The clamour for improvement in the Nigerian oil and gas sector led to the Petroleum Industry Act, which led to the metamorphosis of some Federal Government’s agencies, including the Nigerian Upstream Petroleum Regulatory Commission. SUCCESS NWOGU, in this report, x-rays the impacts and challenges of the commission.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is one of the agencies of the Federal Government that emerged following the signing of the Petroleum Industry Bill 2021 into law on Monday, August 16, 2021, by President Muhammadu Buhari after it was passed by the National Assembly on July 1, 2021, after about 13 years of legislative work.
NUPRC being a critical agency of the Federal Government is a major driving force in the technical implementation of PIA. It is strongly viewed that the success or failure of PIA largely depends on what the agency does or fails to do.
Challenges, impacts of NUPRC
Since its inauguration in 2021 by President Muhammadu Buhari, NUPRC has had to grapple with enormous challenges in the sector and has also made some landmark achievements.
It has established a strong collaboration with stakeholders to enable Nigeria achieve higher productivity and attract the desired investments in the oil and gas sector. The Commission has escalated engagements with both domestic oil companies and international oil companies on how to increase producibility and address oil theft in the country.
The Commission has also been vigorous in pursuing the provision of PIA, which provided for administrative, institutional governance, attractive fiscal regimes, mechanisms for the improved environment and peaceful co-existence between operators and host communities.
It has also been active in technical and commercial regulation of the upstream petroleum activities in a manner to ensure sustainable hydrocarbon exploration and production at optimum cost as it was the Act that empowered the Commission.
Another major stride of NUPRC is the successful completion of the 2020 bid round, which made the Federal Government to rake in a total of N202.91 billion and an additional $7 million in signature bonuses and others through the recent award of 57 marginal fields to about 49 new investors.
The feat was described by stakeholders in the energy sector as a positive development that has boosted the finances of government and, which would also positively impact the oil and gas sector. Relishing the accomplishment of NUPRC, its Chief Executive Officer, Mr Gbenga Komolafe, stated that one of the major tasks inherited by the Commission upon its inauguration in 2021, was the need to conclude the 2020 bid round. He stated that NUPRC pursued the matter frontally and was satisfied that the exercise, which commenced in June 2020, had been concluded.
He said, 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.
The joy of the NUPRC boss appears to corroborate the views of some industry watchers that the successful conclusion of the 2020 marginal oil field bid round was as a result of the determination of the management of NUPRC to ensure that the exercise was carried out in a fair and transparent manner.
Komolafe said: “Besides, the initiative was also targeted at creating employment opportunities and encouraging increased capital inflow to the sector. Since its inception, a total of 30 fields have been awarded, with 17 currently producing. A breakdown of the allocation of the fields to indigenous operators is as follows: two fields were awarded in 1999, 24 in 2003/2004, one each in 2006 and 2007, and two in 2010.
“Ten years after, in 2020, 57 fields were put up for bidding. 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 $7 million (N2.91b billion at an official exchange rate of N415.64/$) respectively.”
Also in his keynote address at the opening ceremony of the on-going 39th Annual International conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE), NUPRC boss said the Commission had taken aggressive steps toward the plan to help Nigeria achieve 40 billion barrels oil reserve and three million barrels per day (bpd) targets. He said part of the strategy was the initiation of a public-privatepartnership (PPP) involving security agencies, private operators and other stakeholders to address the challenging issues of crude oil theft, sabotage and pipeline vandalism.
He added that other measures being taken by the Commission included collaborative efforts between operators, and communities and the deployment of state-of-the-art technology to monitor pipelines in remote areas are on course.
He said: “Already, as a commission, we have commenced consultation with relevant stakeholders towards the achievement of these objectives. “A more aggressive policy on routine Asset Integrity Management to cub crude leakages and spills caused by ageing facilities will be adopted. “An initiative to reduce the cost of production, while also benchmarking cost across terrain, is ongoing.”
According to him, the Commission is making provision to incentivise drilling targets at deeper horizons and to also provide guidelines to ensure seismic acquisition design to image deep plays. He said an attractive incentive was being made to encourage multiclient and speculative data companies to acquire state-of-the-art data in open acreage to facilitate exploration activities.
History of NURPC
PIA brought to an end the Department of Petroleum Resources (DPR), which metamorphosed into NURPC.
NURPC had started with the hydrocarbon section of the then Ministry of Lagos Affairs, which reported directly to the governor-general. It was basically to keep records on matters relating to exploration and importation of petroleum products, as well as enforcement of safety. In 1971, a new body, the Nigerian National Oil Corporation (NNOC), was created to handle direct commercial operational activities in the oil industry on behalf of the Federal Government, while DPR in the Ministry of Mines and Power continued to exercise statutory supervision and control of the industry.
In 1975, the department was upgraded to a ministry and named the ministry of petroleum and energy, which was later renamed the ministry of petroleum resources. By decree 33 of 1977, the petroleum inspectorate was created as an integral part of NNPC and entrusted it with the regulation of the petroleum industry.
It remained there until March, 1988, when the inspectorate was excised from the corporation, and transferred to the Ministry of Petroleum Resources and renamed DPR, before its recent renaming as NURPC.
PIA made robust provisions
Komolafe, during a stakeholder engagement with the Independent Petroleum Producers Group (IPPG) held in Lagos recently, said President Muhammadu Buhari had provided robust fiscal provisions in PIA, to enable investments in the upstream sector, but specifically stressed that this could only be achieved through various partnerships.
Komolafe said: “I want to assure your members (IPPG) that we will not because of energy transition abandon our hydrocarbon and so we really need to think outside the box and also we want to get feedback from our stakeholders to see how we can get a structural financing group to commit on financing critical projects in our upstream sector. “I know that financing is a critical issue posed by energy transition and I know that if we sit down to think together, there will be results.
“The PIA had not only made the Commission a technical regulator but a commercial regulator. We will upgrade to being a business enabler and other different regulatory cultures and this is the prescription of the law and the law has made the Commission a technical and commercial regulator and so in that wise, we will be concerned equally as to how we will facilitate financing for stakeholders in the industry and we will not do that in isolation of the members.” “We can look at ways to optimise production in the upstream and thereby enhance federation’s revenue,” he added.
NUPRC is saddled with the responsibility of regulating the technical and commercial activities of the upstream petroleum sector and getting things going in the right direction. “The best and only option opened to us to maximise the benefits from fossil fuels is to improve the welfare of those who are saddled with the responsibilities of managing the sector,” Komolafe said.
IPPG boss’s assessment of IOCs’ divestment Chairman, Independent
Petroleum Producers Group, Abdulrazaq Isa, said FG’s support for indigenous E&P companies’ participation in the international oil companies divestment was imperative as, according to him, it will provide a solid avenue for securing Nigeria’s energy future. Isa, who is also the Chief Executive Officer of Waltersmith, disclosed that in the last two decades, the number and contribution of indigenous players, largely due to government’s initiatives and IOCs’ divestments, has significantly increased.
Isa, stated further that the enactment of the Nigerian Oil and Gas Industry Content Development Act (NOGICD Act) in 2010 had further supported the emergence of stronger indigenous oil & gas companies and complemented the government’s empowerment agenda.