By Michael Eboh

THE Department of Petroleum Resources, DPR, has stated that the procedure for lease renewal in the Nigerian petroleum industry follows a transparent and open process which operators are fully aware of.

This was in reaction to allegations by the Senate, accusing the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu and the DPR of sharp practices in the renewal of oil and gas leases for companies in the petroleum industry.

Deputy Manager, Public Affairs of the DPR, Mr. Mohammed Saidu, explained in a statement that the lease renewal procedure draws its legal basis from Sections in the Petroleum (Drilling & Production) Regulation 1969 as amended in 2001.

According to him, the law mandates the Minister of State for Petroleum Resources, HMSPR, to renew Oil Mining Leases, OML, once statutory payments in terms of applicable royalty, concession rentals and fees are paid, and the asset being worked in a business-like manner by the leaseholder.

He said: “The HMSPR and the DPR in recognition of the Federal Government’s drive for the Accelerated Revenue Generation Initiative to shore-up government revenue and facilitate investment inflows into the upstream sector of the Nigerian oil and gas industry have encouraged  oil companies towards  early lease renewal programme. Arising from the above, companies whose leases are due to expire apply for renewal to the DPR.”

Saidu disclosed that upon receipt of the application and payment of $2 million application fees, the DPR progresses the application through a number of regulatory gates, such as thorough assessment of all the exploration and development efforts undertaken in the block to ensure that sufficient investments were made to optimally explore and develop the block in business-like manner with due compliance to applicable rules and regulations.

He added that the DPR also assesses the production profile and production growth plan to ensure that sound reservoir management practice is adhered to for optimal maturation of the asset.

Other checks conducted by the DPR, he said, include; “Review and assessment of compliance with payment of all applicable royalties, concession rentals and other statutory payments.

“Economic evaluation of both surface and subsurface assets of the block taking into cognisance the remaining reserves and possible cost of future development, using standard industry methodologies for valuing oil and gas assets to determine the lease renewal bonus payable by the leaseholder.

“It is worth mentioning that a five percent net present value of the asset was approved to be charged as a renewal bonus.”

Saidu noted that at the end of the evaluation and assessment of the historical maturation and development of the asset to ensure there have been continuous and progressive value creation and addition to the nation in conformity with best practices, the DPR makes recommendation to the minister on whether to approve the lease for renewal or otherwise, adding that once is approval is granted, the company is duly notified.