Govt, operators join issues on 2007 oil block bid round
By Yakubu Lawal .Deputy Energy Editor
OIL industry operators have urged the government to review the 2007 oil block bid round with a view to postponing the exercise.
Investigation by The Guardian revealed that many operators including the Multi-national operators in the country are showing apathy to the exercise designed to sell 45 oil blocks in six basins before President Olusegun Obasanjo hands over power this month.
Specifically, investigation revealed that for Nigeria to have a credible bid round that will meet international standard and stand the test of time, investors need at least three months to be able to package all the relevant data for the technical and financial bid proposals.
A Senior Exploration Manager with one of the operating companies who spoke with The Guardian on the basis of anonymity questioned the rush for another bid round when the administration has less than one month to go.
Another manager in an indigenous oil prospecting firm said the situation that happened before General Abdulsalam Abubakar (rtd) left office in 1999 when oil blocks were hurriedly given to some investors are now being repeated by Obasanjo administration.
"The irony of this exercise is that when Abdulsalam did it eight years ago, Obasanjo revoked those licenses, so why the hurry? If they insist for credibility sake, the in-coming government of Umar Musa Yar Ardua should have the courage to stop it," the manager stated.
The managers who are also members of the professional bodies like the Nigerian Association of Petroleum Explorationists (NAPE) and Society of Petroleum Engineers (SPE) noted that most of the oil multi-national are already showing apathy to the entire exercise considering the fact that some of them were not pleased with the 2005 and 2006 bid rounds exercise.
A group of concerned operators have also expressed dissatisfaction with the on-going exercise, stating that the fact that some companies are being treated specially by granting them "the Right of First Refusal" shows that the exercise will lack transparency and competitiveness it requires.
According to The Guardian sources, government should focus on restoration of peace in the Niger Delta oil-producing region first than selling the blocks.
"The atmosphere in the Niger Delta is tensed enough and that has affected our operations negatively with many companies rejecting jobs in Nigeria and life of workers at risk amidst daily kidnapping and intimidation, this is why the Multi-nationals are not taking our government serious on this exercise" One of the operators said.
The industry sources listed other challenges as litigation in some of the blocks, lack of functional database for investors and raising the necessary financial and technical partners within the short time granted for the exercise.
The concerned stakeholders group however believed that if government must continue with the exercise, operators granted ROFR must do the following bearing in mind that many of those who enjoyed the privilege in the past exercise have not fulfil their own part of the bargain.
To this end the stakeholders want beneficiary of the ROFR to deposits the sum of $2 billion as investment fund in an Escrow Account established and controlled by the Central Bank of Nigeria.
Alternatively, group said government should suspend all arrangements for the 2007 Bid Round until there is compliance with the above condition.
They also want government to cancel all ROFR to all current beneficiaries in order to establish a level playing field for all bidders.
"FGN must review the 2007 Bid Round right away by cancelling all the ROFRs, extending the bid closing date by 2 months and establishing a level playing field for all bidders. Short of that, we are convinced it will need to be reviewed by the new government." the statement said.
But the Minister of Energy, Dr. Edmund Daukoru, while addressing group of investors in Houston, USA, assured that the exercise would be fair, transparent and competitive in conformity with Nigeria's commitment to the Extractive Industries Transparency Initiative (EITI).
"We are determined to ensure that Nigeria benefits from the best available state of the art technology and expertise in petroleum and gas acreage development and Production," Daukoru stated.
Daukoru had told investors in London recently that refusal of Multi-nationals to participate in the exercise was due to the stringent policy review of the government which had blocked all the loopholes that before now make it possible for foreign oil companies to profit more in the venture than the government.
Similarly, the Department of Petroleum Resources DPR had stated that it was unreasonable to demand that companies granted the Right of First Refusal 'must within 60 days deposit US$2 billion as investment fund in an escrow account.
DPR said explained that projects promised in the downstream sector that attracted such privilege are normally complex and development occurs in stages with financial and funding institutions gaining confidence and thus making funds available as the project matures.
" It is not realistic to deposit the entire project funds on day one, rather what is practical is the measure recently approved by Mr. President, requiring downstream investors to demonstrate seriousness by depositing the sum of US$1 million per 10,000 barrel per day capacity for oil projects (or per 10 million standard cubic feet capacity for gas projects) with the government." DPR said
The department pointed out that Government would return the funds to the investor if the project commences as agreed within 18 months of entering the agreements with the government otherwise the funds would be forfeited to the State.
" Thus an investor committing to develop a 100,000 barrel per day refinery or 1000 MW IPP will be required to domicile US$10 million with the government before a license is granted or Right of 1st Refusal is exercised." it added.
It stated further that it is untrue that companies granted the Right of 1st Refusal are exempted from payment of registration, application, prying and bid processing fees and are not required to deposit 50% of the bid Signature Bonus to be declared winner adding that in contrary all bidders will pay all fees mandatory and the companies enjoying the Right of 1st Refusal in addition must lease the data for the respective blocks that they are granted the Right of First Refusal.
