Nigeria’s oil marginal fields 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, has attracted bids from 39 companies, up from 33 firms last year. In May this year (2016) Norway’s 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, Nigeria’s oil sector regulator, charged with the responsibility of conducting the bid rounds, that it is still in the process of developing guidance notes for the exercise.
“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 DPR, 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 rounds. A source said that Ibe Kachikwu, the minister of state for petroleum resources, is seeking to raise $5billion from the current oil marginal fields licensing rounds.
Udoma Udo-Udoma, minister of budget and national planning, last year, said government is considering raising funds through asset sales, advance payment for license rounds and infrastructure concessioning,, to deal with reduced income from crude oil sales.
There are hower, also concerns that as the elections approach, the likelihood of the licensing round holding, seem more lower. If it does, there are fears about how transparent the process would be.
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 for this story are not confident that the oil marginal fields licensing round would commence soon. A former energy sector operator, described it as a lot of ‘hot air’.
Meanwhile, 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 set to commence soon.
“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.
Long fraught with concerns, Nigeria’s 2001-2003 Marginal Fields Licensing Round, the first to be organised by the Federal Government, awarded 24 licenses to 31 indigenous companies.
A total of 30 Marginal Field Licenses have been awarded since the policy was introduced in Nigeria, of the current licensees, only around 30% of the fields have reached commercial production. While a bid round was proposed for 2013, it never held and the 2013 guidelines did not take effect.
In the absence of new guidelines, it is unclear, the number of blocks that 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.
Legal analysts at Bloomfield law firm, in a newsletter, said that “Marginal field production only makes up 3.05% of crude oil output between 2015 and 2016, which is far less than the projected output envisaged by the Ministry of Petroleum Resources, during the award stage of the marginal fields, thus prompting the Minister to threaten the revocation of licenses for non-producing fields.”
However, Nigeria’s licensing rounds have not held up to transparency scrutiny. It is ranked 77th among 89 countries assessed by the Natural Resource Governance Institute (NRGI), a global extractive sector transparency NGO in its 2017 Resource Governance Index.
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