NEITI recommends revocation of oil block licenses of Agip, Sahara, Shell, others

The Nigerian Extractive Industries Transparency Initiative (NEITI) has suggested that the licenses on oil block management granted some indigenous and international crude oil prospecting companies be revoked.

The agency made the recommendation in its latest Oil and Gas Industry Report for 2021, where it noted that no less than 23 oil blocks managed by the oil companies, failed to produce crude or were inactive in the year under review.

It also revealed that the blocks were under the crude oil Production Sharing Contracts (PSC) with the Nigerian National Petroleum Company Limited (NNPCL).

A PSC is an arrangement or contract where the contracted oil company undertakes to fund operations to explore, develop and produce petroleum within a concession area, under an Oil Prospecting License and for an agreed number of years.

When the effort is successful, the company will be subject to pay Petroleum Profit Tax, royalty and other bonuses/levies to the government. The company is entitled to recover its costs, in-kind, through what is known as ‘Cost Oil’.

The NEITI report indicated that in 2021, 12 of the PSC oil blocks made production, while 17 blocks did not produce. It also showed that there were also six inactive blocks, bringing the total number of both inactive oil blocks and those that did not produce crude during the review period to 26.

Some of the PSC contractors that did not produce crude from selected blocks included Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, Texaco Nigeria Outer Shelf Limited, Star Deep Water Petroleum Limited, Statoil Nigeria Limited.

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Others included Newcross Petroleum Limited, Sahara Energy Exploration and Production Limited, Conoil Producing Limited, Continental Oil and Gas Limited, Enageed Resources Limited, Nig-Del United OIl Company Limited, Sterling Oil Exploration and Energy Production Company Limited, among others.

The contractors managing the six inactive PSC blocks included GEC Petroleum Development Company Limited, Nigerian Agip Oil Company, Monipulo Limited, and Esso Exploration and Production Limited.

The report said in part: “The following were the observations on production from PSC blocks In 2021: Only 12 (34 per cent) of the PSC blocks recorded production, while 23 other blocks, representing 66 per cent of total numbers of PSC blocks, did not produce.

“Total production from the PSCs, which was 242.96 million barrels, represents 42.92 per cent of total production of the 566.13 million barrels.

“The PSC arrangements, which contributed highest to the total production volumes, operated only 34 per cent of the total allocated blocks.”

The report recommended that there was the need for the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and NNPC Ltd to speedily review the technical, operational and other constraints limiting production from the idle PSC blocks with the view of optimising production from the PSC arrangements.

“Where these issues cannot be resolved, consider revocation of licenses and subsequent allocation to other interested parties,” NEITI, a Federal Government agency stated.

The report, however, captured the responses from NNPCL as regards the development, saying that the national oil firm explained that “PSC blocks transit from exploration/appraisal phase to production overtime.”

According to the report, NNPCL also noted that “some of the blocks are still at award status as some contractors may not have come forward for budget/work programmes due to various reasons from regulatory to business operations’ considerations.

“We (NNPCL) are hopeful that about two to three blocks will soon attain production status.”

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