Marginal Fields: NUPRC Moves to Mitigate Awardees’ Funding Challenges

•Set to release corporate governance framework 

• To hold financing roadshow for investors 

•16 firms submit field devt plans

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), yesterday, disclosed that it was aware of current funding issues faced by the recent winners of marginal oil fields in the country. NUPRC explained that it was working to mitigate the challenges.

In a statement by Chief Executive of the commission, Mr. Gbenga Komolafe, the oil and gas industry regulator noted that in recognition of the financing hurdle faced by many licence holders, it was planning a production-based lending engagement that will help them source needed capital.

According to the organisation, the move would assist the awardees in their bid to commence full field development towards hitting “first oil”.

Komolafe added that the engagement, planned to commence soon, would be between the commission and the Petroleum Production Licence (PPL) awardees, Exploration and Production (E&P) service providers, and Nigerian banks.

The 2020 marginal field bid round was originally overseen by the defunct Department of Petroleum Resources (DPR) before the process was taken over by the successor commission, NUPRC. However, work on the fields has not progressed as fast as expected, especially for Nigeria, which desperately needs to meet its Organisation of Petroleum Exporting Countries (OPEC) quota.

THISDAY had also exclusively reported on Monday that most of the oil firms awarded fields in the 57 fields auctioned during the 2020 marginal field bid round had not been able to progress their licences to field development and first oil production due to the dual challenge of lack of capital and existing corporate governance.

According to the list of awards seen by THISDAY, some of the fields and their awardees included: Egbolom – Oando Energy Resources and two others; Udibe – Folstaj; Omofejo – AsherDelta and two others; Ugbo – Energia; Oloye -A.A Rano; Nkuku -Vhelbherg E&P, NIPCO and four others; Mesan -Accord Petroleum; and Kuri – Shepherd Hill and Nord Oil.

Others were: Ekpat – Duport Midstream, Magnum Flo Ltd; Bita – Odu’a Investments; Atamba – Matrix Energy and Naptha Global; and Ruta – Faceato and seven others.

THISDAY had also reported that apart from Udibe marginal field, awarded to Folstaj International, and Omofejo field, awarded jointly to AsherDelta, Zigma Limited and GlenPetro, other assets were currently in a state of inactivity, as their owners were still trying to set up proper corporate governance and move to rally for funds needed to get to the next level.

Out of the current 1.8 million barrels per day (bpd) OPEC production allocation to Nigeria, the country is only able to drill 1.3 million bpd, the highest production level in over a year, according to February 2023 data from the commission.

But Komolafe noted that the new set of engagements with stakeholders was meant to provide platforms for strategic partnership and alliance between the awardees and the service providers for well re-entry and drilling services.

The arrangement, he said, was to be offered on service fee recoverable by the service providers from production to be attached.

The NUPRC chief executive said the commission had already concluded plans to organise an E&P international financing roadshow in Abuja in the coming weeks for financiers, investment bankers, private equities, and multi-lateral institutional investors.

The initiative, Komolafe added, was to showcase the high value quick-win opportunities available to investors in the recent PPL awards, the ongoing National Gas Flare Commercialisation Programme (NGEP), as well as the ongoing mini-bid awards.

Besides, to ease the challenges thrown up by the initial corporate governance issues that arose before the inauguration of the Petroleum Industry Act (2021), Komolafe stated that the commission had developed a corporate governance framework for upstream petroleum operations.

According to him, the framework is currently at an advanced stage of internal review and stakeholder engagements required for its finalisation.

He stated, “This is to enhance sustainability, environmental and corporate governance requirements and to facilitate capital attraction by investors for the optimal and efficient development of the PPLs and other assets.

“To facilitate dynamic data gathering and accelerate the achievement of ‘first oil’, the commission initiated the revision of the subsisting Extended Well Test (EWT) guideline to enhance early cash flow and speed up the journey to first oil.

“The strategy has already yielded positive results with 16 companies submitting Field Development Plan (FDP), two already commencing unitisation processes, six re-entries and two having gone through the EWT.”

Komolafe pointed out that the commission was not unmindful of the protracted dispute among some of the awardees triggered by shareholder disagreements and misunderstanding.

He disclosed that NUPRC was collaboratively engaging the parties and mediating to facilitate early closure and diligent progression towards achieving the expected regulatory milestones, including value creation and hitting first oil.

Since the award of 47 PPLs to solely Nigerian entities in June 2022, Komolafe said the commission had made concerted efforts within the stipulations of the law to provide statutory guidance and support towards the progression of the assets to field development.

He listed the steps taken to include the convocation of regulatory induction programme for PPL awardees to enable them have the requisite understanding of the statutory protocols from the award to first oil. He stressed that there was also a week-long tripartite engagement in Lagos for all awardees and initial asset owners in December last year, with about 30 entities in attendance.

During the event, Komolafe noted that both the awardees and former asset owners resolved all impediments to the smooth take over by the awardees and operation to first oil.

He said, “That event set the stage for engagements on issues required to fulfil initial work programme obligations.

“Areas that were presented and rigorously deliberated upon include Royalty and Tax administration, Data Exchange Protocol and Leasing requirements, Field Development Plan under the PIA (2021), Permitting Processes for Drilling and Re-entry Applications, Production Accounting, Facilities Deployment, and Host Communities’ Development.”