Oil deals: NUPRC to award licenses after N174 billion bonus payment

As the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) plans to close the 2020 Marginal Fields Bidding Round (MFBR), the commission has insisted on following due process in the award final documents and Petroleum Prospecting Licenses (PPL) to the winners.

The federal government has earned 174 billion naira so far after signing bonuses were fully paid for 119 awards earlier this year, with nine others partially paid while 33 awards went unpaid.

Speaking on the closing of the tender, the Director General of the Commission (CCE), Mr. Gbenga Komolafe, said that this would be done in a way that showed strict adherence to the rules governing approvals and licensing in the upstream sector of the country’s oil and gas industry. .

Komolafe, who had hinted in May 2022 that the publication of the final documents could take place this month, insisted on the need for the regulator (NUPRC) to ensure that the law and due process are respected in the allocation of licenses to operators.

He said that under his leadership, no fringe field operator would be allowed to “trade” papers issued by the organization.

“The rule of law would be strictly adhered to in issuing final licenses to winners, and there would be no pressure for the commission to award final documents without due process,” Komolafe stressed.

How 57 oilfields were opened for lease

The defunct Department of Petroleum Resources (DPR), in June 2020, announced 57 marginal field offers.

The DPR said 661 companies submitted their expression of interest forms, of which 540 were shortlisted, while 405 applicants submitted 482 bids.

DPR then shortlisted 161 companies as potential recipients, 50% of which would have met all the conditions and, therefore, were eligible for the marginal oilfield awards.

In May 2021, the successful bidders were named in a $500 million (N235 billion) deal while the winners received their letters on May 30, 2021, but the process was later halted after the new tax law. industry (PIA) of August 2021.

Along with the PIA, the DPR was among the agencies that merged to form the new Nigeria Upstream Petroleum Regulatory Commission (NUPRC) whose management team was led by Mr Komolafe in October 2021.

In December 2021, the NUPRC said it had begun finalizing the closing process for the 2020 Marginal Oilfields Tender Program in accordance with the 2021 Petroleum Industry Act (PIA).

Mr. Komolafe, in a notice to program participants, had indicated that an internal task force was being formed and was addressing outstanding issues.

One was the concerns of beneficiaries who argued that there were, in some cases, multiple beneficiaries per asset.

Komolafe also said that the winners trained Special Purpose Vehicles (SPVs) in accordance with the respective award letters.

Through the notice, the NUPRC gave a six-month window to awardees who have problems using the resolution mechanism provided, indicating that the national interest must prevail.

The commission, for its part, since December 2021, has started working with current tenants to agree on transition mechanisms for the tendering exercise for marginal oil fields.

This is to ensure that new licensees will take over the marginal oilfield seamlessly from previous lessees who did not win a bid for such an asset.

Also in December, the 45-day deadline granted by the NUPRC for the payment of the signing bonus by the winners, as stipulated by the guidelines on marginal fields, had expired.

For those who have paid in full, the commission said it will ensure that all applicable guidelines to allow them to proceed to the next stage of the exercise are fully implemented.

Winners pay N174bn, await final documents

In January, the commission confirmed that at least N174 billion had been earned through the payment of signature bonuses by winners for the 2020 marginal oil fields.

Komolafe, who spoke as he contracted winners and tenants of marginal fields in Abuja, said 57 fields had been identified for the 2020 round of tender exercise, while a total of 665 entities expressed interest.

The NUPRC CEC said 161 investors emerged as potential winners after extensive evaluation processes, as required by law.

He revealed that signing bonuses for 119 awards have been fully paid, while nine awards have been partially paid and 33 have not been paid.

Speaking further recently, Komolafe said the marginal oilfield supply was designed in the urgent need for the country to increase its oil production.

Komolafe said: “One of our cardinal objectives is to ensure that we increase national oil production and, of course, we now realize that the marginal field could really help to improve it.

“As of this moment still, we have registered almost 90% of the co-beneficiaries forming their SPV and at this stage, it is the very comfortable stage where the commission can move forward to issue petroleum exploration licenses (PPL ),” the NUPRC boss noted.

The federal government’s regulatory agency in the oil and gas sector further stated that the allocation of the marginal fields was intended to increase indigenous participation in the upstream sector of the petroleum industry; increase oil and gas reserves and production volumes; improve technology transfer; enable job creation and generate revenue for the government.

Funding of marginal operations in the field

Speaking at a stakeholder engagement session on the marginal land bidding round, which is the fourth in six months, the NUPRC CCE, said the serial engagements were aimed at ensuring stakeholder input and alignment before the commission releases the final documents.

However, in one of these recent stakeholder sessions, some participants raised questions about the bidding cycle, mostly saying it was not long-term.

According to the Director of Underground, Energy and Mineral Resources Limited, Mr Collins Ibekwe, a participant, those who set up the process were not focused on the long term; they were too focused on the short term, adding that “but it won’t be too late to say, let’s reverse this process, give that money back.”

Another concern of stakeholders is that given the schedule set for oil production, some of the indigenous beneficiaries may not have the capacity to realize the full potential of the marginal oil field which they would take possession of in a few weeks.

However, alleviating fears, the Head of Pool Valuation and Lease Administration, NUPRC, who spoke on behalf of Mr Komolafe at the meeting, said that being aware that funding could be a hurdle, the NUPRC has identified various financing options that operators and investors can tap into. .

These options include private equity, capital market, strategic alliance and debt financing. Further, Section 95(5) of the POA also provides that licensees or lessees may, as security, assign, pledge, hypothecate their interest, in whole or in part under the applicable license or lease, provided that the consent of the commission is obtained.

This means that the law allows a tenant to involve other investors in its operations as long as it presents its model and the NUPRC approves it.

The current and pioneering leadership of NUPRC said it is still finding ways to reduce the cost per barrel (cost of production) through key initiatives.

These include improving due diligence protocols to enable investors and operators to access information before making investment decisions, encouraging synergies in the use of shared facilities and facilitating crude oil handling/transportation agreements to ensure favorable terms for all parties.

As the Petroleum Exploration Licensing (PPL) processes are being finalized according to the NUPRC, Komolafe urged co-beneficiaries who trained Special Purpose Vehicles (SPVs) to be assured that due process is followed to historically close the offer.

“I want to say to the co-winners to be less worried about this given that as a responsible regulator we are very concerned, especially since the level of investment that the co-winners have made is very huge.

“We are very aware of that, especially the cost of capital, because investing is not charity,” Komolafe said.

By Sunday Michael Ogwu and Simon Echewofun Sunday

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