The PIA in 2025: Navigating Host Community Trusts and Gas Flaring Penalties

The Petroleum Industry Act (PIA) 2021 remains the single most important piece of legislation governing Nigeria's energy sector. As we move through 2025, the focus has firmly shifted from legislative debate to the practicalities of implementation. For oil and gas companies, two aspects are particularly critical: the functioning of the Host Community Development Trusts (HCDTs) and the impact of the gas flare commercialization program.

The HCDTs, which require settlors (oil companies) to contribute 3% of their actual annual operating expenditure, are now largely established. The key challenge in 2025 is ensuring these trusts function effectively to deliver tangible benefits to communities and prevent the operational disruptions they were designed to mitigate. Legal and governance issues persist, including disputes over the definition of 'host community,' the appointment of trustees, and the management of funds. Companies are finding that robust, transparent, and continuous engagement with community stakeholders is as important as the financial contribution itself. We are seeing a rise in disputes requiring mediation and legal interpretation of the HCDT regulations, and companies must have a clear strategy for managing these potential conflicts.

On the gas front, the PIA's enhanced framework to end routine gas flaring is being put to the test. The 'polluter pays' principle is now more stringent, with increased penalties for flaring. However, the more significant development is the structured pathway for third-party investors to access and commercialize flare gas. The 2025 outlook shows a mixed picture. While several small-scale gas capture projects have been licensed, larger investments are hampered by concerns over bankability, gas pricing, and the reliability of downstream offtake infrastructure. Legal due diligence for flare gas investors is intense, focusing on the security of gas supply, the enforceability of offtake agreements, and navigating the regulatory interface between the NUPRC and the NMDPRA. The success of this policy will depend on the government's ability to de-risk these projects and provide a stable contractual environment.