FG scraps signature bonus payment for oil blocs

The Federal Government has waived the signature bonus requirement in the bidding process for newly auctioned oil blocks.

The Minister of State for Petroleum Resources, and Oil, Mr Heineken Lokpobiri, said this exemption is to attract fresh investments and ramp up oil output.

He disclosed this on the sidelines of the ongoing 2024 Offshore Technology Conference, OTC, in Houston, Texas.

A signature bonus is a single, non-recoverable lump sum payment made upfront by oil companies to the government for the rights to develop an oil block commercially after successfully winning in the license bid round.

Recall that the Nigerian Upstream Petroleum Regulatory Commission announced bidding processes for the 2024 oil bid round with 12 oil blocks and five deep offshore assets.

At the event, the minister assured investors that oil will remain relevant in Nigeria’s economy for a long time and that the government is creating an enabling environment to attract the best investments into the country.

Lokpobiri, who urged investors to take the opportunity of the oil bid round to invest, said, “Historically, no source of energy goes away. So, do not be deceived that fossil fuel will go away. Discourse at the recent global conferences has further proved that fossil fuel will continue to remain, the quicker we extract our oil, the better for us as a country.

“We are here at OTC to show the rest of the world that Nigeria is different and our government is different, in creating the best regulatory framework, allowing competitiveness, and removing all the investment barriers.

“Today, we are restoring investment confidence in the sector and ensuring investors can bring in their funds without worries. This will show to the world that Nigeria is ready for business.”

Announcing the removal of the signature bonus, Lokpobiri said over the years, payment of signature bonuses remained a huge bottleneck for investors as well as investment into the sector.

“Stakeholders had explained that globally, payable signature bonuses by awardees of an oil bloc or marginal field rank highest in Nigeria. On many occasions, the huge amount involved in payment of signature bonus was a setback for investors,’’ the minister added.

He said to ensure investors have a soft landing, such payments will now be tied to immediate exploration and production activities by new entrants.

Lokpobiri added, “Rather than pay such monies into the coffers of the Federal Government, the investor must now be able to prove to us that they have the funds required to move into exploration.

“What we have resolved going forward and with the 2024 oil bid round is to see that fields won in a bid round must be put into immediate use as against what obtained in past where fields are left idle after assets are won.”

He said the new strategy will create jobs and boost activities in the upstream oil sector.

In his remarks, the Chief Executive Officer, Nigerian Upstream Petroleum Regulatory Commission, NUPRC, Gbenga Komolafe, said the recent Presidential Executive Orders issued in March this year, were aimed at improving the efficiency and attractiveness of Nigeria’s oil and gas sector.

He added that it would culminate in further increasing the nation’s oil and gas reserves, currently standing at 37.5 billion barrels of crude oil and condensate reserves and 209.26 trillion cubic feet of natural gas reserves.

Komolafe said, “The exercise, which was initially announced on the 29th of April 2024, is a significant leap in our strategic hydrocarbons development initiative. This round introduces twelve meticulously selected blocks across diverse geological spectra — from the fertile onshore basins to the promising continental shelves and the untapped depths of our deep offshore territories.

‘’Each block has been chosen for its potential to bolster our national reserves and stimulate economic vitality. Our approach is underpinned by the robust legal framework of the Petroleum Industry Act 2021, which ensures compliance with best practices to boost investors’ confidence.

‘’In keeping with the provisions of the PIA and regulations made under the Act, the commission has issued a licensing round guideline and published a licensing round plan for the twelve blocks (namely PPL 300-CS; PPL 301-CS; PPL 3008; PPL 3009; PPL 2001; PPL 2002; PML 51; PPL 267; PPL 268; PPL 269; PPL 270; and PPL 271).

“In addition to these blocks, the seven deep offshore blocks from the 2022 Mini-Bid Round Exercise which cover an area of approximately 6,700 km2 in water depths of 1,150m to 3,100m shall also be concluded along with this licensing round.’’