Opportunities for investment and beneficial engagements, By Akpandem James

A major shift is happening in Nigeria’s upstream oil and fuel sector the place indigenous vitality corporations are more and more coming into the sector and positioning themselves to compete on a bigger scale. Native oil corporations (LOCs) are buying belongings divested by Worldwide Oil Firms (IOCs) whereas rising companies are efficiently securing blocs in marginal fields and shallow waters. The previous 12 months has been notably noteworthy, marked by the completion of main divestment offers and conclusion of the 2024 bid spherical.

A brand new period appears to have begun with new entrants within the business securing profitable oil wells through the simply concluded 2024 bid spherical, a course of overseen by the Nigerian Upstream Petroleum Regulatory Fee (NUPRC) and marked by transparency. This was the primary bid spherical because the enactment of the Petroleum Trade Act (PIA) in August 2021 and the primary absolutely supervised by the Fee. Engr. Gbenga Komolafe, the Fee Chief Government (CCE), described the second as pivotal: “This Licensing Spherical (2024) isn’t merely a business train; it’s a daring declaration that Nigeria is prepared for enterprise.”

Chapter 4 of the PIA helps indigenous oil corporations in Nigeria’s upstream sector. It stipulates provisions for marginal fields. These fields, outlined as dormant or categorised as marginal earlier than January 1, 2021, are convertible to Petroleum Prospecting Licenses (PPLs), permitting indigenous companies to learn from beneficial phrases. Such fields will need to have been found however left untapped for not less than ten years from the preliminary discovery date. The PIA additionally prioritises native content material and transparency, making a extra conducive setting for indigenous participation. It was the cornerstone of the 2024 Licensing Spherical because it launched a number of engaging fiscal regimes designed to stimulate funding.

Part 7(t) however empowers the NUPRC to conduct periodic licensing rounds, granting PPLs and Petroleum Mining Leases (PMLs) to potential traders. The Fee has a duty to make sure transparency, governance and accountability in managing the nation’s petroleum assets. In discharging this mandate, the fee launched into the completion of current bid rounds and initiated the 2024 spherical. The 2024 spherical had particular curiosity in native entrepreneurs. 

The fee had a elementary function in supporting indigenous oil corporations via regulatory oversight, cooperation facilitation and promotion of native content material initiatives. This was meant to encourage native participation within the business and improve contributions to Nigeria’s vitality safety. The Fee, nonetheless, has a duty to make sure compliance amongst indigenous oil corporations via operational monitoring, regulatory opinions and stakeholder engagement, whereas actively collaborating with the Unbiased Petroleum Producers Group (IPPG) to deal with compliance challenges and promote inclusion within the regulatory course of. Additionally, indigenous companies going through funding difficulties are assisted by streamlining licensing and approvals, fostering production-based lending and collaborating with monetary establishments, thereby making a extra supportive setting.

Nigeria is wealthy in crude oil, condensate and pure fuel reserves, accounting for over 30% and 33% of the continent’s complete oil and fuel reserves, respectively. The nation additionally possesses a various array of renewable vitality assets. Its future is essentially linked to the event of key mature hydrocarbon fields, which supply substantial alternatives for development. These embrace Nsiko Subject (OML 145), Bonga Southwest/Aparo Subject (OML 118) and OML Egina South Subject (OML 130). These fields, together with others in improvement, kind a elementary a part of Nigeria’s long-term technique to extend manufacturing capability and maximise its reserves. Nigeria targets oil and condensate output of two.06 million barrels per day (bpd) for 2025 and a pair of.6 million (bpd) in 2026.

These days, there have been concerted efforts to leverage this endowment and increase Nigeria’s economic system, via engaging incentives to traders. For example, on February 28, 2024, President Bola Ahmed Tinubu signed three Government Orders as a part of a authorities initiative to reinforce funding alternatives within the nation’s oil and fuel sector. The goal was to enhance the effectivity and attractiveness of the sector, with deliberate incentives for oil and fuel improvement, together with measures to stop native content material bottlenecks from hindering improvement and agency directives for lowering contracting prices and timelines to reinforce world competitiveness and obtain a better fee of return on investments. This marked a big step in a transformative agenda aligned with stringent worldwide requirements and commitments.

Given its mandate, the NUPRC concluded the 2022/2023 licensing rounds and initiated the 2024 licensing spherical which it supervised from begin to end. This period presents vital alternatives for home and worldwide traders in Nigeria’s hydrocarbon business. The rounds had been designed to align with world sustainability targets, guaranteeing that Nigeria’s oil and fuel improvement meets each financial and environmental requirements. The Fee, in keeping with the PIA, launched complete reforms and developed a regulatory framework geared toward modernising licensing processes, enhancing stakeholder engagement and guaranteeing environmental sustainability.

The goal, mainly, was to draw each native and worldwide investments that will drive development and innovation. The Fee issued a licensing spherical guideline and revealed a plan for the blocks on provide. The 2024 spherical featured a number of blocks chosen throughout diverse geological terrains – from the promising onshore basins to the profitable continental cabinets and the unexploited depths of deep offshore basins.

To facilitate a clean licensing course of, there was a necessity for a visual roadmap for traders. NUPRC, the business’s lead regulator introduced the Licensing Spherical, which enthroned a pre-qualification course of the place corporations needed to reveal technical and monetary capabilities, facilitated technical and business bid submissions, evaluated bids and hosted Bid Conferences. It subsequently supervised aggressive bidding processes in keeping with these provisions. What follows is the award of licenses or leases and periodic assessments of the awardees.

The important thing targets of the licensing spherical embrace: Rising the nation’s oil and fuel reserves via aggressive exploration and improvement, boosting manufacturing whereas increasing alternatives for fuel utilisation throughout the worth chain, enhancing vitality safety and financial development, attracting investments whereas creating employment alternatives and enabling know-how switch and optimising the worth of petroleum belongings, and guaranteeing sustainable improvement of Nigeria’ untapped potentials.

The 2024 Licensing Spherical was distinctive in some methods. It featured investor-friendly phrases, streamlined allocation, enabled collaboration for native content material improvement and ensured sustainability commitments. Particularly, native entrepreneurs had been assured of tax incentives, entry to assets and capability constructing, amongst others.  Launched in Might 2024, the train supplied twenty-four (24) chosen blocks spanning onshore, shallow water and deep offshore terrains. Complementing these had been the seven deep offshore blocks from the 2022 Mini Bid Spherical, bringing the entire to thirty-one (31) blocks.

A number of new corporations entered the 2024 bidding course of and gained bids, even towards long-standing and outstanding entities. These embrace Sifax and Royal Gate Consortium, Oceangate Engineering and Oil and Fuel Restricted, Applefield, First E&P, MRS Oil and Fuel Restricted, Hakilat Oil and Fuel Consortium Restricted and Biswal Oil and Fuel Restricted, amongst others. This displays elevated curiosity within the nation’s oil and Fuel sector following regulatory adjustments.

Engr. Komolafe had maintained that the train was anticipated to be a big success for Nigeria, representing a serious step towards rising the nation’s oil and fuel reserves via proactive exploration and improvement efforts. This initiative aimed to reinforce manufacturing, develop alternatives for fuel utilisation and promote complete improvement throughout the upstream worth chain. It additionally offered an opportunity to reaffirm Nigeria’s dedication to openness and transparency, in alignment with the ideas of the Extractive Trade Transparency Initiative (EITI).

On a worldwide scale, the Licensing Spherical is certain to learn all stakeholders and, in the long term, contribute to sustained vitality sufficiency. Notably, the method for the Licensing Spherical was designed with a give attention to world vitality sustainability targets. Implementation is focused to deal with not solely technical and business components however emphasise methods, processes and actionable plans that align with net-zero carbon emission targets, the elimination of fuel flares, and general environmental, social and governance (ESG) concerns.

Whereas acknowledging the fact of vitality transition and Nigeria’s readiness to capitalise on the alternatives arising from the evolving panorama, Nigeria sleeps properly acknowledging that latest world occasions recommend the continued relevance of fossil fuels as a elementary part of the worldwide vitality combine properly into the longer term, even past the established 2050 targets for reaching net-zero carbon emissions.

The Nigerian 2022/2023 and 2024 licensing rounds subsequently represented a elementary alternative for funding within the oil and fuel sector, with a roadmap to draw native and worldwide gamers.

Akpandem James, a communication specialist, is a Fellow of the Nigerian Guild of Editors.