NNPC’S $60 Billion Crude Lifting Contracts What The Local Companies Should Know

As it appeared in This day Lawyer Section, in This day Newspaper (a fore most Nigerian Newspaper) on
the 10th
of July 2012.
P a g e | 1
folawusu@yahoo.com
Commercial Lawyer, Oil and Gas Contracts Specialist and I.P. Consultant
Please connect with me on LinkedInhttp://www.linkedin.com/pub/olufola-wusu/22/317/587
NNPC’S $60 Billion Crude lifting Contracts: What the Local Companies
Should Know.1
Introduction
It is commendable that the Federal Government through the Nigerian National
Petroleum Corporation decided to award nearly half of the 2012/2013 crude oil
lifting contracts worth approximately $60 billion (sixty billion Dollars) to
Nigerian companies.
This writer congratulates the successful Nigerian Companies and hopes that
the increased cash flow will give these companies the needed leverage to grow
and evolve into full-fledged International Oil Companies.
During exploration, extraction and even transportation of same, value is added
to the unrefined oil and gas by technology, and other business practices that
help process the extracts into useful and valuable consumer products.
Innovation, technology and business processes (Intellectual Property Assets)
become valuable assets to a business organization, when they are registered
and competitors prevented from accessing and using proprietary innovation
for free.
Owners of such Intellectual Property Assets may actively commercialise their
assets by licensing them to companies willing to use these Intellectual Property
1
As it appeared in This day Lawyer Section, in This day Newspaper(a fore most Nigerian Newspaper) on the 10
th
of
July 2012.

the 10th
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Assets in exchange for a license fee. Such businesses often enjoy competitive
advantages over their competitors, by virtue of increased revenue flow.
Please find below the legal regime for the protection of Intellectual Property
Rights in Nigeria.
Copy Right Act, Cap. C 28 Laws of the Federation of Nigeria 2004
Patents and Designs Act, Cap P2, Laws of the Federation of Nigeria 2004; and
Trade Marks Act, Cap. T13 laws of the Federation of Nigeria 2004
The need for Innovation/Intellectual Property Commercialization
At the very minimum however these Nigerian companies need to pay a little
more attention to research, development and the resulting innovation that
increases profitability which should be protected by Intellectual Property
possibly Patents, Trade Secrets etc.
Mechanisms for Protecting Oil & Gas Technologies
Patent protection is the traditional choice but sometimes such technologies or
business models can be kept confidential, then Trade secret
protection becomes an option.
The Way Forward…
What is the nature of the company controlling the technology? Can access to
the technology be controlled? Will our company benefit or be harmed by the
disclosure of information when a patent application is filed? Does our company
believe that the invention is sufficiently novel and non-obvious? Does our

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company have the funds to maintain a patent portfolio? Can the invention in
question be reverse engineered?
Oil and Gas Patents
A patent is a document issued, upon application by a government office (or a
regional office acting for several countries), which describes an invention and
creates a legal situation in which the patented invention can normally only be
exploited (manufactured, used, sold, imported) with the authorization of the
owner of the patent.
Patents cover cutting-edge equipment and technologies used in exploration,
production, refinement and manufacturing. It covers robotic oil well fire
fighting cranes, drilling bits, oil rigs, oil pipeline cleaning scraper pigs; heavy lift
ships carrying oil platforms, hydraulic fracturing fluids etc.
Patent Protection “fathered” the Oil Field Service Industry.
The logistics required to locate, extract, process and transfer crude oil or gas
can possibly make some companies think twice about even venturing into oil
and gas production in the first place.
Oil Field Service Companies offer products and services geared at lowering
costs, reducing risk or improving productivity during exploration activities
thereby improving the operating environment for operating companies.
So kudos to companies like Schlumberger Limited, Halliburton, Saipem,
Transocean Ltd, Baker Hughes, Fluor, Weatherford International, BJ Services
Company, Petrofac, China Oilfield Services Ltd and IBM.

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It goes without saying that companies in the oil field service industry, would
probably not have been formed and would not continue to exist today
without protection of its Intellectual Property!
Commodity Sellers vs. Proprietary Industry…
If the products of Oil Field Service companies were not protected by patents,
they would have been priced as a “commodity”.
If their products had been priced as a “commodity”, they may not have been
developed and made available to the industry.
The thing is that Intellectual Property Rights are enforceable against the whole
world while Contractual Rights are enforceable against only the parties that
enter into contract with you!
Trade secrets
A “trade secret” is defined as any product, operating formula, pattern, device
or other compilation of information which is used in a business, which gets its
economic value from being kept secret, and gives the business a competitive
advantage.
The upstream oil and gas industry depends heavily on trade secret protection.
Large amounts of exploration data, design data and some production data are
confidential and protected as trade secrets.
Trade Secrets arise without engaging any administrative process, they operate
by denying competitors information that is necessary to access and use the
technology.

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Duration of Trade Secret protection
The duration of trade secret protection is in a way potentially, perpetual, as the
protection continues as long as you can keep your trade secret, secret.
Paradigms of Trade secrets protection
Shades of Trade Secret protection
A school of thought states that ideas are ten naira a dozen; so they share their
innovations by just executing better and getting to the market place in
lightning speed, the second school treat their innovation as proprietary, and
use available legal means to protect it: e.g., nondisclosure agreement; and
generally limit access to information.
The right approach will be a mix of two of the options outlined above in
conjunction with patent protection.
Threats to Trade Secret Protection
Regulatory Approval
For regulatory approval to be given for an Oil and Gas project there must be
some form of disclosure which possibly erases the efficacy of trade secret
protection.
In reality compliance with such regulations are sometimes illusory, companies
spend millions of dollars to create new innovations and are very reluctant to
disclose them even to regulatory bodies, this is particularly evident in our
technology transfer experience, as seen in the inefficacy of Nigeria’s
technology transfer clauses.

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Employee Mobility
Where employee mobility is on the high side trade secret protection is no
longer a viable option for the protection of intellectual property for the oil
company.
Publication
Once the trade secret information becomes public, the trade secret, and its
inherent value, becomes to a large extent permanently extinguished.
Patent protection cannot remedy Trade Secret disclosures…
Where trade secret protection is lost, it is permanent, and patent protection
cannot remedy such a loss as the innovation would already be in public domain.
Oil Field Service Companies- Patents
Oilfield service companies’ deal with numerous customers which increases the
risk of information about their technology being leaked into the public domain
regardless of control mechanisms like confidentiality or non-disclosure
agreements binding employees and even contractors! Technologies developed
by oilfield service companies, are usually protected by patents.
Operating companies- Patents and Trade Secret Protection
Minor processes and innovations developed in-house at operating companies
usually use trade secret protection, possibly because customers are not
exposed to underlying technology used to produce a finished product.

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Valuable innovations that have broader application beyond a singular
operation may be better protected by patents
Commercialisation of Patents and Trade Secret
Patents are public documents which disclose information about the invention
(technology) in exchange for state protection, which is the exact opposite of
trade secret protection. However, commercialisation of patents and trade
secret is a desirable option, thus trade secrets are licensed along with patent
rights, in what is called a “hybrid” license.
Conclusion
Thus for our Oil and Gas companies to grow, they are going to have to take
their innovation and resulting Intellectual Property like patents and trade
secrets seriously, because that is what gave birth to the Oil Field Service
Industry in the first place and that is what keeps them in business, the right to
exclude others from exploiting their products (by sale, manufacture, use and
importation) without their authorization (the owner of the patent) and this is
usually granted in exchange for hefty license fees and other charges!
Olufola Wusu Esq.
Copyright © 2012
folawusu@yahoo.com

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NNPC’S $60 Billion Crude Lifting Contracts What The Local Companies Should Know

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NNPC’S $60 Billion Crude Lifting Contracts What The Local Companies Should Know