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NUPRC Initiatives Adding Values to Nation’s Oil and Gas Sector

It is becoming crystal clear that steps taken so far by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) since its establishment in October last year, have in many ways added and still adding significant value to the nation’s oil and gas industry and the economy

The last ten months has truly been a beehive of activities and serious regulatory business at the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), with one positive initiative or action following another in short timeframe. All these initiatives and actions are solely aimed at adding significant value to the Nigerian oil and gas industry with huge implications on the wider economy.

NUPRC is one of the excellent creations from the enactment of the Petroleum Industry Act (PIA) 2021, which was signed into law on August 16, 2021 by President Muhammadu Buhari.

With the management board of the NUPRC appointed and confirmed by the president and the Senate, respectively, NUPRC was subsequently inaugurated on October 18, 2021, with Gbenga Komolafe serving as the Chief Executive Officer while Isa Modibbo serves as the Chairman.

BOOSTING OIL PRODUCTION

At the inauguration of NUPRC at the time in Abuja, just like in other industry gathering where he was opportune to speak afterwards, one thing continued to reverberate in the thought and speech of the CEO: growing Nigeria’s oil production and meeting the nation’s production quota from the Organization of Petroleum Exporting Countries (OPEC). The reason is not far-fetched. He is a seasoned industry professional, who has served in various capacity in the nation’s petroleum business, and thus understands the industry’s challenge and how it is affecting the country’s economy.

He knows the mood of the government in relation to the nation’s under-performance in oil production and saw his appointment as a call to rescue the industry and the nation from the difficult situation, through problem-solving regulatory policies.

Speaking at the inauguration, Komolafe had stated, with precision, “Basically, we shall focus on activities that enhance the production activities in the upstream in a manner that we will be able to hit our OPEC quota and will endeavour to ensure that we deliver to Nigerians a 21st century regulatory commission…

“But the key is that we focus on activities that will expand and enhance production activities in a manner that we can be meeting our OPEC quota and as much as possible to optimise the federation revenue.”

Beginning from no particular order, about a month ago, the Commission inaugurated a 10-man expert team to work on a report that would lead to the reactivation of over 3,000 shut-in oil strings which have contributed to the country’s inability to meet OPEC’s quota. Nigeria’s oil production has experienced a downward spiral, plummeting from a high of over two million barrels per day last three years to now a million barrels. This has impacted negatively not only on the federation’s income, but on the government’s aspiration to hit three million bpd.

The government planned to hit three million bpd oil production and 40 billion barrels oil reserves in few years, banking on new investments, completion of ongoing field development projects, and the 2020 marginal field awardees among others. The government also hoped to achieve this production growth by ensuring that oil wells that were shut in resulting from one reason or the other were brought back to production.

So, in its strategic thinking, NUPRC thought about setting up this 10-man expert team to work on a report that would lead to the reactivation of over 3,000 shut-in oil strings which have contributed to the country’s inability to meet the 3 million bpd and OPEC’s quota. Members of the committee inaugurated in Abuja included: Amadasu Enorense, a Deputy Director as the Team Lead; Georgeson Victor, Boma Atiyegoba, Dadi M.B, a Deputy Chief Geologist and Mumuni O.T.

Other members of the expert team were: Omion O.O, Namtari S.B, Uzoigwe F.F, and Mamman J.M while SShokoya Y.M is to act as Secretary of the committee.

ESSENCE OF COMMITTEE/EXPECTATIONS

Stressing the need for such committee, Komolafe noted that the move had become inevitable due to shut-ins arising from oil theft and sabotage in the Niger Delta. He stated that the nation had suffered significant losses in crude oil production, especially in land and swamp terrains, saying a major consequence of which was the declaration of force majeure on the Bonny Oil & Gas Terminal (BOGT) and shut-in of wells from fields evacuating through the Nembe Creek Trunk Line (NCTL) and the Trans Niger Pipeline (TNP).

He said the menace has resulted to Nigeria achieving only 60 per cent compliance with Technical Allowable Rate (TAR) and 72 per cent of its assigned OPEC quota. According to him, the socio-economic impact of production and associated revenue losses to both government and investors had become a deep cause for concern for all stakeholders.

He added that the development was causing a threat to national and energy security, erosion of global competitiveness and ease of doing business, and had also given rise to unemployment across the industry, increased conflicts due to proliferation of arms as well as a widespread Health, Safety and Environment (HSE) and community concerns.

“In light of these issues and government’s production target of 3 million barrels of oil per day in three years, the NUPRC has developed regulatory initiatives and optimisation strategies aimed at decreasing this menace to the barest minimum in the short run, and eventual elimination in the long run.

“The strategies involve various industry stakeholders and cuts across techno-socioeconomic and security initiatives. It is my utmost belief that the impact of these joint strategies would be felt across the industry in a few months,” he assured.

Komolafe stated that the initiative to conduct an industry-wide integrated study on the reactivation of shut-in strings was  conceptualised in the commission and approved by him as a low hanging strategy to gain incremental production.

“Our analysis shows that we have over 3,000 shut-in strings in-country with huge potential to boost production in the short term (i.e six months), mid-term (i.e one year) and long term (i.e over a year),” he declared.

The CEO maintained that the committee would be saddled with the responsibilities to collect and quality-check data of all shut-in strings, evaluate the basis for shut-in based on subsurface (geology and reservoir engineering) and surface considerations.

He gave the terms of reference of the committee as, the development of an empirically-driven criteria to identify candidate wells for production ramp up in the short, mid and long term; to prioritise candidate reservoirs/fields with the potential to increase recovery factor in the short, mid and long term and develop a robust report with action and implementation steps.

“The committee would engage industry stakeholders to get their buy-in on this strategic initiative. The committee has a one-month period effective today to conclude the study and revert to management with a robust report that will become a working document for the industry in this regard,” he noted.

ACHIEVING NIGERIA’s 2060 NET ZERO OBJECTIVE

In acknowledgement of the current energy transition and the need for the world to reduce global carbon emissions to 1.5C by 2050, NUPRC is also working with other stakeholders to drive Nigeria’s compliance with the climate change objectives as well as achieving the 2060 set by the federal government for Nigeria. For instance, in November last year, the Commission’s CEO had at a session in Lagos, listed the measures the were aggressively implementing to ensure carbon-free operations in the upstream oil sector.

Citing the Nigerian Gas Flare Commercialisation Programme (NGFCP) as part of such Initiatives, he said the commission would also ensure that all approved Field Development Plans (FDPs) incorporate full gas utilisation and monetisation programmes. Others are the introduction of regulations that would ensure new exploitation and production projects include decarbonisation elements to further attract foreign investments.

He said further that the commission would collaborate with the NNPC Limited and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDRA) to encourage investment in refining and gas-based industries.

According to him, the commission would also collaborate with counterpart regulatory agencies within the Sub-Saharan region in order to create strong alliances that ensure sustainability and demand for our crude oil and refined products.

 TACKLING ENERGY TRANSITION CHALLENGE

Against the challenge posed by energy transition, NUPRC is focusing its regulatory focus on enabling sustained upstream investments.

It is equally driving a paradigm shift in the exploration and production value chain of the Nigerian petroleum industry, which it identified as imperative for the survival of the sector. Admitting that more than ever before, the industry is being plagued by investor skepticism, high level competition, climate change and clamour for clean environment, Komolafe stated that for oil and gas to entice the needed investment, there must be an attractive fiscal framework, which the PIA seeks to address.

ENABLING BUSINESSES

Living true to its words, NUPRC has been enabling businesses in the oil and gas sector since its inauguration and this has been confirmed by many industry players. The CEO had promised that the commission would not just be a regulator but would be an enabler of investment, adding that the Commission would be a world class regulator where professionalism would reign. However, worried by the plans by the international oil companies (IOCs) to exit their onshore and shallow water operations, the Commission has been engaging the IOCs to understand their challenges in order to find solutions to them and have the oil majors continue to play in the sector for more value addition.

“We will engage critically with them and if it becomes their decision to move from their onshore activities, what will be paramount to us is to look at their challenges and see how far we can intervene positively. Don’t forget, the Act makes the commission both technical and financial regulator.

“We will do more because investment decisions are commercial decisions and we will see how we can intervene,” he stated.

He also assured that the commission would work towards eliminating all forms of bureaucracies that impede business operations and discourage further investments in the Nigerian oil and gas exploration and production business.

INCREASING OPPORTUNITIES FOR LOCAL FIRMS

Aside the IOCs, the commission has been actively interfacing with the independent operators under the aegis of Independent Petroleum Producers Group (IPPG) in order to increase their participation and contribution to Nigeria’s oil and gas exploration and production segment. Through the completion of the last marginal field bid exercise, where 57 fields were put on offer, which cumulated in the issuance of Petroleum Prospecting Licence (PPLs) to many Nigerian companies, the commission has set the stage for more investments to flow in the sector.

It’s support to local operators has ensure that they increase their capacity and competitiveness as well as making them to adopt global best practices in their operations.  In his testimony to the support from the NUPRC, Chief Executive Officer of Waltersmith Petroman Oil, Mr. Chikezie Nwosu, once stated at a function that “the amount of support we have received from government is immense.”

Waltersmith operates the Ibigwe oil field and runs a 5000bpd modular refinery in Ohaji/Egbema Local Goverment Area of Imo State.

Nwosu had testified, “The NUPRC CEO has done quite a lot to support our expansion. So, we are expanding this modular refinery principally because of what Komolafe has done for us in the last couple of months.

“NUPRC is also a partner, they have been a partner in our modular refinery. They don’t come to our refinery to penalise us, they come to support us, to make sure that we stay at those international standards that they have set for us, and we on our own are trying to also continue to improve.

“They don’t come to monitor what we are doing from the point of view of penalising us, but by pointing out any part of our process system that has challenges.

“So, I do not have any issues whatsoever with support from government, they are business enablers. The support we get from government especially the NUPRC is really huge.”

STANDING FIRM ON ITS REGULATORY POWERS

In a swift move that apparently excited many industry stakeholders, the Komolafe-led NUPRC last week, stood firm to its statutory powers on the issue of granting Seplat Energy the approval to buy the ExxonMobil’s oil assets in Nigeria.

Maintaining its earlier position of disapproval of thetransaction due to “overriding national interest”, Komolafe, armed with relevant sections of the PIA, faulted the position of the presidency, which had earlier in the week directed that ministerial approval be granted to Seplat to proceed with the deal.

This intervention, which was later backed by the president, no doubt saved the presidency, the nation and the industry a looming embarrassment and an ugly precedent that may put the industry in jeopardy.

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