The Federal Government, through the Department of Petroleum Resources (DPR) an oil sector regulator, has foreclosed the possibility of the controversial discretionary oil bloc allocation happening in the forthcoming oil marginal fields licensing rounds.
In a public notice, the DPR also refuted media reports that it has concluded plans to hold an oil bidding round for the award of marginal oil fields, putting paid to hopes of a quick conduct of the licensing rounds this year.
According to a recent report by a national daily (not BusinessDay) the oil licensing rounds would hold later this year or early 2018. The report claimed that as part of the guidelines, the FG could award oil blocks to Niger Delta indigenes through a discretionary award.
“Though the DPR is yet to finalise any framework for a bidding round, we can however reaffirm government’s longstanding adherence to the principle of an open competitive bidding process, as opposed to a discretionary award process of acreage allocations that has long been discarded by the Federal Government,” said the DPR.
Discretionary award of oil blocks is a contentious issue in Nigeria. During the days of the military, oil blocs were awarded to government cronies, who the traded the blocks for huge profits since they lacked both financial and technical competence to develop them, leading to huge revenue losses to Nigeria.
While discretionary oil bloc award, based on political patronage, reduced with the return of democracy in 1999, Nigeria’s bid rounds have not been without controversy.
Some of the marginal fields awarded over the years, are lying idle because some of the bidders who acquired divested assets, lacked financial and technical competence to run them, said Osten Olorunshola, chairman, Energy Institute, Nigeria and former director in DPR, at an oil and gas conference last year.
Discretionary award of licenses, violates global best practices and also negates the Extractive Industry Transparency Initiative, (EITI) of which Nigeria is a signatory.
This provision has been prohibited in the Petroleum Industry Governance Bill (PIGB) passed by the Senate in May this year. The bill still awaiting passage in the House of Representative before being sent to the President for assent, vests approval for allocation of oil blocs in a new regulator, the Nigerian Petroleum Regulatory Commission (NRPC).
The NRPC now has the power to issue, modify, amend, extend, suspend, review, cancel and reissue, revoke and / or terminate upstream licences made in compliance with applicable laws and regulations of the country.
DPR admitted there are plans to conduct oil bidding rounds, but these exercises would only be conducted when the agency has been given requisite authorisation by the Minister of Petroleum Resources, to submit operational guidelines and technical frameworks with which to midwife the process.
The agency further said that when such approvals have been secured, appropriate mechanism would be activated to properly appraise interested participants and investors, within Nigeria and the international community, as to how the process would be managed, reminiscent of the transparency and openness that have become sacrosanct guiding principles of the current administration.
Nigeria is planning to conduct bid rounds for its marginal fields to raise funds to mitigate a slump in crude earnings and finance the N7.4 trillion, 2017 budget.
Marginal fields are undeveloped discoveries located in oil blocks held by oil majors operating in the country. A total of 30 marginal field licenses have been awarded since the policy was introduced in Nigeria, of which the current licensees, only around 12 fields have reached commercial production. While a bid round was proposed for 2013, it never held and the guidelines did not take effect.
As at 2016, four oil mining leases (OMLs) and 24 oil petroleum leases (OPLs) have expired. In the next five years, 47 OMLs will be expiring, while 27 OPLs will be available for renewal. The DPR has not said which blocks would be up for bids and when, and as can be deduced from the agency’s public notice, neither do they.
ISAAC ANYAOGU
