Two Years After, NUPRC Closes Out 2020 Marginal Oilfields Bid Round
•Unveils template, procedure guide for host communities’ development trust
• FG rakes in N200 billion, $7m with 70% full payment
•Kyari: Over 200 illegal refineries operating in Nigeria
Emmanuel Addeh and Udora Orizu
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) yesterday finally closed out the 2020 marginal oilfields bid round two years after the process commenced.
This was just as the Group Managing Director (GMD) of Nigerian National Petroleum Company (NNPC) Limited, Mr. Mele Kyari, yesterday lamented that none of the government-owned refineries are presently working, even as he revealed that there were over 200 illegal refineries being operated across the country.
With the issuance of the Petroleum Prospecting Licences (PPL), the winners of the awarded oilfields can now move to site for preliminary prospecting activities, THISDAY learnt. In the process of getting to conclude the bid rounds, the NUPRC stated 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.
The unveiling of the template on host communities fund administration was a major development for oil-producing areas of the Niger Delta who are expected to benefit from the three per cent operating expenses of oil companies in the area.
Section 235 of the PIA provides for the incorporation of Host Communities Development Trust by the Settlors, that is, the oil and gas companies, for the benefit of their hosts. It places the responsibility to set up the HCDT and appoint the Board of Trustees (BoT) on the companies in consultation with the host communities.
In addition, Section 247 of the Act requires the BoT to set up a management committee to handle the general administration of the fund.
The HCDT provided by the PIA proposes to advance the development of the host communities within the scope of funds available to the BoTs for such purposes. It is also envisaged that sabotage of oil and gas infrastructure will be reduced since local communities now have a slice of the pie.
Since the regulations, which were officially unveiled by the government are now ready, the managers of the fund should be announced anytime soon.
Describing the ceremony as a giant milestone for the current administration, Minister of State, Petroleum, Mr. Timipre Sylva, who spoke during the event, noted that about 70 per cent of the entire bid winners had fully paid up.
He recalled that the roadmap of the marginal field awards began with two fields awarded in 1999, adding that prior to the award, 13 fields had been awarded on land, eight fields in swamp and nine fields offshore, leading to a cumulative of 30 marginal fields so far awarded in Nigeria.
“It is worthy of note to state here that this present award process saw 57 fields offered and over 70 per cent of them have their signature bonuses fully paid. This indeed is a testament to the increasing interest in our petroleum operations,” he said.
With the implementation of the PIA 2021 in top gear, the minister reminded the new awardees that their assets would be fully governed by the provisions of the new law.
“As a result, each successful field will be issued a Petroleum Prospecting Licence (PPL) in line with the PIA. This is a complete departure from what used to be where the marginal field owners had no licences.
“This marks the beginning of a new era for us in the oil and gas sector and I urge the awardees of the PPL to take full advantage of the opportunities being presented to exploit, develop, and bring the assets to productive use,” he declared.
As they move to develop their assets with the Special Purpose Vehicles (SPVs), he urged the award winners to ensure that good oilfield practice was employed, while environmental considerations and community stakeholders’ management should not be neglected.
He charged the commission to provide every necessary support to ease and facilitate seamless upstream petroleum operations in line with the objectives and provisions of the PIA.
Some of the winners of the bid rounds 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 which commenced in 2020 had been bogged down by bureaucratic challenges, meaning that the actual drilling for oil had yet to effectively take off after a long time, although 161 companies were eventually shortlisted to advance to the final stage from 591 entities that applied for pre-qualification.
The then head of the defunct DPR, which has now transformed into the NUPRC, Sarki Auwalu, had said the exercise was worth roughly $500 million in signature bonuses.
But in his remarks at the event, the Chief Executive of the NUPRC, Mr. Gbenga Komolafe, noted that the commission was faced with several constraints during the course of the exercise which have now been surmounted.
He listed some of them as the COVID-19 interruption, partial payment of signature bonuses by some of the awardees, and the unwillingness of co-awardees to work together in forming SPVs for field development.
Komolafe explained that historically, the marginal fields award initiative began in 1999 and was borne out of the need to entrench the indigenisation policy of government in the upstream sector of the oil and gas industry and build local content capacity.
Besides, the initiative was also targeted at creating employment opportunities and encouraging increased capital inflow to the sector.
“Again, it is noteworthy that the 2020 marginal field bid round exercise in respect of which PPLs are being issued today has attracted government revenue of about N200 billion and $7 million respectively,” he stressed.
He noted that the NUPRC would continue to provide a predictable and enabling regulatory environment to operators in line with its technical and commercial statutory mandates with a view to optimising the development and exploitation of the nation’s hydrocarbon resources.
Komolafe lamented that Nigeria currently wasn’t meeting its oil production quota, stating that it was the reason Nigeria wasn’t feeling the positive impact of the current surge in crude prices.
“It is worthy of note that the average price of crude oil in recent months has been above $100 per barrel. This upward swing in market fundamentals is largely associated with the Russian-Ukraine conflict.
“However, the impact of the upswing in the crude oil price is not reflecting in the nation’s revenue earnings due to disruptions in our national oil production owing to sabotage, theft, and other operational challenges.
“Therefore, potential licensees are urged to take advantage of the current market realities and quickly bring their fields to production,” he said.
In addition, the NUPRC head announced the unveiling of the Template and Procedure Guide for the Host Communities Development Trust for commencement of implementation of the provisions of Section 235 of the PIA, 2021.
He said the commission was committed to transparency in its processes and has therefore, implemented the Beneficial Ownership (BO) reporting, which requires full disclosure of ownership information.
“The objective is to ensure financial transparency, accountability, and public financial management among others,” Komolafe stated.
Speaking on the sidelines of the event, a former Chairman of the Petroleum Technology Association of Nigeria (PETAN) and an oilfield winner, Bank-Anthony Okoroafor, described the awards as the most transparent process in the history of marginal fields awards in the country, adding that the issue of “forced marriage” has now been resolved.
He noted that the IOCs should fully cooperate with the winners by giving them assess for evacuation of crude as far as it was optimal and avail them all the information needed to make it easier to transition to first oil.
Okoroafor urged the federal government to solve the issue of crude theft and vandalism as well as declare it a national emergency.
Kyari: Over 200 Illegal Refineries Operating in Nigeria
Meanwhile, Kyari, has lamented that none of the government-owned refineries are presently working, even as he revealed that there are over 200 illegal refineries being operated across the country.
The GMD made this known when he appeared before the House of Representatives Joint Committee on Petroleum Resources (Downstream) investigating the increase in prices of diesel and cooking gas.
Addressing the Committee chaired by Hon. Abdullahi Gaya, the GMD said though the situation was regrettable, the NNPC was doing something to bring the refineries back to work.
While noting that a good number of illegal refineries had been taken out, he said the company was in the process of doing a quick fix on the Warri refinery.
On petroleum supply, the GMD stated that no one could guarantee the security of petroleum supply, as countries are preserving excess volume that they have in their kitty.
Kyari blamed the current energy crises on the Ukraine and Russia war which resulted in the increase of petroleum product.
He said the solution was to restore crude oil production, and for the Central Bank of Nigeria (CBN) to create more dollars, adding that there was a massive intervention that was ongoing to see if the issue would be resolved by the end of July.
He explained, “Community members are not the thieves, absolutely not. Everything we are doing is to incorporate the communities into the process of protecting these assets.
“The National Assembly in its wisdom also included Trust Fund for the communities in the Petroleum Industry Act (PIA) so that they become parts and parcel of the system. Criminals in the Niger Delta come from all parts of the country. At these illegal refineries there are people from all works of life there.
“Many of these people are completely armed and the community members cannot even report them, they are helpless because if they report them, they will come after them.
“My suggestion this moment is deliver supply, make sure oil marketers are also able to import, and there’s need to engage the CBN to create more dollars, once we do these, dollars will be allocated for the import of AGO, the will also dampen the effects of going to buy dollar in the open market.
“So you can have cheaper dollar and definitely it will affect the price. Secondly, the regulatory institutions, the authority, Consumer Protection Council and NNPC, I suggest we need to sit jointly to see how arbitrage can be managed so that the end user is not completely exploited.”
Speaking further, Kyari ruled out the possibility of returning to the regime of subsidising diesel and LPG.
“Today countries are toying with subsidy because prices are so high because they don’t think they can manage inflation associated with it,” the GMD added
On his part, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NPRA), Mr. Farouk Ahmed agreed with the GMD that the invasion of Ukraine by Russian contributed to the energy crises, due to fact that Russia is a major producer.
Ahmed also blamed supply disruption, the rise in the barrel of crude oil price to as high as $120 and the prevailing naira exchange rate for the energy crisis in the country.
He opined that the availability of adequate foreign exchange at official rate of N410 to the dollar and the revitalisation of the nation refineries remained the panacea to the energy crisis in the country.
According to him, “it is important to stress that the country has no control over the price of AGO or any other petroleum products at the international market.
“However, countries all over the world are making various efforts at easing the present global high crude oil prices on domestic petroleum products prices. The following are recommended initiatives to address the current high prices of AGO and LPG in the country.
“Required amount of FX for importation of the petroleum products be made available to the genuine importers at CBN official rate; encourage establishment of more local refineries and LPG processing facilities to meet domestic demands, and increase LPG supply from major domestic producers including NLNG, BRT processing, CNL LPG FSO. Consequent upon the foregoing, an extensive consultation is required amongst key Stakeholders, towards lessening the present tension being generated by the global high oil prices.”
In their presentations, some of the oil marketers appealed to the lawmakers to urge the CBN to make FX available to them, in order to make the importation of petrol into the country competitive, reduce the rising cost of the product, and stop the overdependence on NNPC.
Earlier in his remarks, Gaya noted that Nigerian has refining capacity but because none of the refineries were functioning was what placed the country in its sorry state.
He said there was need to find solution to the high cost of diesel and cooking gas in a bid to cushion the effect on the generality of Nigerians.