• Sunday, February 25, 2024
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Bureaucracy stunts 60% of Nigeria’s oil blocs

Nigeria to sell 36 assets to boost finances as oil revenues fall

At least 60 percent of Nigeria’s oil prospecting blocs remain idle, more than two years after the landmark Petroleum Industry Act (PIA) was signed into law, a development experts say is adding to deny the country the much-needed revenue.

Data sourced from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that out of 57 Petroleum Prospecting Licences (PPL) in the country, about 33 are non-producing oil blocs.

The initial diagnosis was that unattractive fiscal terms was the culprit, but more than two years after the PIA was signed into law, Nigeria’s energy sector has continued struggling to attract new investment to boost oil production.

Experts who spoke to BusinessDay said the projected gains from Nigeria’s oil and gas sector following the passage of the PIA have remained a mirage as poor implementation leaves principal actors in a battle for supremacy and revenue.

“Officials at both regulatory agencies and other agencies still demand bribes to attend to licences and approvals, and the delay in the process and bureaucratic obstacles did not change,” a senior industry source who pleaded not to be quoted said.

In August 2021, former President Muhammadu Buhari signed into law the PIA, which had been in the making for over twenty years.

The PIA signed into law in August 2021, is one of the most audacious attempts to overhaul the petroleum sector. If implemented diligently, it can facilitate the country’s economic rejuvenation, by attracting and creating investment opportunities for local and international investors.

“Political interference and deliberate refusal to adhere strictly to the law have worsened fortunes of the sector to the pre-PIA era when opacity, graft and tardiness reigned unchecked,” a source said.

According to the source, officials at both regulatory agencies and other agencies still demand bribes to attend to licenses and approvals, adding that the delay in the process and bureaucratic obstacles did not change.

Suraj Oyewale, energy policy analyst and co-founder of Fortrose Consulting is cautious about declaring PIA as the silver bullet to the development of Nigeria’s energy sector.

“The devil is in the implementation,” he said in a note seen by BusinessDay.

Tunde Adenikan, a senior energy analyst with a global law firm, said the expected confidence on the part of investors has not happened because the old system of opacity has not given way to a new regime of transparency and accountability.

“There are still reports of corruption among operators who are slow to adjust their ways,” Adenikan said.

Kelvin Emmanuel, chief executive officer of Dairy Hills Limited said the incidences of oil spills from bunkering and vandalisation that come from a lack of political will to automate the pipeline surveillance process, as well as punish perpetrators, no matter how highly placed, are key considerations to attracting fresh capital.

“The Nigerian government needs an amendment to the PIA 2021, especially as it concerns local content for the participation of servicing companies and remittances required by the content management and development board,” Emmanuel said.

He added: “The macroeconomic issues in the trio of inflation, interest and exchange rates are a big consideration for foreign companies operating here”.

Adeola Adenikinju, energy scholar at the University of Ibadan, said implementation of key components of the PIA has been slow, and timelines have not been adhered to as contained in the Act.

Read also: Protest at Chevron’s terminal threatens Nigeria’s oil, gas earnings

“Much of the expectations of stakeholders are yet to be met. There are still regulatory overlaps between the two industry regulators. The process of getting approval is still slow, deliberately hindered and costly,” Adenikinju said in a note.

On Monday, Gbenga Komolafe, the chief executive officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), said the Federal Government is planning to revoke oil exploration leases that were granted to companies that have not been able to carry out any activities on them.

Komolafe said that the Federal Government was prioritising technically and financially viable companies under the Petroleum Industry Act, with over 60 percent of issued licenses, having expired.

According to him, it is only those companies that have a viable technical and financial backup that would keep their leases.

“Based on the PIA, the commission is focused on delivering value for the nation. So, only firms that are technically and financially viable will keep their leases,” Komolafe said.

BusinessDay findings showed that some of the expired licences belong to Afren Global Energy Resources Limited, Total Exp. & Prod. Nig. Ltd, Nigeria Agip Oil Co. Ltd, Oando plc, Sahara Energy E&P among others.

“Where there has been no commercial discovery during the term of the Petroleum Prospecting Licence that has expired, the right to exclusively explore and carry away petroleum from such acreage is terminated,” Ayodele Oni, energy lawyer and partner at Bloomfield Law Firm said.

He added, “The NUPRC, may, therefore, exercise its powers under the PIA by evicting such holders of expired licences from the fields and giving out such fields to new petroleum licensees or lessees for exploration or prospecting. Where there is strong justification, the NUPRC may consider re-assigning to the same holders”.

Beyond the regulatory uncertainties, experts said the country’s oil production has been blighted by large-scale theft and vandalism, as well as decades of under-investment in infrastructure.

Read also; Dangote Refinery key to Nigeria’s energy security — Otedola

Meanwhile, as Nigeria struggles to attract investment into its energy sector, Namibia, a country of less than three million people, is emerging as a global exploration hotspot over the past two years, primarily due to deepwater discoveries by industry giants such as Shell and TotalEnergies.

Additionally, major oil companies like Chevron, ExxonMobil, and Galp Energia have initiated exploration and appraisal activities in the region.