09 Mar 2021

DPR reviews 5 terms in gas production sharing contracts

The Department of Petroleum Resources (DPR) says it has reviewed five terms for gas development under the Production Sharing Contracts (PSC) in the Country.

Mr Sarki Auwalu, the Chief Executive Officer, said this during a Public hearing at the National Assembly organised by the Joint Committee on Gas Resources and Petroleum Resources, Upstream and Downstream, in Abuja, on Monday.

The hearing was on the Topic: “Inclusion of Gas Terms in Production Sharing Contracts  by the Nigerian National Petroleum Corporation (NNPC).”

He said DPR had considered and reviewed five terms for gas development in PSC and the terms included duration, cost of gas, tax gas, royalty and profit gas.

“These five terms, we believe when considered, will definitely make it robust and enable the provisions that made in the Petroleum Industry Bill (PIB) to adequately address all issues and concerns,” said Auwalu.

He explained that the first PSC as a business arrangement was signed in 1973 between the government and international oil companies with the absence of gas terms in the contract.

According to him, others were signed in 1993 with oil majors and 1998 with main indigenous companies, while 2005 and 2007 served contracting documents between NNPC and their contractors.

He noted that under the existing PSC and gas terms, Oil mining Lease (OML) 42 and 36 were awarded on PSC, in addition to OML 127 and 130 that were on Sub lease.

“The new regime of the PSC was introduced by the deep offshore by the inland basin connection Sharing Contracts of 2004 and was amended  in 2019 to replace the royalty regime of  1999 act,” he said.

On utilisation of PSC funds, he noted that so far gas from OML 18O and 130 operated by shell and Total were being utilised via Nigerian Liquified Natural Gas (NLNG).

These, he said were also strategies used in the industry to enhance gas penetration and utilisation in Nigeria.

Auwalu added that the gas price mechanism template would be presented to the Minister of State for Petroleum Resources, Chief Timipre Sylva, on March 9th.

He said the government was also making effort to ensure full penetration of gas in the country.

“We are making efforts to have more infrastructure to make gas available in Nigeria as well as creating the enabling environment for investors and private owners, especially for PSC,” Auwalu said.

On appropriate gas pricing, he said the DPR and NNPC would ensure that a good price mechanism would be put together to enable gas exploration, production and utilisation across the nation.

He said the effort being championed by the National Assembly would  definitely lead to energy security.

“The minister declared this decade, the decade of gas and this proposal by us and our submission to the joint committee will give a base line for intended work that the NASS is doing for energy security for the country.

“It is our understanding that the PIB will be passed, this is the time to address a lot of issues, and this submission could be among the best inputs to that document that we are anxiously waiting to be passed,” he added. (NAN)