A total of twenty-six oil blocks have been proposed for divestment, the Chief Executive Officer of Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr. Gbenga Komolafe, has said.
Komolafe, who disclosed this in his opening remarks at the industry dialogue with International Oil Companies on divestment of their oil and gas assets to indigenous companies, said the workshop aims to give insight and guidance, as well as consider due diligence and interrogation on compliance with the laws and processes of divestment.
According to him, the oil blocks have an estimated total reserve of 8.211million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas saying it will contribute significantly to Nigeria’s hydrocarbon resources.
He said, “Additionally, these blocks contain P3 reserves estimated at 5,557 million barrels of oil, 1,221 million barrels of condensate, 14,296 billion cubic feet of associated gas and 13,518 billion cubic feet of Non-Associated Gas.
“It is worth noting that a substantial part of the P3 reserves is located in or near producing assets. This means that a competent successor could easily mature them to 2P reserves. Additionally, the current average production from these blocks is 346,290 barrels per day (bpod) (NAOC-28,018 bopd, MPNU-159,378 bopd, EQUINOR-36,155 bopd and SPDC-122,739 bopd), but the technical production potential is much higher – standing at 643,054 barrels (NAOC-147,481 bopd, MPNU-244,268 bopd, EQUINOR-39,203 and SPDC-212,102 bopd). These blocks have the potential to significantly boost our national production, which would benefit all stakeholders.”
The NUPRC boss insisted that it would continue to ensure that parties in the divestment process conform to the approved divestment guidelines.
“We aim to ensure that the companies that take over these blocks have the necessary financial resources and possess the technical expertise required to responsibly manage the blocks throughout their lifecycle in accordance with good asset stewardship practices. Furthermore, we must ensure that the inherent environmental, host communities and end-of-life liabilities, i.e. decommissioning liabilities, are accurately identified and assigned to the party best equipped to bear the associated risks. This necessitates a comprehensive understanding of regulatory requirements, industry best practices, and the unique challenges associated with oil and gas operations,” he said.
The regulator said it has implemented measures that will not only streamline regulatory procedures but also eliminate unnecessary barriers to investment. In this regard, the Commission came up with seven pillars aimed at ascertaining compliance with extant petroleum laws and the assignees’ capacity to assume the responsibility of developing the assets acquired.
The pillars include: Technical Capacity, Financial; Legal; Decommissioning and Abandonment;
Host Community Trust/Environmental Remediation Fund; Industrial Relations and Labour Issues; and Data Repatriation.
“To achieve our divestment framework objectives, the Commission has engaged two leading global oil and gas decommissioning consultants, S&P Global Commodity Insights (SPGCI) and Boston Consulting Group (BCG) to carry out due diligence on the Assets to be divested. Their role is to work with the Commission as independent consultants in defining all end-of-field life and abandonment legacy liabilities in compliance with divestment guidelines. They will also manage the operational risk across the entire asset portfolio, create a workflow for estimating total onshore decommissioning CAPEX liabilities, determine the host community’s obligations based on three per cent (3%) OPEX stipulated in the PIA, benchmark best practices on asset sales, and provide case study reports that draw lessons based on best practices.
“One of the objectives we hope to achieve in this workshop is to ensure that the environmental, host communities, and end-of-life liabilities associated with these assets do not become the financial responsibility of the federal government.
“To achieve this, the Commission is proposing that the divesting entities should either agree to the grant of Ministerial consent to the divestments, on the condition that they will retain the Liabilities until the Commission’s investigation is concluded and the liabilities are allocated to the proper party. In this case, the divesting companies will be required to issue an undertaking to retain the liabilities until confirmation of the release by the Commission of all or part of the retained liabilities. Alternatively, the divesting entities can agree that Ministerial consent will not be granted until the Commission has identified and assigned all liabilities to the capable party. In this situation, the divesting entities will also be required to issue a waiver, waiving their rights to deemed consent as provided in Section 95 (7) (b) of the PIA. Please note that the Commission expects the divesting parties to indicate their preferred option and issue the applicable instrument within two weeks of the date of this Workshop.
“I want to make it unequivocally clear that the NUPRC is dedicated to ensuring that investment processes are smooth, transparent, and efficient. The requirement to sign an undertaking or waiver is solely aimed at preventing any unwarranted financial obligations from falling back on the Federal Government of Nigeria. I assure you that the Commission is eager to close the divestments within the shortest timeline upon the receipt of any of the required instruments.
“Furthermore, I wish to reassure everyone here that the NUPRC will assiduously facilitate and enable investors in the upstream sector. We urge all stakeholders to engage proactively, adhere to regulatory requirements, and work collaboratively with the NUPRC to ensure the successful conclusion of these divestments,” he stressed.
