Oil bloc: Tinubu knocks off signature bonus to woo investors

The Federal Government declared yesterday that the signature bonus criterion for bidding on oil blocks will no longer apply in an effort to draw in new capital and increase oil output.

Heineken Lokpobiri, the Minister of State for Petroleum Resources and Oil, made this announcement outside the 2024 Offshore Technology Conference (OTC), which is now taking place in Houston, Texas.

A signing bonus is an advance payment made by oil corporations to the government in the form of a single, non-refundable lump amount for the right to develop an oil block commercially following their successful bid in the licence round.

Investors were reassured by the minister that oil will continue to play a significant role in Nigeria’s economy and that the government is working to create an environment that will draw the best capital.

Lokpobiri, who urged investors to take the opportunity of the oil bid round to make an investment, said: “Historically, no source of energy goes away. So, do not be deceived that fossil fuel will go away. Discourse at the recent global conferences has further proved that fossil fuel will continue to remain, the quicker we extract our oil, the better for us as a country.

“We are here at OTC to show the rest of the world that Nigeria is different and our government is different, in creating the best regulatory framework, allowing competitiveness, and removing all the investment barriers.

“Today, we are restoring investment confidence in the sector and ensuring investors can bring in their funds without worries. This will show to the world that Nigeria is ready for business.”

‘Signature bonus highest in Nigeria’
Announcing the removal of the signature bonus, Lokpobiri said over the years, payment of signature bonuses remained a huge bottleneck for investors as well as investment into the sector.

“Stakeholders had explained that globally, payable signature bonuses by awardees of an oil bloc or marginal field rank highest in Nigeria. On many occasions, the huge amount involved in payment of signature bonus was a setback for investors,’’ the minister added.

He said to ensure investors have a soft landing, such payments will now be tied to immediate exploration and production activities by new entrants.

Lokpobiri noted: “Rather than pay such monies into the coffers of the Federal Government, the investor must now be able to prove to us that they have the funds required to move into exploration.

“What we have resolved going forward and with the 2024 oil bid round is to see that fields won in a bid round must be put into immediate use as against what obtained in past where fields are left idle after assets are won.”

He said the new strategy will create jobs and boost activities in the upstream oil sector.

Exercise to increase reserves, production capacity — NUPRC
In his remarks, the Chief Executive Officer, Nigerian Upstream Petroleum Regulatory Commission, NUPRC, Engr. Gbenga Komolafe, said the recent Presidential Executive Orders issued in March this year, were aimed at improving the efficiency and attractiveness of Nigeria’s oil and gas sector.

He added that it would culminate in further increasing the nation’s oil and gas reserves, currently standing at 37.5 billion barrels of crude oil and condensate reserves and 209.26 trillion cubic feet of natural gas reserves.

Komolafe said: “The exercise, which was initially announced on the 29th of April 2024, is a significant leap in our strategic hydrocarbons development initiative. This round introduces twelve meticulously selected blocks across diverse geological spectra — from the fertile onshore basins to the promising continental shelves and the untapped depths of our deep offshore territories.

‘’Each block has been chosen for its potential to bolster our national reserves and stimulate economic vitality. Our approach is underpinned by the robust legal framework of the Petroleum Industry Act 2021(PIA), which ensures compliance with best practices to boost investors’ confidence.

‘’In keeping with the provisions of the PIA and regulations made under the Act, the commission has issued a licensing round guideline and published a licensing round plan for the twelve blocks (namely PPL 300-CS; PPL 301-CS; PPL 3008; PPL 3009; PPL 2001; PPL 2002; PML 51; PPL 267; PPL 268; PPL 269; PPL 270; and PPL 271).

“In addition to these blocks, the seven deep offshore blocks from the 2022 Mini-Bid Round Exercise which cover an area of approximately 6,700 km2 in water depths of 1,150m to 3,100m shall also be concluded along with this licensing round.’’

We are shifting to gas, deep offshore, not leaving Nigeria — Shell
On her part, the Managing Director, of Shell Nigeria Exploration and Production Company Limited (SNEPCo), Elohor Aboni, disclosed that Shell does not intend to leave Nigeria.

She said the company is globally shifting from oil to gas while focusing on the development of its deep offshore oil and gas assets.

Recall that in 2022, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, disclosed that it realised N174 billion from signature bonuses paid by winners in the 2020 marginal oil fields licenses, while it revoked those of 33 companies for failing to meet the 45-day deadline required to pay the signature bonus for the fields.

667 firms eyeing 57 oil blocks on offer
A total of 57 fields were on offer with 665 companies indicating interest to acquire them.

Meanwhile, the Executive Chairman, Lee Engineering and Construction Company, Chief Leemon Ikpea, has said indigenous companies are ready to acquire assets of International Oil Companies, IOCs, under divestment.

He said: “I can rightly assure Nigerians that indigenous companies have the capacity and are ready to double the investment of these divested assets. What is important for us is collaboration as well to bridge the gap. Great minds and not portfolio investors are spanning from indigenous operators and you will be surprised at what they can pool and grow these investments.

“Indeed, following the Federal Government of Nigeria’s commitment to the Nigerian Local Content Act, which seeks to promote indigenous technological capabilities in the oil and gas sector, Lee Engineering is currently building a gigantic, next-generation production facility in Warri, Delta State, Nigeria, to be commissioned soon.

“The facility has an installed capacity to manufacture high-volume industry equipment such as pressure vessels, heat exchangers, process skids, tanks and other oil and gas tools that will help transform the industry. The investment in the gigantic fabrication facility is estimated to be worth over 200 million dollars.

“However, there is a need for continuous government support and incentives to drive this needed objective for indigenous operators, which will in return discourage capital flight and strengthen the country’s currency for profitability and economic recovery.”