August 7, 2022

NUPRC Sets New Paradigm In Acreage Management And Lease Administration

2 min read

The Nigerian Upstream Petroleum Regulatory Commission is adopting a more strategic approach in the administration of licenses and leases to attain the objectives of the objective in line with the objective of the Petroleum Industry Act to optimize value from acreage management and administration and the new acreage allocation principles enunciated in the law.

To position, the Commission on a Performance Centered paradigm for acreage management, a new strategy of acreage allocation, management, and administration based on a holistic assessment of the prior performance of all licenses and leases awarded before the PIA is required.

The assessment would seek to identify the areas of regulatory underperformance in acreage management and administration leading to the failure of licensees and lessees’ inability to carry out license and lease performance obligations including the acquisition of data, drilling of wells, and maturing of identified leads and prospects within the license or lease span.

In a memo to the senior management staff of the Commission, Chief Executive Gbenga Komolafe listed the aspects of the new strategy to include reviewing assignee performance and contributions to licenses and lessees, reviewing compliance performance in reporting milestones by licensees and lessees, and the administration of regulatory consequence mechanisms, review loss allocation by licensees and lessees under the PIA, including, production, cost and revenue, and performance review of existing multi-client arrangements and streamlining on-going activities to the PIA.

The assessment framework would require all existing licenses and lessees to undergo a performance assessment audit of the operation of licenses and leases based on a framework to be developed by Lease and focused on OPLs, OMLs, Marginal Fields, and Multi-client arrangements. Evaluation is expected to cover the following:

  • Compliance with environmental requirements and with work programme commitments;
  • Compliance with revenue payment obligations and reporting obligations;
  • Audit of operation systems and third-party provider activities and assessment of Assignee roles and performance obligations

In the new dispensation, there would be a need for a team with representation from relevant departments to achieve a performance schematic of existing licenses and leases; identify oversight weaknesses, identify licencee and lessee-centered failures in regulatory reporting requirements and other performance indices; improve oversight mechanism in line with the objective of the PIA and aspects of the new strategy as well as develop fresh Standard Operating Procedures for acreage management and lease administration in line with the PIA.

The team which will be made up of a member each from Exploration and Acreage Management: Development & Production; Health, Safety, Environment, and Community; Economic Regulation and Strategic Planning and the Legal Secretary Departments, is expected to submit a final report by August 30, 2022.

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