How NUPRC is avoiding pitfalls with host communities, frontier exploration fund

Since the Petroleum Industry Bill (PIB) was passed on July 1 2021 and its provisions made public, many conspiracy theories have emerged with the underlying erroneous assumption that the frontier exploration fund was created to finance drilling oil only in the North to benefit the region.

Nigeria’s frontier basins are believed to hold vast deposits judging from discoveries made in similar terrains in neighbouring countries. However, exploration is fraught with challenges due to uneven terrain, insecurity and poor commercial prospects, which have kept away international investors but they run through the country.

To work a new path of growth, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is kicking off the second phase of consultations on the much-talked-about Frontier Exploration Fund (FEF) as well as the regulations on decommissioning and abandonment of assets by oil and gas operators.

Whereas there was no concrete framework on both industry issues before now, the Petroleum Industry Act (PIA) now provides for strong rules on how oil companies would henceforth decommission or abandon their facilities without causing harm to the environment.

Speaking during the new round of consultations in Abuja, the Commission’s Chief Executive, Gbenga Komolafe, revealed that progress had also been made on phase one of the exercise, leading to the gazetting of the host communities’ fund.

The fund is expected to provide the much-needed relief for oil-producing areas of the Niger Delta which have been subjected to years of neglect by the oil companies and the government.

Other draft regulations to be considered include: Acreage Management (Drilling and Production); Regulations and Upstream Petroleum Environmental Regulations as well as the Upstream Petroleum Environmental Remediation Fund Regulations.

Why is exploration important?

As petroleum asset is utilised, production depletes the hydrocarbons available within that asset. The asset is not self renewable and thus finite, which will mean depletion over time. It is important that the total reserves of the country are replenished. And for this to happen, frontier acreages must be explored and new deposits must be found.

Also, the frontier exploration fund is not domiciled with NNPC LTD, rather it is saved in an escrow account overseen by the Nigerian Upstream Regulatory Commission saddled with the responsibility of improving Nigeria’s reserves via exploration on all fronts, including basins.

The commission takes over the functions of the Petroleum Inspectorate and the DPR, and will regulate the upstream sector of the petroleum industry. We will also have a Nigerian Midstream and Downstream Petroleum Regulatory Authority — this covers all three sectors of the industry.

Next steps for Host community fund

Also, up for discussion during the three-day event are the Upstream Petroleum Safety Regulations and the Unitisation Regulations.

Represented by the Executive Commissioner, Health, Safety, Environment and Community, NUPRC, John Tonlagha, Komolafe stated that the consultation was in furtherance of the initial rules reviewed in April.

The NUPRC chief executive recalled that six draft regulations were presented for discussion in April during the first phase of its consultations with stakeholders.

According to Komolafe, the stakeholders’ inputs from the engagement were incorporated where necessary, in the draft regulations which were forwarded to the Attorney General of the Federation and Minister of Justice for vetting, legislative standardization, and approval.

While one of the regulations, the host communities’ trust fund regulation had been gazetted, Komolafe stated that the remaining five had been finalised and ready to be gazetted.

“Our commitment to create an enabling environment for growth and investments in the upstream oil and gas industry in Nigeria has steered our focus towards working with all stakeholders.

“This can be seen in our efforts to ensure that regulations and key policies necessitated by the PIA are developed and gazetted timely so that the industry operators can align their operations with the PIA provisions as quickly as possible,” he stated.

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Komolafe reiterated that the process of formulating the regulations had been rigorous being products of critical evaluation and hard work by the commission’s regulatory development team and the presidential implementation committee on PIA.

“Please permit me to reiterate that the process of formulating the above regulations has been a rigorous and strenuous exercise. They are products of critical thinking and evaluation, and hard work by the commission’s regulation development team and the Presidential Implementation Committee on PIA.

“Despite this however, the process is not complete until the stakeholders’ critical inputs are obtained, discussed, and incorporated, where necessary, in the regulations.

“To this end, I am of the firm view that with the level of turnout today, we will have healthy, robust, and intellectual discussion on the regulations during the syndicate sessions to come out with robust regulations with best international best standard.

“In conclusion, this phase in our regulations development is by no means a final or exhaustive one in our drive to support the upstream industry operators. The commission will continue to embark on programmes and policies that will create enabling environment for growth and more investments in the Nigerian upstream oil and gas sector,” he assured.

Speaking earlier, the Commission’s Head of Compliance and Enforcement, Dr Joseph Tolorunse,said that the forum served as an avenue to listen to stakeholders’ views on the regulations and secure their buy-in which would determine PIA’s implementation.

He maintained that it had been confirmed empirically that if stakeholders were part of the regulations-making process, compliance would be achieved easily.

“With this procedure of rulemaking, it is believed that consensus will be built, trust between the regulator and the regulated entities will improve and ultimately the regulations will be easier to implement and sustained,” he stated.

Also in attendance were stakeholders from the oil and gas industry, officials from the World Bank, indigenous and International Oil Companies (IOCs), among others.