The newly enacted Petroleum Industry Act, 2021 (PIA) provides for the overhaul of the institutional, regulatory and fiscal framework for Nigeria’s petroleum industry. Amongst the key changes introduced by this reform legislation is the new licensing and fiscal regime for upstream operations. However, Oil Prospecting Licences (OPLs) and Oil Mining Leases (OMLs) granted under the Petroleum Act do not automatically transition into this new regime. The PIA allows holders of OPLs and OMLs granted under the Petroleum Act to opt in to the new regime by converting their respective OPLs and OMLs into an appropriate licence or lease to be issued under the PIA. Key considerations for upstream operators at this time in determining whether to exercise the right to opt in are the fiscal framework and the downsizing of the licence or lease acreages within their portfolio. There are bound to be trade-offs in deciding whether to opt in to the PIA regime and upstream businesses must at this time evaluate the best course of action to take in respect of each licence or lease they currently operate; perhaps based on the inherent peculiarities of the geological formations within those assets and the best value that can be derived from exploiting those assets under the erstwhile or the new fiscal regime offered in the PIA.
This publication highlights for the benefit of upstream players currently holding interests in OPLs, OMLs, Production Sharing Contracts (PSCs) and Marginal Field assets, the fiscal regime ushered in by the PIA and the streamlined asset retention framework, to aid their election on whether to opt in to the PIA regime.