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FG Set To Issue Prospecting Licences To Winners Of Marginal Oilfields

After a long wait, the federal government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), yesterday said that it was set to issue Petroleum Prospecting Licences (PPL) to successful awardees of marginal fields in the 2020 bid round.

The commission noted that the move was in fulfilment of the promise made early this year, pursuant to the provisions of the Petroleum Industry Act (PIA), 2021.

A statement signed by the NUPRC Chief Executive, Mr Gbenga Komolafe, indicated that the event would hold on Tuesday in Abuja.

This is coming as the Minister of State for Petroleum, Mr Timipre Sylva, at the weekend said the gap between Nigeria’s oil production and the quota given to it by the Organisation of Petroleum Exporting Countries (OPEC) would be filled by August.

The marginal oil fields bid round, which commenced in 2020, had been bogged down by bureaucratic challenges, which prevented the winners from commencing the development of the fields over one year after the awardees were officially handed the initial certificates.

On May 30, 2021, the then Department of Petroleum Resources (DPR) 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.
Head of the DPR, which has now transformed into NUPRC, Mr 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 had been unproductive for over a year.

In January, the NUPRC disclosed that the 2020 marginal field bid round concluded in 2021 had at the time, yielded about N174.944 billion, with owners of 30 fields having partially paid and two fields stalled by court cases.

The new commission further stated that 20 companies which won the bids had partially paid up, among those who won the 57 oilfields.

But in the statement issued yesterday, Komolafe stated that the event would also witness the unveiling of the implementation template for the Host Communities Development Trust Fund for the commencement of the provisions under Section 235 of the PIA, 2021.

According to him, this will positively impact restiveness in the host communities and the process guarantees seamless operations and boost investors’ confidence.

Furthermore, the NUPRC chief executive stressed that it will provide enabling environment for sustainable development of the country’s hydrocarbon resources.

“These will mark the conclusion of some of the most urgent and critical tasks inherited by the commission when it was inaugurated in October 2021, after the signing into law of the PIA 2021,” he stated.

He recalled that the commission had in March this year informed all participants in the 2020 marginal field bid round programme that it had put all necessary machinery in place to progress the bid round exercise to a conclusion in line with the PIA 2021.

“In furtherance of that resolution, the commission constituted an in-house work team to distil and address the concerns of awardees with a view to close-out issues affecting multiple awardees per asset and formation of Special Purpose Vehicles (SPV) by awardees in line with the respective letters of the award.

“Awardees were therefore enjoined to avail themselves of the resolution mechanism provided by the commission in the overriding national interest,” he noted.

The NUPRC explained that the successful coordination and resolution of the issues culminated in the emergence of the successful awardees that would be handed over licences this week.

Meanwhile, despite a huge gulf between Nigeria’s current oil production compared to its expected OPEC monthly allocation, the Minister of State, Petroleum, Sylva, at the weekend said the gap would be filled by August.
Sylva who spoke during an online media conference also dispelled the notion that OPEC could turn on spare capacity and pump more, citing capacity concerns.

The comment came almost a year after similar assurances by the minister and the Group Managing Director of the Nigerian National Petroleum Company (NNPC), Mallam Mele Kyari, that the country would drill enough oil to cover the deficit by December 2021.

But the aspiration expressed by the minister remains very ambitious as the latest OPEC market report indicated that Nigeria reported a paltry 1.024 million barrels per day production in May, quoting primary sources, a multi-year production low.

In all, the latest figure released by the OPEC, means that Nigeria’s underperformance was as high as 700,000 barrels per day for the month, although the cartel’s total allocation to Nigeria exceeded 1.75 million bpd for the month.

The 1.024 million bpd production was about 195,000 bpd less oil drilled last month when compared with April’s total of 1.219 million bpd, OPEC said in the report.

Nigeria has a quota allowance to produce 1.77 million barrels a day in June and 1.80 million in July respectively.

What the OPEC figures imply is that rather than improve, the country’s oil production has deteriorated massively in the past months, although the authorities say efforts are being made to ramp up production.

Citing massive theft as one of the reasons for its inability to meet its quota, the federal government had also months ago, deployed a heavy military presence in the Niger Delta to curb the menace. But even that move has not helped much.

However, Sylva said during the interview that the country would be able to meet its OPEC production quota by the end of August as the country aims to boost security in its oil industry.

“For us in Nigeria, we are at a low point. We are not able to meet our OPEC quota. We have given ourselves just about a month to ensure that we can … we believe that by August we would see some security improvement.
“At this moment, there is a little capacity that can be brought to the market,” the minister was quoted by Bloomberg and as having said.

The perceived lack of spare capacity among many OPEC members has helped to keep oil prices high in recent months, despite lofty ambitions from the group regarding July production targets.

The July figure was set at 648,000 bpd higher than the June target and over a million bpd higher than the May target which OPEC is not meeting either.

If Nigeria manages to meet its August production target, it is expected to make a huge difference in the oil market which countries like the United States have complained is currently undersupplied.

The minister further said that the OPEC+ alliance of oil producers was running out of capacity to pump more crude, including its biggest member Saudi Arabia.

“Some people believe the prices to be a little bit on the high side and expect us to pump a little bit more but at this moment there is really little additional capacity.

“Even Saudi Arabia, Russia, of course, Russia, is out of the market now more or less,” the minister added.

The extended group will meet next week Thursday to decide whether to proceed with a planned August oil production increase. Over the last year, the cartel has been boosting output in a series of planned increases.

“At this moment, I think the prices are firming up and I don’t think there will be any surprises in OPEC in August,” Sylva said.

Aside from not being able to produce enough, the country has an additional headache, with international majors selling and exiting onshore and shallow-water fields.

“Struggling even to meet the quota has been very sad for us and operators have planned to fill the gap within a couple of months,” Sylva said.

“By end of August, generally the commitment is that we’re at least going to produce our OPEC quota and then of course look at going even beyond that after August,” he added.

Last Thursday, the federal government inaugurated a 10-man expert team to work on a report preceding the reactivation of over 3,000 shut-in oil strings, which the authorities say will help increase production in the coming months.

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