The Nigerian Upstream Petroleum and Regulatory Commission (NUPRC) has been under scrutiny by the Federal Government to potentially revoke oil exploration leases that have been granted to companies but have not yet been utilized for any exploration endeavours. According to Gbenga Komolafe, the CEO of the Nigerian Upstream Petroleum Regulatory Commission, he highlighted the imperative for companies to demonstrate significant technical expertise and financial stability in order to maintain their possession of leases.
In Nigeria, the most recent statistics provided by the NUPRC reveal that more than 60% of the exploration licenses awarded to both domestic and international petroleum companies have now expired. These expirations come at a time when the nation is striving to entice fresh investments that will enhance its oil production capacity. Komolafe emphasized that the Commission has a main objective, as outlined in the Petroleum Industry Act (PIA).
Maximizing the benefits of the nation by making value delivery priority.
This major objective of the body is to ensure that only companies that are both technically and financially capable will retain their leases. The Petroleum and Regulatory Commission is dedicated to ensuring the maximization of the benefits of the nation by making value delivery priority. Oando (OANDO.LG), an energy company listed on the stock exchange, and TotalEnergies’ exploration division in the Niger Delta both possess a few leases that have already reached their expiration dates.
Also, Nigeria, with its status as the Giant of Africa and the continent’s primary oil exporter, has faced a decline in oil production due to the detrimental activities of crude theft and pipeline vandalism, along with an insufficiency of fresh investments dedicated to revitalizing the sector. Nigeria, in the year 2021, introduced a significant transformation to its oil sector by empowering the regulator to evaluate the technical and financial capabilities of enterprises possessing oil exploration licenses.
Major oil companies withdraw from onshore and shallow water assets.
Oil companies were granted a total of 53 exploration leases by the federal government of Nigeria. These leases varied in age, with some dating as far back as 2003, one decade ago. However, a significant number of these leases, namely 33, have expired and were not renewed. Among these expired leases, four are currently entangled in contractual conflicts. The regulator’s stance has changed, as they are no longer willing to allow companies to cling onto leases indefinitely.
However, this act by the federal government does not mean that the leases have been automatically revoked. Additionally, there has been a scarcity of oil exploration investments in the country as major oil companies withdraw from onshore and shallow water assets. This withdrawal by major oil companies across the nation is primarily due to the increasing insecurity and sabotage of oil infrastructure, as well as legal conflicts with the communities residing in the Niger Delta region.
Increase in the demand for Nigerian crude in Europe.
Furthermore, the industry has faced prolonged stagnation due to insufficient investments in exploratory endeavours, as well as a decrease in oil extraction caused by the rampant theft resulting from dismantling of pipelines. There has also been an Increase in the demand for Nigerian crude in Europe, which resulted from the European Union’s imposition of an oil embargo on Russia in response to the invasion of Ukraine. Many European refiners have increasingly favoured Nigerian crude oil grades, stated Maryamu Idris, the executive director of crude and condensate at NNPC Trading Limited, during November.