Seven Deep Offshore Blocks: NUPRC Evaluates Expression of Interest Tendered by Prospective Investors

*Targets addition of 1.2m barrels to Nigeria’s oil production from strategic initiatives

Peter Uzoho

As local and foreign investors currently jostle for a share of the seven Deep Offshore oil blocks recently put on offer in the 2022/2023 petroleum prospecting licensing round, the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Gbenga Komolafe has disclosed that the commission has started evaluating Expression of Interest (EOI) tendered by prospective investors.

Komolafe, equally stated that Nigeria’s oil production would be boosted in no distant time with over 900,000 barrels per day (bpd) expected to be earned from Quick Win interventions and additional 1.2 million bpd to be earned from medium and long-term initiatives of the commission.

The NUPRC chief executive made the disclosures in his paper presentation at the Petroleum Club of Lagos quarterly dinner, held in Lagos, with the topic, “Nigerian Upstream Petroleum Sector: Value Optimisation, Energy Transition, And Regulatory Perspectives.”
Komolafe, explained to the industry players present that as part of the strategic actions for hydrocarbon value optimisation and in keeping with industry laws and regulations, the commission had issued a licensing round guideline and published a licensing round plan for a total of seven open blocks.
He listed the blocks as 300-DO, 301-DO, 302-DO, 303-DO, 304-DO, 305-DO & 306-DO.

Some analysts had expressed optimism that the Deep Offshore blocks would attract interests from local and foreign businessmen because of their low tax obligation, in addition to their insulation from security risks such as theft and vandalism that are associated with onshore assets.
Specifically, the Partner in charge of Energy and Natural Resources, at KPMG Professional Services, Mr. Ayo Salami, had told THISDAY that under the Petroleum Industry Act (PIA), Deep Offshore fields were very lucrative because the tax rate was 30 per cent, stressing that the fiscals of the assets remained competitive enough to attract any potential foreign investment.
Komolafe had in December, 2022 announced the beginning of the 2022/2023 mini bid round for the seven Deep Offshore blocks otherwise called Petroleum Prospecting Licences (PPLs).
The blocks covering an area of approximately 6,700 square kilometres in water depths ranging from 1,150metres to 3,100metres, are located outside the coast of Lagos.

He had equally announced during the pre-bid round conference in Lagos in January that winners of the deep offshore licensing round would be announced in the next four months, revealing that a renowned global firm, Wood Mackenzie, had been contracted as the consultant for the mini-bid.
However, providing updates on the ongoing mini-licencing round, Komolafe revealed that the commission is currently evaluating Expression of Interest (EOI) from prospective investors, saying the exercise was expected to be a huge success for Nigeria and a big step towards growing the nation’s oil and gas reserves.
“We are currently evaluating the Expression of Interest (EOI) received from prospective investors. The exercise is indeed expected to be a huge success for Nigeria and a big step towards growing the nation’s oil and gas reserves. This will be done through aggressive exploration and development efforts”, Komolafe said.

He recalled that Section 6 of the Petroleum Industry Act (PIA) 2021, prescribed a number of statutory functions for the commission as the upstream petroleum technical and commercial regulator.
 In alignment with the objectives, he said they had focused on achieving basic regulatory goals, including increasing Nigeria’s oil and gas reserves and production, developing a transparent approach to hydrocarbon accounting, and attaining operational efficiency and effectiveness in the industry operations.
In addition, Komolafe said the commission was committed to facilitating peace and harmony in the host communities to guarantee conducive operating environment for investors, positively impact on operating cost and attraction of more investment opportunities.

As part of strategy for value optimisation and increased production from the national oil and gas reserves, he noted that the commission had focused on regulatory initiative aimed at reviving declining wells through enhanced oil recovery approach, maintaining that the commission was working with operators to identify candidate wells and appropriate interventions that would lead to increased production.

In addition, Komolafe explained that NUPRC was focusing on shut-in wells which could be revived, saying in pursuance of this, the commission inaugurated a committee on June 23, 2022 to conduct industry-wide study on reactivation of shut-in strings.

He said the committee had submitted its report, which included recommendations categorised into ‘Quick Wins, Medium and Long-Term initiatives’ that would enhance national oil and gas production volumes.  

He said findings from the report revealed that, “over 900,000 barrels of oil per day can be earned from the Quick Win interventions while the Medium and Long-Term initiatives could potentially add 1.2 million barrels of oil per day if properly and fully implemented.”

He said the total number of strings that needed to be revived was also known and that the commission had commenced engagement with the relevant operators to operationalise the initiative.

Komolafe stated that NUPRC had also completed the 2020 Marginal Field Bid Round and issued 50 Petroleum Prospecting Licenses (PPLs) to deserving awardees.

He said it was expected that with the existing discoveries in the awarded fields, early Field Development Plan (FDP) would be pursued by the awardees leading to incremental oil and gas production.

On its part, he noted that the commission was facilitating timely approvals for expedited re-entry and early production, and that the estimated incremental production from the awarded fields was approximately 58,000 bpd and 87mmscf/d.

In the short to medium term, Komolafe said NUPRC expected an estimated incremental volume of 461,000bpd and 565mmscf/d from new wells and well re-entry.

In the long term, he said they expected an estimated incremental volume of 162,000bpd and 868mmscf/d from FDPs which had been approved and were at various stages of execution.

The NUPRC chief executive, however, pointed out that one major area of value erosion in the Nigerian oil and gas industry was the menace of crude oil theft.

“Our records indicate that the menace of oil theft has negatively impacted the oil and gas sector for about two decades with attendant huge financial losses to our nation. I must point out that on the marching orders of President Muhammadu Buhari, the commission in collaboration with the various arms of the security forces, the Nigerian National Petroleum Company (NNPC) Limited and the host communities have been able to suppress the ugly trend of hydrocarbon value decimation.

“Now, our nation has continued to record good dividends of these collaborative efforts as production figures are progressively increasing. The January 2023 volume is approximately 1.5 million barrels per day of oil and condensates.

“It is expected that this number will continue to increase as further measures are introduced and sustained to remove all illegal connections that aid crude oil theft,” Komolafe said.

In driving towards transparency in hydrocarbon accounting, he explained that the commission recently held consultations with stakeholders in respect of the third phase of regulations, among which, he said, was the Upstream Petroleum Measurement Regulations.

“These regulations have been developed to ensure sustainable transparency in hydrocarbon accounting,” he added.  

Komolafe explained further that the commission had also conducted a forensic audit covering the period January 2020 to November 2022 on crude theft numbers, with a view to ascertaining with accuracy, the stolen volume of crude oil within the reference period.

According to him, the report showed that approximately 40 per cent of the volumes credited to crude losses are attributable to measurement inaccuracies.  

He maintained that the commission was committed to dealing with issue of metering errors by ensuring that Original Equipment Manufacturers (OEMs) licenced directly as agents of the commission would be responsible for deployment and maintenance of metering facilities across the Nigeria’s oil and gas facilities for transparency in hydrocarbon accounting.