Stimulating Nigeria’s economic prosperity with upstream regulations, policies – The Sun Nigeria


By Adewale Sanyaolu

The Nigerian economy is set to witness a rebound with the enactment of the Petroleum Industry Act (PIA) which has been described as a game changer by stakeholders in the oil and gas industry.

Prior to its enactment, President Muhammadu Buhari had said Nigeria lost an estimated $50 billion worth of investment in the petroleum sector. This, he said, was due to uncertainty over the 20-year non-passage of the Petroleum Industry Bill (PIB), lack of progress, and stagnation in the petroleum industry.

The stagnation, he said, affected the growth of the economy, citing a lack of political will on the part of past administrations to actualise the needed transformation.

He, therefore, declared that assent of the Petroleum Industry Bill on August 16, 2021, marked the end of decades of uncertainty and under-investment in the petroleum industry.

According to him, “We are all aware that past administrations have identified the need to further align the industry for global competitiveness, but there was lack of political will to actualise this needed transformation. This lack of progress has stagnated the growth of the industry and the prosperity of our economy. In the past ten years, Nigeria has lost an estimated $50 billion worth of investments due to uncertainty created by the non-passage of the PIB.”

To reverse the trend and quickly begin to reap the fruits of the new law, the PIA advocated the unbundling of the industry regulator; Department of Petroleum Resources (DPR) into two distinct entities to carry out different roles. They are; the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream Downstream Regulatory Authority (NMDRA).

Since the coming on stream of NUPRC, the agency has outlined measures aimed at increasing the oil revenue profile of the country, stemming oil theft through improved technology, development of various oil and gas fields and the discouragement of gas flaring.

NUPRC has the statutory responsibility of ensuring compliance to petroleum laws, regulations and guidelines in the oil and gas Industry. The discharge of these responsibilities involves monitoring of operations at drilling sites, producing wells, production platforms and flow stations, crude oil export terminals, refineries, storage depots, pump stations, retail outlets, any other locations where petroleum is either stored or sold, and all pipelines carrying crude oil, natural gas and petroleum products, while carrying out the following functions, among others.

Gas flaring nears end

Gas flare remains one of the challenges confronting Nigeria’s oil and gas industry. With national gas reserves of 208.62 (trillion cubic feet) TCF, representing an increase of 1.01per cent compared to 206.53 Trillion Cubic Feet (TCF) as at 1st January 2021, Nigeria cannot be said to have fully reaped from this God-given natural resource, as oil companies continue to flare gas, thus consisting environmental hazards. It was for this reason and many more that the Nigerian Gas Flare Commercialisation Programme (NGFCP) promoted by NUPRC and aimed at accruing more revenue into the federation account and end the pollution of the environment.

The programme was launched by the Federal Government on December 13, 2016 and was designed as a strategy to implement elimination of gas flares with potentially enormous multiplier and development outcomes for Nigeria.

To declare its zero tolerance to gas flaring, NUPRC recently disclosed that it might not likely take further excuses from oil majors operating in Nigeria for not meeting the 2030 gas flare out deadline.

The commission said that it will stick to the timeline on gas flare out date, so as not to derail the Federal Government’s gas development initiatives.

As a result, the commission advised major oil firms to take additional steps towards investing in gas gathering infrastructure and avoid sanctions that will follow any infractions.

According to a recent GlobalData report, Nigeria and other nations involved in such act could lose up to $82 billion a year due to global gas flaring.

The report identified the biggest gas flarers accounting for over 87 per cent of all flared gas in 2020, to include Nigeria, Algeria, Angola, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Russia, the United States and Venezuela. Though the Federal Government had pledged to end the burning of gas as a by-product of oil production by 2030 under its latest climate plan submitted to the United Nations, independent sources stated that Nigeria flared an average of 11.1 million barrels of gas last year.

Addressing members of the Oil Producers Trade Section (OPTS), in Lagos, the Commission Chief Executive (CCE), of NUPRC, Gbenga Komolafe, said that the commission would take into account key challenges facing operators with a view to creating an enabling environment to further grow the sector.

“Upon my assumption of office as the pioneer Chief Executive of the newly created NUPRC, I identified the OPTS association as a critical stakeholder and partner in the development and operations of Upstream assets in the Nigerian Oil and Gas Industry,” Komolafe said.

He said it was against that backdrop that he decided to host the meeting in Lagos to reinforce his acknowledgment of their association and to solicit their collaboration as industry stakeholders.

“Therefore, our meeting is to formally unveil the NUPRC to you and to familiarise and identify with you as a regulator business enabler in upstream operations.

“This is coming at a critical point in the industry when the clamour from the global community is focused on energy transition from fossil fuels to cleaner energy which is competing with the need for enhanced revenue to fund critical infrastructure through monetisation of our hydrocarbon resources. On our part, NUPRC will remain committed to its mandate to optimise revenue for government and investors.” he said.

Komolafe said he expected the meeting to distil issues militating against their optimisation of project investments in key areas of the upstream sector.

“Permit me also to say that this is the first in the series of engagements with you, as our vision is to build a 21st century regulator that will be fair, just and be a critical enabler in the upstream petroleum sector. It is in this wise that we urge you all to join hands with us in building confidence in the industry for robust investment,” he said.

But responding to issues on reviewing the timeline on gas flare out date, head of NUPRC, Joseph Tolurunse, said that the 2030 deadline remains sacrosanct, as operators have a nine-year opportunity to exit gas flare from their fields.

Tolurunse said that any other plan outside that would not only truncate national flare out plans, but would also discourage Nigeria’s gas commercialisation programmes.

Ten years jinx broken

Two years after commencing the process of issuing licences to prospective investors who had indicated interest in acquiring oil assets, NUPRC finally resolved one of the most conundrums for indigenous oil companies with the conclusion of the 2020 marginal oilfields bid rounds whose last exercise held about 10 years ago.

With the issuance of the Petroleum Prospecting licences (PPL), the winners of the awarded oilfields can now move to site for preliminary prospecting activities.

In the process of getting to conclude the bid round, the NUPRC revealed that about N200 billion was raked in from the 57 oilfields to the coffers of the Federal Government, plus an additional $7 million in signature bonuses and others.

In addition, the NUPRC announced the unveiling of the Template and Procedure Guide for the Host Communities’ Development Trust (HCDT) for commencement of implementation of the provisions of Section 235 of the Petroleum Industry Act (PIA) 2021.

Concluding the process, the commission affirmed that over 70 per cent of the awardees paid fully for their licences, two years after bids were sought for the oil blocks.

Marginal fields are smaller oil blocks located onshore or in shallow waters and are typically developed by local companies.

The NUPRC, which was established last year after the Federal Government passed a new petroleum law, said 30 oil fields were awarded between 1999 and 2010, with 17 producing. The latest round of 57 oilfields began in 2020.

As a matter of fact, Nigeria, Africa’s biggest oil producer and exporter, moved to boost production from the fields to bolster state finances and increase local participation in the oil sector, which provides the bulk of the country’s foreign exchange.

While local companies have become increasingly important to the industry, it remains dominated by international oil majors that are selling onshore assets to focus on deep-water drilling.

In fact, expectant awardees were all jubilant when the commission announced that the Special Purpose Vehicles (SPV) formed by successful investors in Nigeria’s 57 marginal oil fields of the 2022 bid round were billed to get their various Petroleum Prospecting Licences.

The 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 closing out issues affecting multiple awardees per asset and formation of Special Purpose Vehicles by awardees in line with the respective letters of award. According to the PIA, the Petroleum Prospecting Licences allows its holders to carry out petroleum exploration on a non-exclusive basis and to drill exploration and appraisal wells.

NUPRC begins phase 2 of regulations devt

To ensure that it develops a robust regulation to meet the current  needs of the oil and gas industry, the NUPRC in compliance with section 216 (1) of the PIA 2021, and in consultation with stakeholders prior to finalising any regulations, recently called for inputs from the lessees, licensees, permit holders, host communities, and other stakeholders in the Nigerian Upstream petroleum sector.

The matters to which this stakeholder’s inputs and consultation relates are as follows; upstream decommissioning and abandonment regulations, upstream environmental remediation fund regulations, acreage management (Drilling and Production) regulations, upstream petroleum safety regulations, unitisation regulations, upstream petroleum environmental regulations and Nigeria frontier exploration fund regulations.

ADVERTISEMENT



Source link : https://www.sunnewsonline.com/stimulating-nigerias-economic-prosperity-with-upstream-regulations-policies/

Author :

Publish date : 2022-08-05 23:48:43

Tags:
share on: