Nigeria Begins Probe into Oil Production Underperformance, Says Issues Deeper than Oil Theft

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Tuesday night said it was commencing a probe into Nigeria’s perpetual crude oil underperformance, stressing that the matter could be deeper than oil theft.

In a statement by the Commission’s Chief Executive, Mr Gbenga Komolafe, the NUPRC stated that letters inviting oil and gas firms in the country had already been dispatched.

According to the chief executive, the commission during the enquiry will particularly be interested in the mode of operation of the companies in relation to the approvals as per their operational licences, the level of conformity with the technical provisions and production terms.

In addition, the statement said that the NUPRC will also be looking at the companies’ level of investments to enhance capacity utilisation, the challenges they are facing, especially those contributing to the current ‘unacceptable situation’

“One of the steps, in line with its technical and regulatory powers, is to probe into the operational and commercial activities of exploration and production companies operating within the country to ascertain the level of compliance with the terms and conditions in their operational contracts, as well as the challenges impeding expected deliveries,” the commission stated.

Beginning Wednesday September 28, the commission said it will be engaging all the exploration and production companies individually to get to the root of the current situation.

“It (the commission) believes strongly that there might be more fundamental issues in the industry affecting expected output and deliveries beyond the much touted issue of crude theft,” Komolafe added.

According to him, during the engagement, the operators would be expected to present their work programme performance, acreage status, divestment plans (if any) and field development plan (FDP) implementation status.

In addition, they would be expected to make submissions on upstream investment in the last five years, exploration activities including geophysical acquisition/processing/reprocessing, leads and prospects maturation plans as well as exploratory wells drilled in the last five years.

Furthermore, the companies would be required to present their reserve status; life index, current reserves replacement ratio (RRR) and reserves growth strategy (RGS); status of Joint Venture/Production Sharing Contract activities.

They are also expected to include ongoing facility projects, number of drilled wells, re-entry applications and approvals granted in the past five years; shut-in wells, their potential and reactivation plan(s) and expected incremental volumes.

Other requirements, according to the NUPRC head would involve technical allowable/production performance and production optimisation strategy, including production profile for the last 10 years; status of production facilities, as well as unit technical cost of production on field basis.

“The NUPRC is determined to take bold and revolutionary steps, using a non-kinetic approach, to address the challenges of crude oil theft, improve national crude oil production and save the country’s economy from further degeneration.

“Although NUPRC is not an operator/producer, it has a statutory responsibility as a regulator to probe into the situation and seek drastic solutions to the challenges as the current situation has seriously affected the country’s economy and posed a huge challenge to the funding of the national budgets.

“The commission will do everything within its authority to challenge the narrative and halt further degeneration by ensuring transparency in hydrocarbon accounting,” Komolafe said.

During the engagement, Komolafe stressed that the commission would also insist on knowing the companies’ gas development strategy, gas reserves commitment status and domestic gas delivery obligation performance.

Added to the aforementioned, he noted that it would also inquire into the status of utilisation activities (if any); crude oil evacuation route and exported volumes from January this year, status of statutory payments as well as the challenges they are facing in the course of their operations.

“The move by the commission is to ensure transparency and accountability in the industry to guarantee effective operation and output delivery in the interest of the country’s economy and the benefit of the investors and industry operators,” the statement said.

Emmanuel Addeh

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