20 July 2018, Sweetcrude, Lagos — The Department of Petroleum Resources (DPR), Thursday, faulted the Senate’s claims of sharp practices in the Lease Renewal exercise, while it declared that the renewal procedure follows a transparent and open process which the industry players are fully aware of.
The DPR in a statement signed by its Deputy Manager, Public Affairs, Mr. Mohammed Saidu, said the lease renewal programme draws its legal basis from Sections in the Petroleum (Drilling & Production) Regulation 1969 as amended in 2001.
According to him, the law mandates the Honourable Minister of State for Petroleum Resources (HMSPR) to renew Oil Mining Leases (OML) once statutory payments in terms of applicable royalty, concession rentals, and fees are paid, and the asset is being worked in a business-like manner by the leaseholder.
He said, “Arising from the above, companies whose leases are due to expire apply for renewal to the DPR. Upon receipt of the application and payment of $2 million application fees, the DPR progresses the application through the following regulatory gates:
“Thorough assessment of all the exploration and development efforts undertaken in the block to ensure that sufficient investments were made to optimally explore and develop the block in a business-like manner with due compliance to applicable rules and regulations.
“Assess the production profile and production growth plan to ensure that sound reservoir management practice is adhered to for optimal maturation of the asset.
“Review and assessment of compliance with payment of all applicable royalties, concession rentals, and other statutory payments.
“Economic evaluation of both surface and subsurface assets of the block taking into cognizance the remaining reserves and possible cost of future development using standard industry methodologies for valuing oil and gas assets to determine the lease renewal bonus payable by the leaseholder. It is worth mentioning that a five percent (5%) net present value of the asset was approved to be charged as a renewal bonus.”
Saidu explained that at the end of the evaluation and assessment of the historical maturation and development of the asset to ensure there have been continuous and progressive value creation and addition to the nation in conformity with best practices, the DPR makes recommendation to the Minister of Petroleum Resources on whether to approve the lease for renewal or otherwise.
He also added once is approval is granted by the minister, the company is duly notified.
The Senate had on Wednesday accused the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, and the DPR of sharp practices in the ongoing Oil and Gas Lease Renewal exercise in the petroleum industry.
The Senate had disclosed that its Committee on Petroleum Resources, Upstream had since December 2017 been inundated with a myriad of petitions and complaints about the multiplicity of irregularities associated with the ongoing renewal of oil and gas leases being executed by the minister and DPR.
In its debate on a motion moved by Senator Omotayo Alasoadura (Ondo Central), the Senate argued that government was bound to lose revenue in excess of $10 billion due to illegal discounts and rebates associated with the process of oil and gas lease renewal.
The Senate noted with concern that the action of Kachikwu was capable of shortchanging the country and denying the Federation the appropriate revenue accruable from the renewal of the said leases