In an era marked by the global energy transition, the Nigerian Upstream Regulatory Commission (NUPRC) is undertaking a strategic initiative to transform Nigeria into a prime destination for investment in the petroleum industry. This initiative, spearheaded by NUPRC’s Chief Executive Officer, Gbenga Komolafe, comes at a time when the operating environment in Nigeria’s petroleum sector is experiencing significant challenges, leading to the withdrawal of key industry players.
The NUPRC, undeterred by these challenges, has crafted the Regulatory Action Plan (RAP) for 2024-2026, with a firm commitment to ensure rigorous implementation by all stakeholders. This plan aims to create a more conducive environment for operators, service providers, and industry participants, ultimately benefiting the nation.
President Bola Tinubu and various oil and gas experts have echoed the NUPRC’s stance on the energy transition, emphasizing the need for a program that considers the unique circumstances of Nigeria, Africa, and other resource-rich developing economies. This program must balance evolving energy dynamics with geographical, historical, and socio-political factors, ensuring equity, inclusivity, sustainability, and energy justice.
Komolafe, in the 2024-2026 RAP, highlights a critical challenge: the decline in investments in Nigeria’s oil and gas sector. A study conducted by the Commission reveals a diminishing appetite for investment among the top five international oil and gas companies (IOCs) operating in Nigeria. This decline is attributed to global factors and local challenges, including regulatory uncertainty, community conflicts, security challenges, and fiscal and commercial bottlenecks.
In response, the NUPRC aims to revitalize investor interest without compromising the global energy transition goals or short-changing Nigeria. The Commission plans to implement a broad-based strategy in 2024 and beyond, focusing on establishing rules of general application, issuing new regulations, and eliminating barriers to investment.
Key initiatives include the “Ease of Investment in Nigeria Upstream Oil and Gas Initiative,” designed to foster collaboration among government agencies, state and local governments, and industry stakeholders. This initiative seeks to streamline investment and operational processes in the oil and gas sector.
The Commission is also focused on maintaining competitive entry fees for exploration blocks, responding to global investment trends. A review of regional Signature Bonuses across the globe shows a significant reduction in such fees, as seen in Brazil, Guyana, Israel, Indonesia, Thailand, and other countries. This trend underscores the shift away from hefty signature bonuses, a practice that has traditionally been a barrier to entry for investment in exploration blocks.
To further support investment and ensure value for stakeholders, the NUPRC is developing models that align with government aspirations. These models aim to optimize government revenues sustainably, ensure competitive entry fees, and reflect economic, geopolitical, and market conditions in decision-making.
Another pivotal aspect of the NUPRC’s strategy is the implementation of the Domestic Crude Supply Obligation (DCSO) under the Petroleum Industry Act (PIA) 2021. This policy mandates oil-producing companies to allocate a specific percentage of their crude oil production for domestic refining, addressing the paradox of Nigeria importing refined products despite being a major oil exporter.
The NUPRC is also committed to environmental sustainability. It plans to operationalize the Environmental Remediation Fund and implement regulations to address the environmental impacts of oil and gas operations. Additionally, the Commission will collaborate with the Nigerian Content Development and Monitoring Board (NCDMB) to ensure that the implementation of the Nigerian content regime does not escalate costs.
Looking towards the future, the NUPRC aims to conduct acreage licensing based on modern practices, including the use of interactive tools and feedback mechanisms to ensure regulatory certainty and predictability. This approach will be reflected in the ongoing Deep Offshore Blocks Licensing Mini Bid Round and future licensing rounds.
In summary, the NUPRC’s efforts represent a comprehensive approach to addressing the challenges facing Nigeria’s upstream petroleum sector. By implementing strategies that balance investment attraction with environmental and social considerations, the Commission is working to ensure that Nigeria remains competitive in the global energy landscape while transitioning towards a more sustainable and equitable energy future.
