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Oil acreage management and relinquishment process Nigeria’s pragmatic approach

The exploration and development of mineral fields by way of maximising their potential  as a source  of revenue generation be it solid or liquid extraction are issues of significant that are central to the overall national and security interests of countries that are so endowed with any form of exploitable minerals.

Nigeria, with an outstanding oil and gas reserve profile estimated at over 40 billion barrels coupled with an increasing daily oil output of over 2 million barrels per day is best described as an oil and gas province. The potential for active exploration on Land, Sea and Swamp as well as on the continental shelf, present one of the finest opportunities for any investor anywhere in the world to clinch.

Indeed the Nigeria’s present fiscal regime according to experts is believed to be among one of the most liberal globally. This assertion is best explained given the continuing interest shown by investors in the Nigerian oil and gas sector, especially, the desire by upcoming investors to buy in interest in either the existing fields or in new frontiers of the oil and gas sector.

In furtherance of the effort to consolidate on the gains and to open up the country’s oil and gas industry to best international practice, the Government under its current review of the existing laws governing the operation and administration of the oil and gas sector as contained in the Petroleum Industry Bill attempted to critically re-examine aspects of the present laws as it relate to upstream investment as well as the allocation of oil blocks and a relinquishment process of undeveloped  fields which, hitherto, are being held and counted in part as assets to the holding company.

It is an established fact that the approach to acreage allocation and the process of relinquishments of previously held oil licenses that have remained largely undeveloped run at variance with international best practice on acreage allocation and relinquishment.

It is on this premise, therefore, that the steps taken in the b PIB to liberalise the process of allocation of oil acreage and relinquishment processes through the adoption of the global acreage management system comes as a welcome panacea. The objective in effect is intended to enshrine good governance and accountability in the entire process.

The acreage management system allows the issuing Authority to specify a timeline during which investment must be accomplished on the allocated license covering the assigned portion for the purposes of oil prospecting and exploration.

At the end of the investment period only the area so covered by the prospecting and exploration activities would be earmarked and converted into,(PML), Petroleum Mining Lease to be issued to the allotted company. What is left of the vast area based on the original licence would then revert to the governing authority, in this case, Nigeria.

The advantages to this approach are many. First, it would enable the issuing authority in this instance, the Nigerian Government to regain control over substantial portion of the land area space possibly between 50-90 percent of the under developed area covering the license.

Secondly, it will also provide opportunity for the reclaimed prospecting and exploration areas to be made available for re-allocation to other investing interests, and by so doing, disallowing companies from holding tight in their possessions vast potential oil fields at the detriment of the country.

Thirdly, it offers Nigeria a leverage to harness to the fullest the economic benefit of its oil potentials for the general economic wellbeing of its peoples.

It is a fact long established that one potential obstacle affecting the growth of the Nigerian oil industry is the lack of a well structured acreage management system. By inference, allocations to prospective investors were made without recourse to due diligent and timeline bearing which such allocation shall be regarded as null and void.

Indeed the country’s desire to open up its oil and gas sector to global competition has been applauded in several quarters, especially coming at a time that a bill creating a new fiscal regime under the auspices of the Petroleum Industry Bill is before the consideration of the Nigerian Legislative House.

When the bill is finally pass, the management of the country’s oil and gas resources will never be the same again. Nigeria stands to benefit, but this time, under a clearly defined and transparent process.

According to Professor M. Robert, a world renowned oil fiscal regime analyst, Nigeria has for long been on the receiving end of the business equation with oil companies having the upper hand dictating the pace of development of the industry in Nigeria. A time for a strategic shift has come. And it is now. Nigeria has therefore no option but to make amends and align itself with the global best practice on Oil Acreage and Relinquishment Management system.

The Petroleum Industry Bill and its Memorandum earlier alluded to contain a number of provisions that clearly spelt out the management of the petroleum Prospecting Licenses as well as the Mining Leases crafted in a way consistent with best international practice. All the provisions therein, specified guidelines as it relate to exploration phases; work commitment for the development for each phase project activity; and a plan for the exploitation area.

Others include possibility for relinquishment during exploration period, as well as the option to relinquish acreage upon termination of exploration period. There is also a provision allowing for relinquishment of exploitation area if not producing within the given time frame or the possibility for termination if development is not carried out within the stated time allotted.

The provision is comparable to most developed and developing oil terrain  in many  countries and especially those with net oil export capabilities such as Angola, Egypt, Gabon, and Ghana among several others.

Thus, the provisions in the PIB as it concerns acreage and relinquishment processes are not peculiar to Nigeria, but a development practice done in the industry globally. Umar Gbobe AMINU is an Oil and Gas News Development Analyst. He wrote from Gwarimpa in Abuja, Nigeria.


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