News - Oil & Gas - March 7, 2022

2021 marginal oil field bids: Why winners are yet to take possession of the assets

NUPRC approves 60 days extension grace period for awardees to appoint special purpose vehicles to complete the bid process

By Bassey Udo

Winners of the 58 marginal oil field licenses awarded under the 2021 marginal oil licensing bid round are unable to take possession of their assets months after due to the complex and cumbersome model adopted in the bid exercise, the Chief Executive of the Nigerian Upstream Regulatory Commission (NUPRC), Gbenga Komolafe, has said.

Consequently, the Commission has granted a 60 days extension as grace period for awardees to remedy their defaults and progress with the appointment of their Special Purpose Vehicles (SPVs) despite that the time provided in their letters of award for that exercise has since expired.

Those who fail to take advantage of the grace period to resolve all issues delaying their completion of the bid process risk having their awards withdrawn.

The NUPRC has therefore appealed to the bid winners to show understanding and cooperate with the regulator to resolve the contentious issues thrown up after the awards in May 2021, prior to the commencement of the Petroleum Industry Act (PIA) 2021.

Komolafe, who was reacting to reports of frustrations by some of the award winners, blamed the situation on ‘inherited problem’ that resulted from the complex model used in conducting the bid exercise.

The model adopted in conducting the bid and awarding equities, the Commission boss explained, merged strange bedfellows and asked them to work together on the same oil fields.

“This became a problem, as it was difficult for some of them to agree on certain terms and conditions, because of their incompatible and incongruent backgrounds and capacities,” Komolafe lamented.

“The development has since slowed down the commencement process and achievement of the goal for which the exercise was meant to achieve,” he added.

Acknowledging the economic impact the resultant delay in completing the process was exerting on the awardees following their inability to take possession of the assets, Komolafe sympthised with the awardees, particularly those who have already paid their signature bonuses.

The situation, he said, has also affected the country’s economy which has been denied the expected income from increased crude oil production and taxes that would have accrued from the operational activities of the awardees.

He said the NUPRC has been doing everything within its capacity to resolve the matter in the interest of parties involved in the transaction.

Describing the model adopted in the bid as “complex and complicated,” the CEO blamed it as the major cause of the inability of the awardees to effectively proceed towards the process of oil production.

“On inception in October 2021, the Commission prioritised the resolution of the issues thrown up in the process and has made remarkable progress in that direction,” he said.

When it became apparent that the fallouts of the cumbersome model used were detrimental to the objectives of the award exercise, Komolafe said NUPRC moved to resolve the situation by setting up a technical team to help fix the issues identified.

The technical team, he said, has so far held several meetings and workshops in both Lagos and Abuja with the aggrieved parties with the aim of resolving the contentious issues, particularly that of putting in place of the SPVs to help firm up the partnerships that would kick off the joint operatorship of the assets.

After the series of meetings and consultations on the issues, and having reviewed the circumstances and noted the issues involved, Komolafe said the regulatory authority has asked the awardees to exercise patience and understanding while the issues created by the model they willingly consented to ab initio were being addressed.

To demonstrate the Commission’s understanding of the situation and its willingness to help the awardees find solutions, the CEO said a further 60 days grace period has been granted to them, to remedy their default as provided for under section 97(1)(b) of the Petroleum Industry Act (PIA) 2021.

Such remedies would allow the awardees to progress with the SPVs, despite that the time provided for them under their letters of award has since expired.

Komolafe warned that those who fail to take advantage of the extension and comply risk having their awards withdrawn as the NUPRC would soon commence issuing Petroleum Production Licenses (PPL) to SPVs upon finalisation of the operational guidelines in compliance with Section 94, Sub-section 2 of the PIA 2021.

Komolafe emphasised that the Commission was determined to boost the country’s oil production capacity, promote indigenous participation in the country’s oil and gas industry and provide opportunity to gainfully engage the pool of high level technically competent Nigerians in the upstream oil and gas sector.

He said the Commission was determined to tackle with all necessary and available capabilities all issue that have the tendency of disrupting, limiting or stalling the commencement of the capacity enhancement process in the oil and gas industry.

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