TERMINAL Operators under the aegis of Seaport Terminal Operators Association of Nigeria (STOAN) have picked holes in the proposed plan to amend Oil and Gas Export Free Zone Authority Act 2004(OGEFA).
According to the group, the proposed amendment is allegedly fraught with a lot of “ambiguities that would lead to avoidable controversies and litigations and run contrary to international trade, maritime law and international law principles”.
In a position paper presented at a public hearing held by the Senate Joint Committee on Trade & Establishment and Public Services, recently, the group argued that the concession agenda was designed by the Federal Government to produce fair competition.
Represented by its solicitor, Mike Igbokwe, Senior Advocate of Nigeria (SAN), STOAN said: “It is important to know that the port concession merely involved ‘the Leasing of Nigerian Ports Authority’s terminals and equipment to private operators for a long duration of between 15 and 40 (or 10 to 25) years on terms and conditions that would ensure optimal utilization, improvement of infrastructure, efficient operations and maximization of revenue accruable to the Authority’ and should not be confused with privatization whereby ownership of the entire land, water area and assets of the ports are transferred to a private company for a fee”.
Igbokwe also referred members of the committee to a paper titled “Port Concessioning, Legal Framework and Challenges”, delivered by Chief Adebayo Sarumi, former Managing Director, Nigerian Ports Authority (NPA) at the 9th Maritime Seminar for Judges, Abuja, held between 4th and 6th July, 2006, “especially at pages 5,2,3,5”.
He said the main rationale behind the ports privatization/concession programme of the Federal Government “was to ensure that due to the inefficiency and revenue leakages noticed, the monopoly of NPA in the rendering of ports services and operations had to be broken and the private sector allowed to take over the management and operations of these ports.
“Moreover, through the efficiency and competition that such concession allowed, the cost of ports services and imported goods were to be brought down, inflation stemmed whilst revenue to the Federal Government and ports development would be enhanced. It was also to ensure that terminal operators/concessionaires competed under similar constraints, benefits and responsibilities to their workers, regulatory bodies and the nation.
“This was to produce a fair competition and give shippers, consignees, charterers, Ship owners more options to compare port dues/charges, dump inefficient, expensive and slow terminal operators/concessionaires for fast and efficient and cost-efficient ones which would induce increased capacity and lower port charges/dues.
“The resulting increased capacity and productivity and port services were to add to the gross domestic product and economic growth”.
He argued that ‘oil and gas related cargo’ which has now been allegedly misinterpreted by the Federal Ministry of Transport and NPA to include containerized cargo due to and being handled by our client’s members is bound to induce mismanagement, uncompetitive high port charges and dues.
Explaining further, Igbokwe said: “Distinguished Senators, on STOAN’s close look at the proposed Act to amend the Oil and Gas Export Free Authority Act (OGEFA), our client saw and appreciated the commendable innovative intentions of your Committees and the Senate to widen and extend the functions of the Free Zone Authority to include investment and to create special investment areas in addition to the Free Zones to be designed, developed, funded or operated by either the Authority or both the Authority and a private or public enterprise, all of which are geared towards attracting, facilitating and retaining foreign direct investment, trade, productivity, employment, growing the Nigerian economy and improving the lots of Nigerians that you represent”.
Canvassing a level playing field for all terminals, Igbokwe said some terminals including Port Harcourt and Western zone ports not designated as oil and gas terminals are shut out from handling all oil and gas related cargo even though they are ports concessioned by the FGN/BPE/NPA to investors and have “massively invested in cargo (including oil and gas) handling equipment to handle such cargoes”.
He said the alleged “discriminatory exclusion of Port Harcourt ports and Western zonal ports from the ports of discharge of ‘oil and gas related cargoes’ will adversely affect financially our client’s members operating the Port Harcourt ports and make it impossible for them to fulfill their obligations to NPA and the Federal Government and frustrate them out of business.
“By their concession leases, NPA as the Lessor of the port concessioned to our client’s members by the Federal Government, imposed duties on our client’s members in favour of NPA and the Federal Government. NPA imposed on them, the obligation to guarantee minimum tonnage, handle and achieve 90% of forecast or projected volume or throughput as contained in their technical proposals, failure to achieve which would warrant payment of penalties.
“The proposed amendment to section 12 of the Act will reduce the cargo coming to and being handled by PTOL in Port Harcourt port and also to other ports outside the zone. Consequently, the throughput they would handle and their ability to meet the aforesaid minimum throughput which they had projected based on the types of cargo they agreed to handle at the said port will be reduced.
“The expression ‘substantial investment’ which is the basis or consideration for providing that all oil and gas related cargoes must be handled only at approved oil and gas concessioned ports is a relative expression which can be interpreted in many ways. If it must be retained in the proposed amendment, the meaning of the expression should be stated in the proposed Act either in terms of money or money’s worth and with its components in order to avoid abuses because there are foreign ‘investors’ who come into Nigeria without foreign capital and use borrowed Nigerian money to trade or invest.
” In the same way, ‘Oil and gas related cargoes’ is nebulous. What constitutes ‘oil and gas related cargo’ ought to be defined and stated in order to avoid controversies and litigation as to its meaning and application.
“Our client has taken a position that there is nothing like ‘oil and gas related designated Port which position had been communicated to the Vice President, the BPE, the National Assembly through its Committees on Privatization & Marine, the NPA and the Federal Ministry of Transport.
“For the same reasons, the expression ‘approved oil and gas concessioned ports’ in the proposed section 12 must also be defined because there is no Act of the National Assembly that has defined ‘approved oil and gas concessioned ports.
“The concessions of the ports to our clients was done under the NPA Act 1999 and Public Enterprises (Privatization & Commercialization) 1999 Act with specific GMT (Guaranteed Minimum Tonnage) targets based on the expected general cargoes inflow including oil & gas related cargoes and not under the Oil & Gas Export Free Zone Act CAP 05 LFN 2011.
“The proposed amendment is a duplication and the overlapping of the roles and functions of oil and gas free zones and of Nigerian Ports Authority with respect to ports services and administration at a time when the FGN had been working on merging Agencies with similar and overlapping functions in order to save costs and multiplicity of requirements by operators and users.
“Therefore, for the above among other reasons and to avoid instituting discriminatory treatment, unequal playing fields, wrongful encouragement of monopolists in oil and gas cargo handling of not only the Eastern Ports Zone (but also Western Zone ports), STOAN urges the distinguished members of the joint Committee and the Senate to review the proposed amendments and either: -‘
“(i) Remove entirely the expression “However, investors are free to choose ports of discharge of their cargoes within the designated terminals at Onne, Warri and Calabar port” in the proposed amendment to section 12 of the Act; or
“(ii) Retain the expression and add after the word “Warri” therein the words, “Port Harcourt and other ports”, or
“(iii) Just retain the expression to the following extent namely: – “However, investors Are free to choose ports of discharge of their cargoes.”