Worries over vandalism, insecurity as Nigeria awards 49 oil licences

• Generates N200b, $7m from 2020 marginal bid round
• Stakeholders eye reserves, oil production increase as IOCs pledge support
• FG moves to address host community challenges with new regulations

The over 100 Nigerian companies offered 49 Petroleum Prospecting Licences (PPL) by the Federal Government, yesterday, may need to get ready for tough times due to concerns over vandalism, insecurity, funding and harsh business environment.

Coming at a time when International Oil Companies (IOCs) are exiting the country for the same reasons, stakeholders who converged on Abuja for the historic event (which took decades to come), said the new oil fields could deplete crude oil reserves to 40 billion barrels and push stagnating daily production to three million barrels.

At the occasion, hosted by Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the Federal Government disclosed that over N200 billion and another $7 million revenue was generated through the process, which initially put up 57 oil fields for award.

Marginal fields are carved out of existing permits of mainly IOCs. In June 2020, the Federal Government put up 57 fields in a bidding process. Previously, 30 fields were awarded with 17 currently producing.

While regulation on host community was equally launched at the event, Minister of State for Petroleum, Timipre Sylva, described the development as a window to improved crude oil reserves and production, and a way to fostering peace in the Niger Delta region.

He anticipated job creation through the new blocks, noting that the marginal fields scheme under the Petroleum Industry Act (PIA) now directly offers PPL licences to indigenous oil companies, a shift from the previous experience.

He said: “This is a complete departure from what used to be, where the marginal field owners had no licences. This marks the beginning of a new era for us in the oil and gas sector, and I urge the awardees of the PPL to take full advantage of the opportunities being presented to exploit, develop, and bring the assets to productive use.”

“As you develop your assets with the Special Purpose Vehicles (SPVs), ensure that good oil field practice is employed, environmental considerations and community stakeholders’ management are not neglected”

According to him, onboarding of new oil and gas players in the petroleum sector is part of government’s policy to encourage more indigenous participation in petroleum operations.

Chief Executive of NUPRC, Gbenga Komolafe, urged the awardees to hit the ground running by developing their assets in line with industry best practices.

He pledged that the commission would offer support by providing a predictable and enabling regulatory environment to operators.

He said disruptions in oil production, owing to sabotage, theft, and other operational challenges rob the country of benefits in the ongoing price upswing.

“Therefore, potential licensees are urged to take advantage of the current market realities and quickly bring their fields to production.”

One of the awardees and former President of Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor, said awardees would struggle if government does not solve the challenges of crude theft, vandalism, insecurity to life and property and harsh business environment.

He said: “It should be a national emergency, given the contribution of oil to our economy. If we want this country to survive, if we want to be able to provide services, medicals, education and other things for the populace, solving the challenges of theft and vandalism of pipelines must be prioritised.”

Lamenting the dwindling crude oil production in the country, Okoroafor insisted it is not the role of oil companies to solve the issue.

He said the current bid round remains the most transparent, adding that some of the issues that affected previous marginal fields licences were addressed, including forceful joining of companies.

Recall that in the first four months of this year, data from the Nigerian National Petroleum Company Limited showed that the country was losing about 250,000 barrels of crude oil per day to theft.

This did not only bring the total loss to about $1.5 billion; it also became the biggest threat to national development and the environment.

Some of the awardees are: Matrix Energy, Suntrust Oil, Petrogas Energy, Somora, Moore Oil, Genesis, Adoba Plc, Petrodeph and Seven Wave.