• Fri. Sep 29th, 2023

Renewal of NNPC’s PSCs with IOCs will help restore Nigeria’s crude oil output, says Kyari


Aug 26, 2022

By Bassey Udo

The recent decision by the Nigerian National Petroleum Company Limited (NNPC Limited) to renew its Production Sharing Contracts (PSCs) with its joint venture partners was strategic to the realization of its aspirations and targets, the Group Chief Executive of the national oil company, Mele Kyari, said on Thursday.

Kyari who spoke at the 2022 Strategic International Annual Conference of the National Association of Energy Correspondents (NAEC) in Lagos on Thursday, said NNPC’s PSCs renewal deals would help the country restore its oil production capacity to about 2.1 million barrels per day per day.

Recently, the NNPC and some of its JV partners signed the revised PSCs after years of protracted dispute over the terms of the 1993 contract stalled production on existing concessions as well as new investments in the country’s oil and gas industry.

During the agreement signing ceremony, the JV partners also signed the Dispute Settlement agreements as well as Escrow/Settlement agreements to signifying the end to the lingering disputes over contract terms since 2007.

Some of the JV partners that signed the revised agreements included Chevron Nigeria Limited (CNL), 2021 which is the operator of oil mining licenses (OML) 128; South Atlantic Petroleum Company (SAPETRO), Texaco Nigeria Outershelf Nigeria Limited; Texaco Nigeria Outershelf Nigeria Limited, operator of OML130; Shell Nigeria Exploration Production Company (SNEPCO), operator of OMLs 132 and 133; Esso E&P, operator of OML138 on behalf of ExxonMobil.

Kyari, who lamented over the country’s declining production capacity as a result of the insecurity in the Niger Delta region, said the renewal of the PSCs, which has a lifespan of 20 years each, would help deepen investments and development of the country’s deepwater petroleum resources towards realising NNPC’s triple mandate of ensuring energy supply security, sustainability, and accessibility.

“The new PSC’s will encourage NAPIMS to collaborate with PSC Contractors to put in place the essential final investment decision parameters for major deepwater projects in the country, including Agbami Gas Projects operated by Chevron; Owowo and Bosi development by ExxonMobil; Bonga North and Bonga Southwest Aparo, Bolia-Chota by SNEPCO, and Preowei Project by TotalEnergies,” he said.

Prior to the breakout of the COVID-19 pandemic, which culminated in the lockdown of businesses and significant scaling down or outright shut down of operations in the oil and gas industry worldwide, Nigeria’s oil production capacity rose close to about 2.436 million dollars barrels per day.

With COVID-19, which triggered a global economic recession and decline in the productivity of companies, the country lost almost half of its oil production capacity, with daily output dropping to about 1.1million barrels.

But, speaking on Thursday, Kyari gave a renewed hope that the country was on the way to regaining her lost capacity, despite new challenges in the form of the growing incidence of crude oil theft and sabotage of oil pipelines.

“In the last three weeks, we have settled issues with our partners. We have met the terms and conditions in the PIA (Petroleum Industry Act),” Kyari said.

“Although our oil production is very low, mostly because of the security challenges in the Niger Delta region, we are working collaboratively with stakeholders to address these issues.

“If we resolve the security issues, we will regain our capacity and get back to about 2.1 million barrels output per day,” he said.

On its part, the upstream petroleum industry regulator, the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), said it was doing everything within its regulatory powers to support the drive to restore the country’s oil and gas production capacity.

The Commission however declared that the era of discretional award of oil blocks and marginal oil fields in the oil and gas industry was gone for good.

The Chief Executive of NUPRC, Gbenga Komolafe, said provisions of the PIA signed into law by President Muhammadu Buhari on August 16, 2021, was very clear on the issue.

Komolafe, who was represented at the event by the Head, National Oil and Gas Excellence Centre (NOGEC) of the Commission, Abel Nsa, said the conclusion of the 2021 Marginal oil field award marked the end of any such exercise in the history of the country’s oil and gas industry.

He said the marginal field award was initiated to increase the participation of indigenous companies in the upstream sector and boost the country’s local content capacity.

Also, Komolafe said the exercise was targeted at creating employment opportunities and encouraging increased capital inflow to the sector.

Reviewing the progress so far with marginal field licensing exercise, the NUPRC CEO said since its inception, a total of 30 oil fields have been awarded, with 17 currently producing.

Details of the allocation of the fields to indigenous operators showed two fields were awarded in 1999; 24 in 2003/2004, while one each was awarded in 2006 and 2007, and two in 2010.

“10 years after, in 2020, 57 oil fields were put up for bidding,” he said.

With the conclusion of the exercise, he said the issuance of Petroleum Prospecting License (PPL)to the deserving awardees ushered in a new dawn for the country’s indigenous operators.

“They have to hit the ground running in developing their awarded assets in line with industry best practices and to take full advantage of the increasing crude oil price in the international market,” he said.

Komolafe said Section 94(9) of the PIA states that “No new marginal field shall be declared under this Act”.

Under the PIA, the Minister of Petroleum Resources, with the NUPRC, are authorised to award petroleum prospecting licenses (PPLs) on undeveloped fields based on an open, fair, transparent, competitive, and non-discriminatory bidding process in line with Sections 73 and 74 of the Act.

On the implementation of the PIA, he said the Commission had issued six priority regulations, and namely those on Nigeria Upstream Host Communities Development, Nigeria Upstream Fees and Rents, Nigeria Royalty, Conversion and Renewal, Domestic Gas Delivery Obligations and Licensing Round.

He said the Commission was also in the process of issuing additional seven regulations in the second phase of the exercise in consultation with stakeholders, in line with Section 216 of the PIA.

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