Nigeria has initiated preliminary steps for the 2024 petroleum licensing round through its upstream oil and gas industry regulator, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC.
The Commission has announced the commencement of the Licensing Round, which is intended to bolster the country’s oil production and revenue.
The Licensing Round, initially offered twelve selected blocks across diverse geological formations aimed to attract significant interest from domestic investors and international oil companies (IOCs)and following the calendar of events, is projected to last till January 20253.
However, in a move to bring more investors into the exercise Government added 17 deep offshore oil blocks to the 2024 Licensing Round for oil fields.
On the May 8, the government invited investors to bid for 12 oil blocks and seven deep offshore assets in the 2024 marginal fields bid round.
Also on June 12, 2024, it was reported that the Federal government had increased the number of oil blocks on offer in the 2024 marginal bid round.
This is considered a strategic effort to stimulate investment in the sector.
This initiative follows the 2022 mini-bid round, a significant event aimed at attracting investors and boosting sectoral growth.
The government’s actions appear to be part of a broader strategy to create a more favourable investment climate, encouraging both local and international stakeholders to participate actively in the sector. Such measures are crucial for fostering economic development and leveraging the sector’s potential to contribute significantly to the nation’s economy.
The success of the 2024 Licensing Round depends on the Commission’s ability to create conducive conditions for investment in the country’s oil and gas sector.
This responsibility is underscored by the Commission’s statutory obligation to promote an enabling environment for investment in upstream petroleum operations, as mandated by the Petroleum Industry Act (PIA).
However, stakeholders been concerned about the purported increase in signature bonuses within Nigeria’s oil bid process, but then the Minister of State for Petroleum Resources (Oil), Mr. Heineken Lokpobiri, has addressed this issue.
He stated that the country has revamped the signature bonus payments required from new investors in the oil and gas sector.
To ensure a smooth transition, signature bonus payments will now be tied to immediate exploration and production activities.
Rather than depositing these payments into governments account, investors must demonstrate their financial capacity to proceed with exploration activities in Nigeria.
It is expected that this move by the government will encourage more committed investments, and ultimately enhance the efficiency of oil and gas development in the country.
Investor departures have recently become a significant concern in the oil and gas industry, with IOCs progressively divesting from the country due to challenges such as complexities in engaging with host communities and rampant crude theft in the oil-rich Niger Delta. However, this shift presents an opportunity for indigenous investors to participate in the Nigerian oil and gas market.
The Licensing Round represents a significant step toward growing the nation’s oil and gas reserves through aggressive exploration and development. It aims to boost production, expand opportunities for gas utilisation, and foster end-to-end development across the value chain.
Additionally, it seeks to strengthen energy security and the economy, engage competent companies in the sector, create employment opportunities, enable technology transfer, valorise petroleum assets, and attract investments.
Amidst the challenges surrounding the Licensing Round, the government through the Commission, has assured its commitment to transparency and accountability in the oil and gas sector.
There is hope that the coming days will bring positive developments. As industry stakeholders closely monitor the Commission’s actions regarding the Licensing Round, it is prudent for interested investors to seek expert guidance and representation as they navigate the guidelines and next steps recently published by the Commission.
Incentivising Investors
The federal government has emphasised Production Bonus – Payment by an operator to a host country upon achievement of oil and gas production – thus building confidence and attracting many local and foreign investors to invest in Nigeria’s oil blocks.
Before now, the government relied on a high Signature bonus – a single, non-recoverable lump sum payment made upfront by oil companies for their rights to develop oil blocks – as an option for maximising revenue generation, which discouraged investors with limited resources from bidding.
But under the current arrangement, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, which regulates activities in Nigeria’s oil and gas industry, has removed entry barriers, thus encouraging massive investments.
According to experts, this aims at growing oil and gas production, enhancing Nigerian Content Development, attracting Foreign Direct Investment, contributing to long-term global energy sufficiency, expanding opportunities for gas utilisation, and creating employment opportunities while adding value to government and investors.
They said the development showed the sensitivity of the Commission to developments around the world, especially the sustainable rise in Capital Expenditure, CAPEX, going into funding renewables in the spirit of the global energy transition as well as the level of Signature bonuses in other nations.
Available data indicate that in the Middle East and North Africa, signature bonus currently stands at about $10 million while Thailand and Indonesia have about $3 million (minimum) and N1.5 million, respectively, meaning that Nigeria’s oil and gas landscape is now in alignment with the rest of the world.
It was gathered that Nigeria will be able to complete many projects, leading to the creation of many multiplier effects, including production capacity, employment, contracts, community development, local content and gas-to-power, thus providing more energy to households and businesses nationwide.
Also, it was further gathered that Nigeria will be able to generate substantial revenue in the form of production bonus when investors begin their oil and gas production.
Reacting to developments in Nigeria, the executive chairman, African Energy Chamber, NJ Ayuk said, “Nigeria has established a robust framework that is set to attract foreign exploration companies with modernised fiscals that are competitive for deepwater exploration. We the AEC believe the most lucrative balancing point between creating a welcoming environment for international companies and achieving Nigeria’s own national goals is important.
“Key to this bidding round will be the role of independents and indigenous players when it comes to exploration. The bidding round also paves the way for gas monetisation that will bring amazing benefits to Nigeria and also international markets.”
On his part, the Executive Director, Emmanuel Egbogah Foundation for Petroleum, Prof. Wumi Iledare, said, “A high signature bonus is regressive. It does make a petroleum province with a high signature bonus less attractive.”
Similarly, the national president, Oil and Gas Service Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, said, “Investors need a conducive environment to put their money. Once the right environment exists, foreign capital will begin to flow in.”
Also, speaking at the recent pre-bidding conference in Lagos, the Commission Executive, NUPRC, Engr. Gbenga Komolafe, said, “A review of Welligence Energy Analytics reports on Licensing rounds across the globe including Brazil, Guyana, Angola, Middle East, North Africa, SouthEast Asia, etc, revealed that the era of huge front-loaded signature bonuses is over.
“Accordingly, Nigeria under President Bola Ahmed Tinubu, as the Minster of Petroleum Resources has proactively and intuitively vacated barrier to entry for investment in exploration blocks being offered, in both the 2022 deep offshore bid round and the 2024 licensing round, in line with international best practices.
“President Bola Ahmed Tinubu and Minister of Petroleum Resources, Nigeria have embarked on a transformative agenda that aligns with the most stringent global standards and commitments. The recent Presidential Executive Orders issued in March this year, aimed at improving the efficiency and attractiveness of Nigeria’s oil and gas sector, were generously targeted to incentivise oil and gas development, introduced measures to balance the implementation of Nigerian Oil and Gas Industry Content Development Act, 2010 to ensure that oil and gas development is not hindered by local content bottlenecks. The Executive Orders also include directives on the reduction of contracting costs and timelines to enhance the global competitiveness of our oil and gas industry and achieve a higher rate of return on oil and gas investments.”
“Nigeria is endowed with abundance of Crude Oil and Condensate Reserves and of Natural Gas Reserves representing above 30% and 33% respectively of the entire Oil and Gas reserves in Africa aside abundant mix of other renewable energy resources. In a bid to exploit and optimize these abundant Hydrocarbon resources, Section 7(t) of the Petroleum Industry Act (PIA) empowers the NUPRC, the Industry Regulator to conduct bid rounds for the award of PPLs and PMLs under the Act and applicable Regulations.
“It is on this premise that the Federal Government of Nigeria through the NUPRC recently announced the commencement of the 2024 Licensing Round both in-country and outside the shores of the nation. It would be recalled that we commenced the announcement at the maiden edition of the NEITI Dialogue Session, 2024, where the bid processes were thoroughly interrogated by civil society and the media.
“This was subsequently followed by the announcement of the commencement of the bid round at the 2024 OTC in Houston, the roadshow in Miami organized by Zeste Advisory, African Energies Summit in London organized by Frontier Network and Invest in Africa Energy Summit in Paris organized by Energy Capital Power. The Commission aims to project and attract robust local and foreign investors who will be participating in the bid exercise.
“The NUPRC on behalf of the Federal Republic of Nigeria is committed to conducting the licensing round in a fair, competitive and transparent manner and ensuring a level playing field for both indigenous and international investors. Our approach is underpinned by the robust legal framework of the Petroleum Industry Act 2021(PIA), which ensures compliance with best practices to boost investors’ confidence.
“In keeping with the provisions of the PIA and regulations made under the Act, the Commission has issued a licensing round guideline and published a licensing round plan for the blocks. This round introduces some meticulously selected blocks across diverse geological spectra from the fertile onshore basins to the promising continental shelves and the untapped depths of our deep offshore territories. Each block has been chosen for its potential to bolster our national reserves and stimulate economic vitality. Subsequently, on 13th May 2024, the Commission opened a dedicated bid portal to allow prospective bidders to register/submit Pre-Qualifications documents on or before the stipulated 25th June 2024 deadline.”
He also said: “Interestingly, the Commission, in partnership with its multi-client partners, has acquired more geological data resulting in the identification of more prospective blocks. The newly identified blocks will be added to the pool of blocks originally scheduled for the bid exercise, and their details will be made available on the bid round portal. In addition to these blocks, the seven deep offshore blocks from the 2022 Mini-Bid Round Exercise which covers an area of approximately 6,700 km in water depths of 1,150m to 3,100m shall also be concluded along with this Licensing round.”
