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‘Local firms produce 30% of oil, gas

The Chief Executive (Officer CEO) Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Mr. Gbenga Komolafe, has said indigenous firms account for the production of between 30 per cent and 20 per cent of crude oil and gas.

He spoke at the Independent Petroleum Producers Group (IPPG) dinner at the 21st Nigerian Oil and Gas Conference and Exhibition in Abuja.

The theme of the event was ‘International Oil Industry Divestments- Nigeria’s Energy Security, and The Role of the IPPG in this New Mix’.

He said: “As at today, I am proud to say that indigenous companies contribute about 30 per cent of crude oil and 20 per cent of the gas production, as well as 40 per cent and 32 per cent of oil and gas reserves.”

He added that seven indigenous companies are among the top 20 companies with the highest oil reserves in Nigeria.

Komolafe noted that the Commission is not oblivious of the threat posed to the development of the  hydrocarbon industry by divestments of the IOCs.

The impetus for divestment by the IOC, according to him, is mainly attributable to the hostile upstream petroleum environment arising from crude oil theft and energy transition as a global response to the advocacy for reduction in carbon emissions.

He said the NUPRC is of the view that IPPG and other prospective indigenous players should see the IOC divestment in some of the upstream assets as an opportunity rather than a threat to the development of the Nigerian upstream petroleum sector.

The CEO stressed: “It is indeed the right time to look inwards in the sector to proof the capability of the local content in value addition and optimising development of the nation’s hydrocarbon resources.

“Therefore, we encourage you as indigenous players across the value chain to deploy your competency and ingenuity in promoting vibrancy and capacity utilisation in the industry.”

According to him, it is estimated that the energy demand across Africa in 2040 would increase by about 30 per cent.

He said consequently, the divestment of the IOC from Nigeria’s onshore and shallow water terrains presents a massive opportunity for new operators of those assets, in which the IPPG is better positioned to take advantage of to meet the increasing energy demand.

He added that the Commission expects the IPPG to stay competitive, optimise future energy security and be resilient in the Nigeria’s oil and gas extractive industry.

“IPPG should adopt an innovative and pragmatic approach towards operational excellence to include decarbonisation and improvement in cost efficiency; creation of enabling environment with their host communities and utilisation of appropriate skills and capabilities.

“In this new mix, the IPPG is expected to have an increased focus on natural gas exploitation and utilisation.

“As you position to take the opportunity being presented by the divestments, the need to be prepared to make the necessary investments for gas pipeline infrastructure, gas processing facilities, meeting domestic gas delivery obligations to strategic sectors of the economy, and global gas export requirements should be in focus,” he said.

Komolafe said on the part of the Commission, the management shall provide the requisite regulatory support in line with the provisions of the PIA 2021, stressing that it is encouraging that Section 52 in the PIA provides for the establishment of the Midstream and Downstream Gas Infrastructure Fund.

The Commission, he said, advocates strengthening the capacity of IPPG through collaboration, strategic alliances, mergers and acquisitions targeted at producing synergies and large independents that can compete with multinationals.

He recalled that prior to 1970 the oil and gas industry was dominated by foreign companies in the upstream and downstream sectors.

Komolafe explained that the first initiative to indigenize the petroleum sector came in the 70s and 80s with the award of blocks to two indigenous companies (Henry Stephens and Nigus Petroleum). The efforts however fizzled out as the companies lacked the technical and financial capabilities to carry out petroleum operations.

According to him, “historically, some of the major indigenous participation initiatives, since the 90s, are: Introduction of the indigenous operatorship programme, where 30 blocks were awarded on sole risk basis between 1990 and 2000.

“Twenty-four fields were awarded through a bidding exercise between 2003-2004 in the marginal field operatorship programme.

The licensing rounds between 2005 and 2007 had indigenous operators actively participating due to the local content requirement.

Over 23 assets were divested by the IOCs between 2009 to date presenting an opportunity for acquisition by indigenous companies.

“57 fields were offered for awards in 2020 to indigenous operators, resulting in the issuance of 102 Petroleum Prospecting Licenses (PPLs) by the Commission on the 28th of June 2022.”

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