…As 40 more licenses await approval
By Fred Ojiegbe
Despite the dwindling capital to finance 2019 budget, the federal government is ready to raise funds through the renewal of oil blocks in the country. So far, the government has generated over $2 billion from the renewal of oil blocks and the funds would be used to fund the 2019 budget.
The Department of Petroleum Resources (DPR) has renewed 30 oil fields while 40 is awaiting approval from President Muhammadu Buhari. The 30 renewed oil blocks are expected to add more than 300 million barrels of crude oil to the nation’s production.
Ibe Kachikwu, the minister of state for petroleum resources, has promised oil blocks owners awaiting renewal that all their licenses would be attended to before the end of the first quarter of 2019. He said the ministry is currently analyzing the renewal applications lodged for the 2019 round in order to ensure the best use of Nigeria’s oil fields.
“We are doing analysis on what these people can bring to bear on the time limit between which you must develop the block that you asked for. If you can’t, let somebody else get into it and try and create a joint venture to find funding, but just holding to a block is depriving the government, state and even the investors money and it does not make any sense.”
This also indicates that the federal government will possibly generate more funds to carry out capital projects and implement the annual budget from the renewals.
However, Prof. Wumi Iledare, Director of Energy Information Division of the Centre for Energy Studies, and oil and gas expert, disagreed with Kachikwu on renewing the oil block licenses in the first quarter of the year.
He is of the view that renewing the oil blocks in the first quarter might be seen as a desperate move by the President Muhammadu Buhari led administration to raise capital to finance the 2019 elections. He said the federal government may not get the fair market value of the oil blocks if they are renewed before the elections.
“Honestly speaking, I don’t think the president should renew the licenses before the elections or the first quarter because we might not get the fair market value. He should do it after the election. Again, this is where the PIGB becomes important. Some of these things are not ad-hoc.
“We need proper policy to guide the way we do these things. This ad-hoc system has denied Nigerians a lot of fair market share for these natural endowments called petroleum and gas. And if we don’t have opportunity for prospecting, we can’t increase our reserves. We need to get the value of these blocks before renewing them.”
“But Kachikwu had said that his ministry intentionally designed the framework to hasten oil block renewals in order to raise funds for the 2019 budget. “I put a policy of early renewals in place so that even blocks that are not due for renewal before 2019 are being renewed right now.”
Irrespective of the efforts put in place by Kachikwu and the ministry of petroleum resources to ensure renewal of these 40 oil blocks, it is the prerogative of the president, who is also the minister of petroleum resources to renew and allocate oil blocks. With Buhari’s involvement in his re-election campaign, actively or passively, it looks impossible that he would approve the oil block renewals in the first quarter of 2019.
Again, the president’s body language towards oil block owners that refused to develop their wells over the years might also influence the decision of Buhari in approving the oil blocks. The president is not happy that most indigenous oil block owners over the years have failed to develop their wells or begin any major production work on the oil blocks since they were awarded to them. This factor might also be the reason why this administration has not awarded new licenses for oil blocks.