TotalEnergies Proposes Attractive Entry Cost, Market Reflective Bonuses to Grow Oil Sector

*Says it’s in Nigeria for long term, not considering exiting

Peter Uzoho

Multinational energy giant, TotalEnergies, yesterday laid out five key propositions before industry operators and stakeholders, targeted at rebounding Nigeria’s oil and gas sector.

The country has been grappling with underinvestment, loss of momentum and production decline for over a decade.

According to the global oil firm, to revamp the oil sector, there should be the introduction of more attractive investor entry cost as well as provision of market reflective signature bonuses for oil blocks during bid rounds.

In addition, it sought clarification of the ‘back in right’ of the Nigerian National Petroleum Company Limited (NNPC) before handing over assets to new lease holders and operators.

Others were the suggestion for government to re-license all unexplored or expired oil and gas blocks to new holders as well as the activation of the ‘Drill or Drop’ clause enshrined in the Petroleum Industry Act (PIA) to discourage companies from sitting on assets for longer time without creating value out of it.

Chairman of TotalEnergies Companies in Nigeria and Managing Director of TotalEnergies EP Nigeria Limited, Mr. Matthieu Bouyer, advanced the proposals in Lagos while speaking during the management session at the  ongoing 42nd annual conference and exhibition of the Nigerian Association of Petroleum Explorationists (NAPE).

Represented at the event by the company’s Executive Director, Corporate Services, Mr. Olatunji Akinkumi, Bouyer noted that Nigeria was responding to the need for competitiveness with progressive changes in the energy landscape in recent years.

He acknowledged that the government had taken some steps and initiatives to revitalise the Nigerian oil and gas upstream sector including the enactment of the Petroleum Industry Act (PIA) which he said had brought some level of certainty into the sector as well as the Presidential Executive Orders and tax incentives among others.

But, according to the TotalEnergies boss, despite the aforementioned major efforts which were significant, there were still some more areas that required additional efforts.

“The first is to have more attractive entry cost and conditions for exploration in new blocks. We urge the provision of market reflective signature bonuses and the consideration of introduction of a ‘drill or drop’ clause in exploration phase in this new blocks.

“The second area is access to expired deepwater blocks. We expect the encouragement or facilitation in unexplored  but expired deepwater blocks through creation of strategic partnerships within the industry”, he advocated.

He further canvassed that the federal government should state the terms of the NNPC’s ‘back in right’ clearly prior to licensing round and leasing of assets, adding that the back in right should be cash-funded and reduced to a strategic minimum holding.

A back-in right is an agreement in the oil and gas industry that allows the original owner of a lease to regain a share of the profits after the new owner has recovered their costs.

This agreement gives the original owner the right to receive a reversionary interest in the future, once certain conditions are met.

Bouyer added: “The third one is government or NNPC ‘back in right’. Government should confirm the terms of the back in rights clearly prior to licensing round and leasing of assets. The back in right should be cash-funded and reduce most probably, to a strategic minimum holding.

“The fourth aspect is on security of assets and infrastructure. We encourage the development of a robust strategy for host communities to be part owners of energy infrastructure, which will serve as motivation to cooperate more with government and other stakeholders on asset security”.

He also encouraged the government to work with other nations in West Africa to develop regional synergy for combating the threats to the sub-region’s maritime assets.

However, he rebuffed the insinuations  that TotalEnergies was exiting Nigeria as it was divesting its onshore assets, declaring that the company was in Nigeria for long term and not considering leaving the country.

“Coming to TotalEnergies in Nigeria, we are proud and honoured to say that we are in Nigeria for the long term. We will not and we are not considering leaving Nigeria.

“We continue to align with the efforts by government and other stakeholders for sustainable development of our dear country”, Bouyer added.