NIGERIAN UPSTREAM PETROLEUM REGULATORY COMMISSION (NUPRC)
ENGR. GBENGA KOMOLAFE FNSE
“POST PIA: REGULATION AND EVALUATING SECTORAL IMPACT SO FAR”
I am delighted and honoured to deliver this Special Industry Address to an esteem audience of media practitioners, industry professionals and critical stakeholders in the Nigerian Oil and Gas industry, at this year’s edition of the annual conference of the Association of Energy correspondents of Nigeria themed: “Nigeria’s Energy Transition: Enhancing investment opportunities & addressing challenges in oil and gas sector”.
- Ladies and Gentlemen, I would like to start by appreciating the organisers of this event for convening a gathering of energy enthusiasts and providing a platform where we can discuss, in detail, the impact of the PIA on the oil and gas industry in Nigeria today. My sincere appreciation also goes to the leadership and membership of the Nigerian Association of Energy Correspondents (NAEC), your consistency and dedication have been essential in showcasing the growth and development of our industry, proudly announcing to the world that we are the shinning beacon of operational efficiency, safety and indeed every investor’s dream.
- Distinguished Ladies and Gentlemen, the theme of this year’s workshop: “Nigeria’s Energy Transition: Enhancing Investment Opportunities & addressing challenges in the Oil and Gas Sector”, is apt, as it provides the instance to re-assess our preparedness for energy sustainability and value optimization in the Nigerian oil and gas sector. My address today will highlight the impact of the Petroleum Industry Act 2021 (PIA) on the sector from a Regulatory perspective.
- As you may be aware, the PIA was enacted to provide a fresh legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry consistent with modern operational and administrative realities. The Act empowers the Nigerian Upstream Petroleum Regulatory Commission (The Commission) to perform the role of technical and commercial regulator in the Upstream petroleum sector, monitoring activities in a manner that will ensure sustainable hydrocarbon exploration and production in a manner that ensures optimal return on revenue for all stakeholders. The PIA also introduced incentives aimed at driving the growth of our nation’s reserves in a bid to attract more investments to the sector and boost our daily production even in this period when the world clamours for a shift in the global energy dynamics.
- Distinguished guests, Ladies and Gentlemen, conferences such as this provide a unique platform to discuss strides made by our nation to ensure energy sufficiency, our journey towards Energy transition as well as the attendant changes to our energy economy. It suffices to note that in addition to our huge hydrocarbon reserves, Nigeria is blessed with potentials for blue energy, solar, wind, biomass as well as other sources of renewable energy thereby providing the right mix in the energy transition regime.
- Distinguished guests, you will agree with me that the Petroleum Industry Act (PIA) 2021 has set out a framework to enhance the business landscape of Nigeria’s petroleum industry, as it has provided a more transparent, efficient and investment-friendly regulatory framework for the industry. This renewed disposition reflects the nation’s readiness to attract local and international investors in the oil and gas space.
- Ladies and Gentlemen, you will recall that Section 6 of the Act enumerated several objectives of the Commission as the upstream petroleum regulator. Drawing from these objectives, our regulatory focus has been, amongst others, to increase Nigeria’s Oil and Gas Reserves and Production rates; develop a transparent approach to hydrocarbon accounting as well as to attain operational efficiency by producers. Furthermore, in adherence with the provisions of the PIA, the Commission is poised to ensure peace and harmony in host community environment that will guarantee seamless operations in the industry, contribute to reducing unit operating cost, create sanity and predictability while attracting investment opportunities. The NUPRC is also committed to ensuring safe operations in the upstream petroleum sector thus enabling Maximum Economic Recovery through enhanced resources management and asset stewardship.
- To achieve these, we have developed priority regulations to provide meaning to the intent of the Act, hence creating a predictable regulatory environment for would-be investors. So far, 23 Regulations have been developed out of which 12 have been gazetted and published, 5 have been uploaded on the Commission’s website for stakeholder comments and 3 have been reviewed by Federal Ministry of Justice completion while another 3 are awaiting review by the Ministry.
- In consideration of these strides taken by the Commission since inception, it is imperative that we take a step back to appraise our performance so far in uplifting the industry and ensuring energy sustainability in the country. Distinguished Ladies and Gentlemen, permit me to use this medium to reel out several strategic initiatives which have been embarked upon and their benefit to the industry and the nation at large:
- Initiatives to Increase Oil and Gas Production
- Completion of the 2020 Marginal Field Bid Round: The additional appraisal and developmental activities to be carried out as part of the Marginal Field process, is critical to shoring up our reserves and production volumes. Accordingly, award of Petroleum Prospecting licences (PPL) under the 2020 Marginal Field Bid Round exercise was carried out promptly and we have resumed immediate regulatory oversight to ensure early field development.
- Implementation of the Drill or Drop Provision: The Commission commenced a comprehensive review of assets which have been undeveloped by operators. Such assets will be placed in a basket and then offered to willing and qualified investors with the capacity to explore, develop and produce the block(s)/field(s) in a timely, efficient, safe, and environmentally friendly manner.
iii. Initialisation of the 2022 Mini-Bid Round: The ongoing mini bid round for seven (7) Deep Offshore Petroleum Prospecting Licences (PPLs) will boost the Nation’s Reserves as well as bring about anticipated benefits to the Nation and other stakeholders.
- Other initiatives adopted by the Commission to increase oil and gas production include the reactivation of shut-in wells, frontier basins exploration, streamlined approval stages for field development plans, well intervention programmes and so on.
- Reduction in Unit Cost per Barrel and Increase in Government revenue.
The Commission is committed to ensuring a significant reduction in the cost of doing business in the upstream petroleum industry. Following an in-depth comparative analysis between the Unit Operating Cost (UOC) in Nigeria and those obtainable in other climes, we have commenced the development of cost studies and benchmarks to ensure an improvement in the cost efficiency of our upstream petroleum operations, in accordance with Section 8 of the Petroleum Industry Act 2021. The NUPRC has also began a review of all Crude Handling Agreements (CHA) with a view to entrenching openness and competitiveness, thereby reducing the cost of production while increasing government revenue from the sector.
It is noteworthy that in the year 2022, using the strategies listed above, the Commission outperformed its revenue collection target by 18.3%.
- Enhancement of Transparency in the Sector
Ladies and Gentlemen, transparency in hydrocarbon accounting is essential in ensuring maximum value derivation by both the Government and stakeholders. It is essential to ensuring security of investments made by our financial partners. We have prioritized measurement accuracy across the sector and have made it a mandatory requirement by all operators. Leveraging the provisions of the PIA, the Commission has developed a regulatory framework to arrest all incidences of metering inefficiencies and inaccuracies.
Additionally, the Commission has introduced the Advance Cargo Declaration regime in upstream petroleum operations to curtail export of stolen crude oil by ensuring that Crude Oil and Gas cargoes exported from Nigeria will have a unique identifier that confirms all documentation as regards the exported consignment. This implies that any cargo without the unique identifier becomes tagged as illegitimate. This, by no small measure, enhances transparency in our export operations. Furthermore, Ladies and Gentlemen, NUPRC has deployed key resources to the Special Investigative Unit of the Commission to forestall any cases of sharp practices by operators in the sector.
- Ensuring climate friendly operations in line with Energy Transition Agenda
Distinguished guests, the global drive towards energy transition. In 2021, the Intergovernmental Panel on Climate Change issued a stark warning to the global community to reduce emissions by 45% in 2030 and reach net zero by 2050 in order to limit global warming to relatively “safe” levels of 1.5°C – 2 °C of pre-industrial levels. Indeed, the world is fast moving to a carbon neutral future and as part of our Nationally Determined Contributions (NDCs) policy submitted to the United Nations Framework Convention on Climate Change (UNFCCC) ahead of the 26th Conference of Parties (COP26) summit in Glasgow, Scotland 2021, Nigeria aims to cut fugitive methane emissions from the oil and gas sector by 60%. Accordingly, we have developed guidelines on the management of fugitive methane and GHG emissions in the upstream sector to drive the emission reduction and mitigations targets of the National Determined Contributions (NDCs). Furthermore, we have established the Energy Transition and Carbon Monetisation Regulatory Unit within the Commission to drive the carbon monetisation efforts of the upstream sector.
- Relaunch of the Nigerian Gas Flare Commercialisation Programme (NGFCP)
The Gas flare commercialisation Programme is aimed at driving Nigeria’s target to end routine gas flaring by 2030 in support of the Nigeria Energy Transition Plan (ETP). The Programme aims to create value from hitherto wasted gas resources. Though initially launched in the year 2016, the Commission relaunched the NGFCP in the year 2022 to aid in curbing the environmental menace of gas flaring while supplying gas to the rapidly growing market.
We have partnered with relevant global players to leverage the carbon credit market mechanism thus improving the bankability of projects under the umbrella of the NGFCP.
- Implementation of Host Communities’ Development Trust (HCDT)
To foster peaceful and harmonious relationship between host communities and oil companies, Chapter 3 of the PIA 2021 provided for the establishment of the HCDT. The Act provided distinct roles for all stakeholders including the Commission, Settlors, and Host Communities. We are focused on working with host communities and other stakeholders for the effective implementation of the Host Community Development Trust (HCDT). Distinguished Ladies and Gentlemen, the NUPRC has developed Regulations and an Implementation Template for the promotion of accountability and transparency in the management of the HCDT and ultimately to ensure that business investments in the oil and gas sector are adequately protected while safeguarding the safety and sustainability of the environment.
Look Ahead
- Dear Friends, since its establishment, the Commission has made deliberate efforts to achieve its mandates in line with the provisions of the PIA. You will agree with me that the various initiatives reeled out earlier highlight deliberate actions taken by the Commission in this regard. These initiatives are geared towards unlocking the full potential of Nigeria’s upstream petroleum sector and as a nation, we have already begun reaping the rewards.
- Over the next few months, we are positive that we shall record a marked increase in our national oil and gas production volumes. Quick-win strategies such as our aggressive drive to reactivate shut-in and declining wells will boost production prior to the onset of more long-term initiatives like operations from the new Marginal Field awardees. Also, the Commission is working alongside security operatives to bring a halt to the menace of crude oil theft, which has over the years contributed to a huge loss of production.
- Distinguished Guests, it is also important to state that with the commencement of projects under the NGFCP, we expect a rapid decline in gas flaring rates and an increase in gas supply to our domestic market.
- We would be leveraging on technology to achieve our mandate by ensuring all our processes become fully automated, transparent, and accountable in line with the tenets of the PIA.
Closing
- Distinguished Ladies and Gentlemen, permit me to conclude by stating that the Commission shall continue to collaborate and engage with all stakeholders in a timely manner for the sustainable and environmentally safe development of our nation’s hydrocarbon resources with the goal of ensuring a mutually beneficial environment for Nigerians and all investors in the industry.
- The Commission continues to welcome comments from, the participation of, and collaboration with the industry and other critical stakeholders; this is the only way we can ensure that we are regulating in alignment with the yearnings and aspirations of our key stakeholders.
- To my dear Energy Correspondents, I say keep the flag of the industry flying high – this is the beginning of an eventful period for the industry, and I know that I can count on your support to make it both memorable and momentous.
Thank you for your kind attention.
