After raking in N203.91 billion from 29 investors, the Federal Government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is demanding speedy exploration of crude oil to boost efforts at meeting the production quota set by the Organization of Petroleum Exporting Countries (OPEC) and meet local refining needs.
Findings by BusinessDay showed Nigeria lost its status as Africa’s top oil producer to Angola as the continent’s biggest economy saw its output decline the most in May among its peers in the Organization of the Petroleum Exporting Countries (OPEC).
OPEC’s monthly report for May showed that Nigeria’s oil production reduced by 195,000 barrels per day (bpd) to 1.02 million bpd in May from 1.22 million in April, based on direct communication.
With the issuance of the Petroleum Prospecting licenses (PPL) and winners of the awarded oilfields moving to sites for preliminary prospecting activities, analysts say the 57 marginal fields currently awarded to investors could help cut the deficit by half, if they are fully developed.
In the process of getting to conclude the bid rounds, the NUPRC revealed that about N200 billion was raked in from the 57 oilfields to the coffers of the federal government, plus an additional $7 million in signature bonuses and others.
In addition, the NUPRC announced the unveiling of the Template and Procedure Guide for the Host Communities’ Development Trust (HCDT) for commencement of implementation of the provisions of Section 235 of the Petroleum Industry Act (PIA) 2021.
Concluding the process, the Commission affirmed that over 70 per cent of the awardees paid fully for their licenses, two years after bids were sought for the oil blocks.
“In fulfilment of the promise made early this year, the NUPRC will on Tuesday in Abuja, issue Petroleum Prospecting Licences to successful awardees of marginal fields in the 2020 bid round,” the Chief Executive, NUPRC, Gbenga Komolafe explained.
“Awardees were therefore enjoined to avail themselves of the resolution mechanism provided by the commission in the overriding national interest,” Komolafe stated.
What is Petroleum Prospecting Licence
According to the PIA, the Petroleum Prospecting Licences allow its holders to carry out petroleum exploration on a non-exclusive basis and to drill exploration and appraisal wells.
The holder is required to submit to the commission a commitment to a field development plan within a period of 2 years after a commercial discovery declaration to the commission.
In respect of onshore and shallow water acreages, the licence is valid for 3 years and renewable for an additional period of 3 years at the option of the holder while for deep offshore and frontier acreages, it is valid for an initial period of 5 years and an optional extension period of 5 years.
Next steps for marginal field investors
The PIA also noted that the holder of a Petroleum Prospecting Licence is required to submit to the commission a commitment to a field development plan within a period of 2 years after a commercial discovery declaration to the commission.
The field development plan may be submitted in phases but upon submission, the NURC is expected to evaluate the technical and commercial terms of the field development plan and shall approve it where it meets certain conditions.
Conversion of Petroleum Prospecting Licences
According to the PIA, a producing marginal field is allowed to continue at the original Royalty rates and Farm-Out Agreements but is required to convert to a petroleum mining lease within 18 months from the effective date of the PIA.
Revocation of Licences
The PIA also explained that a Petroleum Prospecting Licence may be revoked by the Minister of Petroleum. However, a notice of default shall be sent to the last known address of the holder in addition to the provision of a remediation period of not less than 60 days.
“Where a satisfactory remedy is received, the revocation process shall be terminated, otherwise it shall be revoked and the fact of revocation shall be published in the Federal Government Gazette,” PIA explained.
Nigeria’s marginal fields sub-sector has been the cornerstone of the country’s upstream local content development strategy since early 2000, as previous rounds gave birth to what are now strong local and regional African exploration and production (E&P) companies.
Peep into the bid round
Some of the winners of the bid rounds included Matrix Energy, SunTrust Oil, PetroGas Energy, Genesis Hydrocarbons, Samora Oil & Gas, Ardova, Terra Energy and Mainland Energy.
It also included Energia, Bono, Calm Marine, Virgin Forest, Tempo, Deep Offshore, North Oil, Shepherd Oil, Hilltop Global, Duport, among others.
The process which commenced in 2020 had been bogged down by bureaucratic challenges, meaning that the actual drilling for oil had yet to effectively take off after a long time, although 161 companies were eventually shortlisted to advance to the final stage from 591 entities that applied for pre-qualification.
Komolafe, noted that the commission was faced with several constraints during the course of the exercise which have now been surmounted.
He listed some of them as the COVID-19 interruption, partial payment of signature bonuses by some of the awardees, and the unwillingness of co-awardees to work together in forming SPVs for field development.
Komolafe explained that historically, the marginal fields award initiative began in 1999 and was borne out of the need to entrench the indigenisation policy of government in the upstream sector of the oil and gas industry and build local content capacity.
Besides, the initiative was also targeted at creating employment opportunities and encouraging increased capital inflow to the sector.
“Again, it is noteworthy that the 2020 marginal field bid round exercise in respect of which PPLs are being issued today has attracted government revenue of about N200 billion and $7 million respectively,” he stressed.
He noted that the NUPRC would continue to provide a predictable and enabling regulatory environment to operators in line with its technical and commercial statutory mandates with a view to optimising the development and exploitation of the nation’s hydrocarbon resources.
Komolafe lamented that Nigeria currently wasn’t meeting its oil production quota, stating that it was the reason Nigeria wasn’t feeling the positive impact of the current surge in crude prices.
“It is worthy of note that the average price of crude oil in recent months has been above $100 per barrel. This upward swing in market fundamentals is largely associated with the Russian-Ukraine conflict.
“However, the impact of the upswing in the crude oil price is not reflected in the nation’s revenue earnings due to disruptions in our national oil production owing to sabotage, theft, and other operational challenges.
“Therefore, potential licensees are urged to take advantage of the current market realities and quickly bring their fields to production,” he said.
SOURCE: businessday.ng