The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has set a deadline of two weeks for parties involved in the ongoing oil and gas reinvestment and divestment process in the country to choose from two options and revert within 14 days.
The aim of the deadline is to ensure the expeditious completion of negotiations, minister’s consent, as well as regulatory approval. The process involves 26 blocks, and the companies involved are Nigerian Agip Oil Company (NAOC), Mobil Producing Nigeria Unlimited (MPNU), Equinor, and Shell Petroleum Development Company (SPDC).
Speaking at an industry dialogue in Abuja organized by the NUPRC to trash out pending issues hobbling the completion of the process, Chief Executive of the commission, Mr. Gbenga Komolafe, stated that the meeting was necessary to give insight and guidance to the process.
The commission proposed a short-term option that would see the four ongoing deals signed off on by June or a long-term option that would extend the conclusion of the deals to August. The regulatory body has laid a framework of requirements for divestment, which must be met by the International Oil Companies (IOCs). The commission has engaged two leading global oil and gas decommissioning consultants, S&P Global Commodity Insights (SPGCI) and Boston Consulting Group (BCG), to carry out due diligence on the assets to be divested.
The NUPRC has now laid out a framework of requirements for divestment that must be met by the IOCs. The framework consists of seven cardinal pillars, including technical capacity, financial strength, legality of the entity, adherence to decommissioning and abandonment regulations, compliance with the Host Community Trust/Environmental Remediation Fund, resolution of all industrial relations and labor issues, and data repatriation by the divesting companies.
The commission proposed that the divesting entities should either agree to the grant of ministerial consent to the divestments, on the condition that they would retain the liabilities until its investigation was concluded, and the liabilities allocated to the proper party. Alternatively, the entities could agree that ministerial consent would not be granted until it had identified and assigned all liabilities to the capable party.
Komolafe stated that the requirement to sign an undertaking or waiver was solely aimed at preventing any unwarranted financial obligations from falling back on the federal government. He emphasized that the commission was dedicated to ensuring that investment processes are smooth, transparent, and efficient.
The NUPRC has listed a short-term option that would see the signing off of the four ongoing deals by June or a long-term option that would extend the conclusion of the deals to August. The commission expects the divesting parties to indicate their preferred option and issue the applicable instrument within two weeks of the date of the workshop. The commission is eager to close the divestments within the shortest timeline upon the receipt of any of the required instruments.
The blocks proposed to be divested have an estimated total reserve of 8.211 million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas, and 46,604 billion cubic feet of non-associated gas. The current average production from the blocks is 346,290 bpd, with NAOC’s 28,018 bpd, MPNU’s 159,378 bpd, Equinor’s 36,155 bpd, and SPDC’s 122,739 bpd. According to Komolafe, the blocks have the potential to significantly boost national oil production, which would benefit all stakeholders.
The NUPRC's regulatory goal is to ensure that parties in the divestment process conform to the approved divestment guidelines, and the commission will ensure that the companies that take over the blocks have the necessary financial resources and possess the technical expertise required. Furthermore, the NUPRC chief executive maintained that it will ensure the inherent environmental, host communities, and end-of-life liabilities, including decommissioning liabilities, are accurately identified and assigned to the party best equipped to bear the associated risks.
In their separate speeches, the divesting companies and the intending buyers commended the NUPRC for publishing clear guidelines to getting through the divestment process. The Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Dr. Ogbonnaya Orji, who spoke at the event, stressed that transparency was key in the process of divestment, noting that NEITI was following the matter closely.
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