NNPC advocates split of petroleum licences into components

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17 May 2018, Lagos — The Nigerian National Petroleum Corporation (NNPC) has called for a split of petroleum licenses into two components to prevent perpetual ownership of oil acreages.

In a presentation at the Public Hearing organised by the House of Representatives Committee on the Petroleum Industry Administrative Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and the Petroleum Industry Host Community Bill (PIHCB), Group Managing Director of the NNPC, Dr. Maikanti Baru, recommended the splitting of the licences into two components for prospecting and production phases.

The issue is under the draft Petroleum Industry Administrative legislation, which along with the Bills are currently before the National Assembly.

Baru declared that the proposed split would prevent a situation where operators would sit perpetually on oil acreages.

The NNPC’s recommendation under the PIAB, according to Baru, seeks a break up of Petroleum Licence into Petroleum Exploration Licence (PEL) – to prospect for petroleum, while the second component to be known as Petroleum Lease (PL), should be created to cover the production phase to search for, win, work, carry away and dispose of petroleum.

The corporation also pushed for a re-think of the duration of licences as proposed in the PIAB which stipulates initial duration of 25 years for onshore and shallow water petroleum licence and 30 years for deep water and frontier acreages.

NNPC proposed five years prospecting licence for onshore and shallow fields and a duration of 10 years for deep offshore and frontier basins.

It also recommended 20 years production lease for onshore and shallow fields as well as deep offshore and frontier basins.

The NNPC insisted that the that only the production lease period should be renewed for a period not exceeding 20 years.

On the PIFB version of the proposed oil industry law, NNPC recommended a three-stage licences regime consisting of: Exploration Licence (EL) – to explore for petroleum on a non-exclusive basis; Petroleum Exploration Licence (PEL) – to prospect for petroleum on exclusive basis; and Petroleum Lease (PL) – to search for, win, work, carry away and dispose of petroleum.

Beyond the clause by clause recommendations, the corporation also advocated for the simplification of the fiscal system for ease of implementation and to ensure progressivity.

It called for expunging all regulatory issues out of the draft legislation to empower the Commission to regulate the industry effectively.

NNPC highlighted the need to introduce and provide clauses that will ensure easy review of provisions of the bill in response to economic, technical and other considerations while disallowing legislation on issues bordering on contracts.

Chairman of the House Committee, Honorable Abdulrazak Namdas, thanked the NNPC for its contribution, noting that the committee would sift through all the submissions by stakeholders before taken informed decisions on the issues.

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