Nigeria’s population of over 200 million people and oil reserves of over 36 billion barrels of crude oil reserves and 206 trillion cubic feet (tcf) proven gas reserve, the largest in sub-Saharan Africa, should make it an attractive place for any oil and gas investor to do business in.
Active oil exploration brings about a billion investments in the country’s economy as well as the development of related sectors of the economy and infrastructure. It also supplies new jobs for Nigerian citizens and improvement of social and living standards in general while absence of oil exploration implies a reverse of increased economic growth.
With billions of dollars revenue waiting to be fully harnessed through sustainable gas utilisation and development, the benefits of tapping into this goldmine cannot be overemphasised as the economy continues to grapple with revenue shortages.
That is where the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) steps in to see that Nigeria earns more income by maximising opportunities in the oil and gas sector.
It is worthy to note that the NUPRC was created by the Petroleum Industry Act (PIA) 2021, signed into law by President Muhammadu Buhari. The beautiful legislation brought to a close, a 20-year effort to reform Nigeria’s oil and gas sector. The legislation has created an environment a more conducive for growth of the sector and addressed legitimate grievances of communities most impacted by extractive industries.
Read also: Nigerian manufacturers groan as gas supply constraints threaten operations
Recently, NUPRC completed the 2020 marginal oilfields bid round two years after the process commenced. The N200 billion plus $7 million signature bonuses were raised. Also, the passage of the Petroleum Industry Act (PIA) 2021 was aimed at eliminating bottlenecks in the oil and gas sector and attracting more investments for sustainable growth of the oil and gas sector.
NUPRC has, therefore, announced its four cardinal areas of focus: gas reserves growth, optimised gas production, domestic gas utilisation and gas flare elimination.
This move is seen by stakeholders as major progress in the agency’s quest for improved revenue to the economy and continued development of the oil and gas sector. Such investment is expected to support millions of Nigerian jobs, provide lower energy costs for consumers, and ensures energy security.
Already, the oil and gas sector, which accounts for about 5.8 per cent of Nigeria’s real Gross Domestic Product, is responsible for 95 per cent of Nigeria’s foreign exchange earnings and 80 per cent of its budget revenues.
Analysts have lauded Komolafe for leading NURPC at this critical time and having the courage to see the marginal oilfields award completed seamlessly. 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. Energia, Bono, Calm Marine, Virgin Forest, Tempo, Deep Offshore, North Oil, Shepherd Oil, Hilltop Global, Duport, among others, made the winners’ list.
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. The then head of the defunct DPR, which has now transformed into the NUPRC, Sarki Auwalu, had said the exercise was worth roughly $500 million in signature bonuses.
However, 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.
According to experts, the project is expected to revive production of oil in fields that have been abandoned for at least 10 years from the date of first discovery. Also, they said that with the Oil Prospecting Licence (OPL), the winners can legally search for oil and operate on an oil field in Nigeria.
Prior to the enactment of the Petroleum Industry Act (PIA) 2021, the fields were classified as marginal when they were not considered by licence holders for immediate development due to assumed marginal economics under prevailing conditions or left unattended for more than 10 years. They also included assets that leaseholders considered for farm-out due to portfolio rationalisation or those, which the president may, from time to time, identify as such.
Komolafe, noted that the engagement with the marginal field awardees and leaseholders was for NUPRC to state the policy position on the 2020 Marginal Fields Bid Round (MFBR). Komolafe stated that this would enable successful awardees progress to field development phase in line with the PIA. He stated that the marginal field initiative was conceived to entrench the indigenisation policy of the government in the upstream sector of the oil and gas industry.
According to him, the objective is to promote indigenous participation, increase oil and gas reserves, as well as production, encourage capital inflow, generate employment, and build local capacity in the sector. Komolafe noted that relevant leaseholders had also been invited to the forum so that they could understand their roles and responsibilities as it affects the farm-out of the fields, which he said included facilitating the achievement of first oil in a collaborative manner.
In all, he reiterated that 57 fields were identified for the 2020 bid round exercise, and a total of 665 entities expressed interest, explaining that after extensive evaluation processes as laid down in the guidelines, 161 entities emerged as potential awardees. Komolafe explained that signature bonuses for 119 awards were fully paid, nine awards were partly paid for, and 33 awards had yet to be paid for, a situation he said had resulted in various challenges inhibiting the close-out of the exercise.
Notably, marginal fields have proven to be vital to Nigeria’s upstream local content development strategy. Preceding exercises produced some notable indigenous stakeholders in the industry such as Seplat Petroleum, Belema Oil?, and Shoreline Energy and it is expected that the current awards of marginal oil fields will lead to emergence of more oil giants in the economy.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
