NNPC asks National Assembly to cut duration, split of oil licenses

Nigerian National Petroleum Corporation, NNPC, has urged lawmakers to review downward the duration of petroleum licences as stipulated in the draft Petroleum Industry Administrative legislation, PIAB, currently before the National Assembly. In a statement in Abuja, Group Managing Director of the NNPC, Mr. Maikanti Baru, also recommended the splitting of petroleum licences into two phases prospecting and production.

Baru made this 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). He advocated 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. He proposed five years prospecting licence for onshore and shallow fields and a duration of 10 years for deep offshore and frontier basins.  

He also recommended 20 years production lease for onshore and shallow fields as well as deep offshore and frontier basins, noting that only the production lease period should be renewed for a period not exceeding 20 years. The NNPC’s recommendation under the PIAB also 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.

Baru said the proposed split would prevent a situation where operators would sit perpetually on oil acreages. On the PIFB version of the proposed oil industry law, Baru said the NNPC  is recommending 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 NNPC also advocated 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. In his comment, 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.