The Commission Chief Executive, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr. Gbenga Komolafe, who recently unveiled winners of 25 oil blocks in Nigeria at the conclusion of a licensing round commercial bid conference in Lagos explained the next steps for the winners of the new oil blocks.
How significant was this exercise and what is the big takeaway?
Today is a history making event for us in the country. In the history of Nigeria’s upstream and since the passage of the Petroleum Industry Act (PIA), this is the first time we are conducting an exercise that could be adjudged to be in alignment with international best practices in terms of licensing round. Since the assumption of office, we promised the nation that we would conduct the affairs of Nigeria’s oil and gas industry in alignment with the prescription of the law. Don’t forget that section 3 subsection 1 (a) of the PIA mandates the commission to ensure that bidding for oil blocks in Nigeria, as against being discretionary, shall only be done in a fair, transparent and competitive manner. So, it is a dictate of the law, prescription of the law that licensing should be done in a transparent and competitive manner.
That provision is in alignment with best practices. So, what we have done today is a clear departure from history, to show that as a nation, we can actually do things right. Conduct an exercise in a transparent manner as you members of the press can see, even bidders, companies that did not win still adjudged the exercise as fair and transparent.
The transparency with which we have conducted this exercise will free us from what had been the practice where after this kind of exercise, you would see a barrage of litigations. But now we expect less of that, not that people cannot vent their grievances, we are in a democratic regime but we expect to see, if at all, very minimal complaints.
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So we have conducted this exercise, leveraging technology in a manner that all participants were there and the announcement is on a real time basis like you have seen. They confirmed their submissions, the winners and losers were there. What I just did was just the summary of what we all saw. So we don’t expect any complaints from anybody. The exercise is fully recorded.
25 blocks have gone out. What is next in terms of extraction and exploration activities and does that contribute to the overall ambition of the federal government in terms of reserve and energy security?
First and foremost, don’t forget that as provided in the Petroleum Industry Act (PIA), one way by which we grow our national reserve and increase the daily production is to conduct the licensing round. So that is the sole objective. The exercise clearly represents one way by which that is done as provided in the PIA. So, it is expected that upon awards, the next step is that we are going to issue a provisional letter of awards. It is provisional because terms of the awards would be clearly stated in that offer. So, we expect that the offerees would pay the signature bonus and of course, there are other terms that address the issue you have raised as to the expected time to conduct exploration, moving to the field and the implementation of their work programme.
Also, don’t forget that for this bid round, glowing tribute goes to President Bola Ahmed Tinubu, who has reduced the signature bonus. You could see that while the bidding was going on, we were making every bidder to confirm their submission. The qualifying criteria have taken care of a number of issues. In the past, emphasis had always been the quantum of signature bonus that people could pay. So what happened was that people whimsically or just ambitiously put a signature bonus that they could not even pay and after that they got the awards and continued to hoard the papers around.
But what we have done now, we have moved from that trajectory, emphasis is now placed on the work programme. We expect that when people get their offer letter, there is a specified time within which they are expected to pay the signature bonus and operationalise the work programme. Their bid amounts to a lot of promises that they have made that qualify them to actually win the award. We believe by and large the exercise would be of significant benefit to the nation in a multidimensional realm in terms of growing our daily production, impacting positively on federation revenue and of course in terms of employment generation.
Also part of the qualifying criteria is that bidders are expected to put issues like incorporating their green story to ensure that when they begin to develop that, they are going to do it in alignment with global footprint in decarbonisation.
The theme of this was “the unlocked potential”, how does the commission intend to unlock Nigeria’s energy potentials?
What we meant by that is that we are a highly endowed nation in terms of hydrocarbon resources. For now, our reserve is about 37.5bn barrels of crude and about 290 CF of gas. So, what we have done today means that by the time the winners begin to operationalise, implement the terms of the awards, you would see that you are going to unlock the other reserves because what they are going to do is exploration and with that they are going to make more discovery and that discoveries will optimise the federation reserve.
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