The global shift away from hydrocarbons which heightened in the start of 2024 left the fate of many oil producing countries like Nigeria hanging. Big oil and gas players from the emerging countries went into panic mode including the likes of Saudi Arabia and Qatar, who, like Nigeria, are largely oil economies.
In the same year, two of the world’s largest banks, BNP Paribas and Crédit Agricole announced in May of 2024 that they will no longer participate in conventional bond issuances by companies in the oil and gas industry.
In October, the insurer Generali shocked the LNG, pipeline and gas power developers. The firm which is Italy’s largest insurance company announced it will no longer provide new cover for companies in the midstream and downstream sector.
“Phasing out fossil fuels requires a phase-out of fossil fuel financing and insurance. The oil and gas industry will not transition until financing dries up.
“The recent announcements by Generali, BNP Paribas and Crédit Agricole are a good sign, but they are only a tiny step in the right direction. More financial actors and insurers need to step up and pass strict policies that prevent a disastrous fossil fuel lock-in. Otherwise, the 1.5 °C goal will be irretrievably lost,” says a Finance Campaigner at Urgewald, Regine Richter.
These decisions by large creditors dealt a blow on the ability of oil and gas companies to take Final Investment Decisions (FDIs) on major projects in oil rich nations across the globe, leaving countries to chase after the few companies with capacity to invest in oil and gas activities.
Nigeria, as a major player and member of the Organisation of Petroleum Exporting countries was not isolated from the effects of defunding of the oil and gas industry.
According to the Commission Chief Executive (CCE) of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr, Gbenga Komolafe, Nigeria as of January 1, 2024, boasted of a combined reserves of Crude Oil and condensate reached 37.50 billion barrels, while the reserves of Associated Gas and Non-Associated Gas stood at 209.26 trillion cubic feet (TCF).
Total reserves, crude oil and condensate were recorded at 31.56 billion barrels and 5.94 billion barrels, respectively.
The total of Crude Oil and condensate reserves stand at 37.50 billion barrels, while the reserves of Associated Gas and Non-Associated Gas were reported at 102.59 TCF and 106.67 TCF, respectively.
Introduction of Transparency Through Automation of Processes
One of the strategies employed by Komolafe led NUPRC to restore confidence in the oil and gas sector was to conduct its activities in line with the Petroleum Industry Act, 2021 which aligns with global best practice.
To further ensure transparency using technology, the NUPRC conducted a formal visit to the headquarters of Infosys in Bengaluru, India.
Infosys, a global leader in information system technology with about 320,000 employees and about $18.6bn annual turnover provides support and services to the major oil companies, national oil companies and service companies in the petroleum sector as well as other sectors such as aviation, finance and so on globally.
Shortly after the visit, the NUPRC increased its effort to automate key regulatory processes, streamline hydrocarbon accounting, and ultimately block revenue leakages to enhance government revenues.
Transparent Bid and Licensing Round With 25 Winners
The NUPRC in line with the PIA 2021 hunted for investors with the launch of the 2024 bid round at the sideline of the Offshore Technology Conference in Texas, Houston, US and a road show in Miami.
The NUPRC unveiled 17 oil blocks out of which twelve are new blocks namely PPL 300-CS; PPL 301-CS; PPL 3008; PPL 3009; PPL 2001; PPL 2002; PML 51; PPL 267; PPL 268; PPL 269; PPL 270; and PPL 271 including 7 old blocks in the 2022 mini-bid. Following NUPRC’s transparent regulatory oversight, the bid rounds recorded drove of interest from IOC and local investors.
At the conclusion of the exercise, 25 winners were announced in Lagos in November, including International Oil Companies (IOCs) like Total Energies that had criticized the country’s oil and gas sector.
Recall that the global Chief Executive Officer of TotalEnergies, Patrick Pouyanne, speaking at Africa Annual CEO Summit in Kigali, Rwanda criticised Nigeria and insisted that Angola has a more stable business environment, reason he’s moving a $6bn investment into the country.
But Komolafe’s leadership at NUPRC has forced the IOC boss to rethink and participate in the bid round.
“Mr. Pouyanne expressed his company’s interest in exploring additional areas for investment. He informed the CCE that TotalEnergies has registered for the current bid round, signaling its commitment to exploring new opportunities and gaining insight into the NUPRC’s perspective on the process,” NUPRC said after his visit to Abuja.
Completion of IOC Assets Divestment
In October, the NUPRC announced the most successful divestment of IOC assets in the country’s history. Engr. Komolafe during the announcement said the commission received a total of five divestment requests.
He listed the request as the NADC/ OANDO divestment; the Equinor/ Project Odinmim; the Total Energies/ Telema Energies, and the MNO/Seplat divestment. The fifth divestment is the SPDC/Reneissance divestment.
Only the SPDC/Renaissance divestment was yet to receive ministerial consent as at the time of the announcement.
The divestment of assets was a key issue which stifled investment and limited Nigeria’s competitive advantage in the global oil and gas space.
“I believe it is a success for our industry and it will go a long way in facilitating the achievements we have made in the oil and gas industry,” Komolafe said.
The divestment reshaped Nigeria’s oil and gas landscape by attracting more investors to the country.
“Divestment has the potential to unlock over 500 million barrels of oil reserve and over three trillion cubic feet of gas reserve in Nigeria. So, divestment is not bad for the sector and we need to embrace it,” said the Chief Executive Officer of Aradel Holdings, Mr. Adegbite Falade
Launch of Additional One million Barrel Per Day Initiative
Nigeria largely depends on oil proceeds to fund its budget but dwindling oil production due to global factors like low investments in hydrocarbon and local issues like crude oil theft in the previous years frustrate oil out put.
The country has struggled to meet its OPEC quota, producing around 1.35 million barrels per day in August, 2024. However, in October, the NUPRC launched a massive campaign to add additional one million barrels per day to the existing production.
The project titled, ‘Project one Million Barrels of Oil Per Day’ saw huge support from President Bola Tinubu, IOCs like Chevron, ExxonMobil among others and indigenous players like Seplat Energies and Oando.
The project also saw backing of Nigerian banks like United Bank for Africa that pledged to finance projects linked to the output raise.
The initiative is reportedly yielding result as crude oil production including condensates have risen to 1.8 million barrels per day, according to the NUPRC.
Oil Rig Metering and Introduction of Advance Cargo Declaration Solution
Crude oil theft has been a major setback for the Nigerian oil and gas space. It was estimated that Nigeria loses 300,000 to 400,000 barrels of crude oil per day to theft, according to the Speaker of House of Representatives, Hon. Tajudeen Abbas.
To save the oil and gas ecosystem from the menace, Engr. Gbenga Komolafe revealed that most of what is called crude oil theft is due to metering error.
Komolafe-led NUPRC took a decisive step to meter all oil rigs.
In July, Komolafe inaugurated a nine-man team to deliver both the approved audit of Upstream Measurement Equipment and Facilities, and the Advance Cargo Declaration Solution.
He said the scope for the audit of metering of equipments include, “To establish reliable and comprehensible baseline data for all measurement points, systems and measurement equipment. To carry out a formal Gap Analysis for production, allocation and custody transfer measurement requirements.
“To propose and implement appropriate and targeted intervention actions to enhance production measurement, and flare metering including recommendations to procure, install and commission new metering infrastructure.”
For the Advance Cargo Declaration Solution, Komolafe said the project will help, “To establish a robust system for the declaration and tracking of crude oil transportation and export from Nigeria.
“To monitor and account for the movement of crude oil within Nigeria from production to delivery points. To prevent disruptions, theft, and under-declaration of crude oil within Nigeria and at export terminals.
Introduction of Framework To Speed Up Decarbonisation Target By 2060
NUPRC initiated a decabonisation initiative aimed at reducing carbon emissions. The Commission had established the Energy Sustainability and Carbon Management Division, demonstrating its commitment to achieving a sustainable energy future.
The commission took additional steps to partner with multilateral agencies, development institutions, and US-based entities like the US Department of Energy, and the Net-Zero World Initiative to underscore its commitment to collaboration on energy and climate matters.
This initiative bolstered the interest of investors and global stakeholders in the oil and gas industry.
To further the decarbonisation target in line with Nigeria’s net zero plan by 2060, the NUPRC on December 31, 2024 issued the Upstream Petroleum Decarbonisation Template (UPDT) to the industry as a regulatory tool.
Komolafe announcing the framework said, “Template will become a mandatory component of applications for licences, permits, and approvals across upstream activities, commencing in January 2025.
“The UPDT mandates the integration of decarbonisation strategies/plans into upstream operations including Field Development Plans (FDPs), wells, drilling & rig operations, and project/facility engineering.”