Nigeria, Sao Tome approve Addax operator of JDZ oil block
By Collins Edomaruse in Abuja and Mike Oduniyi in Lagos, 02.08.2006
The Federal Government yesterday said it realized about $1 billion (N130 billion) from the auction of oil acreages at the 2005 Bid Round conducted by the Department of Petroleum Resources (DPR) last August.
Also, the Joint Develop-ment Authority (JDA), the body administering hydrocarbon resources in the Joint Development Zone, has approved Swiss oil firm, Addax Petroleum, as the operator of oil block 4 in the Gulf of Guinea.
Minister of State for Petroleum Resources, Dr. Edmund Daukoru, while officially declaring the licensing round closed in Abuja, said that revenue represented what he called the full payments made in bonds by 25 firms that fulfilled all conditions set out for the exercise.
He, however, said that the list of the 25 firms would not be available until another week when it was expected that all relevant bodies in the industry, would have completed the audit of the process.
The minister, at the event that was attended by the industry’s big names like Group Managing Director of Nigerian National Petroleum Corpora-tion (NNPC), Engineer Funsho Kupolokun, and the Ambas-sador of Norway to Nigeria, Mr. Tore Nedrebo, explained that of the 44 awards that were made at the end of the exercise, 25 companies made full payments for the blocs they won, eight of the firms dropped partial payments while others couldn’t fulfill any financial obligations associated with the exercise.
“But we have ordered that the monies paid by the firms that lost out, just about $83m, be refunded to them immediately.”
The minister also said that, “the government, in keeping with the mood in the country, has ordered the DPR to refund all payments partially made by some companies as a way of mitigating their losses. In other words, those who made full payments, gained their blocs, those who made partial payments had their deposits back while those who did not make any payments at all and the other second category, are advised to take another opportunity which comes up before the end of this year, but must learn to bid more sensibly.
He described the bid rounds as encouraging, adding that the post-bid process holds more potential for improvement in the industry. “What we have done in the upstream, is the replication of what is happening in the downstream. If in the process, there is default, we blame that on first time operation, because funds are very difficult to access from the banks. But if it were in the downstream, banks are always ready to finance obligations to export cargos of downstream products.”
Earlier, the report of the committee of international oil experts that reviewed the bid process was presented to the federal government and the participants.
Chairman of the panel and Norwegian oil expert, Mr. Willy Olsen, expressed satisfaction, on behalf of the panel, with the process, which he scored as transparent, but added there was still plenty of room for improvement.
Presented by the Norway’s Ambassador, the report indicated that: “The 15 members of review panel had extensive discussions on potential improvements in future licensing rounds in Nigeria. The members of the panel represented both international oil companies and indigenous companies. Representatives from the US Embassy, the British High Commission and the Canadian High Commission took an active part in the review. Three representatives of the Norwegian Petroleum Directorate were also members of the review panel as part of the close and ongoing co-operation between DPR and the Norwegian Directorate.
“As part of the review, a major questionnaire was sent to 200 companies that had showed an interest in the 2005 bid round. The panel had, when it met, received 35 responses from a wide range of international and indigenous companies, some of which had won in the bidding round, others that had lost. The majority of the companies saw the bid round as a step in the right direction, but they also emphasized the potential for improvements. Future license rounds should be organised quite similarly to the 2005 round, but the message is that you have to be firm – and not accept alterations after the bids have been delivered.
“ The review panel recommended that a firm schedule should be established to close the 2005 bid round. A clear recommendation in the panel's report was also to allow sufficient lead time to plan and prepare the next license round with a focus on key objectives and processes. The next round has to be executed with firm terms and schedules.
Receiving the report, Daukoru said government would look at the report dispassionately. He assured the participants that the government was preparing for another bid round adding that the forthcoming exercise would afford the authorities the opportunity to right whatever imperfections were noticed during the previous exercise.
Meanwhile, the Joint Development Authority (JDA) has approved Addax Petroleum, as the operator of oil block 4 in the Gulf of Guinea. Addax replaces US independent oil firm, Pioneer Natural Resources which pulled out from the consortium with ERHC Energy, the US-based company in which Nigerian indigenous oil firm, Chrome Energy, has a majority stake.
President and Chief Executive Officer of ERHC Energy, Mr. Walter Brandhuber told newsmen yesterday that Addax would be bringing to bear on the consortium, its wealth of experience in oil exploration and production particularly in Nigeria’s offshore area.
"The JDA has approved Addax as the operator for block 4. The approval was given last week," Brandhuber said, adding that ERHC has already communicated to the JDA its readiness to sign the Joint Operating agreement (JOA) and Production Sharing Contract (PSC) for block 4.
According to the ERHC chief executive, the consortium is now ready to sign the Joint Operating Agreement (JOA) and the Production Sharing Contract (PSC) agreement on block 4. “If the JDA calls for the signing now, we are optimistic that we are prepared to sign the PSC," he said.
A spokesman for the JDA also confirmed the approval for Addax saying "I can confirm that both parties (Nigeria and Sao Tome) represented in the Joint Ministerial Council have now approved the Addax operatorship of block 4.”
By the JDA approval, Addax has now replaced all the major American oil firms in the consortia with ERHC Energy in exercising all the rights granted it by the JDA in the five oil blocks awarded last May. The consortia included the ERHC/Devon/Pioneer in Blocks 2 and 3.
Meanwhile, the Joint Ministerial Council (JMC) of the JDA yesterday, agreed to convene a meeting on February 28, 2006 in Abuja, to consider and approve the Production Sharing Contract (PSC) guiding operations in the five oil blocks awarded last year.
The JMC, which consists of representatives from Nigeria and Republic of Sao Tome and Principe, which began meeting on Tuesday, also rejected the judicial report purportedly issued by the Office of the Attorney General of Sao Tome and Principe, condemning the process of award of the blocks.
The Sao Tomean Attorney General late last year, released a report alleging "serious flaws" in the way the blocks were awarded. The said several of the companies chosen to explore the JDZ blocks, lacked the technical know-how and the financial muscle necessary to carry out the work, and that the procedures used to select the companies which received concessions contained serious flaws and did not satisfy the minimum standards required for the award of such licenses.
The tiny archipelago island also picked holes in the preferential rights granted ERCH Energy, in many of the blocks. ERCH Energy is a quoted company on the New York Stock Exchange in which a Nigerian indigenous oil company Chrome has major equity interest. The country said it would lose about $58 million in expected income if the award to ERHC was allowed to stay.
The Joint Ministerial Council has the overall responsibility for all matters relating to the exploitation and exploration of hydrocarbon resources in the JDZ. It has the final say on all matters bordering on the treaty.
At stake is the princely sum of $283 million to be earned from the award, based on the signature bonuses offered by the winners of the blocks. The amount is made up $71 million for Block 2, $40 million on Block 3, while partners in Block 4 including Conoil, will pay $90 million signature bonus. The signature bonus on block 5 fetched $37 million while Block 6 fetched $45 million.
According to the treaty, Nigeria will get 60 percent of the revenue and Sao Tome, 40 percent.
