Why? NUPRC Yet to Publish Details of Frontier Basin Exploration Development Plan - Africa’s premier report on the oil, gas and energy landscape.

Why? NUPRC Yet to Publish Details of Frontier Basin Exploration Development Plan

By Adeniyi Adeoloye

The Frontier Exploration Fund section of Nigeria’s Petroleum Industry Act (PIA) 2021 was a -hot button issue during the final arguments leading to the passage of the PIA by the National Assembly.

The major contention was the money voted.

That 30% of state hydrocarbon company NNPC Limited’s profit oil and profit gas (as in the production sharing, profit sharing and Risk service contracts) goes to the Fund, aroused strong emotions from many industry watchers and the political class, particularly along the north-south divide. However, the fervour soon ebbed after assent of the bill by former President Muhammadu Buhari.

Following the enactment of the PIA, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the upstream regulator, formulated and gazetted several regulations aligning with the omnibus law. Among these regulations, the Frontier Basin Exploration Fund regulation is one that provides the window on the operational framework of the Fund.

On May 24, 2023, nearly 21 months after the PIA came into force, an opportunity to gain insight into the workings of the Frontier Exploration Fund emerged when NUPRC published the Frontier Basins Exploration Administration regulation. The objectives of this regulation are to “provide the general rules for the exercise of the Commission’s responsibilities with respect to frontier basins in Nigeria pursuant to section 9 of the Act”, and also to “provide a procedure for the administration of the Frontier Exploration Fund”; as well as to “attract investment to the frontier basins in Nigeria”.

Per the regulation, NUPRC is expected to “issue an annual Frontier Basin Exploration and Development Plan (the FBED Plan)”. Noting that the inaugural FBED Plan will be produced and published on the website of the Commission within three months of the regulation’s commencement, with expiration on the 31st December, 2023. Subsequently, the FBED Plan will be issued and published on January 1 of every year that follows. However, a look on the Commission’s website 3 months after the regulation was made, that is: August 2023, and later on January 1, 2024 showed no presence of the FBED Plan. Instead a strategy document released by NUPRC on January 1, 2024 titled “NUPRC Regulatory Action Plan 2024 & Near Term (2024 – 2026)”, highlighted the implementation of the Frontier Exploration Fund as part of its action plan to grow reserves and production, but lack details on the FBED Plan.

The FBED Plan as a document is supposed to contain the Commission’s exploration strategy for managing frontier acreages for the year under review. In addition, review of exploration work program in the frontier basins submitted by NNPC Limited, proposed expenditures from the Escrow Account that houses the fund, promotion of exploration activities, information on frontier basin petroleum resources, planning analysis for unassigned acreages, and outlining proposed drilling or testing operations that the Commission has requested NNPC Limited to undertake.

An inquiry to NUPRC seeking clarification on the FBED Plan as contained in the regulation up to the time of publishing this piece got the response “we are working on your request”.

Prior to the Frontier Exploration Fund, there was a division (Frontier Exploration Service) at NNPC, the predecessor entity to NNPC Limited, responsible for prospecting activities in frontier basins. Since the PIA came into force, this responsibility has been transferred to the regulator that now oversees the Frontier Exploration Fund.

In response to queries on the funding sources deployed in frontier basins, Olufemi Soneye, Chief Corporate Communication Officer of NNPC Limited stated that “Before the enactment of the Petroleum Industry Act (PIA) on August 16, 2021, Frontier Exploration activities in Nigerian Frontier Basins, including the Benue Trough and Chad Basin, were directly funded from the Federation Account. Post the PIA implementation, effective August 16, 2021, funding for frontier exploration operations shifted to Section 9 of the PIA. This involves 30% allocation from NNPC Production Sharing Contract (PSC) profit oil and gas, alongside service contracts”.

Soneye additionally expressed that “The initial exploration of the Kolmani field in Gombe/Bauchi States was funded through the Federation account. However, it now adheres to the PSC governance structure led by NEPL in collaboration with NNDC, spanning OPLs 809/810 in the Gongola Basin of Upper Benue Trough. Presently, as per PIA provisions, NNPC Ltd collaborates with NUPRC for Frontier exploration activities in basins without commercial hydrocarbon discoveries. The 2024 Frontier Exploration budget has been sanctioned by NUPRC in accordance with PIA provisions. Hence, the ongoing exploration in Nasarawa State – Middle Benue Trough (Ebenyi-1 well Drilling) and Borno State – Chad Basin (Wadi-2 well Drilling) are funded through the Frontier Basins Exploration Fund per PIA provisions. The Bauchi-Gombe Kolmani Integrated Field Development Project follows the PSC structure led by NEPL & NNDC”.

For clarity, NNDC (New Nigeria Development Company Ltd) is a company with roots from 1949 and later incorporated in 1965 to play development finance role in the northern states, and Nigeria as a whole.

The bottom line is that NUPRC’s failure to publish the specifics of the FBED Plan, as outlined in the regulation, has created an information gap on frontier prospecting operations spending, especially with the drilling campaigns in Nasarawa State, Borno State, and the ongoing “development” initiatives in Bauchi State by NNPC Limited. The lack of transparency becomes more apparent given the non production of the 2022 annual report from the state-owned enterprise, a document that would have showed the expenditure figures. For “regulatory certainty and predictability”, it is crucial for the regulator to follow the provisions outlined in its regulation.

Adeniyi Adeoloye, a petroleum geoscientist based in Calgary, Canada, is a consulting Editorial Associate with Africa Oil+Gas Report.

 

 

 

 

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