NUPRC approves $10bn deep offshore oil development agreement between IOCs, NNPC
…Insists it will stick to timeline on gas flare out date
By Uthman Salami
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has given a nod to the agreement earlier reached by the International Oil Companies, (IOCs) operating in Nigeria with the Nigerian National Petroleum Corporation (NNPC).
NUPRC believes that for growth and development of the sector, it will tarry a little to harmonize precious agreements on acreage development with the provisions in the Petroleum Industry Act.
Oil majors would reconsider their exit plan following uncertainties created by the just passed PIA which provided a sort of counter provision on already signed Memorandum of Understanding (MoU) with the NNPC, for deepwater asset development.
Earlier, a 12-year dispute on the operational guideline with regard to Production Sharing Contract (PSC) in the deepwater space had cost parties over $9billion in contingent liabilities.
However, the new PSC understanding is expected to yield $780 million in immediate revenues to government and unlock $10billion investment.
This was revealed at a stakeholder meeting with members of the Oil Producers Trade Section (OPTS), comprising of key major oil companies in the country, yesterday in Lagos.
The Commission Chief Executive (CCE), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr. Gbenga Komolafe explained that the PIA has a timeline of about six to twelve months to clear some grey areas and that the Commission is interested more in encouraging investment in the sector.
He noted that the crux of the meeting was to explain areas of concerns and challenges affecting their operations, assuring them that all issues and concerns raised would be addressed as the PIA is subject to review so as to accommodate all inhibiting challenges.
On point at the meeting were the issues around timeline on gas flare out and PSC agreement earlier reached with the NNPC before the passage of the new law.
Managing Director of Chevron and the Chairman of the OPTS, Rich Kennedy had raised the two major issues which he sees as a major setback in their operations.
He complained that there was a renewed PSC agreement with the NNPC which the PIA if implemented would truncate.
However, in response, Komolafe assured the oil majors that all earlier agreement would be respected as any attempt to tinker with it will be counterproductive.
The head legal unit of the Commission, Joseph Tolorunse, explained that the renegotiated PSC agreement had taken place before the PIA, which currently stands as a contractual agreement until it is adjusted under the new law.
The Group Managing Director of the NNPC, recently met with chief executives of major oil companies to redefine operations in the deepwater space and address seeming disagreements which was aimed at opening opportunities estimated around $10 billion in new investment.
The long dispute had threatened business relationship and affected trust and investment in Nigeria’s oil industry as the NNPC and its production sharing contract (PSC) partners – Shell Nigeria Exploration and Production Company (SNEPCo), Total Exploration and Production Nigeria Limited (TEPNG), Esso Exploration and Production Nigeria Limited (EEPNL) and Nigerian Agip Exploration (NAE) made no investments in that segment.
The new understanding provided opportunities to renew Oil Mining Lease (OML) 118 for another 20 years.
The NNPC signed five agreements covering dispute settlement agreement, settlement agreement, historical gas agreement, escrow agreement and renewed PSC agreement.
But while the disputes lasted, parties were estimated to have lost $9 billion in contingent liabilities with business relationships wastefully marred; and trust and investment sorely affected.
The Commission was to determine and will stick to timeline on gas flareout date so as not to derail federal government gas development initiatives.
The Commission advised major oil firms to take additional steps towards investing in gas gatherings 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 $82billion a year due to global gas flaring,
The report identified 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 US 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 state that Nigeria flared an average of 11.1m3/bbl of gas last year.
Addressing members of the Oil Producers Trade Section (OPTS), in Lagos yesterday, Engr. Gbenga Komolafe Commission Chief Executive (CCE), of NUPRC, said the Commission would take into account key challenges facing operators with a view to creating enabling environment to further grow the sector.
“Upon my assumption of office as the pioneer Chief Executive of the newly created Nigeran Upstream Petroleum Regulatory Commission (NUPRC), I identified the Oil Producers Trade Section (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 familiarize 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 monetization 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 expects the meeting to distill issues/ challenges militating against their optimization of project investments in key areas of 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.”
But responding to issues on reviewing the timeline on gas flare out date, head of NUPRC, Joseph Tolurunse said the 2030 deadline remains sacrosanct as operators have a 9-year opportunity to exit gas flare from their fields.
Tolurunse said any other plan outside that will truncate national flare out plan and discourage Nigeria’s Gas commercialisation programmes.
Meanwhile, The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has unveiled its brand new identity at its head office in Abuja.
At the event, which was performed by the commission’s Chief Executive, Mr Gbenga Komolafe, represented by Mr Ibrahim Ciroma, Deputy Director and Head Corporate Services Strategic Business Unit, NUPRC unveiled its new signage and logo to stakeholders.
According to a statement by the commission on Wednesday, the unveiling of the logo is part of NUPRC strategic branding programme.
The logo, which has simple features, typifies the essence of upstream operations with a rig icon embedded in the logo to reflect the commission’s mandate.
NUPRC, which replaced the defunct Department of Petroleum Resources (DPR), was established to regulate operations including technical, operational and commercial activities in the upstream sector.
“The launch of the commission’s new brand identity is to formally unveil the NUPRC to the world.
“To acquaint and familiarise our investors and stakeholders with a new global regulatory commission of the 21st century that is a regulator business enabler with specific focus on upstream operations,” it said.
Chief Timipre Sylva, Minister of State for Petroleum Resources, inaugurated the Governing Board of the new entity on Oct. 20.
The minister also inaugurated the governing board and CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), which replaced the Petroleum Equalisation Fund (PEF) and the Petroleum Products Pricing Regulatory Agency (PPPRA).
The inauguration of the two bodies are critical steps to ensuring effective regulation and best practices in the sector, in line with the Petroleum Industry Act (PIA) and global standards.
