The Federal Government has re-engineered Nigeria’s oil bidding process with emphasis on production bonus in order to enable investors channel their scarce resources into immediate development and early production.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), revealed at the recent pre-bidding conference in Lagos, the removal of entry barriers, including the slashing of the signature bonus to only $10 million for deepwater assets and $7 million for shallow water and onshore assets.
Signature bonus is a single, non-recoverable lump sum payment made upfront by oil companies to the government for the rights to develop an oil block commercially after successfully winning in the license bid round.
According to experts, the development illustrates the sensitivity of the Commission to developments around the world, especially the sustainable rise in capital expenditure going into funding renewables in the spirit of the global energy transition.
They said it further showed its accurate comprehension of trends in other oil and gas climes; where the governments have drastically reduced signature bonus to attract investors and financiers into their industries.
NJ Ayuk, the executive chairman, African Energy Chamber, said: “Nigeria has established a robust framework that is set to attract foreign exploration companies with modernised fiscals that are competitive for deepwater exploration.
“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.”
Available data indicated 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.
Besides, the current bidding also opens a window for investors to bid for the 2022 blocks based on the current incentivized terms instead of paying the previous $50 million.
Wumi Iledare, the Executive Director, Emmanuel Egbogah Foundation for Petroleum, said: “A high signature bonus is regressive. It does make a petroleum province with a high signature bonus less attractive.”
On his part, Colman Obasi, the National President of the Oil and Gas Service Providers Association of Nigeria, said: “Investors need a conducive environment to put their money. Once the right environment exists, foreign capital will begin to flow in.”
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.
Speaking at the recent pre-bidding conference in Lagos, Gbenga Komolafe, the NUPRC Chief Executive, said that 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 Minister of Petroleum Resources has proactively and intuitively vacated the 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.”
He said: “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 incentivize 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.”
According to Komolafe, the FG through the NUPRC recently announced the commencement of the 2024 Licensing Round both in-country and outside the shores of the nation.
“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,” he said.