This first part of a 3-article series talks about the new regulations of the Nigerian Upstream Petroleum Regulatory Commission (“The Commission” or “NUPRC”) on Domestic Crude Oil Supply, Production & Curtailment obligations. This article will be focused on the following provisions :
– Objective of the regulations
– Application scope
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– Regular production of petroleum from a well
– TAR determination procedures
– NUPRC allocation quotas
– Production quota and curtailment
Objective
– The objective of these regulations is to provide the general rules for production curtailment and utilization of the produced petroleum in relation to export and domestic crude oil supply obligations pursuant to Sections 8 & 109 of the Petroleum Industry Act.
Application Scope
– These regulations apply to production curtailment and utilization of petroleum in relation to export and domestic crude oil supply obligations pursuant to Sections 8 & 109 of the Petroleum Industry Act.
Regular Production of Petroleum From a Well
– Regular production of petroleum from a well shall be based on the Technical Allowable Rate (TAR) and production quota issued by the NUPRC.
– The TAR shall be based on the report of Maximum Efficiency Rate(MER) tests conducted by a lessee and submitted to the commission.
– The MER test shall be witnessed by an officer authorized by the commission.
– A lessee shall not obtain regular production from a well without an approved TAR & production quota from the NUPRC.
Procedure for determination of Technical Allowable Rate (TAR)
– The commission shall allocate TAR for regular production from a well for a duration not exceeding a 6-month cycle as follows –
a). January- June of every year.
b). July- December of every year.
– Notwithstanding the provisions above, every TAR issued less than 6 months to the end of the year by the commission shall terminate by the 31st of December of the year the TAR was issued.
Allocation of Production Quota by NUPRC
– The commission shall allocate production quota to lessees, from time to time, based on :
a). TAR for each well in a lease
b). Production performance of each well in a lease
c). Any other consideration as the NUPRC may determine
– Production quotas shall be issued for a period of not more than 6 months.
Production Quota & Production Curtailment
– A lessee shall not produce petroleum from a well in a lease area above the production quota assigned by the commission.
– The commission shall use TAR and production quota in the assessment of the performance of a well.
– Where the minister gives directives in line with the Petroleum Industry Act to the commission to cut back production, the commission shall revise the allocated production quota to conform with the directive of the minister.
Section II
This second installment of the NUPRC regulations focuses on their provisions regarding :-
-The failure to utilize allocated production quotas.
– Periodic reporting requirements.
– The notification of domestic crude refining requirements.
– Notifications of Crude Oil supply shortages/situations of inadequate supply.
– Regulations on the existence of shortages or inadequate supply conditions.
Failure to utilize allocated production quota
– A lessee shall ensure full utilization of allocated production quotas for any given period.
– Where a lessee is unable to utilize or is under-utilizing allocated production quota for 7 consecutive days, the lessee shall within 48 hours notify the commission in writing, stating the reason for such failure.
– A lessee who fails to notify the NUPRC in line with the provision above, contravenes the regulations and is liable to an administrative penalty of $55,000.00 for every day the contravention subsists.
Periodic Reporting
– A lessee shall, in addition to the requirement to notify the commission as explained above, include in its monthly report to the commission, any failure or underutilization of its production quota within the period covered by the report.
Imposition of domestic crude oil supply obligation and export control
– Crude oil produced by a lessee shall be subject to domestic crude oil supply obligations (DCSO) imposed by the commission, provided that the lessee shall be entitled to export any volume of crude oil more than its domestic crude oil supply obligation.
Notification of domestic crude refining requirements
– The commission shall publish on its official website and in 3 national newspapers the domestic crude refining requirement of operating refineries in Nigeria based on information provided to the commission by the authority on the crude oil requirements of refineries in operation in Nigeria pursuant to the Petroleum Industry Act.
-The information published by the commission pursuant to this regulation shall be to facilitate crude oil sales transactions between producers and operating refineries in Nigeria.
Notification of crude oil supply shortage or inadequate supply conditions
– The commission, upon receipt of a notification from the authority pursuant to the Petroleum Industry Act of shortage in the supply of crude oil to operating refineries in Nigeria or the existence of inadequate crude oil supply conditions to operating refineries in Nigeria, shall require the authority to provide a written confirmation of the supply shortage or inadequate supply conditions to the NUPRC, stating the :-
a). Volume of the shortage.
b). Refineries affected by the shortage.
c). Specification or grade of crude oil in short supply.
d). Reason, if any, for the shortage.
e). Any other conditions causing the shortage or inadequate supply condition.
Existence of shortage or inadequate supply conditions
– The NUPRC shall, upon receipt of the information pursuant to these regulations, issue a Request For Quotations (RFQ) to all producing licenses and lessees requiring them to submit a quotation for the supply of any required volume to meet the shortage or close the inadequate supply condition.
Section III
This article is the final installment in the Domestic Crude Oil Supply Obligation Regulations series and focuses on its provisions concerning :
– Conditions for the imposition of the obligation to supply.
– Sale of Crude Oil by lessee.
– Export of crude oil by lessee.
– Submission of reports by lessee.
– Penalties for non-compliance.
What are the conditions for the imposition of the obligation to supply?
– The NUPRC shall impose the obligation to supply by identification and selection of producing licensees and lessees based on –
a). The proximity and accessibility of the supply location to the refiner’s location.
b). Matching of the licensee’s or lessee’s crude specification to the grade requirements for domestic supply.
– Where more than 1 licensee or lessee meet the requirement mentioned above, the commission shall impose the obligation to supply by allocating volumes to each producer based on the weighted proportion of its total production and taking into consideration –
a). Any existing refinery supply contracts it may have.
b). Any existing crude export contract it may have.
c). Its TAR & production quota per lessee.
What do the regulations say on the sale of crude oil by a lessee?
– A lessee on whom a DCSO has been allocated shall sell the allocated volumes of crude oil to the specific refinery nominated by the NUPRC under the regulations.
What are the provisions of the regulations on the export of crude oil by lessee?
– Where production for any given quarter falls below the allocated quota for that quarter, a lessee shall first fulfill its obligation to supply to the domestic market before any export may be permitted by the commission, provided that where there is no demand by any refinery license holder in that quarter, the lessee may export all the production for that quarter.
What are the provisions of the regulations on the submission of reports by a lessee?
– A lessee shall submit a monthly report, in the form and manner prescribed by the NUPRC , relating to the following –
a). Production performance based on the allocated quota.
b). Utilization of production in terms of DCSO and export.
What are the penalties for non-compliance with the regulations?
– A licensee or lessee who fails to submit an RFQ or submits an RFQ outside the time specified is liable to pay an administrative fine of $10,000.00.
Requirements & Procedures For Upstream Gas Exploration & Development Permits In Nigeria – Gas Field Development Plans (GFDPs) & Temporary Gas Flaring Permits/Waivers
This article will be looking at the requirements and procedures involved in granting permits for Gas Field Development Plans and Temporary Gas Flaring Permits as prescribed by the NUPRC Gas Exploration and Development Permit (Requirements & Procedures) Regulations.
Gas Field Development Plans – Requirements & Procedures
– The proposed gas field development programme (GFDP) must be submitted at least 30 working days before the commencement of any part of it and shall be in accordance with the Petroleum Drilling and Production Regulations and its amendments.
– The GFDP shall contain but not limited to the following :-
1). A minimum of 3 wells must have been drilled and a field study carried out detailing the static and dynamic reservoir model.
2). Concept study and reasons for choice of proposed development plan.
3). Seismic and Geologic prognosis.
4). Field reserves and ultimate recovery.
5). A structural map of all gas bearing sands on a scale of 1:25,000
6). Reservoir geologic modeling.
7). Reservoir engineering simulation studies.
8). Well location optimisation/depletion plan.
9). Well bore utility.
10). The production profile and the anticipated dive mechanism.
11). Gas utilization plan in line with the Federal Government policy of zero flare.
12). Cost estimates of the development.
13). Surface facilities.
14). HSE strategy/case.
15). Field abandonment plan.
16). Applicable Processing fee payment to the NUPRC.
– Satisfactory development programmes would then be evaluated and approved.
– However where strong objections exist, the company would be informed. Individual well location proposals still require to be approved on their merits. Also , approvals to drill do not necessarily imply that the target completion zones have been approved.
– Completions are separately considered for approval.
Temporary Gas Flaring Permit/Waiver – Requirements
– The permit for gas flaring waiver application should contain the following:
a). Name of field and facility where flaring is expected.
b). The reason and justification for the temporary Gas flaring exercise.
c). Actions/processes already put in place to reduce the flare volumes before seeking the permit/waiver.
d). The duration over which gas will be flared and total volume of gas expected to be flared.
e). Any other information/supporting facts to justify the application for.