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Nigeria to sell new oil blocks

Five months ago, the Minister of Petroleum Resources, Diezani Alison-Madueke, said Nigeria was on the verge of putting its oil blocks on sale for 2010.

The minister’s pronouncement elicited mixed feelings among stakeholders in the industry; some felt the conduct of the oil bid round at this time is needless since the previous one conducted in 2007 was mired in controversy.

Alison-Madueke, who gave the assurance while addressing the international oil community at the ongoing Offshore Technology Conference in Houston, Texas, United States, also disclosed that the licensing round, which is expected to rake in $880 million into the federal treasury, according to the 2010 budget projections, would be held “as soon as possible.” About two billion barrels of oil reserves, including big and marginal fields, would be auctioned in the renewed bidding round.

She said the assets on offer would include those that some operators have relinquished, having deemed them uneconomical to exploit. Oil blocks that were unsold in previous biddings could also be available, as well as others not previously offered.

“We will move very aggressively because we have very little time in this dispensation. But we will make sure that it is done right and done transparently within the tenet of due process,” the minister said and further assured that she is already reviewing aspects of the industry.

Two months before the expiration of the year, the nation is unsure about the conduct of the bid round, even though the minister for umpteenth time promised that the exercise would come up.

Reporters at the recent media forum of the Department of Petroleum Resources (DPR) sought to know from the director, Andrew Obaje when the exercise would come up but he retorted that he didn’t have any idea. He, however, said there was no fixed date yet for the 2010 bid rounds for marginal fields and oil blocks.

According to him, it was only the Federal Government that could determine when the exercise would come up.

The DPR usually plays a key role in the oil licensing rounds as it always organised it on behalf of government.

Previous bidding exercises, particularly the 2007 round, was virtually marred by intrigues which forced the Federal Government to withdraw some allocated blocks.

Besides, the 2007 bid round which earned $615 million for the Federal Government was stewed in by litigation, involving the tender of 45 oil blocks. 23 of these blocks were allocated to various oil and gas companies through competitive bidding.

Former Minister for Energy, Dr. Edmund Daukoru had said that the remaining 22 oil blocks that were not bidden for through the process, would be ploughed back into the basket for the incoming government to sell to prospective investors.

Former President Umaru Musa Yar Adua set up a special committee to probe the controversial licensing round.

The committee’s report, signed by the Permanent Secretary, Mr. Sadiq Mahmood, was submitted to the president on October 19, 2007, with conclusions that the exercise was not properly conducted causing the then Director of DPR, Mr. Tony Chukwueke, to be shown the way out of the agency.

Only nine companies, the report said, complied with the prequalification requirements in line with the 2007 guidelines; three companies won their bid but were constituted into “Force Joint Ventures” by the DPR

Six companies neither met the requirements, nor formally bade for the blocks which were offered to them; about six blocks were unilaterally awarded by the DPR after the bid conference had been concluded; four blocks attracted litigation, while the remaining are to be returned to the basket at the next bidding round.

The blocks pushed to next licensing round include OPLs 454, 250, 251, 201, 288, 249, 319, 327, 328, 454, 712, 723, 732, 808, 811 and 813. Also in the Anambra basin are five blocks viz: OPLs 901, 902, 903, 904 and 906. Besides, about nine applicants at the bidding round did not pay for the mandatory application fee; 13 applicants did not pay for the mandatory processing fee, while 14 firms did not pay for the mandatory data prying fee but were allowed to participate in the bid round resulting in a loss of about $335,000 to the Federal Government.

One of the reasons why the bid round is put on hold, our correspondent gathered, is because of the pending Petroleum Industry Bill which has been in the cooler of the National Assembly for close to one year.

The bill is expected to change the face of oil and gas business in the country but it has been greeted with suspicion and intrigues by stakeholders. Despite the over 200 amendments effected on the bill, multinational oil companies in the country were still clamouring for favourable upstream agreement and fiscal measures between them and the Federal government.

Besides, under the auspices of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), oil workers threatened to shut down all oil and gas installations and the entire downstream operation in the country if the government goes ahead with the plan to pass the PIB into law as it is without reviewing it based on the suggestions of stakeholders in the sector.

They noted that the total shutdown action by labour is in resistance of the inimical legislative process which is capable of spelling doom for the industry and the nation’s economy if the PIB is passed in its current state.

The unions disclosed that the oil workers, who are the primary operators in the implementation process were consciously excluded in the legislative and review processes, stressing that several concessions and compromises have been made at the behest of the powers that be, on the dictates of institutions and the privileged, and at the whims and caprices of the barons that can pay the piper.

They stated further that 56 changes were made due to the comments made by OPTS; 36 changes made in response to internal government agencies; 66 changes due to the other stakeholders; some changes made to reflect indigenous participants’ comments and additional changes made due to other external bodies but that PIB has undergone discrete and selective legislative processes leading to contentious interventions that have caused fundamental reviews of the original draft and the inputs from public hearing while keeping same off-the-shelves and from the website to forestall transparency and easy access.

Energy expert, Mr. Adewale Sunday told our correspondent that with all these albatross on the bill, it is unlikely that the oil bid round would see the light of the day.

“As it is currently, the future of oil and gas operation in the country is tied to the bill.

Even some of these bidders would want to see the content of law in its entirety before staking their funds. Remember, some of them are still battling with the government over Production Sharing Contract.

And I don’t think the government too would sell oil blocks without getting the bill passed into law.”

Besides, observers believe that the nation’s body polity may be responsible for the delay in the conduct of the bid round.

The body polity, according to an Economist, who doesn’t want his name, in print, is still not totally safe now to conduct an event of that proportion.

He said the spate of kidnapping and the recent increase in bombing incidents may have caused the Federal Government to apply the brakes on the exercise.

“I don’t think the PIB issue is strong enough to warrant the delay. Already, there is an existing guideline governing the conduct of the exercise, and the Minister of Petroleum has also promised to ensure accountability and transparency in the exercise.

The security scenario and of course the coming elections next year, I think are more valid and stronger to cause the government to apply the brakes. Commercial activity of such magnitude cannot hold under this tense atmosphere.”

But some observers said the Jonathan administration may decide to waive all the odds aside and go ahead with the exercise in order to reward political acolytes as his predecessor, Olusegun Obasanjo did in the twilight of his administration in 2007.