NUPRC: Unlocking Investments in Nigeria’s Hydrocarbon Resources with Licencing Rounds

Ifeanyi Onuba

On May 7, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), announced the commencement of the 2024 Licencing Round at the Offshore Technology Conference which was held in Houston, Texas, United States.

 The commencement of the Licencing Round demonstrates Nigeria’s commitment to advancing its oil and gas sector and a reflection of President Bola Ahmed Tinubu’s leadership aimed at attracting the attention and involvement of international investors.

Twelve new blocks namely PPL 300-CS; PPL 301-CS; PPL 3008; PPL 3009; PPL 2001; PPL 2002; PML 51; PPL 267; PPL 268; PPL 269; PPL 270; and PPL 271 including 7 old blocks in the 2022 mini-bid are on offer by the NUPRC.

The broad objectives of the 2024 Licensing Round are to grow the Nigeria oil and gas reserves, enhance Nigerian content development, attract foreign direct investment, contribute to a long-term global energy sufficiency, boost Nigeria’s oil and gas production, expand the opportunity for gas utilisation, create job opportunities, and create value for the Nigerian government and investors.

The Licencing Round offers selected blocks spanning diverse geological formations with great potential for economic growth and energy security for shared prosperity. The regulatory framework, anchored by the Petroleum Industry Act 2021 aimed at entrenching fairness and transparency, thereby fostering confidence among investors.

Since the commencement of the PIA in 2021, the NUPRC under the leadership of the Chief Executive, Engr. Gbenga Komolafe, has taken up the statutory responsibility of ensuring compliance with petroleum laws, regulations and guidelines in the upstream oil and gas sector.

The new dynamics in the global energy arena necessitated that Nigeria, a country that has long depended on the explorations of oil and gas as the mainstay of its economy, re-examine its strategy to secure investments in the energy sector while meeting the global climate goals.

As a country, Nigeria boasts of 36.966 billion barrels of oil which ranks her second in Africa, 8th in OPEC and 11th in the World. Nigeria is also richly endowed with 208.83 trillion cubic feet of natural gas reserves with an upside potential estimated at 600 TCF.

Aside from the hydrocarbon potentials, Nigeria is blessed with potentials for green and blue hydrogen, solar, wind, biomass and other sources of renewable energy to leverage for the right energy mix in the energy transition regime, as well as critical minerals such as lithium, manganese, copper, graphite and nickel for development of clean energy technologies.

Indeed, Nigeria’s potentials are derived from its human, natural and material resources which must be mobilised to propel her on a path of economic growth and development and for her sustainable energy future.

Unfortunately, in the years preceding the enactment of the PIA (2021), investments in the Nigerian oil and gas industry declined mostly due to regulatory uncertainty, de-funding of fossil fuel development occasioned by energy transition and the global call for decarbonisation.

However, the Commission under the leadership of Komolafe is charting a new course in the upstream petroleum sector through the 2024 Licensing Round. The 2024 Licensing Round is different due to the decision of the government to eliminate entry barriers. This is because under President Tinubu, who is the Minister of Petroleum Resources, the government has become a lot more proactive and pragmatic in ensuring that entry does not constitute a barrier to investment in exploration blocks offered.

The Commission Chief Executive, Engr. Gbenga Komolafe gave credence to this when he said that Nigeria’s approach aligns with global energy sustainability goals, as he emphasised environmental, social, and governance considerations.

 As the government navigates through the complexities of the global energy transition, the future that the NUPRC foresees for the Nigerian petroleum industry is one that should promote the utilization of the country’s hydrocarbon resources for shared prosperity, energy accessibility, affordability, sustainability, security as well as energy independence and energy sovereignty.

This is why the NUPRC, under the leadership of Komolafe has adopted a pragmatic approach, ensuring competitive entry fees and commercial viability for investment. The Licencing Round is expected to be a huge success for Nigeria and it is a big step towards growing the nation’s oil and gas reserves through aggressive exploration and development efforts, boosting production, expanding opportunities for gas utilisation and end-to-end development across the value chain, strengthening energy security and economy, providing an occasion to gainfully engage the pool of competent companies in the oil and gas sector with a multiplier effect in employment opportunities, enabling the transfer of technology, valorizing petroleum assets in the Nigerian territory and attracting investments.

The 2024 Licencing Round marks another significant milestone in the ongoing development of Nigeria’s upstream petroleum sector.

Aligned with the Petroleum Industry Act 2021 (PIA), this Licencing Round aims to foster further exploration and investment in the country’s promising petroleum basins. Managed by the NUPRC, this round operates within the robust legal and regulatory frameworks set forth by the PIA, designed to attract new investors and propel the exploration phase in Nigeria’s petroleum landscape.

The 2024 Licencing Round represents an opportunity for both domestic and international stakeholders to engage in the exploration and development of Nigeria’s hydrocarbon resources. Under the stewardship of NUPRC, this licencing round promises transparency and competitiveness in the allocation of exploration blocks.

Central to the success of the 2024 Licencing Round is the availability of high-quality geological and geophysical data. The National Data Repository (NDR) of the NUPRC, in collaboration with multi-client partners, is committed to providing access to extensive seismic datasets. The Commission has assured that it would make available to prospective bidders access to the latest and most accurate information for informed decision-making.

In line with the objectives of the Licencing Round, a mix of deep offshore, shallow water and onshore blocks will be made available to interested investors. The offering comprises a diverse range of exploration prospects, catering to varying technical and operational preferences.

Emphasising a holistic approach to resource management, the 2024 Licencing Round prioritizes environmental, social, and governance (ESG) considerations. Komolafe said the NUPRC is committed to ensuring that exploration activities are conducted in a manner that minimises carbon emissions and mitigates environmental impact.

By incorporating ESG criteria into the licensing process, he said stakeholders can contribute to sustainable development while harnessing the nation’s natural resources.

Komolafe said, “The Licencing Rounds represent an opportunity to reinforce Nigeria’s commitment to openness and transparency in line with the principles of the Nigerian Extractive Transparency Initiative.

“On the global scale, the Licensing Round will no doubt be beneficial to all stakeholders and will in the long run contribute to long-term global energy sufficiency. Interestingly, the Licensing Round process was formulated in cognisance of global energy sustainability goals. “The implementation process will, in addition to technical and commercial considerations, pay the requisite attention to strategies, processes and implementable plans consistent with net zero carbon emission targets, eliminating gas flares as well as overall environmental, social and governance (ESG) considerations.

“Broadly speaking, competitive entry fees that are responsive to prevailing realities will be adopted in the 2024 Block licensing rounds. Also, considerations for the commerciality of projects will be made on a case-by case basis for the determination of appropriate entry fees.”

The Minister of State for Petroleum (Oil) Heineken Lokpobiri who spoke on the criteria and relevance of the Licencing Round explained that the reason for lowering the signature bonus for new oil blocks is to allow investors to use the resources to fund their exploration.

He said the government would support the NUPRC to succeed in regulating the upstream oil and gas sector as the success will determine what happens to the mid-stream and downstream sectors.

Lokpobiri said, “Instead of asking you to pay a signature of $200 million, we are reducing it to the nearest minimum. So, we expect you to use your money to start exploration immediately.

“And if you breach any of the conditions, we will act. We want to give this thing (blocks) to the men with the big pockets that can provide the funding.

“As government,  we are here to support the most strategic agency in the oil and gas industry. If the upstream doesn’t succeed, mid-stream and downstream will be a failure.” According to the petroleum minister, the Bola Ahmed Tinubu-led government is willing to provide a safe environment for companies willing to invest in the country. He said, “We are not playing politics. We are giving the blocks to people who have the wherewithal to undertake the project. “This is my first bidding round as minister, and I hope there will be more bid rounds on those blocks that are lying fallow.”

With the government’s drive towards attracting investments to the oil and gas sector, the NUPRC has been deploying best practices and technology to ensure strategic and responsible utilisation of the vast natural resources for the benefit of all Nigerians.

Onuba, a chartered accountant, writes from Abuja