Section 233: Decommissioning and abandonment fund.

1 Each lessee and licensee shall set up, maintain and manage a decommissioning and abandonment fund held by a financial institution that is not an affiliate of the lessee or licensee, in the form of an escrow account accessible by the Commission or the Authority, as the case may be, under the provisions of the escrow agreement and where funds have been accrued prior to the effective date, such funds shall form part of the decommissioning and abandonment fund established under this Act.

2 The decommissioning and abandonment fund shall exclusively be used to pay for decommissioning and abandonment costs.

3 Where a lessee or a licensee fails to comply with the decommissioning and abandonment plan, the decommissioning and abandonment fund shall be accessed by the Commission or Authority, as the case may be, to pay for the performance by a third party of such lessee's or licensee's obligations under section 232 of this Act, after the licensee or lessee has been informed of the non-compliance and given a reasonable period to rectify the non-compliance.

4 The amounts to be contributed to the decommissioning and abandonment fund shall be based on the following -
a with respect to upstream petroleum operations, on the decommissioning and abandonment plan approved by the Commission in the field development plan required by section 79 (2) of this Act and where -
(i) no decommissioning and abandonment plan exists, and
(ii) a field is in development or producing,
the lessee shall submit a decommissioning and abandonment plan based on the criteria established in section 232 (6) of this Act within one year of the effective date, which when approved by the Commission, shall form the basis of the computation of the amount to be contributed by the lessee; and
b with respect to midstream petroleum operations, on the decommissioning and abandonment plan submitted under section 111 (3) of this Act and where no such plan exists, the licensee shall submit a decommissioning and abandonment plan to the Authority based on the criteria established in section 232
(6) of this Act within one year of the effective date, which once approved by the Authority shall form the basis of the computation of the amount to be contributed by the licensee.

5 The decommissioning and abandonment plan shall establish the yearly amount to be contributed to the respective decommissioning and abandonment fund and the yearly amount shall be based on a reasonable estimate by the licensee or lessee of the applicable decommissioning and abandonment costs, projected forward on a nominal basis and divided by the estimated life of the facilities and the reasonable cost estimate shall be approved by the Commission or Authority, as the case may be.

6 The estimated life of the facilities referred to in subsection (5) shall be based on the
a estimated life of the field, in case of facilities used for upstream petroleum operations; and
b period of time for which the safe operations of the facilities were designed, in case of facilities used for midstream petroleum operations.

7 The estimated yearly contribution under subsection (5) shall be reviewed every 10 years following the first submission.

8 A decommissioning and abandonment fund shall be funded by the applicable licensee or lessee based on the yearly amount established in subsection (5) and as provided in a regulation.

9 A licensee or lessee shall -
a inform the Commission or Authority, as the case may be, of the establishment of its decommissioning and abandonment fund not more than three months from the date of commencement of production for upstream petroleum operations or the commissioning of the facilities for midstream petroleum operations; and
b furnish the Commission or Authority, as the case may be, on an annual basis with statements of accounts with respect to its decommissioning and abandonment fund with a copy to be provided to the Service.

10 Where the licensee or lessee is a party to a farm out agreement with one or more third parties, a decommissioning and abandonment plan funded in whole or in part by the applicable third parties shall be provided for in the applicable farm out agreement.

11 From the effective date, contributions to the decommissioning and abandonment fund shall be eligible for cost recovery and shall be tax deductible, provided that decommissioning and abandonment costs disbursed from the decommissioning and abandonment fund shall not be eligible for cost recovery or deductible for tax purposes.

12 Where there is excess in the decommissioning and abandonment fund after the decommissioning and abandonment has been carried out and approved by the Commission or Authority, as the case may be, the excess shall be considered income for production sharing or tax purposes and the amount after the withholding of profit oil and any tax shall be returned to the licensee or lessee.