Komolafe: There’s Now Regulatory Certainty in Nigeria’s Oil, Gas Sector

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Wednesday, announced that the gradual return of investments to the upstream sector has led to the increase of the country’s oil rig count to 25, up from the previous 20 rigs.

The Chief Executive of the NUPRC, Mr. Gbenga Komolafe, who spoke during a panel session at the Nigeria Oil and Gas (NOG) Energy Week at the International Conference Centre (ICC) in Abuja, disclosed that the gas flare commercialisation bid process gas has now been concluded and that successful bidders will be announced in the coming days.

However, Komolafe, while speaking during a separate interview on Arise News Channel, disclosed that 40 per cent of the ‘fiscalised’ crude oil theft last year was due to metering errors in the industry.

This was just as the Nigerian National Petroleum Company Limited (NNPC) yesterday revealed that Foreign Direct Investments (FDIs) worth about $20 billion were expected to flow into the upstream sector of the nation’s oil and gas industry between this year and 2024.

The Chief Upstream Investment Officer of the NNPC Upstream Investment Management Services (NUIMS), Mr. Bala Wunti, made the disclosure during a separate panel session at the NOG Energy Week at the International Conference Centre (ICC) in Abuja.

Wunti made the disclosure the same day Nigeria redeemed $500 million Eurobond obligation to global creditors, bringing the total amount of securities so far redeemed by the   country in the International Capital Market (ICM) to $1.8 billion.

But, the House of Representatives yesterday, resolved to constitute an ad hoc Committee to investigate crude oil theft in Nigeria with a view to curbing economic loss to the country and ensuring that everyone complicit in the act was brought to book, and report back within six weeks for further legislative action.

On his part, Komolafe, at the event, while announcing that the gradual return of investments in the upstream sector had led to the increase of the country’s oil rig count to 25, up from the previous 20 rigs, attributed it to the gains of the Petroleum Industry Act (PIA).

He added that in the one and a half decades of lack of clarity and uncertainty in the oil sector, Nigeria lost almost 74 per cent capital expenditure (Capex) in the industry

 “We all remember that passing the PIA itself did not occur for almost one and half decades and within this period, you can refer to this period as a period of uncertainty, that is the period where there was no statutory regulatory certainty as to how to take investment decisions.

“So, that itself impacted negatively on the attraction of investment, and now, we are in a PIA regime. The period of certainty and of course, within the period, as had COVID and all that.

” Investment is gradually flowing into the country. I will say that within the period of uncertainty, investment gravitated to other jurisdictions in a manner that we lost almost 74 per cent of the capex in the industry. But now, we have looked at the rig count, because it’s a measure of improvement in investment.

“Within the year, I’ve carefully followed the rig count. The rig count has grown from the period of January to now moving from 20 rigs to about 25 rigs in the country and the graph is picking like that, which means that the industry is gradually responding to the regime of clarity and certainty that I alluded to in my opening remark,” he said.

 Komolafe also disclosed that the gas flare commercialisation bid process had been concluded and that successful bidders will be announced in the coming days.

However, contributing in a panel on “Defining the Roadmap for the Future of Nigeria’s Upstream Sector”, the Managing Director of TotalEnergies EP Nigeria Limited, Mr. Mike Sangster, called for the creation of attractive fiscal terms and an enabling environment to enable the operators to undertake big projects and deliver value to the country.

Represented by the Country Adviser, Multi Energies, TotalEnergies, Mr. Adewale Fayemi said creating the right investment environment was crucial in developing new projects.

“There has to be the right incentives in place. But I think the discussion is on. But without having the incentives in place, it’s going to be difficult for investors to say yes, we’re bringing these projects online,” he said.

Managing Director, Shell Nigeria Petroleum Company (SNEPC), Mrs Elohor Aiboni, stressed the need to review the fiscal terms in the industry in order to boost investors confidence.

Noting that capital was sensitive, she noted that it goes where investment climate supports it.

“There are factors that will drive those projects and first is around the fiscals which is very critical. So, there must be right and clear fiscal terms to support the execution of the projects,” she stated.

Also at the conference, chief executives of the International oil companies (IOCs) from TotalEnergies EP Nigeria Limited, Shell, ExxonMobil and Chevron raised concerns on the high investment risks in the industry and called for fiscal incentives and an enabling environment for their operations.

However, speaking on Arise News Channel, Komolafe, disclosed that 40 per cent of the ‘fiscalised’ crude oil theft last year was due to metering errors in the industry.

A THISDAY calculation of the amount that was lost to the anomaly given the $2 billion indicated that the amount was $880 million was lost to the phenomenon.

Speaking further, Komolafe said: “Let me give you  a rough picture. Only last year alone, the nation lost $2.2 billion, and based on the forensic audit we conducted, we found out that about 40 per cent of that figure was attributable to metering errors and that’s what that regulation intends to cure,” he stated.

He also said the recently enacted regulation on the issue of gas flaring which prohibits the practice, would take care of the problem as Nigeria moves to eliminate the burning of its abundant gas resources.

He admitted that gas flaring had been going on for some time, but said the Petroleum Industry Act (PIA) has now prohibited the practice through section 104, while flaring is now considered one of the major pollutants nationwide.

 According to him, the commission was working to ensure that gas flaring becomes a source of wealth by the taking over of the flared gas, announcing that the auction awardees will be announced soon.

He said the exercise has now been concluded, but explained that the NUPRC was bothered by the practice of flaring which now attracts a penalty of over $2 per 1,000 Standard Cubic Feet (SCF) as prescribed.

Komolafe said it had become a major climate project to decarbonise the environment, stressing that it was dear to the NUPRC as a regulator to ensure the deployment of cleaner sources of energy.

Although Nigeria is currently flaring about 10 perc cent of its gas produced, Komolafe  said the challenge was being resolved by the commission and is determined to eliminate through the ongoing Gas Flare Commercialisation Programme (GFCP).

The NUPRC boss who also spoke on illegal oil bunkering, noted that as a technical and commercial regulator, the issue was being addressed in so many ways, including outright kinetic means.

However, he said the commission was collaborating with the security agencies since the agency doesn’t bear arms and would need their cooperation.

Meanwhile, speaking on the topic: “The Investors Perspective: Assessing the Attractiveness of Nigeria’s Energy Sector”, Wunti said a couple of upstream projects were already advancing towards Final Investment Decision (FID).

He listed the projects as the TotalEnergies’ Pereowei, Shell’s Bonga North, Chevron’s Agbami as well as ExxonMobil’s Owowo field and others were all reaching FIDs and that they would cumulatively result in FDIs amounting to between $18 billion to $20 billion in a matter of months.

 “About four days ago, TotalEnergies in partnership with NNPC launched a major tender for a project. That tender is going to rake in significant foreign direct investment. SNEPCo is about to take FID on Bonga North.

“That will rake in an investment in the neighbourhood of $4 billion. Going back to Total, we are restarting the Pereowei project. It’s a tie-in project, clean project. We expect something in the neighbourhood of over $2 billion investment.

” We are significantly advancing on the Agbami gas project. That is bringing in a significant couple of billions of foreign direct investment,” Wunti added.

In addition, he said the NNPC was working with ExxonMobil towards bringing the Owowo project to light, adding that those positives were being recorded because of the presence of Petroleum Industry Act (PIA) and the renewal of the Production Sharing Contracts (PSC).

“Put all these together, you will see an outlook between this year and next year of somewhere in the neighbourhood of $18 billion to $20 billion of foreign direct investment,” he stated.

While noting that a lot of opportunities abound in the Nigerian oil and gas sector, Wunti pointed out the players need to understand the changing investment climate and make their projects bankable in order to secure funding.

He further said: “We know where we are today: energy transition is real. We can take whatever position we want to take, we have our desires, but the reality is, capital has become what it is.

“In the international market, capital has become very discriminatory against fossil fuels. We also know that capital is becoming impatient, it’s very impatient today. Everybody wants to invest today and harvest tomorrow. Nobody wants to invest and wait for a 10-year cycle to be able to get returns.”

Wunti said the industry must attract capital by structuring themselves to speedily key into the global dynamics and narratives around carbon management and carbon emission management.

He added: “Good enough, we have a very decent balance between gas and oil and gas has been agreed as a transition fuel. We in Nigeria, we don’t look at it as transition fuel, we see it as destination fuel. There is no analysis that doesn’t show gas playing a prominent role in the next three to four decades.”

Nigeria Redeems $500m Eurobond Obligation to International Creditors

 Nigeria on Wednesday, redeemed $500 million Eurobond obligation to global creditors, bringing the total amount of securities so far redeemed by the   country in the International Capital Market (ICM) to $1.8 billion.

Incidentally, the $500 million Eurobond obligation matured on Wednesday, its due date.

The redemption provided an opportunity for the country to reaffirm a commitment to meeting its debt service obligations.

The Debt Management Office which conveyed the development via a statement recalled that the debt instrument was issued in July 2013.

“The Eurobond was issued in July 2013 (as part of a dual-tranche USD1 billion Eurobond) for a tenor of ten (10) years at a coupon of 6.375%per annum.

“Nigeria had previously redeemed a $500 million Eurobond in July 2018, another $500 million Eurobond in January 2021, and a $300 million Diaspora Bond in June 2022.

“These, together with the $500 million Eurobond redeemed today, bring the total amount of securities redeemed by Nigeria in the International Capital Market(ICM)to $1.8 billion.

“Nigeria’s successful redemption of its Eurobonds and Diaspora Bond in the ICM over the past six years is a demonstration of its strong debt management operations and planning,” the DMO said.

Nigeria’s external debt stock, including Eurobonds, stood at $42.671 billion as of March 31, 2023.

Of this amount, Eurobonds, which are commercial loans, accounted for $15.618 billion.

With $1.8 billion Eurobonds so far redeemed, Nigeria still has an outstanding in excess of $13 billion securities to clear in the international capital market.

 House of Representatives to Probe Crude Oil Theft

The House of Representatives on Wednesday resolved to investigate crude oil theft in Nigeria.

The resolution followed the adoption of a motion on the ‘Need to Investigate Crude Oil Theft and Loss of Revenue Accrued from the Oil and Gas Sector in Nigeria,’ moved by Hon. Philip Agbese, at plenary on Wednesday.

Agbese, noted that in recent times, the media had been replete with news on the loss of trillions of naira as a result of crude oil theft and loss of revenue from oil and gas exploration in the country.

He noted that reports had revealed that about 40 percent of crude oil losses were due to inaccuracies in measurement and theft as metering errors continued to occur as a result of poor maintenance of metering facilities, thus resulting in lack of transparency in hydrocarbon accounting.

He stated that reports revealed that in 2021 alone, Nigeria lost $4 billion to oil theft at the rate of 200,000 barrels per day, and the figures have since risen, adding that security agencies of the federal government were allegedly complicit and largely responsible for facilitating most of the oil theft in the Niger Delta.

He further stressed that the Nigerian military had been accused several times of being behind 99 per cent of oil theft and despite promises to conduct proper investigations, no substantial action had been taken by the federal government to address the matter.

“Disturbed about a 2022 report by the Nigerian Extractive Industry Transparency Initiative (NEITI) that about 619.7 million barrels of crude oil, valued at $46.1 6 billion have been stolen in the last 12 years, while stakeholders have often described crude oil theft in the country as an organised crime perpetrated by the Nigerian elite.

“In spite of the huge funds appropriated to adequately equip Nigeria’s security and intelligence agencies, their performance in terms of curbing oil theft has been abysmal.

“Despite the enormous resources at the disposal of the NNPC Ltd and the NUPRC, they have, in active connivance with national and multinational oil and gas companies, allegedly continued to sabotage every effort to ensure an effective running of metering facilities at the well heads, flow stations, loading platforms.

“If crude oil theft is allowed to go on unhindered, it will result in, not only devastating consequences to the country’s economy, but it will also gravely impact the environment, health and social life of the host communities, determined to reform the oil and gas sector and ensure that crude oil theft is effectively curbed in order to arrest the attendant huge losses to the economy.”

Ndubuisi Francis, Emmanuel Addeh, Peter Uzoho and Juliet Akoje

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