What the new prospecting licences mean for 57 marginal field investors

Two years after authorities sought bids for oil blocks, the Federal Government, on Saturday announced that the Special Purpose Vehicles (SPV) formed by successful investors in Nigeria’s 57 marginal oil fields of the 2022 bid round would get their various Petroleum Prospecting Licences on Tuesday.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had in March this year informed all participants in the 2020 marginal field bid round programme that it had put all necessary machinery in place to progress the bid round exercise to a conclusion in line with the Petroleum Industry Act (PIA), 2021.

In furtherance of that resolution, the Commission constituted an in-house work team to distil and address the concerns of awardees with a view to close out issues affecting multiple awardees per asset and formation of Special Purpose Vehicles by awardees in line with the respective letters of award.

“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.

Read also: Marginal Fields: local companies voyage to first oil

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.