Amid divestment, Nigeria targets oil, gas royalty, licensing rounds in new regulations

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Nigeria is planning about six new regulations on the backdrop of the Petroleum Industry Act (PIA) that sets fresh modalities for oil and gas royalty, award of oil blocks, fees and rentals amidst divestment by International Oil Companies (IOCs). This was disclosed yesterday, in Abuja by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

The new regulations being set on host community issues are coming in the face of energy transition and geo-political issues, which are ushering new dimensions to global economy.

The new regulations are Nigerian Upstream Fee and Rent Regulations, Petroleum Licensing Round Regulations, Domestic Gas Delivery Obligations Regulations, Nigeria Conversion Regulations, Nigeria Royalty Regulations and Nigeria Host Community (Commission) Regulations.

While Nigeria passed the long awaited PIA last year, the success or failure of the law is largely dependent on the regulations, which are expected to serve as the vehicles for driving the provisions of the law.

Coming at a time when Nigeria risked its oil and gas being stranded due to campaign against fossil fuel, the Minister of State for Petroleum Resources, Timipre Sylva, said at a stakeholders consultation on the draft regulations organised by NUPRC yesterday that there was need for innovative ways in the exploitation and exploration of fossil fuel in the country.

He admitted that only effective regulations could help the country harness the gains of the PIA. “If we must continue to be relevant at the global stage, we must in designing regulation put in focus how we can balance the energy base load for Nigeria so that we will not be left behind in the energy transition train, while still harnessing our rich natural hydrocarbon reserves.

“The assent to the PIA by Mr President signalled a new era in the oil and gas sector of the economy after almost two decades of unsuccessful efforts to have the law passed in the country. The enactment of the PIA is expected to open up opportunities in the oil and gas sector of the economy,” he said.

Chief Executive Officer of NUPRC, Gbenga Komolafe, noted the feared impact of energy transition, saying it remained critical for Nigeria to take advantage of the oil and gas supply gap resulting from the current developments in Russia and Ukraine.

Komolafe said: “This is deliberately so, because we are conscious of prioritising regulations to meet the timelines in the PIA. As such, this first phase of the stakeholders’ engagement will capture robust discussions around issues dealing with royalty, licensing rounds, fees and rentals, burning issues on implementation of host community fund in line with Section 235 of the PIA.”

According to him, there are burning issues on implementation of host community fund in line with Section 235 of the PIA as well as finalising the 2020 bid round through issuance of PPL in line with Section 94 (2) of the PIA.

Leader of Host Communities of Nigeria Producing Oil and Gas (HOSCON), Prof. Jasper Jumbo, at the event, asked government to amend PIA, especially as it relates to the host communities.

He noted that the section on board nominations is below par, adding, “we are talking of mutual co-existence and protection of critical installed national asset, that is why we as fathers and leaders in the region, are coming in to say that we must be carried along. There is an organised host communities body, which must be carried along in the implementation of the new governance code in the industry.

Also speaking, the chairman, Senate Committee on Host Communities, Senator Bio Barakuma, stated that the passage of PIA was the biggest event in the petroleum industry, having lingered for over two decades. He added that the delay in the passage threw the industry to a world of uncertainties.

He expressed joy that a full chapter in the PIA is totally dedicated to host communities to address myriads of issues affecting them and oil exploration in general. He reckoned that the PIA may not address the entire challenges of host communities as no act driven by human efforts is perfect, but described the Act as a good takeoff point.

He noted that the stakeholder event was key and timely to enable the legislature to make its inputs. “There are a few grey areas seeking clarification. We may need an amendment of the PIA to address those”, he said.

ALREADY, the Nigerian National Petroleum Company (NNPC) Ltd will from July 1 this year become a fully limited liability company whose operations will be fully run in compliance with the provisions of the Companies and Allied Matters Act of 2020. The implementation of the PIA enacted into law in 2021 has made it imperative for NNPC operations to be run like a private sector enterprise.

The Group Managing Director (GMD) of NNPC, Mele Kyari, had recently admitted that there are some challenges facing the operations of NNPC, particularly as it relates to pipeline vandalism and crude oil theft, which, according to him, has reduced crude oil production to about 1.5 million barrels per day.

He, however, said that currently, the crude oil production challenge is being addressed through collaborative efforts between the NNPC, other agencies of government and security agencies.

Speaking on the July 1 debut of the company, Kyari said unlike previously when it was owned by the government, there is need for the NNPC to become more efficient in its operations with new roles and targets for Nigeria’s oil and gas market, as determined by the PIA, to be able to effectively maximise returns on investment for over 200 million Nigerians.

Kyari announced the company’s growth targets, which include plans to increase gas production capacity to eight billion cubic feet and to become the world’s fifth largest natural gas producer. The state entity will be listed on the Nigerian Stock Exchange and advance Nigeria’s plans to leverage natural gas as a transitional energy source for energy security.

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