NUPRC Unveils Three-Year Regulatory Plan For Nigeria’s Upstream Oil & Gas Sector

… To Conclude Ongoing Deep Offshore Blocks Licensing Mini Bid Round In 2024

…Targets $20 Per Barrel Crude Oil Production Costs

In compliance with the Petroleum Industry Act 2021, the Nigerian Upstream Petroleum Regulatory Commission has unveiled the outlook of the upstream petroleum sector for 2024 and the near term.

The outlook, a copy of which was made available to THE WHISLER was signed by the NUPRC Chief Executive, Engr Gbenga Komolafe.

It highlights in broad terms the regulatory approach and actions that are to be implemented by the Commission in furtherance of its mandate as the apex regulatory agency established by law to supervise upstream petroleum operations in Nigeria.

Among its key mandates established by the Act and all enabling laws in force, the Commission is responsible for implementing all legislations relating to upstream petroleum operations in Nigeria and supervising operations in the upstream petroleum sector to achieve the broad objectives established in the PIA for the reform of the industry.
The PIA, which became law in August 2021 is an ambitious legislation aimed at the overall reformation of the Petroleum Industry operations in Nigeria to re-energise and set it on the path of greater profitability and sustainability in the key areas of revenue optimisation, environmental sustainability, and economic efficiency.

In line with its mandate, the Commission, which is the independent regulator of the Upstream Petroleum Sector has issued a policy statement to set out the various Regulatory and Policy actions and Key Focus areas in 2024 and the near term, for the upstream oil and gas sector in Nigeria.

The public policy statement is issued within the context of the global energy landscape which is currently in a state of rapid change in response to climate concerns and the challenges faced by the fossil fuel industry and economies long dependent on it.

These challenges include climate change issue, the energy transition momentum, and the drive towards net zero emissions by the international comity of nations in such Forums such as the recently concluded United Nations Conference of Parties (COP) 28 conference in Dubai, United Arab Emirates, and such other international fora before it.
Nigeria’s position on energy transition aligns with that of OPEC in the call for just, inclusive, equitable and balanced energy transitions. The Agenda for Nigeria, Africa, and other resource-rich developing economies is that the evolving energy dynamics must be calibrated against geography, history, and politics as well as the need for energy justice, equity, inclusivity, and sustainability.

The Regulatory Action Plan (RAP) articulated by the Commission is aimed at addressing the need in the oil and gas sector and signpost to the industry and the world that the Upstream Regulator, although young in the eyes of the law, is ready and prepared, to take the bulls by the horns and successfully navigate the challenges; and deliver the objectives of the PIA for the benefit of all stakeholders.
In furtherance of this agenda the Commission said that in line with its 10-year Strategic Plan (2023-2033) unveiled in May 2023, it would undertake regulatory activities, and implement tactical initiatives articulated in the NUPRC Regulatory Action Plan for 2024 and the Near Term under the following broad headings.

Specifically, Komolafe said in the document that the one of the area that focus would be given is regulatory certainty and predictability, adding that this is predicated on rule-based decision-making on the part of the Regulator in furtherance of the PIA.

To achieve this purpose, he said the Commission would implement a broad-based strategy in 2024 and the near term, to entrench rules of general application as follows: “Continuing issuing of new regulations in addition to those already issued since the coming into effect of the PIA to cover all aspects of upstream petroleum operations and administration.

“Identify the Key Performance Indicators from the new regulations and ensure adherence on a non-discriminatory basis.

“Issuing guidelines and standard operating procedures based on the identified KPIs from the regulations for the effective and efficient implementation of the regulations and the Act.

“Conducting annual performance evaluation involving the deployment and use of modern interactive tools and feedback mechanisms to complete a circle of regulatory certainty and predictability.”

On the implementation of the Future Licensing Rounds Policy, the NUPRC Boss added that in line with Section 73 of the PIA for the conduct of acreage licensing, the Commission would, beginning from 2024, conduct all future licensing rounds based on a Licensing Round Plan and modern acreage licensing practices, to include, “Periodicity of licensing based on predictability of timelines and long-term national economic and developmental agenda.

“Deployment of modern information management systems on resource basins. The management of licensing of acreage based on an acreage management plan

“Deepen alignment of licensing practice with the objectives, philosophy, and procedures of the PIA. Continuous evaluation of economic, geopolitical and market conditions and reflecting the outcome of such evaluations on decision making. Periodic road shows and targeted investment outreach. Alignment of seismic acquisition activities with policy on acreage licensing.”

The document added, “Going forward, every licensing round exercise shall have a defined objective which may include any one or more of the following: Opening of new or virgin areas for exploration and development (frontier licensing. To raise immediate financing to address other national needs. To attract fresh investments in exploration and development. To meet exploration or production targets.
To increase reserves. To advance bilateral relationships. To promote Indigenous participation and domestic wealth. To monetize its gas resources for enhanced domestic supply or to expand global market share

“To that end, the Commission is committed to successfully concluding the ongoing Deep Offshore Blocks Licensing Mini Bid Round in 2024.”

On plans to optimize the unit cost of crude oil production, Komolafe said In accordance with the commercial regulation mandate of the Commission as enshrined in Section 4 of the PIA, the Commission would, in 2024 and the near term, pursue strategies aimed at optimising the unit cost of production for oil and gas by driving the reduction of the current average unit cost of production in all terrains to below $20 per barrel, in the near term from current sub-optimal levels of $25-40 per barrel

To achieve this target, the Commission would, in the near term:

“Set up a framework for crude oil and gas transportation and/or handling costs based on a standardised tariff Template/Model. Implement an Open Access regime for upstream oil and gas pipelines and ancillary facilities.

“Incentivise investment in oil and gas transportation infrastructure to boost domestic delivery and stimulate the deregulated domestic gas market through the ease of administrative approval processes.

“Operationalise the Host Community Development Trust Fund(s) development actions to engender social inclusion and commitment to protect oil and gas facilities and ensure uninterrupted operations thereby eliminating costs associated with community agitations and disruptive activities.

“Activate the Environmental Remediation Fund provision of the PIA through the issuance of the Environmental Remediation Fund Administration Regulations 2023 (currently awaiting gazetting). The Commission will diligently implement the regulations to address the environmental impacts of oil and gas operations during the period.

“Agree on a protocol with the Nigerian Content Development and Monitoring Board (NCDMB) to ensure that the implementation of the Nigerian content regime does not escalate costs.

“Implement cost benchmarking strategies to ensure optimised costs for oil and gas operations. Optimise hydrocarbon accounting systems and processes.”

On the commission’s plans for automation and business process improvements for operational efficiency, Komolafe said in the document that the Commission will continue to improve its business processes to support the industry by improving service delivery through automation and digital operations.

This, he added, would be achieved through the integrated business optimisation suite of solutions deployed by the Commission to create value for industry and government stakeholders.

Part of the document is reproduced below:

In 2024, the Commission will optimise the functionality of automation systems by enhancing efficiency of existing optimising tools and the streamlined deployment of new ones. The use of productivity tools and electronic communication channels will be entrenched to improve customer interface, reduce logistics, and deepen ease of compliance.

The NUPRC will ensure 100% use of the National Production Monitoring System (NPMS), the Annual Work Programme Portal, the Dynamic Acreage Management System (DAMS), the HOSTCOMPLY, and the Oil and Gas Industry Service Permit (OGISP) automation tools by the Commission and the industry.”

a. Promote Ease of Entry and Investment Retention
In furtherance of the mandates in Sections 6(h) & 66(e) of the PIA, the Commission has conducted a review of the state of the upstream oil and gas industry in Nigeria to enunciate appropriate strategies for encouraging and facilitating investment in the industry as well as encouraging new entrants.

In addition to upstream capital investment trends, the Commission has identified other key barriers to entry to include: global concerns on climate change, local content requirements, infrastructure deficit and inadequate local gas market, access to finance, paucity of data in frontier areas, lack of a well-defined periodicity for competitive licensing rounds, high front-loaded entry fees, bureaucratic bottlenecks and high cost of development and production.

Thus, the Commission will fashion out implementable strategies to retain existing investments, encourage additional investments by existing licensees and lessees and attract fresh investments by eliminating identified barriers such as high signature bonus payments, convoluted assignment procedures, high cost of development and production and restiveness in producing communities.
To achieve this objective, the Commission would in 2024 establish and implement “The Ease of Investment in Nigeria Upstream Oil and Gas Initiative” aimed at seeking the collaboration of government agencies, state, and local governments as well as oil and gas operators and the communities to sign up a Protocol on Ease of investment and operations in oil and gas activities, to be developed by the Commission. In addition, the Commission shall strengthen the Nigerian Oil and Gas Business Opportunity Desk to serve as a rallying point for sustained advocacy on opportunities for investment and participation in Nigeria upstream. The NUPRC will drive collaboration amongst stakeholders to achieve this aim.
b. Vacating Entry Barrier Associated with Huge Asset Acquisition Fees

The Commission has paid close attention to the impact of high asset acquisition fees to the investment attractiveness of the upstream sector. A careful review of regional Signature Bonuses across the globe based on Welligence Energy Analytics (WEA)evaluation revealed that several Host Governments are dialling back from the traditional hefty signature bonuses paid for exploration blocks. That review showed that Latin America has been the most active region where signature bonuses paid for exploration blocks have been disclosed. In Brazil, for instance, where multiple license rounds have been organised in the last decade, Signature bonuses paid for deepwater blocks dropped from over US$ 6 billion paid for exploration blocks in 2013 to an average of US$43 million in the round of 2022”. The WEA’s review recognised Guyana basin as one of the highly sought-after exploration basins globally and noted that in recent license round the minimum signature bonus was US$10 million and US$20 million for shallow water and deepwater blocks respectively.
Similarly, signature bonuses in regions like Middle East (e.g. Israel) and North Africa, where blocks have been awarded recently, are estimated to be around US$10 million. In South-East Asia, for instance in Indonesia, signature bonuses are in the region of US$1 to $1.5 million while in Thailand’s recent bid round, bidders were expected to offer at least US$3 million signature bonus. In Sub-Sahara Africa, on the other hand, signature bonuses paid for exploration blocks awarded in recent years has not been disclosed, “but license bid rounds in Angola and Nigeria have attracted hefty signature bonuses in the past”, according to WEA. For example, the Angolan Block, 15/06, raked in more than US$900 million in signature bonus in April 2006, as reported by Energy Intelligence, 2006.
The import of the above narrative is to showcase the current disposition of several regional host governments towards entry fees such as signature bonuses which has a huge implication on the direction of flow of investments.
Recognising that the era of front-loaded huge signature bonuses is over, the NUPRC, in the ongoing deep offshore licensing round, has become a lot more pragmatic in ensuring that entry fees do not become a barrier to entry for investment in exploration blocks offered. As a responsible regulator, the Commission will continue to review the prevailing global investment climate to ensure that the entry fees associated with all future licensing rounds are competitive in the context of global realities and energy transition imperatives and advise government accordingly.

The Commission is working out suitable models that support investments and guarantee value for stakeholders in accordance with the government aspirations based on the following broad principles:
• Optimisation of government revenues in a sustainable manner.
• Competitive entry fees that are responsive to prevailing realities as against the traditional (static) front-loaded fees.
• Consideration for the commerciality of projects benchmarked against similar terrains in comparable petroleum provinces.
• Consideration for the commerciality of projects will be considered on a case-by-case basis for the determination of appropriate entry fees
• Where necessary and appropriate, include structured payments for signature bonuses, or other entry fees
• Emplace a deferred payment structure for signature bonus through bonuses or other alternative mechanisms.
c. Deepen Transparency, Accountability and Elimination of Discriminatory regulatory practices.

The Commission recognises the risk of a lopsided Upstream petroleum sector due to the variants of business arrangements, company ownership, and nature of transactions. Prior to the enactment of the PIA, this development created a non-uniform fiscal regime which was complex to administer. In addition, the preponderance of human interface due to manual operations under the pre-PIA regime posed significant risk to transparency.

Leveraging the PIA, the Commission is poised to steer the sector such that companies operate in a non-discriminatory regulatory environment by putting in place predictable regulatory processes through business automation and strict adherence to the provisions of the law.

In this regard, the Commission commits to consider and approve all applications, approvals and requests on operational activities based on clear Key Performance Indicators (KPIs) established in the Act and the regulations and in line with Guidelines and Procedures put in place by the Commission.
d. Implementation of a Carbon Credit Earnings Framework for Upstream Operations

In response to the global climate concerns and the emerging opportunities therefrom, the Commission established the Energy Transition & Carbon Monetisation Division to coordinate industry decarbonisation efforts to mitigate the impact of energy transition and sustain investments. The Commission is also leveraging the emerging opportunities in the carbon market based on the requirements for greenhouse gas emissions management in the PIA.

To refocus the industry towards decarbonisation and take advantage of carbon finance and funding mechanisms, the Commission, in 2024, will undertake the following:

• Develop a comprehensive policy and regulatory framework for Carbon Credits Earning .
• Establish the protocol for data management, monitoring, and emissions trading systems.
• Develop transparent market infrastructure.
• Introduce incentive mechanisms to encourage voluntary emissions reduction.
• Collaborate with relevant stakeholders to develop the carbon market in Nigeria.

The implementation of the framework will achieve a range of outcomes, including a systematic reduction in carbon emissions, diversification of revenue streams for the Commission and industry players, stimulation of technology transfer and innovation, enhanced international reputation, competitive advantage, and entrench environmental stewardship.

e. Accelerate the execution of oil and gas development and production projects.

The Commission shall in 2024 implement identified measures to accelerate the execution of oil and gas development and production in Nigeria through fast tracking of end-to-end approval processes, to expedite bringing barrels to market.

To address these gaps and ensure timely value delivery, The Commission will in 2024, implement the following key initiatives:

• Introduction of FDP Guidelines to provide clear context and insights into PIA provisions, fostering a culture of accelerated development and timely execution.
• Regular Engagements with stakeholders to identify challenges impeding FDP execution and Facility development and inform policy decisions to drive progress.
• Collaborating with other contributing agencies to accelerate approvals relating to execution of oil and gas projects.
• Issuance of regulations to operationalise the salient provisions of the PIA that support streamlined approval mechanisms for FDP and new projects.
Similarly, the Commission will enhance regulatory support for the development of gas fields and facilities in line with the Decade-of-Gas Initiative through streamlined approval processes and facilitating collaboration in joint development and facility/infrastructure access.
f. Enforcement of Drill or Drop Provisions of the Act

In furtherance of Section 88 of the PIA, the Commission is undertaking the performance of licenses and leases with a view to implement the Drill and Drop policy in line with the Act and global realities.

Further to the above, the Commission will ensure the realisation of the following
To enhance the Performance Assessment framework and entrench transparency and predictability:

• Development of standardised procedures that define clear timelines for meeting the terms of license and lease awards,
• The implementation of a robust monitoring mechanism and establishment of an Asset Performance Notification System (APNS).
• Enhance the efficiency of monitoring and evaluating operator performance and facilitating timely identification of non-performing assets.

g. Optimisation of Federation Oil Revenues

There is no gainsaying that petroleum accounts for a significant proportion of federation revenues and thus requires focused attention for economic stability and sustainability. However, the decline in production in recent years has been considerable with production hovering around 1.4 – 1.6 MMBOPD, due to security challenges, reduced investments, and energy transition-induced defunding of fossil fuels.

Be that as it may, the Commission, in collaboration with relevant government entities, is pursuing measures to complement the kinetic efforts of security forces, to grow oil production progressively to 1.8 MMBOPD – 2.6 MMBOPD and gas to about 10 BSCFD within the period. These interventions include operational optimisation and enablers to delivering high-impact projects within the portfolios of Producers.

Within the context of the overall drive for national production growth, the Commission will, in the near term, encourage a renewed production philosophy which prioritises monetized production, that is, production from assets within networks that are less prone to third-party interference and theft. This targeted philosophy, which is the outcome of production and asset disposition over the 5 years, would take into consideration asset areas, terrain, contract types and fluid type, with the aim of optimising revenues to government and industry players.

Key interventions by the Commission during this period that would drive this policy to guarantee increased revenue from oil production include:

i. Adoption of risk analysis framework to assess and manage project risks.
ii. Development of a heat map of the Niger Delta to direct development to areas less prone to theft
iii. Promote crude hedging mechanisms based on market analysis and pricing assumptions
iv. Third-party investment via innovative asset financing models
v. Shared facility and joint development for operators with limited funding
vi. Regulatory support for alternative crude oil evacuation routes in areas prone to theft

h. Decarbonisation and GHG Emissions Management in Producing environment and Incorporation of green story in FDPs.

The Commission unveiled the Regulatory Framework for Decarbonisation and Carbon Monetisation in Nigeria’s Upstream Operations at the recently concluded COP 28. The launch of the framework was greeted with wide international acclaim by the oil and gas business community and environmental groups. The Framework has incorporated in it a phased implementation plan to align with the evolution of the energy space, status of Nigeria Upstream, technology maturity and national circumstance.

Commencing in 2024, the Commission will commence the implementation of the proposed measures anchored on the seven (7) pillars of the Framework through the issuance of Advisory on Best Practices, Notices, Directives, Guidelines and Regulations. Moreover, the NUPRC shall drive compliance with GHG reporting and ESG measures as provided in the methane guidelines and the timelines stated therein.

In addition, the Commission shall implement elaborate in-house decarbonisation measures to set the pace for the industry and other sector of the economy, consistent with the Energy Transition Plan.

i. Diligent Monitoring of Implementation of the NGFCP Awarded Sites for Optimum Flares-out Monetisation.

Leveraging the successful completion of the NGFCP award process, the Commission is focused on ensuring the commencement of project development and the start of beneficial operations in line with its upstream decarbonisation drive and national net zero emissions target.

To this end, the Commission will sustain the handholding of the Awardees through the collegiate forum to be held monthly, consisting of service providers, multi-lateral organisations, gas investors, and financiers to drive the programme to success. With this approach, many of the project sites will come on-stream and commence flare monetisation during the period.

j. Host Community Trust Fund Implementation and guiding the Trust Funds activities to reduce agitation in the operations areas.

The Commission shall in 2024 establish a framework aimed at ensuring that host community trust funds established pursuant to the PIA embark on activities in their respective beneficiary communities aimed at ensuring peaceful operations by reducing significantly and ultimately eliminating all forms of disruptive agitations by host communities in the operational areas.
To this end, the Commission shall, in collaboration with the Settlors or the Trusts and the Trustees of the various Trust Funds institute a quarterly dialogue series with Settlors and the Trust Funds as a platform for proactive engagement between the Commission, the Settlors and the Trust Funds on all issues concerning the progressive implementation of the Trust objectives and the establishment of harmony and peace in the host community beneficiary areas.
In a similar vein, the Commission shall ensure the full functionality of the recently launched HOSTCOMPLY platform to ensure simplified administration of the HCDTs for easy and efficient oversight of the Commission on the Fund’s administration and implementation of the HCDT projects as provided in the PIA.
k. Project 100% hydro-carbon accounting

The Commission shall, in 2024 implement the 100% hydro-carbon accounting project aimed at ensuring that all hydrocarbon produced and exported in Nigeria are efficiently and properly accounted for through reliable and efficient metering systems.
To achieve this, the Commission shall conduct an audit of all measurement points, establish a metering plan for all licences and leases and ensure that licenced metering service providers are deployed by all licensees and leases to carry out metering services in line with the metering regulations.
The above measures will enhance the transparency and accountability in the upstream sector as well as bolster Nigeria’s credibility in the international arena and debunk negative publicity.
l. Implementation of new Production Curtailment regime and domestic crude supply obligation
The Commission shall in 2024 implement a new regime of production curtailment and domestic crude supply obligation regime based on the Domestic Crude Oil Supply Administration Regulations, 2023.
The strategy of implementation shall where necessary and as required by the PIA and the applicable regulations involve the engagement of other agencies to ensure that the objectives of the laws and regulations are met. The new mechanism will entrench role delineation and administrative clarity in crude oil production and export accounting as envisaged by the PIA

m. Annual Asset Performance Assessment and Reviews
Comprehensive evaluation and periodic assessment of the performance of licences and leases is a fundamental mandate of the Commission in the PIA. Hitherto, petroleum asset performance reviews were handled as operational engagements with little or no strategic focus. Leveraging on the PIA, however, the imperatives for a robust and comprehensive periodic asset performance assessment cannot be over emphasised.
Against this backdrop, the Commission has remodelled the annual asset performance review to create value for all stakeholders and align deliverables from the review with global best practices and PIA expectations. The new approach will focus on fast-tracking production via the Maximum Economic Recovery (MER) philosophy.

To achieve the intendment of the proposed asset performance review, the following key actions will be taken:
• Development of appropriate regulations and database of all assets.
• Continuous review of asset key performance indicator to ensure analysis of key metrics conforms to international best practice.
• A phased approach with specific set of metrics designed in line with the objectives and peculiarities of each phase.
• Clear delineation of applicable metrics across the value chain to ensure effectiveness and efficiency in the evaluation process and outcomes.

n. Enforcement of DCSO and DGDO to Improve Domestic Refining Capacity
Nigeria despite being a major oil exporter, has faced the paradox of importing refined products, leading to increased costs and vulnerabilities in the face of global oil price fluctuations. To this end, the Petroleum Industry Act (PIA) 2021, in Section 109 introduced the Domestic Crude Supply Obligation (DCSO). The DCSO is a policy that mandates oil-producing companies to allocate a specific percentage of their crude oil production for domestic refining.

The Commission has fully operationalised the implementation of the Domestic Crude Oil Supply Obligation since the regulation was gazetted a few months ago. Alignment with NMDPRA, operators and refineries on the operating framework has fully commenced in line with PIA provisions.

Several factors played a key role in shaping the DCSO policy in Nigeria; some of the factors include (1) Uncertainty in global oil price (2) Changing energy dynamics and geopolitical concerns (3) Environmental and climate considerations (4) Opportunity to build the technical and innovative capacity of Nigerians (5) Enhanced collaboration via international partnerships and agreements.

Potential gaps that may hinder the achievement of DCSO include inadequate refinery capacity, poor operational inefficiency, Funding, delayed TAM, policy inconsistency and security and infrastructure concerns. In the same vein, the following key interventions should be considered to address the potential gaps highlighted above:

• Refinery rehabilitation
• Policy consistency
• Adequate security measures
• Capacity building and technology transfer

It is believed that the implementation of the DCSO shall bolster socio-economic growth for Nigeria including energy security and reduced import dependency of refined products. An effective feedback mechanism shall be adopted to manage stakeholder expectations during the implementation of DCSO.

The overarching thrust of this policy is to promote adequate supply of crude oil for domestic refining and consumption while fostering responsible resource management, energy security, economic stability, and sustainable development.

o. Implementation of Frontier Exploration Fund
Recognizing the significance of frontier exploration to reserves and production growth as well as bolstering investors’ confidence by de-risking the hydrocarbon development of the basins, the Federation catered for NNPC’s activities in the frontier basins to complement the meagre private investments in frontier exploration activities prior the enactment of the PIA. This source of funding ends with the passage of the PIA into Law. In its place, the PIA introduced the Frontier Exploration Fund to support exploration and development in Nigeria’s frontier acreages.

Based on the PIA, the Commission steered the process of enacting regulations to guide the operations of the Fund. The Commission is committed to the development of the Frontier acreages in line with the intent of the PIA in a manner that guarantees that the Fund is utilized economically for an efficient and effective development of the frontier basins to grow reserves and production.

p. Decommissioning and Abandonment (D&A) Fund
The PIA makes specific provisions on the decommissioning plan, establishment of the D&A Fund and annual contributions to the Fund to ensure cash backing for execution of decommissioning programs. Pursuant to Section 233 of the Petroleum Industry Act (PIA) 2021, the Nigeria Upstream Petroleum Decommissioning and Abandonment Regulations (D&A Regulations) 2023 was issued by the Commission which amongst other things require Licensee and Lessee to set up a decommissioning and abandonment Fund (D&A Fund).

Feedback from the industry reveals that the funding requirements are considered onerous, particularly the requirement for a progressive in-country domiciliation to reach 100% after five years, impacting security of funds. Furthermore, following the enactment of the D&A Regulation, the Commission was advised by the Central Bank of Nigeria (CBN) that the Bank cannot hold Escrow Accounts of a commercial nature as required by the regulation, hence, the Bank is unable to open the individual escrow accounts for licensees and lessees in respect of their licenses and leases.

In view of the foregoing, the Commission will take the following distinct actions to ensure the timely establishment of the Decommissioning and Abandonment Fund and the adequacy of the contributions to the Fund:

1. In the coming days, the Commission will secure Government approval to direct licensees and lessees to open D&A Funds account with Nigerian Commercial Banks.
2. Before the end of Q1, 2024, the Commission after due consultation with relevant stakeholders will prescribe the Minimum Financial ratings for Nigerian Commercial Bank for the domiciliation of any portion of the D&A Fund required by the regulation to be domiciled in Nigeria.
3. Conclude the procedure for the amendment of the D&A Regulations 2023 before the end of Q1 2024.
4. Issue guidelines for the establishment of D&A Fund and determination of annual contribution before end Q2 2024.

q. Zero Tolerance to Default in Royalty Payment
Recognising the importance of revenue generation to the actualisation of Government plans, programs and budgets, the Commission is poised to ensure the appropriate assessment and remittance of royalty as and when due through:

a) Enforcement of the Nigerian Upstream Petroleum Measurement Regulations, 2023 to ensure transparency in crude oil measurement and accounting thereby blocking leakages arising from hitherto inaccurate measurement.

b) Advance Cargo Declaration: The Advance Cargo Declaration Regulation is targeted at curbing disposal of illegally obtained crude oil majorly through stealing. It is a non-kinetic initiative by the Commission to complement the fight against oil theft in Nigeria.

c) Application of the instrumentality of the law which among others empowers the NUPRC to:
• Suspend all regulatory approvals and permits until payments are made.
• Seize crude in lieu of debt during monthly lifting programme.
• Impose penalty and interest.
• Revoke lease or license as enshrined in Paragraph 13 of the Seventh Schedule of the PIA.

r. Value Creation through Approval of Annual Work Program/ Budget and Monitoring of Financial Viability

Section 78(17) of the PIA and Section 53(3) of the Petroleum (Drilling and Production) Regulations 1969 mandates all operating Exploration and Production Companies to present their planned Annual Work Program to the Commission. By this mandate, the Commission reviews the planned activities of the industry to ensure alignment with Government’s aspirations.

The Commission’s strategy for the administration of the work programme focuses on three (3) key areas:

• Ease of administration

The Commission has deployed technology to enable data submission, review, analysis and approval. This is to enable timely response, eschew bureaucracy improve turnaround time for approvals.

• Industry Engagements

Technical sessions would be held with operators on a need-to-have basis to provide clarity, advance regulatory steers and ensure alignment.

• Performance Evaluation
Performance evaluation would be carried out based on identified criteria and other performance targets in line with Government’s aspirations.

In addition, companies’ financial viability is assessed pursuant to the provision of Section 7(y) of the PIA (2021). This evaluation is intended to reveal any risks to, and vulnerabilities of upstream petroleum companies that may impact their abilities to carry out commitments on upstream petroleum operations.

The Commission conducted the inaugural assessment of the financial viability of E&P companies in the industry. Fifty-eight (58) companies were assessed based on their 2021 annual financial report and rated accordingly in terms of credit-worthiness, solvency, liquidity, capital structure, economic return, and profitability.

In 2024, the mechanism and modalities of this assessment will be enhanced, and appropriate mitigation measures enforced to promote the overall financial health of the Nigerian Upstream.

s. Crude Oil and Gas Pricing in Contemporary Terms
Global crude oil prices have fluctuated significantly, with key factors influencing contemporary oil and gas pricing including but not limited to transition to cleaner energy, geopolitical tensions and supply concerns, OPEC+ production policies, currency exchange rate, technological advancements and innovation, energy transition and investment shifts, regulatory changes & carbon pricing, supply chain challenges etc. Prices can vary from below $30 per barrel to well over $100 per barrel within relatively short periods.

Similarly, natural gas prices are influenced by supply-demand dynamics, weather patterns affecting consumption, production levels, storage capacities, and global energy policies. Prices can also fluctuate substantially, moving between different price bands, affected by seasonal changes and unforeseen events, including regional or global geopolitics.

Based on the provisions of Paragraphs 8 (1) and 23 (1&2) of the Seventh Schedule of the PIA, the Commission has established an Oil and Gas Pricing and Value Monitoring Desk to study trends and assumptions and advise in tandem with market realities. The Desk will carry on market analysis and forecasts that will avert undue exposure to Nigeria and industry stakeholders.

t. Revenue generation and the implementation of zero default strategy on payment of royalty
The Commission shall in 2024 begin the implementation of a new administrative process for the management of royalty payments based on the new royalty regulations. The new shall be Zero Default System which ensures a hundred percent payment of royalty as at when due without allowance for any default or late payment.
The foregoing represents in broad terms the key thematic focus areas that would underpin the Commission’s activities in 2004. These are in addition to the Commission’s commitment to its general objectives and functions as provided in the PIA and by implication all other laws relating to upstream petroleum operations in Nigeria.
In focusing on these areas, the Commission aims at bringing into rapid effect the transformation of the sector envisaged by the Petroleum Industry Act and ramping up the efficiency and performance of the Sector.
Furthermore, the implementation of these initiatives would in the short- and long-term increase revenues generated for Government from the industry, improve the regulatory and operating environment, optimise value, generate jobs, and position the country as a destination for foreign direct investment for the Sector.

CONCLUSION
As a strategy-driven organisation, the Nigerian Upstream Petroleum Regulatory Commission is firmly committed to setting a clear agenda for the Nigerian upstream sector to engender efficiency and effectiveness in line with the PIA and government aspirations for a virile, functional, and profitable oil and gas sector. The Commission will ensure that the Regulatory Action Plan (RAP) for 2024 and the near term is implemented vigorously by all concerned in the beneficial interest of operators, service providers, industry participants and other stakeholders, all in the overriding national interest.