastic minds.
I have endeavoured to state the position of the law as of 30 June 2018, although
I have been able to take into account subsequent developments in one or two
instances.
ix
Contents
Part I I ntroductory Context and Principles
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 The African Extractives Industry: Legal Context and Overview . . . 5
1.3 Aim, Scope and Structure of the Book . . . . . . . . . . . . . . . . . . . . . . 11
1.4 Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2 Nature and Scope of the African Extractives Industry . . . . . . . . . . . . 19
2.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Petroleum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2.1 History of the Petroleum Industry . . . . . . . . . . . . . . . . . . . . 21
2.2.2 Importance of Oil and Gas to African Economies . . . . . . . . 24
2.3 Key Stages in Oil and Gas Development . . . . . . . . . . . . . . . . . . . . . 26
2.3.1 Upstream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3.2 Midstream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.3.3 Downstream . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.4 The Solid Mineral Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.4.1 Meaning, Nature and Scope of Solid Minerals . . . . . . . . . . 32
2.4.2 History and Overview of Solid Minerals Development
in Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.4.3 Stages of Mineral Exploration and Development . . . . . . . . 43
2.5 The Need for Dynamic Legal Innovation in the Extractives
Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
2.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3 Extractive Sector Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
3.2 Physical Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
xi
xii Contents
3.2.1 Pipelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.3 Associated Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
3.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Part II L egal Theories, Contracts and Fiscal Regimes on Extractives
Investments in Africa
4 Ownership and Control of Extractive Resources . . . . . . . . . . . . . . . . . 87
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
4.2 The Elusive Ontology of Resource Ownership . . . . . . . . . . . . . . . . 88
4.2.1 Ownership in Dominial Jurisdictions. . . . . . . . . . . . . . . . . . 89
4.2.2 Ownership in Non-Dominial Jurisdictions . . . . . . . . . . . . . 91
4.3 Theories of Resource Ownership and Control . . . . . . . . . . . . . . . . . 94
4.3.1 The Ad Ceolum Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
4.3.2 Non-Ownership Theory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
4.3.3 The Rule of Capture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
4.3.4 Correlative Rights or Qualified Ownership Theory . . . . . . . 102
4.3.5 Ownership of Strata Theory . . . . . . . . . . . . . . . . . . . . . . . . . 103
4.3.6 Servitude Theory (Profit à Prendre) . . . . . . . . . . . . . . . . . . . 103
4.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
5 Sources of Extractive Industry Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
5.2 Sources of Extractive Industry Law . . . . . . . . . . . . . . . . . . . . . . . . . 110
5.2.1 International Law on Resource Extraction . . . . . . . . . . . . . 110
5.2.2 Domestic Statutes and Legislation . . . . . . . . . . . . . . . . . . . . 128
5.3 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
6 Regulatory Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
6.2 Petroleum Sector Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
6.2.1 The Ministry of Petroleum Resources . . . . . . . . . . . . . . . . . 147
6.2.2 The National Oil Company . . . . . . . . . . . . . . . . . . . . . . . . . 148
6.2.3 Secondary Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
6.2.4 Joint Development Authorities (JDAs) . . . . . . . . . . . . . . . . 154
6.2.5 Department or Ministry of Environment (“MOE”) . . . . . . . 155
6.3 Regulatory Institutions for the Solid Minerals Sector . . . . . . . . . . . 156
6.3.1 Ministry for Solid Minerals Development . . . . . . . . . . . . . . 157
6.3.2 National Mining Corporations . . . . . . . . . . . . . . . . . . . . . . . 159
6.3.3 Secondary Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
6.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165