16 May 2018

Nigeria: NNPC Seeks End to Perpetual Hold On Oil Acreage Licences in Nigeria

Abuja — The Nigerian National Petroleum Corporation (NNPC) has asked the National Assembly to split the licences issued for development of oil fields in Nigeria into two components, one for prospecting and another for production phases under the draft Petroleum Industry Administrative Bill (PIAB) currently before it.

In a presentation it made at the public hearing organised by the House of Representatives Committee on the PIAB, Petroleum Industry Fiscal Bill (PIFB) and the Petroleum Industry Host Community Bill (PIHCB) in Abuja, the Group Managing Director of NNPC, Dr. Maikanti Baru, said the proposed split would prevent a situation where operators would sit perpetually on oil acreages.

A statement from the Group General Manager of the corporation, Mr. Ndu Ughamadu, said the recommendation under the PIAB sought a break up of the licences into Petroleum Exploration Licence (PEL) - to prospect for petroleum, while the second component to be known as Petroleum Lease (PL), should be created to cover the production phase to search for, win, work, carry way and dispose of petroleum.

NNPC also pushed for a re-think of the duration of licences as proposed in the PIAB which stipulates initial duration of 25 years for onshore and shallow water petroleum licence and 30 years for deep water and frontier acreages.

It proposed five years prospecting licence for onshore and shallow fields and a duration of 10 years for deep offshore and frontier basins.

It also recommended 20 years production lease for onshore and shallow fields as well as deep offshore and frontier basins, noting that only the production lease period should be renewed for a period not exceeding 20 years.

On the PIFB version of the proposed oil industry law, NNPC recommended a three-stage licences regime consisting of Exploration Licence (EL), to explore for petroleum on a non-exclusive basis; Petroleum Exploration Licence (PEL), to prospect for petroleum on exclusive basis; and Petroleum Lease (PL), to search for, win, work, carry away and dispose of petroleum.

Beyond the clause by clause recommendations, the corporation also advocated the simplification of the fiscal system for ease of implementation and to ensure progressivity.

It called for expunging all regulatory issues out of the draft legislation to empower the regulatory commission expected to come to regulate the industry effectively.

NNPC highlighted the need to introduce and provide clauses that will ensure easy review of provisions of the bill in response to economic, technical and other considerations, while disallowing legislation on issues bordering on contracts.

The statement said that the Chairman of the House Committee, Abdulrazak Namdas, thanked the corporation for its contribution, noting that the committee would sift through all the submissions by stakeholders before taking informed decisions on the issues.


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