Marginal Fields: NUPRC Takes Action To Reduce Financial Difficulties For Awardees

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Tuesday revealed that it is aware of the current financial difficulties that the nation's most recent winners of marginal oil fields were experiencing and that it was attempting to lessen the difficulties.

In a statement, the commission's chief executive, Gbenga Komolafe, highlighted that the oil and gas industry regulator was preparing a production-based loan arrangement to assist licence holders in obtaining the capital they require in acknowledgement of the financial challenge many of them confront.

According to the organisation, the move will assist the grantees in their effort to undertake full field development towards achieving "first oil".

Komolafe noted that the commission will be working with the recipients of Petroleum Production Licences (PPL), providers of Exploration and Production (E&P) services, and Nigerian banks in the soon-to-be-starting engagement.

When the 2020 marginal field bid round was taken up by the succeeding commission, NUPRC, it was first managed by the now-defunct Department of Petroleum Resources (DPR).

However, the pace of development in the fields has lagged below expectations, particularly for Nigeria, which is in dire need of meeting its OPEC quota.

Due to the combination difficulties of a lack of cash and current corporate governance, the majority of the oil businesses awarded fields in the 57 fields auctioned during the 2020 marginal field bid round had not been able to advance their licences to field development and first oil production.

According to the list of awards, some of the fields and their awardees included: Egbolom - Oando Energy Resources and two others; Udibe - Folstaj; Omofejo - AsherDelta and two others; Ugbo - Energia; Oloye -A. A Rano; Nkuku -Vhelbherg E&P, NIPCO and four others; Mesan -Accord Petroleum; and Kuri - Shepherd Hill and Nord Oil.

Others included Ruta - Faceato and seven others; Ekpat - Duport Midstream, Magnum Flo Ltd; Bita - Odu'a Investments; Atamba - Matrix Energy and Naptha Global.

Other assets from the Udibe marginal field, awarded to Folstaj International, and Omofejo field, jointly awarded to AsherDelta, Zigma Limited, and GlenPetro, were currently inactive because their owners were still working to establish proper corporate governance and raise the money required to advance.

Data from the commission from February 2023 shows that Nigeria is only able to drill 1.3 million barrels per day (bpd) of the current 1.8 million bpd OPEC output allocation to the country, which is the highest production level in over a year.

However, Komolafe pointed out that the new set of interactions with the stakeholders was intended to serve as a foundation for a strategic alliance and cooperation between the awardees and the service providers of well drilling and re-entry services.

He disclosed that the agreement would be provided for a service fee that the service providers might recoup from the attached production.

The chief executive of NUPRC stated that the organisation has already decided to host an E&P international financing roadshow in Abuja in the upcoming weeks for financiers, investment bankers, private equity investors, and multilateral institutional investors.

The goal of the campaign, according to Komolafe, was to highlight the high-value quick-win chances that investors might take advantage of in the ongoing mini-bid awards, the ongoing National Gas Flare Commercialization Plan (NGEP), and the recent PPL awards.

Also, Komolafe said that the commission had created a corporate governance framework for upstream petroleum operations to lessen the difficulties caused by the initial corporate governance problems that surfaced prior to the implementation of the Petroleum Industry Act (2021).

He added that the framework is presently in the advanced stages of internal assessment and stakeholder engagements needed for its completion.

“This is to enhance sustainability, environmental and corporate governance requirements and to facilitate capital attraction by investors for the optimal and efficient development of the PPLs and other assets.

“To facilitate dynamic data gathering and accelerate the achievement of ‘first oil’, the commission initiated the revision of the subsisting Extended Well Test (EWT) guideline to enhance early cash flow and speed up the journey to first oil.

“The strategy has already yielded positive results with 16 companies submitting Field Development Plan (FDP), two already commencing unitisation processes, six re-entries and two having gone through the EWT.”

Komolafe emphasised that the commission was aware of the protracted conflict between some of the awardees that was brought on by misunderstandings and disagreements among shareholders.

In order to assist early resolution and meticulous progress towards reaching the anticipated regulatory milestones, including value generation and hitting first oil, he indicated that NUPRC was collaboratively engaging the parties and mediating.

Komolafe claimed that the commission had made concerted efforts within the confines of the law to give statutory advice and support towards the advancement of the assets to field development from the awarding of 47 PPLs to only Nigerian firms in June 2022.

He outlined the actions taken, including as the organisation of a regulatory introduction programme for PPL grantees so they could have the necessary comprehension of the legal procedures from the award to first oil.

He emphasised that all grantees and initial asset owners attended a week-long tripartite engagement in Lagos in December of last year, which was attended by roughly 30 businesses.

Komolafe reported during the occasion that all obstacles to the awards' seamless takeover and first oil operation were removed by both the awardees and prior asset owners.

“That event set the stage for engagements on issues required to fulfil initial work programme obligations.

“Areas that were presented and rigorously deliberated upon include Royalty and Tax Administration, Data Exchange Protocol and Leasing requirements, Field Development Plan under the PIA (2021), Permitting Processes for Drilling and Re-entry Applications, Production Accounting, Facilities Deployment, and Host Communities’ Development.”