According to the Federal Government, no fewer than 23 oil blocks controlled by both foreign and domestic oil corporations that are covered by crude oil Production Sharing Contracts with the Nigerian National Petroleum Company Limited either failed to produce petroleum or were dormant.
This information was provided in the most recent Oil and Gas Industry Report for 2021 published by the Federal Government’s Nigeria Extractive Industries Transparency Initiative. It claimed that the blocks were unable to produce crude throughout the evaluated year.
PSC refers to an agreement or contract wherein the oil company contracted agrees to finance operations to explore, develop, and produce petroleum inside a concession region, under an Oil Prospecting Licence, and for a specified period of time.
If the attempt is successful, the business will be required to pay royalties, additional bonuses, and taxes to the government. The business is allowed to recoup its costs in kind through a process called “Cost Oil.”
Through the NNPC’s arrangement of lifting crude oil and gas for tax, royalty, and share of profit oil (often shared in a predetermined ratio), for sale and remittance to designated accounts, the firm also pays PPT and royalty in-kind.
The funds from the sale of profit oil are transferred immediately to the Federation Account, whereas the account may be a Federal Inland Revenue Service (tax) account or a DPR (now NUPRC) account (royalty).
Since PSC pays for exploration and production, the government is relieved of financial strain.
In 2021, 12 of the PSC oil blocks began producing, but 17 blocks did not, according to The PUNCH’s examination of the most recent NEITI data.
Six inactive blocks were also revealed in the study, increasing the total number of idle oil blocks and blocks that failed to produce petroleum during the review period to 26.
Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, Texaco Nigeria Outer Shelf Limited, Star Deep Water Petroleum Limited, and Statoil Nigeria Limited are a few of the PSC contractors that failed to produce crude from particular blocks.
Other companies were Nig-Del United Oil Company Limited, Sterling Oil Exploration and Energy Production Company Limited, Newcross Petroleum Limited, Sahara Energy Exploration and Production Limited, Conoil Producing Limited, Continental Oil and Gas Limited, Enageed Resources Limited, and others.
GEC Petroleum Development Company Limited, Nigerian Agip Oil Company, Monipulo Limited, and Esso Exploration and Production Limited are the contractors in charge of the six dormant PSC blocks.
The following were the observations on production from PSC blocks, according to NEITI, who provided additional commentary on the development. In 2021: Only 12 (or 33%) of the PSC blocks registered production, while the remaining 23 blocks—representing 66% of all PSC blocks—did not.
“The 242.96 million barrels of total production from the PSCs, or 42.92 percent of the 566.13 million barrels of total production, were produced.”
According to the agency, just 34% of the total allotted blocks were operated under the PSC arrangements, which contributed the most to overall production volumes.
It suggested that in order to maximise output from the PSC arrangements, the Nigeria Upstream Petroleum Regulatory Commission and NNPC Ltd. should quickly assess the technical, operational, and other limitations restricting production from the idle PSC blocks.
The Federal Government agency advised “considering licence revocation and subsequent allocation to other interested parties where these issues cannot be resolved.”
However, NEITI reported that NNPCL provided replies to the news, explaining that “PSC blocks transit from exploration/appraisal phase to production overtime.”
The oil company also observed that “some of the blocks are still at award status as some contractors may not have come forward for budget or work programmes due to various factors, from regulatory to business operations’ considerations,” according to the statement.
About two to three blocks should shortly reach production level, according to NNPCL.
Due to the high level of technology necessary for these services, the Federal Government collaborates with both domestic and international oil companies to explore and produce Nigeria’s petroleum, and PSC is one of these significant partnerships.
PUNCH
