Mr. Gbenga Biobaku
-By Victoria Opeyemi
The oil and gas industry is beyond its technological approach using modern technology with seismic application to discover oil in the field of operation. It is one thing to discover oil in the ground while exploration and production ensue but before a company gets to the level of finding oil, it has to put necessary documents in order. Failure to gets its acts right legally, it will run foul of the law. This is where law becomes a cogent issue for the industry either to buy bloc, share proceeds from production or involving foreign investors and technical partners. Therefore, lawyers play major roles in determining the workings of things in the oil and gas industry.
Recently, the Centre for Petroleum Information (CPI), one of the oil industry’s professional association with the vision of creating value through knowledge and network had its Oil and Gas Law Forum in Lagos.
In his keynote address, Chairman of the Law Forum, Gbenga Biobaku, Partner, GBC law a highly experienced lawyer and has been practicing law since 1986, made it known that the Nigerian oil and gas industry continues to generate bulk of government’s revenue which is estimated at over 70% of total revenue of the federation.
He disclosed that there has been significant increase in the frequency of dues which is being implemented in the industry especially the gas sector. The total value of financing required in the energy industry of an annual basis is between $25 to $30 billion a year to unlock various opportunities in the sector. The value of financing transactions in the oil and gas sector that are currently being negotiated and processed at approval stages by the Nigerian National Petroleum Corporation (NNPC) alone is projected at about $15billion.
Broadly speaking, finance is required for a company to borrow money. On the other hand, legal function in this context is concerned with management of financial liabilities and mitigation of potential exposures.
Lawyers work with finance companies and lenders of private equity funds to assist borrowers mainly oil and gas companies and other agents. These entities need lawyers to provide advice in relation to the main loan documentation such as finance and inter-creditor agreements among others with major security arrangements that need to be put in place.
He noted that lawyers are responsible to draft and negotiate the main documents in accordance with term sheet which is agreed between the lender and borrower group. Lawyers also assist their clients with coordination of various Condition Precedents (CPs) in the documents.
Clients expect legal counsel to oversee all areas of transactions and this is handled with combination of senior and junior lawyers in the firm having various roles with the partners.
However, what is essential is that there is a mechanism for quality control within the firms and all stages of transactions to ensure integrity of the attorney work that is offered to clients. It is important at this stage that there is synergy by all the teams of lawyers that are working together on the project. Indeed, various financing models have been successfully implemented in the Nigerian oil and gas sector with legal teams both in-house and external playing critical roles not only on the support side but also in the creative structuring of these transactions.
This will ensure that commercial aims of clients are achieved. The task taken by lawyers include liaison with other counsels which may be either local or foreign counsels collating documents for closing and finalizing execution of various part of agreement by parties concerned.
Biobaku stated further that “If security is being given in an oversee jurisdiction, it requires local counsel in that jurisdiction to draft security and advice on any particular formalities.”
There is no gainsaying that legal expertise cannot be a substitute for excellent interpersonal and communications skills for transaction counsel. The importance of legal function is further accentuated by the regulatory framework and compliance regime applicable to oil and gas transaction in Nigeria. The increasing sophistication of market trends and practices as well as the evolving highbred of financing models and security taken by major financiers like local and international banks must be put into consideration.
According to the legal expert, a good finance lawyer therefore, should demonstrate thorough commercial awareness and flexibility. The ability to communicate complex ideas in a clear manner with a good attention to detail with enthusiasm.
Biobaku threw more light on the oil and gas industry that it is a sector that government shouldn’t invest, it only needs to create an enabling environment with virile policies that will allow investors to invest. The focus should be on how the International Oil Companies (IOCs) could be encouraged to invest because they have capital to do business.
On insolvency of some oil companies in the country, it was a surprise to discover that with huge investments they could be bankrupt due to issues that may be beyond their control. This happens globally.
He enjoined lawyers to be prepared for such unforeseen circumstances when transacting oil and gas business. During agreement “insolvency provisions need to be more robust to address situations like that so that it is easy for another party to take over the right. Rights and responsibility under those contracts can be transferred to another party.”
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