The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), has approved an agreement reached between International Oil Companies, IOC’s operating in Nigeria with the Nigerian National Petroleum Corporation, NNPC.
The Commission, said for growth and development of the sector, it will tarry a little to harmonize precious agreements on acreage development with the provisions in the Petroleum Industry Act.
With the development, oil majors would reconsider their exit plan following uncertainties created by the just passed PIA which provided a sort of counter provision on already signed Memorandum of Understanding, MoU, with the NNPC, for deepwater asset development.
It will be recalled that a 12-year dispute on the operational guideline with regard to Production Sharing Contract, PSC, in the deepwater space had cost parties over $9bn in contingent liabilities.
However, the new PSC understanding is expected to yield $780 million in immediate revenues to government and unlock $10bn investment.
At a stakeholder meeting with members of the Oil Producers Trade Section (OPTS), comprising of key major oil companies in the country, yesterday in Lagos,
Engr. Gbenga Komolafe, Commission Chief Executive (CCE), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), said the PIA has a timeline of about six to twelve months to clear some grey areas and that the Commission is interested more in encouraging investment in the sector.
Komolafe, said the essence of the meeting was to clearly identify areas of concerns and challenges affecting their operations, as he assured them that all issues raised would be addressed as the PIA is subject to review so as to accommodate all inhibiting challenges.
On point at the meeting were the issues around timeline on gas flare out and PSC agreement earlier reached with the NNPC before the passage of the new law.
Rich Kennedy Managing Director of Chevron and the Chairman of the OPTS, had raised the two major issues which he sees as a major setback in their operations.
He complained that there was a renewed PSC agreement with the NNPC which the PIA if implemented would truncate.
However, in response, Komolafe assured the oil majors that all earlier agreement would be respected as any attempt to tinker with it will be counterproductive.
The head legal unit of the Commission, Joseph Tolorunse, explained that the renegotiated PSC agreement had taken place before the PIA, which currently stands as a contractual agreement until it is adjusted under the new law.
The Group Managing Director of the NNPC, recently met with chief executives of major oil companies to redefine operations in the deepwater space and address seeming disagreements which was aimed at opening opportunities estimated around $10 billion in new investment.
The over a decade dispute had marred business relationship and affected trust and investment in Nigeria’s oil industry as the NNPC and its production sharing contract (PSC) partners – Shell Nigeria Exploration and Production Company (SNEPCo), Total Exploration and Production Nigeria Limited (TEPNG), Esso Exploration and Production Nigeria Limited (EEPNL) and Nigerian Agip Exploration (NAE) made no investments in that segment.
The new understanding provided opportunities to renew Oil Mining Lease (OML) 118 for another 20 years.
The NNPC signed five agreements covering dispute settlement agreement, settlement agreement, historical gas agreement, escrow agreement and renewed PSC agreement.
But while the disputes lasted, parties were estimated to have lost $9 billion in contingent liabilities with business relationships wastefully marred; and trust and investment sorely affected.