‘Increase in royalty, 3% to host communities’ — NUPRC gazettes 5 petroleum industry regulations

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) says five petroleum industry regulations have been gazetted. 

The commission said six others have been finalised and are ready for gazetting.

Gbenga Komolafe, chief executive officer of NUPRC, spoke on Monday in Abuja at the third phase of the authority’s consultation with stakeholders on draft regulations development. 

The consultation is in line with section 216 of the Petroleum Industry Act (PIA).

The engagement had in attendance the Oil Producers Trade Section (OPTS), Independent Petroleum Producers Association (IPPA), international oil companies and indigenous operators, among others.

Komolafe, represented by Habib Nuhu, executive commissioner, NUPRC, said 13 draft regulations were presented for discussion during the first and second phases of consultations with stakeholders in 2022.

He listed the gazetted regulations to include Nigeria’s upstream petroleum host community development trust; royalty; domestic gas delivery obligation; Nigeria conversion and renewal (licence and lease); and petroleum licensing round.

The other six yet to be gazetted are upstream petroleum fees and rents regulations; upstream decommissioning and abandonment regulations; unitisation regulations; acreage management (drilling & production) regulations; frontier exploration fund administration regulations; upstream environmental remediation fund regulations; upstream petroleum safety regulations; and upstream petroleum environmental regulations. 

“I am happy to inform you that five of the regulations have been gazetted while the remaining six have been finalised and ready for gazetting,” he said.

In compliance with section 216(4)(g) of the PIA 2021, he said the commission organised yet another stakeholder consultation prior to finalising more draft regulations.

He listed them as the upstream petroleum measurement regulations; advance cargo declaration regulations; significant discovery regulations; gas flaring, venting and methane emissions (prevention of waste and pollution) regulations; and domestic crude oil supply obligation regulations.

Kelechi Ofoegbu, executive commissioner, economic regulation and strategy planning, NUPRC, provided insight into the regulations.

He said the measurement regulations would give the regulator the ability to know the exact production by different upstream oil operators.

Ofoegbu said it became necessary to understand the regulation because, through the years of production in Nigeria, there has been the quest to know how much the country produces and how much it consumes, from upstream to midstream to downstream.

The Nigeria upstream petroleum host community development trust regulation underscores a three percent annual allocation to host communities from operators’ operating expenditures.

Under the royalty regulation, the benchmark for royalties paid by upstream operators is subject to an annual rise of two percent.

A major highlight of the domestic gas delivery obligation regulation is that operators who fail to comply with the domestic gas delivery obligations under the act must pay a penalty of $3.50 per MMBtu for gas not delivered.

On the Nigeria conversion and renewal (licence and lease), the regulation states that the commission shall not sign a conversion contract unless Nigerian National Petroleum Company (NNPC) Limited has signed off on the fact that the conversion in all respects conforms to the provisions of section 92(3)(a) of the act.

It also states that the effective date of a conversion contract, pursuant to section 92(4), shall be February 16, 2023, or an earlier date upon the expiration of the oil prospecting licence (OPL) or oil mining lease (OML). 

According to the petroleum licensing round regulation, the duration of a licensing round shall be sufficient for bid participants to evaluate all geological, geophysical, technical, economic, and fiscal conditions relating to a block, but shall not exceed one year