Oil and gas
PIA: NUPRC threatens to revoke operating licenses of defaulting OICs
***Issues ultimatum on 3% remittance to oil communities
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has issued an ultimatum to settlors who have defaulted in remitting the 3% operating cost to oil bearing communities as stipulated by the Petroleum Industry Act (PIA)
Section 257 ( 2) of the Petroleum Industry Act, which came into effect in August 2021, stipulates that Oil and Gas Companies should remit 3% of their annual operational expenditure to affected host communities.
The commission was reacting to the recent agitation by host communities in the oil and gas producing areas of the Niger Delta region over the delay by industry settlors/operators in remitting the statutory fees governed by Section 235 of the Petroleum Industry Act (PIA), 2021.
The leadership of the host communities producing oil and gas had moved against the deliberate violation of the Act by oil companies operating in their area who have refused to remmit the 3% operating cost as stipulated by the act.
They said two years after the provision of the law, none of the Oil Producing Companies had complied with it , prompting stakeholders from the affected host communities to cry out in Abuja on Wednesday.
National President of HOSTCOM, Dr. Benjamin Tamaranebi, at a press conference on Wednesday in Abuja, had expressed dismay that the oil companies have refused to remit the 3% to HOSTCOM two years after the passage of the PIA.
The commission in a swift reaction through a statement issued on Friday, threatened to revoke the licenses of oil operators or settlors who failed to remit the three 3% statutory fees to oil communities before September ending.
It called on the operators to fulfill their obligations of the 3% remittance to the oil bearing communities without further delay
“Clearly, the Commission understands and shares in the sentiments and particularly the patience of the host communities on this issue, especially as the PIA had suspended the Global Memorandum of Understanding (GMOU) and the Memorandum of Understanding (MOU), replacing both provisions with a new Host Community Development Trust Fund.
“The Commission is fully aware of the implications of this development if allowed to fester. The agitation might frustrate the Commission’s efforts at up-scaling the drive for higher foreign exchange and attracting Foreign Direct Investment (FDI) into the country. “Incidentally and quite unfortunately, it is also capable of truncating efforts at stabilizing the value of the Naira, attaining the much-desired rebound in our national economy and improving our macro-economic status.
“The statutory provision of the PIA regarding the annual contribution of operators in the industry, under Section 240 (2) of the PIA, 2021, is very clear, and it states:
“Each settlor, where applicable through the operator, shall make an annual contribution to the applicable host communities development trust fund of an amount equal to 3% of its actual annual operating expenditure of the preceding financial year in the upstream petroleum operations affecting the host communities for which the applicable host communities development trust fund was established”.
“It must be stated that given the implications of allowing continued default on sustained peaceful operations and the eventual effect on national oil and gas output, the Commission will be minded to activate its regulatory powers in line with the provisions of the Act as stated above, to bring defaulting and recalcitrant settlors into compliance.
“Recently, the Commission passed the Host Community Regulation and organized a mass sensitization program, emphasizing the responsibility of settlors in host communities under the PIA, 2021.
“Unfortunately, those concerned have neglected this, thereby stoking avoidable agitations. The settlors are, therefore, required to perform their obligation to commence remittance of the statutory 3% contribution.
“The Commission notes that remittance of the statutory contribution, which should have served as succor to the host communities, has sadly become a source of pain to the lawful beneficiaries.
“This has now given impetus to actions that might affect smooth upstream operations within affected host communities, a situation that could have been addressed through routine social inclusion.
“Although the ultimate regulatory sanction, as enshrined in Section 238 of the PIA, is the revocation of assets, the Commission has been careful not to compound the already low level of investment and divestment rate and further impact negatively on production levels and the Federation revenue. Rather, it chose to draw a balance and be strategic in implementing the provisions of the law.
“The relevant section states that “Unless as otherwise provided for in this Act, failure by any holder of a licence or lease governed by this Act to comply with its obligations under this Chapter, after having been informed of such failure in writing by the Commission or Authority as the case may be, may be grounds for revocation of the applicable licence.”
“Therefore, defaulting operators (settlors) under PIA 2021 (section 235) are advised to do the needful by fulfilling their obligations and remitting the outstanding arrears without further delay, as the Commission might be compelled by emerging circumstances to fully apply the law under section 235 of PIA 2021, which states as follows: Failure to incorporate host communities’ development trust:
“unless as otherwise provided for in this Act, failure by any holder of a licence or lease governed by this Act, failure by any holder of a licence or lease governed by this Act to comply with its obligations under this chapter, after having been informed of such failure in writing by the Commission or Authority as the case may be, may be grounds for revocation of the applicable licence or lease.
“Notice is hereby served that in a situation where defaults are not remedied by the end of September 2023, the Commission would have no option but to revoke the license of the defaulting settlor/operator.”
The Federal Government may see a significant rise in revenue, up to N6.99 trillion monthly, following an increase in oil production to 1.8 million barrels per day (bpd), according to the Nigerian National Petroleum Company Limited (NNPC Ltd.).
In collaboration with industry stakeholders, the NNPC has intensified efforts to boost crude oil output to meet the government’s production targets.
This increase is coming as the average price of Brent crude remained stable at around $81 per barrel, creating favorable conditions for substantial earnings. Calculations based on current production levels and exchange rates show that producing 1.8 million bpd at $81 per barrel could yield approximately $4.37 billion in monthly revenue, which translates to N6.99 trillion at an exchange rate of N1,600 per dollar.
NNPC’s Group Chief Executive Officer, Mele Kyari, announced the milestone during a recent Oil Production War Room meeting at NNPC headquarters in Abuja, attended by top officials, including Petroleum Resources Minister Heineken Lokpobiri. Kyari emphasized that the increased production aligns with the Federal Government’s 2024 budget projections and long-term economic goals.
Chief Production War Room Officer Lawal Musa highlighted that the collaboration between the NNPC, security agencies, and local communities had been crucial to achieving the 1.8 million bpd level. The goal is now set to reach 2 million bpd by the end of the year, a target the NNPC is optimistic about achieving given the current momentum and security improvements in oil-producing regions.
Minister Lokpobiri commended the NNPC for achieving this production feat, describing it as a “remarkable milestone.” He expressed confidence that NNPC Ltd could not only meet but exceed the two million bpd target, further enhancing Nigeria’s revenue prospects.
The Chairman of the NNPC Board, Chief Pius Akinyelure, reinforced the board’s commitment to furthering this progress, urging the management and staff to pursue even greater achievements in the oil and gas sector. Dr. Paul Bebenimibo, spokesperson for Tantita Security Services Nigeria Limited, one of the private security agencies involved, confirmed the peaceful and secure environment in the Niger Delta as key to the production surge, assuring that further measures are in place to sustain and even increase output.
The drive to reach two million bpd underscores NNPC’s dedication to stabilizing and expanding oil production, with significant implications for Nigeria’s fiscal health and overall economic stability.
Kogi State Governor Ahmed Usman Ododo has called for enhanced cooperation between the state and the federal government to accelerate investment in oil exploration within Kogi State.
Governor Ododo made this appeal during a visit to Senator Heineken Lokpobiri, the Minister of State for Petroleum Resources (Oil), in Abuja on Thursday.
Special Adviser on Media to the Governor, Ismaila Isah quoted him to have reiterated his administration’s commitment to creating a favorable environment for investors, emphasizing the state’s readiness to work closely with the federal government.
He underscored the importance of fast-tracking oil exploration in Kogi in line with President Bola Ahmed Tinubu’s vision to expand exploration in Nigeria’s frontier basins.
Responding to the governor’s call, Senator Lokpobiri reaffirmed Kogi’s status as an oil-producing state and pledged the federal government’s commitment to attract investment to tap into the state’s vast oil resources. He highlighted the mandate of the Petroleum Industry Act (PIA), which tasks the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) with exploring frontier basins.
He assured that the government is ready to deploy funds for further exploration in Kogi.
Senator Lokpobiri also commended Governor Ododo for his leadership and strides in governance, noting that these efforts will be key in attracting and sustaining investment in the state.
Kogi State became the first oil-producing state in Northern Nigeria in 2022 following the federal government’s confirmation of oil discoveries in commercial quantities.
As the newly appointed chairman of the Senate Committee on Petroleum Downstream, Senator Sumaila Kawu has promised to tackle the persistent lack of transparency in Nigeria’s petroleum industry, which he likens to a “cabal.”
Kawu was appointed as chairman of the Committee following the demise of Senator Ifeanyi Uba who represented Anambra South who held sway as the chairman of the committee
Speaking to newsmen on Wednesday at the National Assembly, Kawu detailed his plans to shed light on the sector’s operations and engage the public in meaningful dialogue.
With rising fuel prices impacting Nigerians daily, Kawu emphasized the urgent need for clarity and accountability within the industry. “Our first step will be to study the current situation and gather information from relevant agencies,” he stated.
He highlighted the importance of holding public hearings, which will allow citizens to voice their concerns and experiences directly.
Kawu’s committee will focus specifically on reviewing contracts awarded by previous administrations and overseeing the current contracts for refinery repairs.
By scrutinizing the agreements, Kawu targets to expose any irregularities and ensure that funds are being used effectively.
He remarked, “We need to ask the hard questions and hold a public hearing to allow Nigerians to express their views.”
In his commitment to transparency, Kawu detailed his plans to engage with stakeholders, including the Nigerian National Petroleum Corporation (NNPC) and refinery operators, to understand the barriers to efficient production and accountability.
According to him, the recent visits to the refineries have given course fir concerns about unmet production timelines, prompting a call for a more rigorous evaluation of the situation.
Kawu’s focus on transparency is not only about identifying issues but also about fostering a culture of openness within the sector.
He promise to use the committee to dismantle the “cabal-like” operations that have characterized the industry, ensuring that decision-making processes are accessible and understandable to the public.
Senator Kawu expressed determination to implement measures that will stabilize the petroleum sector and address the legitimate concerns of Nigerians.
By prioritizing transparency and public engagement, he expressed the hope to restore confidence in the management of Nigeria’s petroleum resources.
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