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Marginal Fields: Upstream Commission Targets June for Drilling


As Nigeria continues to struggle to increase its daily crude oil production, the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Mr. Gbenga Komolafe, yesterday said the agency was targeting the first half of 2022 for marginal field awardees to begin drilling in an effort to find their “first oil.”

He said this while speaking on ‘The Morning Show,’ monitored on ARISE News Channel.

The process which commenced in 2020 had been bogged down by bureaucratic challenges, meaning that the actual drilling for oil has yet to effectively take off over a year after the awardees were officially handed award certificates.

On May 30, 2021, the then Department of Petroleum Resources (DPR) had announced the conclusion of the exercise, the first since 2003, with the presentation of letters to the bid winners in Abuja by the industry regulator.

The regulator had put up 57 marginal fields spanning land, swamp and offshore for lease, with 161 companies eventually shortlisted to advance to the final stage from 591 entities that applied for pre-qualification.

The Head of the DPR, which has now transformed into NUPRC, Sarki Auwalu, had at the time, stated that the exercise was worth roughly $500 million in signature bonuses.

However, a number of the award winners, had decried the slow turn of events, stressing that they had continued to pay heavy interests on the loans that were borrowed to pay for the transactions, despite that the loans have been unproductive for over a year.

But Komolafe, while responding to a question regarding the issue of the 2020 marginal fields award, said although the commission inherited a difficult situation, it expects that by the first half (H1) of this year, all the issues would be sorted out.

“It’s critical because one of our cardinal objectives is to ensure that we increase the national oil production and of course, we realise that the fields will actually help in enhancing that.

“We took the issue frontally. It’s really been very challenging to handle the issue in the sense that the model used poses serious challenges to bringing the matter to an end quickly.

“But I want to assure Nigerians and indeed the awardees that we have been able to, as I speak, tried to bring the issue to a manageable state and device a strategy for bringing the challenge to a close.

“At the moment, we have had over 80 per cent compliance in terms of payment. In fact, one of the challenges we’ve had is that even in forming the SPVs , they are still having challenges working together because of the nature of the model used.

“But by and large, I want to say that we as a commission, we will learn from this experience, and I want to assure Nigeria that the next marginal bid will definitely not be bogged down by these kind of challenges we experienced in managing the fallout of the 2020 marginal field.

“Before the first half of the year, we want to see a situation where some of the awardees will be proceeding to field development plan. At the moment again, we have recorded close to 90 per cent of the co-awardees forming their SPV and at that stage, it is the very comfortable stage when the commission can go ahead to issue Petroleum Prospecting Licences (PPLs),” he explained.

Komolafe described the massive theft of crude oil in the Niger Delta as criminal and horrific, stating that while over $2 billion worth of oil was estimated to have been illegally siphoned in 2021, when added to the first quarter of 2022, it may have climbed beyond $3 billion.

Recently, the Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele, who spoke at the end of the 284th monetary policy committee (MPC) meeting in Abuja, had blamed the trend of oil theft for the inability of Nigeria to meet its oil production quota.

Describing the situation as unprecedented, he stated that the occurrence had had a debilitating effect on government revenue and accretion to reserves, adding that the global prices have gone up and are compounded by the shortage of supply of petroleum products.

On their part, the association of indigenous exploration and production companies, the Independent Petroleum Producers Group (IPPG) recently put it succinctly when it described the occurrence as an “existential threat.”

The Chairman, IPPG, Mr. Abdulrasaq Isa, speaking at the 5th Nigeria International Energy Summit (NIES) had said the challenge should be tackled before it finally kills the sector.

Also, weeks ago, Aiteo Eastern Exploration and Production Company (AEEPCO), operators of the Nembe Creek Trunk Line (NCTL) pipeline, threatened to exit the facility due to incessant vandalism, sabotage and outright theft.

In the same vein, THISDAY reported a Co-founder and former Chief Executive Officer of Seplat Energy Plc, Mr. Austin Avuru as recently calling for a state of emergency in the Nigerian oil and gas sector, revealing that up to 80 per cent of oil pumped in the country, particularly in the East, is stolen.

Avuru’s comments came days after a businessman and Chairman Heirs Holdings, Mr. Tony Elumelu, similarly bemoaned the worsening state of the industry, stressing that about 95 per cent of oil production does not get to the terminal.

Last week, the General Overseer of the Redeemed Christian Church of God (RCCG), Pastor Enoch Adeboye, warned that Nigeria might go bankrupt if the trend is not checked.

He also raised concerns over the country’s economic future, warning that Nigeria’s debt to service revenue ratio might pose danger for decades to come.

Continuing, Komolafe stated that it was not the duty of the commission to secure government oil and gas assets, saying the organisation does not, “regulate” criminal activities.

“The commission does not regulate criminals, that’s not the mandate of the agency. It does not actually extend to dealing with criminal. We do not have the abrasive or the coercive machinery to subdue criminals. Our mandate actually covers technical and commercial regulatory functions,” he argued.

Komolafe noted that whatever affects the oil sector affects the health of the entire nation, reiterating that the upstream and downstream parts of the industry are facing challenges at the moment.

“What we’re witnessing has reached a very alarming situation, a very horrific situation,” he lamented.

According to him, getting investors to put their hard-earned money into the sector has been very difficult with the existing harsh conditions , including the theft of the commodity by saboteurs. “It is worrisome due to the activities of these criminals,” he lamented.

By rough estimates , the NUPRC had said that Nigeria lost more than 115,000 barrels per day (bpd) to oil theft and vandalism between January 2021 and February 2022.

Komolafe reiterated that the NUPRC had established a panel to audit the activities of operators in the upstream sector to ascertain the actual volume of oil lost to the menace.

The commission’s chief executive further pushed back on insinuations that the Timipre Sylva-led steering committee was slowing down work on the commencement of the Petroleum Industry Act (PIA), saying that the collaboration has been seamless.

Culled from THISDAY

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