NUPRC: Nigeria Must Declare Emergency on Oil Theft, Underproduction, Others

*Resolving security challenge will bring back investments to oil sector

Peter Uzoho

Worried by the alarming oil theft, underproduction, high production cost, among others, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has stressed the need for the declaration of emergency on the nation’s oil and industry.

The Chief Executive Officer of NUPRC, Mr. Gbenga Komolafe made the call yesterday in Lagos while delivering his keynote address at the 2022 annual international conference of the Nigerian Association of Energy Correspondents (NAEC).

Similarly, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mallam Mele Kyari, also at the event, stated that the resolution of security challenges in the nation’s oil sector would bring back investments into the industry.
The theme of the event chaired by the Managing Director of Falcon Corporation, Mrs. Audrey Joe-Ezigbo, was “Energy Transition: “Shaping the Future of Nigeria’s Energy Industry, an Appraisal of PIA, Evolving Benefits and Challenges.”

Komolafe, who was represented at the occasion by the Director of the National Oil and Gas Excellence Centre (NOGEC), an arm of the commission, Dr. Abel Nsa, said

apart from the current threat of energy transition to the oil and gas industry, other issues bedeviling Nigeria’s industry included oil theft, security, ageing and decaying infrastructure, amongst others.

Komolafe noted that the challenges of seamless production in the form of rampant crude theft and sabotage of critical infrastructure were still with the country despite several efforts made by the commission and the government.

“The imperative is on Nigeria to declare some sort of emergency for the oil and gas industry. Aside energy transition, other issues bedevil our industry — such as oil theft, security, ageing and decaying infrastructure, amongst others.

“All these contribute to high production costs, which must be minimised. The commission, in line with the spirit of the PIA, will champion urgent access to the industry for all serious-minded players so that unexplored reserves can be tapped into to derive value for investors as well as for Nigeria,” he said.

Furthermore, the commission’s CEO said the agency’s engineering and facilities team would continue to advance and encourage life extension of brownfield assets to extract further value from them, adding that given that most projections foresee oil and gas to be a significant part of the global energy mix, even up to 2050, all hope was surely not lost.

He maintained that exploiting the country’s reserves would help Nigeria achieve some progress with empowering the citizenry, while the country braces up for the inevitable transition to renewable energy sources.

He said the commission had developed some key initiatives aimed at reducing the oil theft menace to the barest minimum in the short run, and eventual elimination in the long run.

He listed such initiatives as the roadmap for tackling the security challenges in the industry through identification and implementing areas of collaboration between the government and operators and ensuring that operators realise their full production potential.  

Others, according to him, were liaison with the top echelon of Nigerian security forces for a robust security framework that ensures government security forces provide pipeline and asset security; and to promote the implementation of Nodal surveillance technologies on the main trunk lines at each manifold for real-time loss detection that would enable swift and more proactive responses.  

In addition to enforcing installation of tamper detection technologies as part of designs for pipeline and related oil and gas production facilities for approval of the commission, Komolafe maintained that another measure was to ensure that operators implement approved security protocols in areas within their control and promptly identify and remove illegal connections and conduct remedial works in record time.  

He said the commission was equally utilising public enlightenment campaign to educate citizens on the dangers associated with crude oil theft and pipeline vandalism, in collaboration with relevant agencies such as the National Orientation Agency (NOA).

NAEC has over the years attracted great minds and eminent personality in the industry as guess speakers to bring the fore topical issues affecting the industry.

This year’s theme was a follow up on that of 2021, ‘PIA: Energy Transition and The Future of Nigeria’s Oil and Gas.’
The PIA had been passed and the implementation of the Act has commenced in the earnest in the Commission which have seen the formulations of relevant and priority regulations aimed at giving meaning to the intent and letters of the Act.  

Drawing from the theme of the conference, Komolafe explained that the global energy transition discuss in the recent time was geared towards moving the energy sector from fossil fuels to zero carbon energies which was seen as having negative impact on the environment by adopting cleaner and renewable energies.

As a developing country with an economy that is dependent on hydrocarbon resources, he stated that it was envisaged that a gradual and more flexible approach would be required in achieving the net-zero carbon target.

This, he explained, informed the adoption of natural gas where Nigeria has reserves in excess of 208 trillion cubic feet (tcf) which could easily be exploited and utilised as the country’s energy transition fuel, while still maintaining the goals of the Paris Agreement and the Conference of Parties (COP26) aimed to achieve zero emission by the year 2060.

According to him, in line with the provisions of the Act, several stakeholder engagements were held to get the buy-in and sensitised the industry player on the proposed regulations.

Komolafe said, “The Commission has issued six priority regulations comprising of: Nigeria Upstream Host Communities Development Regulations, Nigeria Upstream Fees and Rents Regulations, Nigeria Royalty Regulations, Conversion and Renewal Regulations, Domestic Gas Delivery Obligations Regulations and Licensing Round Regulations.  

“The Commission is also in the process of issuing additional seven Regulations in the Phase II of the exercise in consultation with stakeholders in line with Section 216 of the PIA.

“As a reminder, Section 92 of PIA 2021 provides a flexible tool for honouring investment guarantees and contract sanctity. This has created the much desired stability and predictability for the Nigerian oil and gas industry to excel and enabling existing pre-PIA businesses to succeed.
“The generous fiscal terms consciously enshrined in the PIA are also targeted towards bolstering return on every dollar invested in Nigeria as against any other jurisdiction.

“In consonant with the statutory regulatory mandates of the Nigerian Upstream Petroleum Regulatory Commission, the Act empowers the Commission on technical and commercial regulation of the Upstream petroleum activities in a manner to ensure sustainable hydrocarbon exploration and production at optimum cost, dealing with issues of environmental remediation, decommissioning, and abandonment, and setting up of Host Community Development Trust (HCDT).”  

Speaking further, Komolafe said the marginal fields award initiative of government was borne out of the need to establish the indigenisation policy in the upstream sector of the oil and gas industry and build local content capacity.

Beside these, he pointed out that it was also targeted at creating employment opportunities and encouraging increased capital inflow to the sector.
Similarly, Kyari, who addressed the audience virtually, said resolving the security challenge confronting the industry in the Niger Delta would bring back investments to sector.

Kyari said the NNPC was working with security agencies and other stakeholders to address the issue of oil theft which he noted was hindering Nigeria’s ability to meet its Organisation of the Petroleum Exporting Countries’ (OPEC) quota.
He said the NNPC’s target was to increase production and bring back domestic refining capacity to ensure energy security, adding that this was however being constrained by insecurity in the Niger Delta.

Kyari explained, “As you are all aware, we’re doing everything possible to contain it. Security is a major challenge regarding crude oil theft. Yes, we understand today that our production is very low for two reasons. One, because of the security situation in the Niger Delta assets.
“But more than anything, it cannot stop us from investing in the assets and therefore, you can’t have decline. Also, you’re unable to put money into it and expect to have high production.

“Resolving the security challenge will surely bring back investment and will also optimise the current availability or capacity that we have.
“We know that with certainty that we will resolve the security issue and we can easily come to 2.1 million barrels of oil per day.”
He said the government was investing in infrastructure to drive the energy transition and collaborate with security agencies to engage the investment community to secure financing.

The GCEO maintained that NNPC had successfully resolved the disputes it had with the international oil companies (IOCs) relating to upstream assets to further drive investments in the sector.      

Power market owing us  N1.75trn, Gencos insist

Meanwhile, power generation companies (Gencos) have stated that the electricity industry was still owing them huge sums of money to the tune of about N1.75 trillion for power generated for the electricity market since 2013.
The Executive Secretary, Association of Power Generation Companies (APGC), an umbrella body of Gencos, Dr Joy Ogaji, stated this during a panel session at the NAEC conference, with the topic: ”Power Sector Dilemma: Issues, Challenges, Opportunities and Strategic Key Solutions.”
She said the liquidity challenge in the Nigerian Electricity Supply Industry (NESI) had made operating in the generation value chain very difficult for the companies, adding that Gencos were currently owing their gas suppliers about N1 trillion and also servicing loans used for acquisition of the companies in 2013.
Ogaji said the Nigerian Bulk Electricity Trading Company (NBET) needs to intensify efforts to ensure remittances by the 11 electricity distribution companies (Discos) for energy consumed by their customers.
She maintained that Gencos were ready to generate the power needed in Nigeria but that utilisation had been stagnated in the country for a long time due to transmission and distribution constraints.
“Just to give you a context, on November 1, 2013 when the privatisation took place, power was 3,427 megawatts (MW) on the day of takeover. On December 1, 2013, power had gone from 3,427MW to over 4,003MW and by 2020, it had gone up to nearly 8,000MW,” she said.
Ogaji stated, however, that the average uptake of power from the Gencos was about 4,000MW from 2013 till date, saying that was not good for their business.
“So, this does not encourage any investor to keep investing because clearly it shows that your product is not needed. Notwithstanding how Nigerians are always saying give us power, but generation production is driven by demand. When demand is not  moving in line with the production, the producer is not incentivised to produce, and this is a major problem,” she explained.
Ogaji also decried the lack of access to foreign exchange by Gencos, noting that that had become a major challenge to their operations in recent times.