Komolafe: Oil Theft Causing Consistent Shut-in of 1.2m bpd Production

In a session to mark the one-year anniversary of the inauguration of the management of the Nigerian Upstream Petroleum Regulatory Commission,  the Chief Executive, Mr Gbenga Komolafe, speaks on how much the regulatory agency has achieved during the period and aspirations for the future. Emmanuel Addeh presents the excerpts.

Oil theft is a big challenge. Aside the means of tackling it, which are already in the public space, tell us what else you are doing to stop it.

Apart from the fact that we are a regulatory commission, we are also involved in finding non-kinetic solutions to crude oil theft. Part of this responsibility is to make sure that the host communities regulation was quickly developed. Reason being that although the law has been passed, but we needed to have regulations that will give meaning to the intent of the Petroleum Industry Act (PIA) to fully operationalise it.

As we speak, that host community regulation has been passed and gazetted in conjunction with other stakeholders. As a matter of fact, it is now law. Stakeholders were carried along in making that happen. So, it has been gazetted and we have started operationalising it.

The PIA provides for 3 per cent of operating expenditure of the oil companies, which will be set aside for the host community development fund, which the commission will strictly monitor. Our role is that we are setting clear guidelines, which we have already started.

Trustees are being set up. So, in that respect, what is happening is that the commission will ensure the settlors or operators actually mandatorily make sure it works and the commission is ensuring that that is adequately done in line with the provisions of the law.

By implication, we are ensuring the sensitisation of the oil communities in that respect so that they can actually know their obligations and benefits under the host communities provision under the PIA.

The Health, Safety Environment and Community department is embarking on its processes and we expect that it will have positive impact in tackling crude oil theft because part of the challenge coming from our engagement with those communities is the lack of jobs. We are ensuring that the host communities are carried along.

Very soon , the host communities will see that the government and the law see them as critical stakeholders that are recognised and whose needs are being met. And very soon we will begin to see the results as they see themselves as critical stakeholders who should protect the assets. We are also giving attention to hydrocarbons accounting to accurately account for the volume of crude produced and we are collaborating with the intelligence agencies.

Earlier, you mentioned that the nation has about 37 billion barrels reserves. Do these include those in the frontier basins? And how have you met your projected revenue to government?

At the beginning of the year we declared the national crude oil and gas reserves, which are 37 billion barrels and 208 TCF. As for revenue, we have met our budget because what happens is that yearly we have a revenue budget and we surpassed our budget in 2021. And as of the third quota we have moved very close to achieving that of 2022 and we are assuring the nation that at the end of the year, the commission will achieve its target.

And on the audit of crude oil volume, we actually set a task for ourselves, and the reason was that we were having different figures being bandied around as figure for crude theft.

And for us as a commission, we’re not just talking about figures, we are talking about national revenue. Like I said, we are committed to transparent accounting of the nation’s hydrocarbons resources. So we realise that it is very important for us to be able to have the forensic figure in that respect. So that exercise was designed by the commission and as I speak, the exercise is ongoing and we intend that towards the end of the year, the report will be made available to the nation.

What are the biggest challenges you have faced in the last one year?

We have the capacity to meet our quota production of 1.8 million barrels per day within the shortest possible time. What we are losing oscillates between 80,000 and 100,000 barrels per day. And for us as a commission, one area that led to poor oil production is the downtime we are having at Forcados line and the line is critical. We have been working with the Nigerian National Petroleum Company Limited (NNPC) and with the coming on stream of that line, it has the capacity to shore up production by 350,000 to 400,000 barrels per day. If you add that, you will find out that we will be oscillating around 1.5 million barrels per day. So, that will take us close to our Organisation of Petroleum Exporting Countries (OPEC) quota.

We are doing everything possible to ensure that shut-in wells begin to produce. We are engaging all the operators and we just finished with a particular operator and the target is to have clarity around their operations, work programmes and challenges.

We have equally set up an operations committee to identify the shut-in wells to have visibility around the volume of shut-in. That exercise was carried out and with these engagements, we have found out that it is possible and as a matter of fact that  1.2 million barrels per day of oil has been shut in consistently as a result of the impact of crude oil theft.

So, in the engagements we are having, it is aimed at bringing back some barrels to beef up existing depressed crude oil production and if we are able to do this , 40 to 50 per cent of our shut-in volume will be back and it will be easy to have 500,000 bpd additional barrels to meet and surpass our OPEC quota.

Are International Oil Companies (IOCs) interested in getting back these barrels? Because this move may be affected by the energy transition.

The responses we had had have been heart-warming. We have good assurances and they are continuing investment in that respect.

What would you say have been your major achievements in the last one year?

The commission has achieved fundamental milestones in our mandate. We were focused on laying a solid foundation for our regulatory functions and in pursuing that, we have drafted Environmental Remediation Fund Regulation and the Upstream Environmental Regulation and Upstream Petroleum Safety Regulation, both of which have been subjected to stakeholder review in line with the PIA (2021).

The commission also successfully launched the Host Communities Regulations to guide the implementation and operationalisation of the Host Communities Development Trust (HCDT), as also enshrined in the PIA. The commission is putting in place modalities to ensure the smooth take-off of the various Trusts in a timely manner.

In the area of development and production, the commission has within the past one year achieved the declaration of the nation’s reserves which stands our oil and condensate reserves at 37.046 MMMB, this indicates an increase of 0.37 per cent compared to 2020 figures.

We have a life index which now stands at 60 years while gas reserves are 208.62 TCF, this indicates an increase of 1.01 per cent compared to 2020 figures. Life index for this stands at 88 years.

We have carried out automation of upstream work processes which is almost completed. It is planned to improve the efficiency of our work processes and become operational before the end of year 2022.

Ikike first oil was officially celebrated in September 2022. It is expected to deliver peak production of 50,000 barrels of oil equivalent per day by the end of 2022 and we have supported the deployment and commissioning of Aiteo 120kbd barge mounted crude oil processing facility to minimise crude oil theft and vandalism.

There’s deployment and commissioning of Tenoil 10kbd Early Production   Facility (EPF) to increase crude oil daily production by 10kbd, regularisation and commissioning of Halkin 5kbd EPF at Atala OML-46 and inauguration of an integrated industry-wide study to ascertain shut-in wells that can be reactivated in the short, medium, and long-term.

 We also have the development of the Advanced Cargo Declaration Regime, and Crude oil and LNG Tracking (COLT) which are also in process, granted 274 export permits for a total of 480,863,863 barrels of crude oil/condensate/EGTL between Q4 2021 and Q3 2022 and completed establishment of ELI-AKASO crude oil export terminal.

Also, we have published up-to-date data on national crude oil production on the commission’s website which has ensured transparency of data and information and provided accurate volume to both internal and external users.

In line with the provisions of Section 108 of the PIA 2021, we have commenced engagement and sensitisation of all operators to submit gas flare elimination and monetisation plan, awarded 47 Petroleum Prospecting Licences (PPLs) to winners of marginal fields during the 2020 marginal field bid round, among others.

Among others, in the area of economic regulation and strategic planning, the commission has commenced the implementation of the financial viability monitoring of licensees, lessees and permit holders in line with Section 7(y) by requesting the companies to submit their 2020 and 2021 Audited Financial Statements; as well as the review of Crude Handling and Crude Transportation Agreements in line with Section 174(9) with a view to ensuring the tariffs do not negatively impact on the cost of production.

Looking ahead, what should we expect in the next one year?

The commission projects in the next one year to embark on the development of a regulatory framework to reduce facilities development projects delivery costs through effective participation and regulation of concept, design and equipment selection.

We plan initiating the review and drafting of new gas flare regulations further to the provisions of the PIA 2021 and updating the technology adaptation guidelines and technology plan with input from the industry.

We are embarking on development of barging and trucking system/portal which has already reached user acceptance test phase; and the commission has commenced developing draft guidelines for fluid sampling and characterisation in oil and gas field operations in Nigeria.

In the area of Health, Safety, Environment and Community matters, the commission is working on on boarding of all identified host communities, incorporation of trusts and operationalisation.

We are signing off in the operationalisation of the green house gas emission monitoring guideline and gazetting and operationalisation of the upstream petroleum environmental remediation fund regulations.

The commission is also embarking on the upstream petroleum environmental regulations, and the upstream petroleum safety regulations; and state-wide sensitisation workshop for host communities on provision of PIA 2021.