At least 23 oil blocks managed by both international and local oil firms failed to produce or remain inactive in 2021.
This is according to a recently-released oil and gas industry report released by the Nigeria Extractive Industries Transparency Initiative.
According to The PUNCH, these oil blocks operate under crude oil Production Sharing Contracts with the Nigerian National Petroleum Company Limited.
The PSC arrangement involves contracted oil companies funding operations to explore, develop, and produce petroleum within a concession area.
If successful, the company pays various fees, including Petroleum Profit Tax, royalty, and other bonuses to the government. The company can also recover its costs through ‘Cost Oil.’
According to the NEITI report, in 2021, only 12 of the PSC oil blocks were productive, while the remaining 17 blocks did not produce any crude.
Furthermore, six blocks were categorized as inactive, bringing the total number of non-producing or inactive oil blocks to 26.
Notable PSC contractors who did not produce crude from selected blocks included companies such as Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, Texaco Nigeria Outer Shelf Limited, Star Deep Water Petroleum Limited, and Statoil Nigeria Limited, among others.
Additionally, the report highlighted the presence of six inactive PSC blocks managed by companies like GEC Petroleum Development Company Limited, Nigerian Agip Oil Company, Monipulo Limited, and Esso Exploration and Production Limited.
These findings shed light on the state of oil production in Nigeria, prompting discussions about factors affecting the performance of these oil blocks and the broader oil and gas industry in the country.
Commenting further on the development, NEITI said, “The following were the observations on production from PSC blocks In 2021: Only 12 (34 per cent) of the PSC blocks recorded production, while 23 other blocks, representing 66 per cent of total numbers of PSC blocks, did not produce.
“Total production from the PSCs, which was 242.96 million barrels, represents 42.92 per cent of total production of the 566.13 million barrels.”
On the implication of this, the agency said, “The PSC arrangements, which contributed highest to the total production volumes, operated only 34 per cent of the total allocated blocks.”
It advised that the Nigeria Upstream Petroleum Regulatory Commission and NNPC Ltd assess the technical, operational, and other restrictions restricting output from idle PSC blocks as soon as possible in order to optimise production from the PSC arrangements.
“Where these issues cannot be resolved, consider revocation of licenses and subsequent allocation to other interested parties,” the Federal Government agency stated.
NEITI, however, captured the responses from NNPCL as regards the development, as it stated that the national oil firm explained that “PSC blocks transit from exploration/appraisal phase to production overtime.”
It stated that the oil firm also noted that “some of the blocks are still at award status as some contractors may not have come forward for budget/work programmes due to various reasons from regulatory to business operations’ considerations.
It stated that the oil firm also noted that “some of the blocks are still at award status as some contractors may not have come forward for budget/work programmes due to various reasons from regulatory to business operations’ considerations.
“We (NNPCL) are hopeful that about two to three blocks will soon attain production status.”
