Nigeria’s oil licensing round looks all set – to go nowhere

Contrary to indications given by the ministry of petroleum resources and the Department of Petroleum Resources, (DPR) that the oil licensing rounds for marginal oil fields would commence soon, the horizon does not look promising.

Meanwhile, Norway’s licensing round for its mature offshore areas, proposed last year, have attracted bids from 39 companies, up from 33 firms last year. In May, the country expanded areas known as predefined areas (APA) offered near existing discoveries by 87 blocks in the Norwegian and the Barents Seas, according to a Reuters report.

BusinessDay gathered from informed sources close to the DPR, the oil sector regulator, charged with the responsibility of conducting the bid rounds, is still in the process of developing guidance notes for the exercise which government agencies have assured would commence soon.

“The DPR is not anywhere close to concluding preparations for the next bid rounds, in fact from all indications, it does not seem it will happen any time soon, because the guidance notes for the bid rounds are not even prepared yet. It does not even look like it could happen this year,” said a source that preferred anonymity.

A guidance note prepared by DRP states the rules that will be followed in the bid rounds. These include applicable fees, description of oil acreages up for bids, stipulated signature bonus and the method of application.

Nigeria is betting to fund infrastructure from proceeds of oil licensing round. A source said that Ibe Kachikwu, the minister of state for petroleum resources is seeking to raise $5billion from the current oil licensing rounds.

This key in with the statement of Udoma Udo Udoma, minister of budget and national planning who said last year that the government is working on a plan to generate immediate large injection of funds into the economy through asset sales, advance payment for license rounds and infrastructure concessioning, to deal with reduced income from crude oil sales.

However, there are also concerns that as the election approaches, the likelihood that the licensing round would hold, seem more unlikely, and if it does, raises concerns about transparency.

Chuks Nwani, an energy lawyer based in Lagos told BusinessDay by phone that it would have been much better if the licensing rounds were done earlier, because for a government that says it is fighting corruption; any action taken now, opens it up for accusations of favouring some people.

Industry operators who were interviewed over the same issue are not confident that the licensing rounds would commence soon. A former energy sector operator, described it as a lot of ‘hot air’.

Maikanti Baru, group managing director of the NNPC told a delegation of the Independent Petroleum Producers Group (IPPG) who visited him recently, to take advantage of the low crude oil price regime to develop their capacity and acquire technology to bid for marginal fields.

“The marginal oil field lease renewal is an opportunity for your group. You will need to engage the DPR early in discussion to find out the conditions that the Federal Government is interested in.” Baru advised.

BusinessDay earlier reported that local investors in Africa’s largest economy are planning to participate in the bid round for marginal oil fields which have suffered delays since 2013 when the idea was first proposed.

Marginal fields are undeveloped discoveries in the last 10 years, located in oil blocks held by oil majors operating in the country. A total of 28 fields were allocated to 35 indigenous companies since the commencement of the marginal fields program in 1999. 12 fields are currently producing, the rest are at various stages of development.

As at 2016, Nigeria has 4 oil mining leases (OMLs) and oil petroleum leases (OPLs).  In the next five years, 47 OMLs will be expiring while 27 OPLs will be available for renewal. In the absence of guidelines, it is unclear how many of these blocks would be up for bids. DPR is yet to provide details on marginal fields currently not producing which may be up for bids, in response to BusinessDay’s request.

Nigeria’s licensing rounds have not held up to transparency scrutiny. The country’s licensing rounds is seen as the weakest link in the ‘value realisation’ with a score of 17 out of 100 points in policy statement, which placed it 77th among 89 countries assessed, according to the 2017 Resource Governance Index, compiled by the Natural Resource Governance Institute (NRGI), a global extractive sector transparency NGO.
ISAAC ANYAOGU