From Adewale Sanyaolu, Houston Texas
The Minister of State for Petroleum Resources (Oil), Mr. Heineken Lokpobiri, has announced the abolition of signature bonus payment to the Federal Government by new investors in the oil and gas sector.
Signature Bonus is a single, non-recoverable lump sum payment by the license holder to the government upon the granting of a petroleum exploration license.
Lokpobiri stated this in an interview on the sidelines of the 2024 OTC which opened in Houston, Texas, yesterday.
According to the Minister, over the years, the payment of signature bonuses remained a huge bottleneck for investors.
Stakeholders had explained that globally, payable signature bonus by awardees of an oil block or marginal field rank highest in Nigeria.
He added that on many occasions, the huge amount involved in payment of signature bonus was a setback for investors.
But to ensure that investors have a soft landing, he said such payments would now be tied to immediate exploration and production activities by the new entrants.
‘’Rather than pay such monies into the coffers of the Federal Government, the investor must now be able to prove to us that they have the funds required to move into exploration
“What we have resolved going forward and with 2024 oil bid round is to see that fields won in a bid round must be put into immediate use as against what obtained in past where fields are left idle after assets are won.
He said the new strategy would ensure the creation of jobs and boost activities in the upstream oil sector.
A report by the Nigeria Extractive Industries Transparency Initiative (NEITI), noted that: “A total of 106 companies emerged from the process as the Marginal Field Bid Round awardees. It should, however, be noted that only five companies had made payment of signature bonus based on 2021 audit information provided by NUPRC.”
Although payment of signature bonus remains a veritable source of revenue for the country, the thinking in the industry is that of what use is a high signature bonus only for the licencee not to be able to invest in the sector after such payment.
The arguments for a cut in signature bonus may not be unfounded. In 2022, the NUPRC disclosed that it realised a sum of N174 billion from the signature bonuses paid by the awardees for the 2020 marginal oil fields, while it revoked marginal oil fields awarded to 33 companies for failing to meet the 45 days deadline required to pay the signature bonus for the fields. 57 fields were on offer with 665 companies indicating interest to acquire them.