Four divestment deals cleared as NUPRC targets production boost
- Shell’s divestment still stuck in the ring
- 42 firms licensed to commercialise 250 MMscfd from 49 flares sites
Sopuruchi Onwuka
Federal government has finally cleared four of the five petroleum equity divestment proposals by its major multinational partners that initiated, grew and sustained oil and gas operations in the country in the past 60 years.
The divestments which mark a major shift in the control of industry operations from foreign multinational companies to indigenous independent companies also signals a significant phase out of global brands from onshore and shallow offshore petroleum exploration and production activities.
The announcement of the deal approvals was made by the nation’s lease acreage administrator, Engr Gbenga Komlafe, while hosting industry captains and stakeholders to a ceremony to mark the third anniversary of the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) as regulator.
Engr Komolafe who is the premier Commission Chief Executive (CCE) of the NUPRC declared that the anniversary event was conceived on the theme of Transformation, Innovation, and Excellence to chart a strategic way forward towards a sustainable energy future in the industry and for the country.
He stressed that the primary attention is focused on the strategic views of the future of the industry, one of which is the realisation of the government’s mandate for increased oil and gas production as well as enhanced federation revenue.
He noted that the implementation of Regulatory Action Plan for 2024 and the near term led to conception and the launch of Project 1 Million Barrels of Oil per Day Initiative, which he described as an industry collaborative programme to co-create solutions and evolve alternative funding mechanisms to unlock incremental oil production in the short-to-medium term.
The initiative, he pointed out, also comes with expanded opportunities for all industry stakeholder groups.
He explained that the Project 1 Million Barrel initiative is pivotal to production ramp-up, energy security, and economic resilience, all in the overall national interest. It also portends values for producers, service providers, rig owners, financiers, and crude oil off-takers; Engr Komolafe pointed out.
The collective drive in positioning the oil and gas sector for vibrancy and value optimization points to the values and commitment government attaches to the Nigerian petroleum industry, he said, adding that NUPRC has in line with the provisions of the PIA developed seven regulatory pillars to guide divestment in the upstream oil sector for sanity and protection of national interest.
In addressing widely perceived fears of massive investment recovery by the biggest oil companies from the nation’s traditional petroleum terrains, Engr Komolafe acknowledged that divestment is an acknowledged practice and within the right of investors in business decisions globally. He stated that Nigeria is fully committed to the philosophy of free entry and free exit.
He announced that “out of the total of five (5) divestment applications for consent received by the Commission, a total of four (4) (representing 80%) passed regulatory test and secured ministerial consent.”
He listed the asset divestment deals that secured ministerial assent to Mobil Producing Nigeria Unlimited (MPNU) to Seplat Energy Offshore Limited, Equinor Nigeria Energy Company Limited to Project Odinmin Investments Limited, Nigerian Agip Oil Company Limited to Oando Petroleum and Natural Gas Company Limited, and TotalEnergies EP Nigeria Limited to Telema Energies Nigeria Limited.
“However, the divestment of Shell Petroleum Development Company Limited’s assets to Renaissance Africa Energy Company Limited could not scale regulatory test,” he announced without offering details on whether the deal still has a life line.
Eminent industry leaders and investors including the Chairman of A A Holdings Limited, Mr Austin Avuru, and the Chairman of WalterSmith Petroman, Mr Abdulrasaq Isa, had severally and separately urged the NUPRC to facilitate the closure of the divestment deals to boost new investments and work programmes that would lead to enhanced reserves growth and production.
Chairman of A A Holdings Limited, Mr Austin Avuru
Mr Avuru who is pioneer Managing Director of Platform Petroleum and Seplat Energy respectively noted that production from the companies under divestment deals was declining because, according to him, no active owner was taking responsibility for investments in required work programmes.
Mr Isa who is also the leader of the Independent Petroleum Producers Group (IPPG) whose members are in deals to acquire the divested assets had appealed to NUPRC to quickly conclude the divestments to enable the independent companies effectively replace the foreign companies and take greater responsibility in delivering the country’s set economic aspirations for the petroleum industry.
Even during the anniversary ceremony in Abuja where he was a distinguished guest, Mr Isa restated his call for the regulator to urgently conclude the asset divestment deals and dismantle other obstacles to rapid production boost.
Chairman of WalterSmith Petroman, Mr Abdulrasaq Isa
Isa declared in his address at the event that “our current crude oil production of about 1.4 million barrels per day remains very low and hugely inadequate to meet our energy requirements and socioeconomic goals as a nation. Thus, it is critical that our upstream sector is urgently repositioned and for this reason, IPPG will continue to strongly advocate for steps aimed at arresting the dwindling production.
“Specifically, we reiterate our call for urgent actions aimed at unlocking incremental production growth in the short to medium term.”
He listed the actions to include concluding all pending IOC divestment transactions swiftly to derive optimum value from these transactions; unblocking all hurdles to Final Investment Decisions (FID) on IOC deepwater projects; enhancing security across the Niger Delta for a conducive operating environment and stemming incidences of asset vandalism and unrest; and upgrading and expanding industry infrastructure to enhance efficiency and reliability of product supply to both the domestic and export market.
In listing some of the key aspirations and targets that engaged the NUPRC in the past three years, Engr Komolafe stated that in addition to driving the divestment process in a responsible manner, the commission was also engaged in development of regulations, growth in oil and gas reserves, national production disposition, conclusion of the 2020 marginal bid round and issuance of PPL awards, and ongoing licensing round.
Other key programmes that engaged the commission in the period, he added, include energy sustainability, decarbonisation and environment stewardship, implementation of HostCom provisions of the PIA, and deepening regional influence and collaboration through establishment of the African Petroleum Regulators’ Forum (AFRIPERF).
Engr Komolafe stated that the NUPRC developed effective regulatory approaches to enhance oil and gas production, boost government’s revenue and contribute to national economic development and sustainability.
He said the commission was born in an era of transformation, and thus the management inherited the mandate to build a new organisation to revitalize Nigeria’s upstream operations.
He boasted that NUPRC is succeeding at the monumental task of building solid regulatory foundation and aligning it with the strategic imperatives of the PIA “as evidenced by our key initiatives, achievements and positive feedback over the past three years.”
“We are proud to say that the prevailing atmosphere in the Nigerian oil and gas industry today is that of certainty, predictability and attraction of investors’ confidence.”
With the charge to be Africa’s leading regulator promoting sustainable value creation from Nigeria’s oil and gas resources for shared prosperity,” he said, the NUPRC holds a clear objective to ensure the smooth operationalization of the PIA; and lay the groundwork for a transparent, efficient, accountable, predictable and competitive upstream industry.
Engr Komolafe said the PIA has paved the way for government to displace outdated regulatory processes, encumbrances to exploration and development, inefficiencies in production, and issues in the operating environment.
He highlighted transformations in regulation for entrenching innovation, promoting excellence and attraction of investor’s confidence.
According to him, the agency has developed 25 and gazetted 17 priority regulations to operationalize the PIA and entrench regulatory clarity, predictability, and transparency. He explained that the approach has optimised regulatory processes and has boosted investors’ confidence.
The NUPRC, Engr Komolafe stated, has worked with players in the industry on “initiatives to grow oil and gas reserves through studies and development activities to the current levels of 37.5 billion barrels of Oil and 209.26 trillion cubic feet of gas, representing 30% and 33% of Africa’s oil and gas reserves, respectively.”
“Maintaining a healthy Reserves to Production ratio is key to ensuring the long-term sustainability of Nigeria’s energy resources, with due cognisance to global energy dynamics. To this end, we are confident that the ongoing activities of PPL Awardees and the Licensing Rounds will further boost Nigeria’s position and unlock additional opportunities for resource valorisation,” he declared.
He said the industry is pushing positive trends to boost production through notable increase in rig activities, well intervention, and field developments; adding that “the uptick reflects both the impact of regulatory reforms driven by the commission and a renewed focus on maximizing the potential of oil and gas assets.”
“We are glad to report that with the concerted efforts of relevant stakeholders, production has grown from 1.2 million to 1.6 million bopd today,” working to achieve Presidential charge to grow production to sustainable and economic levels.
Engr Komolafe stated that with conclusion of the 2020 marginal bid round and strict mandates on work programmes, about 60,000 bopd and 90MMscfd of incremental oil and gas production will be realized from the assets in the near term.
He said the streamlined work program is projected to bring the fields into production within three years, adding that some players have already made significant progress on field studies, well interventions, and project development.
The NUPRC, he said, has also been optimized to vacate entry barriers and eliminate huge asset acquisition fees in a measure to improve global competitiveness and attract investments.
Engr Komolafe stated that President Bola Tinubu has approved the licensing models and attractive entry fee regime based on comparative study and global benchmarks. The innovative regulatory models which have been advertised to global industry investors, he noted, have already triggered considerable investment appetite for a successful bid round.
On energy sustainability, decarbonisation and environment stewardship, Engr Komolafe said that the commission has retooled its regulatory instruments to incorporate decarbonisation, sustainability, and emissions reduction to enable sustained investments and participation in the industry, anchored on sound ESG principles.
This, he explained, is in recognition of the significance of global energy dynamics, climate considerations, and national commitments for emissions reduction to the optimum development of Nigeria’s oil and gas.
“In view of the above, we awarded Forty-Nine (49) flares sites to forty-two (42) entities to commercialise some 250 MMscfd of flare gas thereby creating value and improving the environmental credentials of operations. The Commission is hand-holding the Awardees to ensure successful project implementation and commencement of operation in collaboration with multiple stakeholders and multilateral institutions,” the regulator disclosed.
In engendering social inclusion through focused implementation of Host Community (HostCom) provisions of the PIA, he stated that the NUPRC has mid-wife the incorporation of 137 Host Community Development Trusts (HCDTs), facilitated remittance of about N200 billion to the various HCDTs’ accounts for disbursement, and ensured transparent administration through the HOSTCOMPLY Portal.
According to him, the approach has enhanced the relationship between the industry and host communities, creating a more harmonious and collaborative environment.
On regional influence and collaboration, NUPRC has rallied African Petroleum Regulators to foster collaboration and address the common challenges of resource sustainability and energy security in Africa, Engr Komolafe said.
By this, he added, Nigeria is indeed taking centre stage in regulatory stewardship and as an economic trigger for Africa.
