FG to accelerate revenue drive as crude price rises

The Federal Government has initiated moves to accelerate the country’s revenue drive through Accelerated Revenue Generation Initiative.

The programme was initiated by Minister of State for Petroleum Resources and the Department of Petroleum Resources (DPR). The programme was designed to shore up government revenue and facilitate investment flows in the upstream sector. This in mind, the DPR instituted a lease renewal programme with a robust process to ensure that due process is strictly adhered to in validating licenses for oil and gas prospecting in Nigeria.

The programme draws its legal basis from the Petroleum (Drilling and Production) Regulation1969 as amended in 2001. Ordinarily, the government uses the opportunity of acreage renewal to review in order to enhance revenue and maximize value for oil and gas assets, many of which licences were issued during low international oil prices.

In doing this, licences are renewed to reflect current economic and operating conditions as well as market international realities. It is also an opportunity to enforce voluntary relinquishment of oil blocks that had been idle for the duration of the licences or revoke them outrightly. Also to maximize the assets, the size of the acreage or oil block could be reduced and newly carved out blocks are put up for sale.

The Nigerian government awards several oil licences either through competitive bidding or discretionary allocations. The validity of such licences ranges from five to 20 years. Petroleum licensing or exploration licence is the act of giving licence (geographical areas at land or sea) to a company or a joint venture allowing them to search for commercially feasible deposits for the extraction of petroleum. An Oil Prospecting Licence (OPL) is granted by the government to search for, win, work, carry away and dispose of crude.

Oil Mining Licence (OML) is usually granted only to the holder of an OPL and these categories of licences are usually held by the big industry players, mostly considered the IOCs. But when the oil find is seen as not commercially viable, these assets are disposed of in smaller sizes for marginal fields operations, where the indigenous companies are now making a lot of foray in exploration and production.

Meanwhile, crude price has been rising recently to an average of $80 per barrel in the last one week. Rising crude price usually comes with mixed feelings for Nigeria. Rising crude oil price results in increasing revenue for the government but it also signifies rising cost of fuel subsidy which was put at about N200 billion in 2017.