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    NUPRC blames IOCs divestments on crude theft, energy transition

    ByBassey Udo

    Jul 4, 2022

    By Bassey Udo

    The gale of divestments sweeping through the Nigerian upstream petroleum industry is as a result of the massive incidents of crude oil theft and the global quest for energy transition, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) 3has said.

    The Chief Executive Officer of the NUPRC, Gbenga Komolafe, stated this on Sunday at the Independent Petroleum Producers Group (IPPG) dinner to Kickstart the 21st Nigerian Oil & Gas (NOG) Conference & Exhibition in Abuja.

    Speaking on the theme, “IOC Divestments – Nigeria’s Energy Security and Role of the IPPG in the new mix,” Komolafe said the impetus for divestments by the IOCs was attributable mainly to the hostile upstream petroleum environment as a result of the menace of crude oil theft as well as the global response to the advocacy for reduction in carbon emissions.

    As a regulator, he said the NUPRC was aware of the threat posed by divestments of the IOCs to the development of the Nigerian hydrocarbon industry.

    He urged the IPPG and other prospective indigenous players to see the upstream assets divested by the IOCs as an opportunity to invest rather than a threat to the development of the Nigerian upstream petroleum sector.

    The divestment by the IOCs, he noted, was the right time for the indigenous operators to look inwards in the sector to proof the capability of the local content in value addition and optimizing development of the nation’s hydrocarbon resources.

    The NUPRC Chief challenged the indigenous players across the oil and gas value chain to deploy their competencies and ingenuity in promoting vibrancy and capacity utilization in the industry.

    Acknowledging the impact of indigenous companies in the oil and gas industry, Komolafe said they contribute about 30 percent of the country’s crude oil and 20 percent of the gas production, as well as 40 percent and 32 percent of the national oil and gas reserves, respectively.

    Besides, he said seven indigenous companies were currently among the top 20 companies with the highest oil reserves in the country.

    With the prospects that the energy demand across Africa in 2040 would increase by about 30 percent, compared to the current level, Komolafe said the divestment by the IOCs away from Nigeria’s onshore and shallow water terrains present a massive opportunity for new operators of those assets.

    The IPPG, he pointed out, was better positioned to take advantage of the opportunities, to meet the increasing energy demand in the continent, urging them to stay competitive, optimise future energy security and be resilient in their operations in the oil and gas extractive industry.

    “The IPPG should adopt an innovative and pragmatic approach towards operational excellence to include decarbonisation and improvement in cost efficiency; creation of enabling environment with their host communities and utilization of appropriate skills and capabilities.

    “In this new mix, the IPPG is expected to have an increased focus on natural gas exploitation and utilization,” he said.

    In positioning to take the opportunity offered by the IOCs divestments, Komolafe stressed the need for the IPPG to focus on making the necessary investments for gas pipeline infrastructure, gas processing facilities, meeting domestic gas delivery obligations to strategic sectors of the economy, and global gas export requirements.

    On its part, he said the Commission would provide the requisite regulatory support in line with the provisions of Section 52 of the Petroleum Industry Act (PIA) 2021, which encourages the establishment of the Midstream and Downstream Gas Infrastructure Fund.

    Besides, he said the Commission was advocating strengthening the capacity of IPPG through collaboration, strategic alliances, mergers and acquisitions targeted at producing synergies to allow large independents compete with multinationals.

    By their operational roles and business activities in the Upstream, Komolafe said from the Commission point of view, as the Upstream petroleum regulatory body, the IPPG has become a major force in the exploration and exploitation of the country’s hydrocarbon resources for optimum value addition to the Nigerian economy.

    He gave the assurance that the Commission would continue to create predictable and enabling regulatory environment to enhance the production capacity of IPPG in the Nigerian oil and gas industry.

    Reviewing the operational environment in the industry, Komolafe said Nigeria has the largest participation of local independents in the domestic oil and gas industry activities of all petroleum producing countries in Africa arising from the robust local content policy.

    Prior to 1970, he said the Nigerian oil and gas industry was dominated by foreign companies in the upstream and downstream sectors.

    However, with the indigenization policy initiative to encourage Nigerians to participate in the operations of the oil and gas industry, two indigenous companies (Henry Stephens and Nigus Petroleum) were in the 70s and 80s awarded oil blocks.

    Komolafe said Since the 90s, following the introduction of the indigenous operatorship programme, 30 oil blocks were awarded on sole risk basis between 1990 and 2000, and another 24 oil fields awarded through a bidding exercise between 2003 and 2004 under the marginal field operatorship programme.

    Again, under the licensing rounds between 2005 and 2007, indigenous operators participated in the operation of the industru due to the local content requirement, while over 23 assets were divested from by the IOCs between 2009 to date presenting an opportunity for acquisition by indigenous companies.

    Another 57 oil fields were recently put on offer under the 2020 Marginal oil licensing round in which indigenous operators were issued 102 Petroleum Prospecting Licenses (PPLs).

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