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Suraj Oyewale (Jarus)

@Jarushub

5 Apr

Understanding Oil & Gas Industry in Nigeria VIII

Regulators (cont'd)

2. NNPC

It's tricky to classify NNPC as a regulator but it does have some regulatory functions so it may not be out of place to regard it as one, although the primary work of NNPC is to manage FGN interest

..in the oil & gas sector. So NNPC is the vehicle through which FGN participates in the oil industry. While DPR is the chief regulator and the eye of FGN in the industry, NNPC is the hand of govt in the industry. It is like other private oil companies only that it is FGN-owned

So it is not a regulator per se but it does have regulatory functions, mainly by enforcing govt contracts (JV and PSC) with other oil companies. NNPC (thru NAPIMS) also need to approve some budgets in some of these partnerships. So NNPC does regulate in a way.

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Suraj Oyewale (Jarus)

@Jarushub

4 Apr

Having breakfast now & remembering my 1st day in Lagos, fresh from secondary school, to visit a young banker bro, sharing apartment with his 2 other young Lagos worker friends. Before bro came back from work, his friends (who had also become family friends) put a loaf of sliced

bread with tea and egg, on the table and asked me to help myself for dinner, while they went to their room to shower and change after long day at work.

By the time they came back, I had finished the entire loaf of about 15 slices. Me wey just come from the village

Thought they were using it to welcome me for the long trip to Lagos

By the time one of them came to the sitting room to hav his own dinner, bread had finished. He shouted, half-jokingly, "Suraju, omo Offa, o ti pari bread". Didn't know it was meant to be the dinner for all of us

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Suraj Oyewale (Jarus)

@Jarushub

4 Apr

Understanding Oil & Gas Industry in Nigeria VII

Regulators

1. Department of Petroleum Resources (DPR)

DPR is to oil & gas industry what CBN is to banking. It's the overall regulator of the oil & gas industry. There is virtually no major activity you want to carry out without

...needing DPR approval - whether drilling plan (upstream) or gas plant construction (midstream) or building filling station (downstream). DPR is also in charge of licensing and award of oil blocks (on behalf of the President and Minister of Petroleum). DPR is also in charge of

collection of certain monies payable to govt by oil & gas companies, including signature bonus (payment for award of oil&gas licence), to royalty (payment for extracting oil or gas from "govt land/water"), to all manner of approval fees. While signature bonus is payable once

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Suraj Oyewale (Jarus)

@Jarushub

2 Apr

Understanding Oil & Gas Industry VI

Common Contract Types

2. Joint Venture (JV)

JV is an arrangement between government oil company (NOC - NNPC in Nigeria's case) and the private oil company where all risks, including exploration risks, are shared by all parties.

In other words, the government oil company is actively involved from start. Unlike in PSC where exploration is funded by the private company, in JV, all parties pool fund together to fund exploration and share the crude proceeds. If no oil is found, all parties have lost money

One party, usually one of the private oil companies, is designated operator. An operator is the party that coordinates the day to day running of the project and operations. It disburses funds to the vendors and contractors, amongst others. However, this does not mean ...

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Suraj Oyewale (Jarus)

@Jarushub

2 Apr

Understanding Oil & Gas Industry V

Common Contract Types

Because oil & gas (esp upstream) is highly capital intensive, there are usually all manner of partnerships among oil companies to pool fund (& technical know-how) together.

Also, because petroleum resources are ...

...usually too important to be left to non-state actors, the govt get involved & this also necessitates partnerships.

The partnerships could be between govt (thru their oil company, generically called National Oil Company, NOC - NNPC in Nigeria's case) and private oil coys, or

between oil companies (especially some marginal field JVs).

Here are the most common contract types

1. PRODUCTION SHARING CONTRACT (PSC)

PSC is a contract type where the govt transfers the exploration risk to the private company, usually the International Oil Companies(IOCs)

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Suraj Oyewale (Jarus)

@Jarushub

28 Mar

Understanding Oil & Gas Industry IV

(Read Parts I-III in my earlier threads)

OIL SERVICING

Oil servicing companies are specialist contractors that have expertise in handling different aspects of oil and gas activities. They do not own the crude oil, unlike E&P companies.

These are specialist contractors that help upstream (and sometimes midstream and downstream) companies carry out their projects. Examples of activities they handle are seismic data gathering and analysis, drilling, pipeline construction, plant construction, well servicing etc

Oil and gas companies contract with them to handle an activity for and pay them. Like the word implies, they "service" the industry. Some of them also have some proprietary technology.

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