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FG embarks on accelerated revenue drive through lease renewal

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Oil rig

Following a legislative inquiry into lease renewal, industry regulator, the Department of Petroleum Resources (DPR), has reiterated that it followed due process in validating licences for oil and gas prospecting in Nigeria.

The agency, not wishing to join issues with the Senate which instituted a probe of its activities in licence renewal, said it had, in 2016, commenced an early lease renewal programme.

A document made available to The Guardian yesterday, explained that the programme “is part of the Accelerated Revenue Generation Initiative of the HMSPR (Honourable MInister of State for Petroleum Resources) and the DPR, to shore up government revenue and facilitate investment flows in the upstream sector of the oil and gas industry.”

The regulator said “the programme draws its legal basis from the Petroleum (Drilling & Production) Regulation 1969 as amended in 2001.”

The Senate, on Wednesday, said Nigeria stood the risk of losing $10billion in the ongoing lease renewal being undertaken by the Ministry of Petroleum Resources, and DPR.

The House of Representatives, last year, also opened an investigation into what it described as revenue leakage in respect of ownership, distribution, and authenticity of oil licences, relinquishment, signature bonuses, and bidding process.

Last year too, the Nigerian Extractive Industry Transparency Initiative (NEITI), in its report, alleged that past upstream licensing processes in Nigeria fell below best practices, and failed to secure maximum value for the country’s assets.

Many calls and text messages to the Director of Press in the Petroleum Ministry, Idang Alibi, to respond to some of the issues raised by the legislators were ignored.

Ordinarily, the government uses the opportunity of acreage renewal to review in order to enhance revenue and maximise value for oil and gas assets, many of which licences were issued during low international oil prices.

In doing this, licences are renewed to reflect current economic and operating conditions as well as market international realities.

It is also an opportunity to enforce voluntary relinquishment of oil blocks that had been idle for the duration of the licences, or revoke them outright.

For instance, in April, DPR approved 14 out of 17 OPL licences applied for by Shell, and revoked three others.

Sometime in the past, government, in effort to tackle scarcity of refined petroleum products and stem importation, tried to enforce a policy that international oil companies (IOCs) seeking renewal of their acreages must first demonstrate serious commitment to investing in private refineries, which never worked.

Also, to maximise the asset, the size of the acreage or oil block could be reduced, and the newly carved out blocks put up for sale, as was the case in April, with Shell’s OML 11, which was regarded as being too large at 2,800sq km, and therefore split into three. Shell was left with one part of the three acreages, as shown in the 2016 guidelines by the DPR made available to The Guardian.

It is uncertain what type of acreage renewal the legislators are worried about, however, the Nigerian government awards a number of oil licences either through competitive bidding or discretionary allocations based on the sentiments of a sitting president. The validity of such licences range from five to 20 years.

Petroleum licensing or exploration licence is the act of giving licences (geographical areas at land or sea) to a company, or a joint venture allowing them to search for commercially feasible deposits for the extraction of petroleum.
An Oil Prospecting Licence (OPL) is granted by the government to prospect for petroleum. An Oil Mining Lease (OML) is granted by the government to search for, win, work, carry away and dispose of crude.

An OML is usually granted only to the holder of an OPL, and these categories of licences are usually held by the big industry players – Shell, Mobil, Chevron, Total and Agip, mostly considered the IOCs.

But when the oil find is seen as not commercially viable, these assets are disposed of in smaller sizes for marginal fields operations, where the indigenous companies are now making a lot of foray in exploration and production.

To boost investigation, the lawmakers summoned the Minister of State for Petroleum Resources, Ibe Kachikwu, and the management of DPR, in order to identify appropriate measures to correct the anomaly.


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DPRIdang AlibiNEITI
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