To enable Nigeria to realize its potential in the petroleum industry amid the quest for the global energy transition to achieve net zero emissions, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has unveiled a 23-points regulatory policies and actions for 2024-2026.
In the three-year regulatory action plan unveiled by the Commission Chief Executive, Gbenga Komolafe, the NUPRC said the public policy document would direct prospective investors on the priorities and focus of the industry over the period.
The plan highlights the regulatory approaches and actions to be implemented between 2024 and 2026 in furtherance of the Commission’s mandate as the apex regulatory agency for Nigeria’s upstream petroleum industry.
Komolafe said the plan was within the context of the global energy transition in response to issues such as climate change concerns, challenges faced by the fossil fuel industry and the drive towards a just, inclusive, equitable and balanced energy transition to net zero emissions.
The agenda, which highlights the challenges faced by Nigeria, Africa and other resource-rich developing economies against the evolving global energy dynamics, stressed the need for energy justice, equity, inclusivity and sustainability.
The CCE said the plan aligned with the provisions of the Petroleum Industry Act (PIA) and Nigeria’s aspirations to meet the global climate goals and national agenda as well as the global objectives on environmental management to optimize the exploitation of the nation’s oil and gas resources.
The Regulatory Action Plan (RAP), the NUPRC Chief said, would proffer solutions to the causes of investment apathy in Nigeria, which include unpredictability in acreage availability through licensing rounds, high cost of development and production, regulatory uncertainty, disruptions in operations due to community conflicts, security challenges and related social issues.
The plan, which builds on the objectives of the Commission’s 10-year Strategic Plan (2023-2033) unveiled in 2022, is expected to also help fix other challenges bordering on fiscal and commercial issues such as contractual bottlenecks and fiscals for offshore and deep-water gas resources and small deep-water accumulation, to help Nigeria build investor confidence and improve global competitiveness.
Although Nigeria’s current crude oil, condensate production as well as gas reserves stand at 36.96 billion barrels and 208.83 trillion cubic feet (TCF) respectively, the CCE noted that the country, along with other countries endowed with oil and gas resources, were facing a serious challenge of declining investments due to local and global realities.
“Despite these challenges and weaknesses, there is need for a firm and clear regulatory agenda for the industry by the regulator. Although young in the eyes of the law, the upstream regulator is ready and prepared to take the bull by the horns, to successfully navigate the challenges and deliver the objectives of the PIA for the benefit of all stakeholders,” the CCE assured.
Details of the plan
Details of the plan would focus on the Implementation of broad-based strategy over the period to entrench new regulations for upstream petroleum operations and administration, in addition to those established since the enactment of the PIA, to establish regulatory certainty and predictability.
Specifically, the plan would establish the policy for future licensing rounds implementation based on modern acreage licensing practices in line with the Regulatory Framework spelt out in Section 73 of the PIA.
Under the plan, the NUPRC said issues of licensing based on predictability of timelines and long-term national economic and developmental agenda; deployment of modern information management systems on resource basins, and management of licensing of acreage based on an acreage management plan, would be covered.
In line with its mandate, the Commission said as the independent regulator of the Upstream Petroleum Sector the policy statement was issued to set out the various Regulatory and Policy actions as well as Key Focus areas in 2024 and the near term, for the upstream oil and gas sector in Nigeria.
From 2024, the Commission said all frontier licensing rounds on opening new oil concessions for exploration and development would have defined objectives, either to raise immediate financing to address other national needs; attract fresh investment challenges; meet exploration or production targets; increase national reserves, or promote Indigenous participation and monetization of gas resources.
Optimizing unit cost of production below $20
In 2024 and the near term, the Commission said it would pursue strategies to optimize the unit cost of production for oil and gas from the current sub-optimal average of $25 and 40 per barrel to below $20 per barrel.
In addition, the plan would promote ease of entry and investment retention, by eliminating barriers such as high signature bonus payments, convoluted assignment procedures, high cost of development and production and restiveness in producing communities.
While optimizing the functionality of automation systems for enhanced efficiency, the Commission said the plan would deploy strategies to encourage and facilitate investment in the industry as well as encourage new entrants, by removing key entry barriers like global concerns on climate change, local content requirements, infrastructure deficit and inadequate local gas market, and access to finance.
To vacate entry barrier associated with huge asset acquisition fees, the Commission said the plan would review regional Signature Bonuses, while ensuring the entry fees associated with all future licensing rounds were competitive in the context of global realities and energy transition imperatives, to advise government accordingly.
To deepen transparency, accountability and elimination of discriminatory regulatory practices, the Commission said it was committed to consider and approve all requests and on operational activities based on clear Key Performance Indicators (KPIs) established in the PIA and the regulations, in line with relevant regulatory guidelines and procedures.
Carbon credit earnings framework
On the implementation of a carbon credit earnings framework for upstream operations, the Commission plans to establish the Energy Transition & Carbon Monetization Division to coordinate industry decarbonization efforts to mitigate the impact of energy transition and sustain investments.
Besides, the Commission would leverage the emerging opportunities in the carbon market based on the requirements for greenhouse gas emissions management in the PIA, with particular reference to refocusing the industry towards decarbonization and taking advantage of carbon finance and funding mechanisms to develop a policy and regulatory framework for carbon credits earning as well as establish the protocol for data management, monitoring, and emissions trading systems.
To accelerate the execution of oil and gas development and production projects, the Commission has plans to fast track end-to-end approval processes, to expedite bringing crude oil barrels to the market.
The Commission plans to undertake the performance review of licenses and leases by enforcing the implementation of the Drill and Drop policy provisions of the PIA and global realities.
To optimize Federation oil revenues, the Commission said that due to the decline in oil and gas production in recent years as a result of security challenges, reduced investments, and energy transition-induced defunding of fossil fuels, the Commission would encourage a renewed production philosophy based on monetized production.
Under the plan, the Commission said it would commence the implementation of the Regulatory Framework for decarbonization and carbon monetization in the country’s upstream operations anchored on the seven pillars of issuance of advisory on best practices, notices, directives, guidelines and regulations.
Optimizing flares-out monetization
To monitor the implementation of the Nigerian Gas Flare Commercialization Programme-awarded sites for optimum flares-out monetization, the Commission said it would focus on project development and the start of beneficial operations in line with its upstream decarbonization drive and national net zero emissions target.
On the implementation of the Host Community Trust Fund (HCTF) and guidance to reduce agitation in the operations areas, the Commission said in 2024 it would establish a framework to ensure established funds embarked on activities in their respective beneficiary communities.
To this end, the Commission said it would collaborate with the Settlors or Trusts and Trustees of the various Trust Funds to institute a quarterly dialogue series with Settlors and Trust Funds to ensure proactive engagements between the Commission, Settlors and Trust Funds on all issues concerning the progressive implementation of Trust objectives.
In 2024, the Commission said it would implement the 100% hydro-carbon accounting project aimed at ensuring that all hydrocarbons produced and exported in Nigeria were efficiently and properly accounted for through reliable and efficient metering systems.
To achieve this, the Commission plans to audit all measurement points, establish a metering plan for all licenses and leases and ensure that licensed metering service providers were deployed by all licensees and leases to carry out metering services in line with the metering regulations.
Again, in 2024, the Commission said it would implement a new regime of production curtailment and domestic crude supply obligation regime based on the Domestic Crude Oil Supply Administration Regulations, 2023, to entrench role delineation and administrative clarity in crude oil production and export accounting as envisaged by the PIA.
Besides, the Commission said it plans to undertake a comprehensive evaluation and periodic assessment of the performance of licenses and leases based on the remodeled annual asset performance review to create value for all stakeholders and align deliverables from the review with global best practices and PIA expectations.
Towards improved domestic refining capacity
To improve domestic refining capacity, the Commission said it would enforce the provisions of Section 109 of the PIA on Domestic Crude Supply Obligation (DCSO) that mandates oil-producing companies to allocate a specific percentage of their crude oil production for domestic refining.
With the implementation of the Domestic Crude Oil Supply Obligation fully operationalized since the regulation was gazetted, the Commission said it would ensure that its alignment with the Nigerian Midstream, Downstream Petroleum Regulatory Agency (NMDPRA) operators and refineries on the operating framework commenced fully in 2024.
Pursuant to an efficient and effective development of the frontier basins to grow reserves and production, the Commission said it would take steps to bolster investors’ confidence by de-risking the hydrocarbon development of the basins, cater for NNPC’s activities in the frontier basins, to complement the meagre private investments in frontier exploration activities.
In addition, the Commission said it would seek government’s approval to direct licensees and lessees to open decommissioning and abandonment Fund (D&A Fund) account with Nigerian commercial banks to ensure cash backing for execution of decommissioning programmes were saved.
To ensure zero tolerance for default in royalty payment, the Commission said it would ensure the appropriate assessment and remittance of royalty as and when due through the enforcement of the provision of the Nigerian Upstream Petroleum Measurement Regulations, 2023 to ensure transparency in crude oil measurement and accounting thereby blocking leakages arising from hitherto inaccurate measurement.
On value creation through effective administration of the approval annual industry work programme, the Commission said it would review the planned activities in the Annual Work Programme as well as Budget and Monitoring of Financial Viability of the industry to ensure alignment with government’s aspirations.
Crude Oil and Gas Pricing
To determine the Crude Oil and Gas Pricing in Contemporary Terms, the Commission said an Oil and Gas Pricing and Value Monitoring Desk has been established to study trends and assumptions and advise in tandem with market realities.
The Desk would carry on market analysis and forecasts to avert undue exposure to Nigeria and industry stakeholders, in view of the significant fluctuation in global crude oil and gas prices at the international market.
To boost revenue generation and ensure the implementation of zero default strategy on payment of royalty, the Commission said it would commence in 2024 the implementation of a new administrative process for the management of royalty payments based on the new royalty regulations.
The new process, the CCE said, would be a Zero Default System that would ensure a 100 percent payment of royalty as and when due without allowance for any default or late payment.
These short- and long-term initiatives would increase revenue generation for the government from the industry, improve the regulatory and operating environment, optimize value, generate jobs, and position the country as a destination for foreign direct investment for the sector.
Komolafe said as a strategy-driven organization, the NUPRC was firmly committed to setting a clear agenda for the Nigerian upstream sector to engender efficiency and effectiveness in line with the PIA and government aspirations for a virile, functional, and profitable oil and gas sector.
