Licensing round: Operators protest imposition of local partners
By Yakubu Lawal, Deputy Energy Editor
WINNERS in the last oil block bid round conducted at the twilight of former President Olusegun Obasanjo's regime are protesting the imposition of local content investors by the Department of Petroleum Resources (DPR), under its Local Content Vehicle (LCV) to the blocks.
The Guardian gathered that many local investors favoured by the Presidency are being asked to be given 10 per cent equity in the oil block won by the prospective companies that were successful in the exercise.
Specifically, the sources said the Presidency may direct the Ministry of Energy, through the DPR, to attach the local companies with 10 per cent equity in the blocks, rather than allowing the prospective winners to come up with their LCV operators.
One of the winners in the bid round who spoke with The Guardian said DPR is now forcing local companies on them, a move considered by the company as negating the rules and guidelines for the 2007 bid round.
"What is happening now is that the DPR is forcing local companies on us in the name of LCV. This is contrary to the rules of the bid exercise, because we have been told that government will not interfere with the selection of LCV operators who will control 10 per cent in the venture," one of the winners said.
The sources stated that with this development, most companies who participated and won oil blocks in the 2007 bid round might not be able to sign the Production Sharing Contract (PSC) before the end of this administration, stating that the partners will need time to draft joint operating agreement, which will form the basis of their business or working together.
The sources also stated that for government to now force companies on them under a "force marriage content" will not help, as past experiences of 2005 and even the bid round are yet fully consummated.
"They tried this force marriage or partnership in the previous round and there was no good result, so how do they think it will work this time around," the industry operator queried.
Though, with the change of government last week, it was not clear whether President Umar Musa Yar' Adua will approve the violation of the guidelines. Already, the PSC could not be signed because most of the winners felt that force marriage by way of imposing local operators on them under the LCV scheme will not help their couse.
A member of the Presidential Committee on the bid round told The Guardian that most of the things that were done and still being done are issues that the committee is not aware of, adding that it would be improper to force any company on the winners since a decision has already been taken before the bid round that prospective investors should go out on their own to seek local partners that they would be able to work with.
The sources said though pressure from the Presidency on matters like this cannot be ruled out, but that for accountability and transparency, people should be allowed to play according to the rule.
"Those who want to participate in the LCV know too well those who won the blocks at the last bid round exercise. Rather than going to the president for such a favour, they should meet those companies and negotiate with them," the sources said.
"From what is happening now, I am not sure we will be able to sign any PSC or hand over the block to the winners before the end of next week. There are a lot of issues that are pending, "the sources said.
Officials of DPR said though many companies have brought notes from the Presidency to be considered as LCV operator, but the final say will still lie with the president or the minister of Energy who could also exercise such power after consulting with the president.
The Minister of Energy, Dr. Edmund Daukoru, had stated at the opening of the commercial bid round for 2007 that no indigenous company would be attached for the 10 per cent local content vehicle (LCV) equity in the exercise, as prospective bid winners are expected to get their own local partners in the block for this purpose.
Daukoru said the idea was to avoid the crisis that characterised the 2005 mini bid round where many local companies who were attached to a block could pay their counterpart fund.
Many of the companies so attached were also engrossed in moves urging their senior partners to carry them or paying their counterpart fund while they remain as dormant partners who only wait for the period when oil is produced from the field, only to participate in the sharing of oil profit.
Director, DPR, Mr. Tony Chukwueke, also reiterated that the department would not want to be dragged into issues arising between the operators and the LCV partners.
"This time around, we don't want anybody to get the department involved in LCV, we are not going to attach anybody, winners should look for their LCV partners and come and sign the pact in our presence. How you intend to operate or relate is your business, DPR will not be part of the process," he stated.
Out of the 45 oil blocks that were put on sale, less than 20 blocks were sold to prospective bidders, realising about $600 million as signature bonus.
