After raising N203.91 billion from 29 investors, the Federal Government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), is demanding rapid exploration for crude oil to boost efforts to achieve the production quota set by the Organization of the Petroleum Exporting Countries (OPEC) and meet local refining needs.
The BusinessDay findings showed that Nigeria lost its status as Africa’s top oil producer to Angola, the continent’s largest economy which saw its output decline the most in May among its peers in the Organization. oil exporting countries (OPEC).
OPEC’s monthly report for May showed Nigeria’s oil production fell by 195,000 barrels per day (bpd) to 1.02 million bpd in May from 1.22 million in April, on the basis of direct communication.
With the issuance of Petroleum Exploration Licenses (PPLs) and winners of awarded oilfields moving to sites for preliminary exploration activities, analysts say the 57 marginal fields currently awarded to investors could help cut the shortfall by half. , if fully developed.
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In the process of concluding the tenders, the NUPRC revealed that about 200 billion naira had been raised from the 57 oil fields into federal government coffers, plus another $7 million in signing bonuses and the like.
In addition, the NUPRC announced the unveiling of the template and procedural guide for the Host Community Development Fund (HCDT) for commencement of implementation of the provisions of Section 235 of the Petroleum Industry Act. (PIA) 2021.
Concluding the process, the Commission claimed that more than 70% of the winners had fully paid for their licenses, two years after tenders were launched for the oil blocks.
“As per the promise made earlier this year, the NUPRC will on Tuesday issue Oil Exploration Licenses in Abuja to the winners of the marginal fields in the 2020 tender,” explained NUPRC Director General Gbenga Komolafe.
“The winners were therefore advised to avail themselves of the resolution mechanism provided by the commission in the overriding national interest,” Komolafe said.
What is an Oil Exploration License
According to the PIA, Petroleum Prospecting Permits allow their holders to carry out petroleum research on a non-exclusive basis and to drill exploration and appraisal wells.
The holder is required to submit to the commission a commitment for the development plan of the field within 2 years after a declaration of commercial discovery to the commission.
For onshore and shallow water areas, the license 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 areas, it is valid for an initial period of 5 years and a optional extension period of 5 years.
Next Steps for Marginal Field Investors
The PIA also noted that the holder of an oil prospecting license is required to submit to the commission a commitment to a development plan for the field within 2 years after a declaration of commercial discovery to the commission.
The field development plan can be submitted in several phases, but upon submission, NURC must assess the technical and commercial conditions of the field development plan and approve it when it meets certain conditions.
Conversion of oil prospecting licenses
Under the PIA, a marginal field in production is permitted to continue at the original royalty rates and farm-out agreements, but must be converted to a petroleum mining lease within 18 months of the effective date of the PIA. .
Revocation of licenses
The PIA also explained that an oil prospecting license can be revoked by the Minister of Petroleum. However, a formal notice is sent to the last known address of the holder together with a remediation period of at least 60 days.
“When a satisfactory appeal is received, the revocation process must be completed, otherwise it must be revoked and the fact of the revocation must be published in the Federal Government Gazette,” PIA explained.
Nigeria’s marginal fields sub-sector has been a cornerstone of the country’s upstream local content development strategy since early 2000, with previous rounds spawning what are now strong African exploration and production (E&P) local and regional.
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Tender winners 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 that began in 2020 had been bogged down by bureaucratic challenges, meaning oil drilling proper had yet to effectively take off after a long period, although 161 companies were eventually shortlisted to take the step. final among 591 entities that had applied. pre-qualification.
Komolafe, noted that the commission faced several constraints during the year which have now been overcome.
He listed some of them as the interruption of COVID-19, the partial payment of signing bonuses by some of the winners and the reluctance of co-recipients to work together to form SPVs for field development.
Komolafe explained that historically, the marginal field allocation initiative began in 1999 and was born out of the need to anchor the government’s indigenization policy in the upstream sector of the oil and gas industry and build local content capacity.
In addition, the initiative also aimed to create employment opportunities and encourage increased capital inflows into the sector.
“Again, it should be noted that the 2020 marginal land bidding exercise for which PPLs are being issued today has attracted government revenue of around N200 billion and N7 million. dollars respectively,” he pointed out.
He noted that the NUPRC would continue to provide a predictable and conducive regulatory environment for operators in accordance with its technical and commercial statutory mandates with a view to optimizing the development and exploitation of the country’s hydrocarbon resources.
Komolafe lamented that Nigeria is currently not meeting its oil production quota, saying this is the reason why Nigeria is not feeling the positive impact of the current surge in crude prices.
“It should be noted that the average price of crude oil over the past few months has been above $100 per barrel. This upward movement in market fundamentals is largely related to the Russian-Ukrainian conflict.
“However, the impact of rising crude oil prices is not reflected in the country’s revenue due to disruptions to our domestic oil production due to sabotage, theft and other operational challenges.
“Therefore, potential licensees are urged to take advantage of current market realities and bring their fields into production quickly,” he said.