Business & Economy - News - Oil & Gas - April 23, 2022

PIA: No automatic pre-qualification for IOCs, others during oil licensing rounds

By Bassey Udo

When the implementation of the Petroleum Industry Act (PIA) 2021 fully kicks in, International Oil Companies and other categories of operators already existing in the country’s oil and gas industry would not be granted any waivers during future oil licensing bid rounds organised by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in the country.

Participants in the consultative forum organised by the regulatory Commission to review the provisions of the Act regarding Petroleum licensing round regulations proposed that there should not be any automatic pre-qualification waivers for any company jostling for allocation of operating licenses for oil assets.

If the proposal is accepted, the implication is that henceforth ompanies with long years of operation and reputation in the country’s oil and gas industry that choose to participate in future oil licensing rounds would subjected to the same conditions with other prospective bidders.

The three days forum, which ended on Friday in Abuja, made the proposal to the Commission to ensure the implementation of the provisions of the PIA guaranteed a level playing field and equal access for all prospective bidders during licensing rounds in the country.

“The proposal is aimed at ensuring that no bidder is allowed undue advantage over others in acquiring the country’s oil assets during future oil licensing rounds,” the draft communique presented to participants on Friday stated.

The proposal was one of the resolutions reached by key interest groups and industry players during the first phase of a series of consultations planned by the NUPRC on the provisions of the PIA.

Other key proposals made by participants in the forum bordered on licensing bid round guidelines, financial capacity of prospective bidders, and criteria for disqualification of prospective bidders, among others.

During the plenary sessions, participants received contributions from the Oil Producers Trading Section (OPTS) of the Lagos Chamber of Commerce and Industry, Total Energies, Chevron Nigeria Limited, Independent Petroleum Producers Group and Niger Delta United Oil Company Limited.

On the issue of automatic pre-qualification of existing operating companies interested in bidding for fresh assets in the industry, the Forum resolved that all bidders for operating licenses would be subjected to the same bid guidelines to be issued by the Commission prior to the commencement of the bid process.

On bid licensing round guidelines, participants resolved that rather than follow permanent guidelines stipulated in the PIA, the Commission shall issue fresh guidelines in respect of any announced bid round spelling out specific terms and conditions guiding the exercise.

In the view of participants, issuing fresh guidelines would allow the Commission to take care of specific peculiarities in the conditions involved in each acreage award.

On the technical and financial capacity of prospective bidders, participants requested the Commission to ensure flexibility in considering these conditions, particularly regarding historical financial records of companies.

Participants said the proposal was informed by their experience in past licensing rounds in which bidding companies participated in the process through the formation of consortia, to establish special purpose vehicles (SPVs) for bids and acquisition of oil assets.

Also, participants urged the Commission to embrace flexibility regarding security, in terms of Parent Company Guarantees (PCG) and other issues acceptable to it, as opposed to reference to PCG only.

Besides, participants said flexibility was equally required for executive reconsideration of the requirement of three years field experience by prospective bidders, saying highly experienced parties in a bid process may be subsumed in a newly incorporated SPV with experience to its name.

In addition, participants proposed that the Commission used the method of weighting the technical and financial capacities of existing producers that intend to acquire new assets, to avoid the problem of inability to develop additional assets by awardees.

On criteria for the disqualification of prospective bidders during bid licensing round, participants sought clarifications from the Commission on the issue of the parameters for the use of indebtedness to the government by a prospective bidder as a criteria for disqualification.

In their view, the Commission should first determine whether reference was about indebtedness to which level of the governemnt, between federal, state and local governments, or upstream industry related debts, or otherwise, materiality of the debt sum, and duration of the debt.

On litigation against the government by a prospective bidder, participants proposed that the Commission should first provide clarification on the parameters for such actions, as a bidder might have a legitimate reason to go into dispute with the government.

By establishing whether the provision was making reference to litigations against Federal, State or Local Government and their parastatals, participants urged the Commission to ensure the issues were filtered by subject matter of dispute, with legitimate disputes likely to be in government’s favour.

On non-compliance with the terms of any license, or agreement with the government, through any of its regulatory agencies – NUPRC or Nigerian Midstream/Downstream Petroleum Regulatory Authority (NMDPRA), participants suggested that both would be accorded same level of vagueness.

Participants equally made submissions on Nigeria Conversion or renewal of oil prospecting licenses and oil mining leases Regulations; Nigeria Royalty Payments Regulations; the Nigerian Upstream Fees and Rent Regulations; implementation of the host community fund in line with Section 235 of the PIA; finalization of the 2020 marginal oil field bid round through issuance of the petroleum prospecting license (PPL) in line with Section 94(2) of the PIA.

Proposals were also submitted by participants on Domestic Gas Delivery Obligations Regulations, and the Nigeria Host Community (Commission) Regulations.

Organisers of the Forum said the next phase in the series of consultations with major players and interest groups, which would deal with the review of other provisions of the PIA, was scheduled tentatively for June this year,.

At the opening of the Forum on Wednesday, the Chief Executive of the Commission, Gbenga Komolafe, said the round of consultations was to prepare the industry for effective implementation of the PIA in line with the Commission’s focus on prioritising regulations to meet set timelines.

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