NUPRC Unveils 2024 Oil Sector Growth Plan, Set to Conclude Deep Offshore Licensing Bid Round

*To drive down average oil output cost in all terrains to below $20/barrel 

*Targets oil production growth of between 1.8m bpd to 2.6m bpd

Emmanuel Addeh in Abuja

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has released its 2024 and near-term oil and gas sector regulatory action plan, targeting key deliverables, including the conclusion of the deep offshore oil blocks licensing bid round this year.

A public notice signed by the Chief Executive of the NUPRC, Mr Gbenga Komolafe,  obtained by THISDAY yesterday, indicated that the regulatory agency also intends to drive down the average cost per unit of oil production per barrel to $20 in all terrains from the current $25 to $40 per barrel.
In the lengthy action plan which mostly covers 2024 and some parts of 2025 and 2026, it further showed that the organisation has ambitious plans to raise oil production during the period to between 1.8 million bpd and 2.6m bpd.

For over three years, Nigeria has been unable to meet its Organisation of Petroleum Exporting Countries (OPEC) quota. Its production for November 2023 was 1.25 million bpd, excluding condensates.
Nigeria’s current crude oil as well as condensate and gas reserves stand at 36.96 billion barrels and 208.83 TCF respectively, corresponding to a reserve life index of about 70 years and 94 years respectively.

However, the realities of global energy dynamics clearly indicate that resource potential may mean little in the foreseeable future as countries face the serious challenge of a decline in investments and the exigencies of completing the NetZero race.
According to the document, a study the NUPRC carried out on investment trends in the Nigerian upstream oil and gas industry in the past 10 to 15 years indicated a declining appetite for investment in the sector by the five leading international oil and gas companies operating in Nigeria.

This, it said is further worsened by the increasing competition from regional peers, with Nigeria attracting a decreasing proportion of the overall upstream investment in sub-Saharan Africa (SSA) down from 44 per cent of SSA’s total in 2014 to 30 per cent in 2022.

Despite an expected global uptick in upstream capital investment, CAPEX in Nigeria, the NUPRC said, is forecasted to grow to only $8.7 billion in 2025 over the next six years, from 2023 to 2028, even as 14 countries in SSA are forecast to attract more CAPEX relative to their resource potential than Nigeria.
Stressing that the Regulatory Action Plan (RAP) articulated by the commission is aimed to address this need, the NUPRC noted that although young in the eyes of the law, it is ready to take the bulls by the horns and successfully navigate the challenges.

Going forward, every licensing round, it said, shall have a defined  objective which may include opening of new or virgin areas for exploration and development (frontier licensing), to raise immediate financing to address other national needs and to attract fresh investments in exploration and development
In addition, it stated that it may be focused to meet exploration or production targets, increase reserves, advance bilateral relationships, promote indigenous participation and domestic wealth and to monetise Nigeria’s gas resources for enhanced domestic supply or to expand global market share.
“To that end, the commission is committed to successfully concluding the ongoing deep offshore blocks licensing mini-bid round in 2024,” the NUPRC document added.

 According to the notice: “The commission would, in 2024 and the near term, pursue strategies aimed at optimising the unit cost of production for oil and gas by driving the reduction of  the current average unit cost of production in all terrains to below $20 per barrel, in the near term from current sub-optimal levels of $25-$40 per barrel.”

In 2024, the commission pointed out that it will optimise the functionality of automation systems by enhancing efficiency of existing optimising tools and the streamlined deployment of new ones.
“The NUPRC will ensure 100 per cent use of the National Production Monitoring System (NPMS), the Annual Work Programme Portal, the Dynamic Acreage Management System (DAMS), the HOSTCOMPLY, and the Oil and Gas Industry Service Permit (OGISP) automation tools by the commission and the industry,” it noted.

The NUPRC said it had been paying close attention to the impact of high asset acquisition fees to the investment attractiveness of the upstream sector.
 Quoting Welligence Energy Analytics (WEA), the commission explained that a careful review of regional signature bonuses across the globe showed that sub-Saharan Africa’s charges were much higher than what obtains in other parts of the world.

“Recognising that the era of front-loaded huge signature bonuses is over, the NUPRC, in the ongoing deep offshore licensing round, has become a lot more pragmatic in ensuring that entry fees do not become a barrier to entry for investment in exploration blocks offered.

“As a responsible regulator, the commission will continue to review the prevailing global investment climate to ensure that the entry fees associated with all future licensing rounds are competitive in the context of global realities and energy transition imperatives and advise government accordingly,”  it said.
Komolafe stated that the commission was working out suitable models that support investments and guarantee value for stakeholders in accordance with the government aspirations based on optimisation of government revenues in a sustainable manner.

Besides, he said that competitive entry fees that are responsive to prevailing realities as against the traditional front-loaded fees and consideration for the commerciality of projects benchmarked against similar terrains in comparable petroleum provinces will be the norm henceforth.

“Consideration for the commerciality of projects will be considered on a case-by-case basis for the determination of appropriate entry fees.
“Where necessary and appropriate, structured payments for signature bonuses, or other entry fees will be included. (We will) emplace a deferred payment structure for signature bonus through bonuses or other alternative mechanisms,” Komolafe noted.

Furthermore, the chief executive stated that the NUPRC will deepen transparency, accountability and elimination of discriminatory regulatory practices.
The commission also said it was committed to the implementation of  a carbon credit earnings framework for upstream operations.
“There is no gainsaying that petroleum accounts for a significant proportion of federation revenues and thus requires focused attention for economic stability and sustainability.

“However, the decline in production in recent years has been considerable with production hovering around 1.4–1.6 mmbopd, due to security challenges, reduced investments, and energy transition-induced defunding of fossil fuels.
“Be that as it may, the commission, in collaboration with relevant government entities, is pursuing measures to complement the kinetic efforts of security forces, to grow oil production progressively to 1.8 mmbopd – 2.6 mmbopd and gas to about 10 BSCFD within the period,” the NUPRC stated.

Among other initiatives, the commission said it shall, in 2024 implement the 100 per cent hydrocarbon accounting project aimed at ensuring that all hydrocarbon produced and exported in Nigeria are efficiently and properly accounted for through reliable and efficient metering systems.
“Nigeria despite being a major oil exporter, has faced the paradox of importing refined products, leading to increased costs and vulnerabilities in the face of global oil price fluctuations.

“The commission has fully operationalised the implementation of the Domestic Crude Oil Supply Obligation (DCOS) since the regulation was gazetted a few months ago,” it added.
But the NUPRC also listed potential gaps that may hinder the achievement of DCSO as inadequate refinery capacity, operational inefficiency, funding, policy inconsistency, among others.

“It is believed that the implementation of the DCSO shall bolster socio-economic growth for Nigeria including energy security and reduced import dependency of refined products.
“An effective feedback mechanism shall be adopted to manage stakeholder expectations during the implementation of DCSO,” the commission said.

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