-By Gideon Osaka
The gains recorded in the oil sector, with the soon-to-be-concluded marginal fields bid round, risk being eroded by the tactics of disgruntled interests to frustrate and discredit the entire exercise, Valuechain findings have shown. Individuals and groups, who may have been justifiably screened out of the process by the watertight guidelines set by the Department of Petroleum Resources (DPR) for the bid rounds, are said to have devised means to portray the exercise as fraudulent and the worst in history.
In June last year, the Federal Government, through the DPR, announced that it would open bid rounds for 57 marginal oilfields that are located onshore, swamp, and shallow offshore terrains exclusively to local operators. After a rigorous selection process, 161 companies were picked from the over 600 companies that applied, to advance to the next and final stage of the bid round process.
Valuechain learnt that right from the announcement of the commencement of the exercise, some fraudulent individuals attempted to taint the entire process for probable pecuniary advantage, by using forged documents to lure unsuspecting applicants.
In recent times, sensational media reports have also emerged, claiming that the Minister of State for Petroleum Resources, Chief Timipre Sylva, aides to President Muhammadu Buhari, and the DPR Director, Engr. Sarki Auwalu, shared almost $100 million bribe money from the sales of the 57 marginal fields. Other seemingly fabricated reports have alleged that while some of the marginal fields were shared amongst Buhari’s aides, cronies and that of the Minister of State for Petroleum Resources, the larger part of the racket were sold to people willing and able to pay bribe money, ranging from $750,000 to $1million and more.
Valuechain reports that, for almost two decades, the objectives of the Federal Government concerning the marginal fields bid programme are yet to be met, as every attempt to conclude the process has been tainted with obstacles. The last bid round conducted in 2003 was fraught with litigations and other challenges which hampered the development of some of the awarded 24 marginal oilfields to the detriment of the nation.
A similar exercise was attempted in 2013/2014, but it was suspended for myriads of reasons including allegations of lack of transparency in the bidding processes. However, when the DPR announced on June 1, 2020, that it has opened bid rounds for 57 marginal oilfields, some skeptics believed that the process would go the way previous exercises had gone in the past.
Faced with these daunting challenges, the DPR management left no one in doubt of the agency’s determination to adopt a different and strategic approach for the 2020 marginal oilfield bid rounds.
The emergence of the COVID-19 pandemic and the crash in global crude oil prices left the regulatory agency with no option but to ensure that the exercise was successfully conducted in line with the anti-corruption mantra of the President Muhammadu Buhari administration and for the benefit of the country.
Transparency, a break from the past
To overcome some of the pitfalls that hampered past bid rounds, the DPR developed a transparent process flow for the exercise, through its published guideline on the award process, otherwise known as the Guidelines for the Award and Operations of Marginal Fields in Nigeria, where it outlined the nine key steps involved in the round.
“We have learnt from mistakes made in the past and have come up with workable solutions to ensure that the objective of the development of our marginal fields is achieved. This time around, our awardees will be credible investors with technical and financial capability,” Sarki Auwalu said during the launch of the exercise.
To also ensure a break from the past, whereby oilfields were awarded based on factors other than merit, capacity and competence, the agency conducted the bid in the most open and transparent manner.
“There are lots of questions on marginal fields, but people need to know that this is an opportunity for Nigerians. Marginal field is not something we can shroud in secrecy. Nigerians deserve to know because this has been 17 years that it was last done. So, people are hungry. They will be given the opportunity to prepare and participate,” he added.
There were also worries about whether the process would be independently handled by the DPR, devoid of any political manipulations and political cronyism which plagued the previous award. But with the outcome of the process so far, and without any protestations, the DPR may have proven critics wrong, who maintained that the Federal Government will flung the process because of quick cash.
“If we want to raise funds, we could have asked the NNPC to divest from some assets to raise money. We need serious investors, and that is why we are not imposing high costs on the forms. It has taken 17 years to get to this point,” Auwalu stated.
The DPR Director explained that the agency has also emplaced Post-General Award Conditions to protect the interest of all investors, adding that any disagreement arising among awardees and their partners post-award, will first be referred to the Nigeria Oil and Gas Alternative Dispute Resolution Centre in DPR.
According to him, this will reduce the years spent in courts over disputes which usually lead to non-performance of the marginal fields, adding that such awards will, henceforth, be withdrawn by the government.
In his response to some of the concerns at the early stage of the bid, the DPR had said fields that are under litigation were not included in the 57 fields being offered to investors. According to the DPR guidelines, wholly-owned indigenous oil companies and investors with substantially Nigerian interest operating as oil exploration and production businesses would participate in the auction. Also, companies whose promoters are either indebted to the government, or currently holding oil assets not operated in a business-like manner would not be pre-qualified to participate in the bid.
In spite of the challenges, DPR has determinedly forged ahead with the process, culminating in the final selection, and leading to the award which is expected to enhance the development of Nigerian content, capacity building, technology transfer and reserves accretion, as well as income generation to expand government’s revenue drive.
Commenting on the ongoing process, former Chairman of Petroleum Technology Association of Nigeria (PETAN), Mr. Bank-Anthony Okoroafor, in a media interview, said he was impressed with the way DPR has handled the bid rounds.
“I have to be honest with you. The way I have seen the exercise is that it went very well. It was transparent, and apart from being transparent, it was detailed.
“There was, first of all, a pre-qualification stage where all the companies had to show technical and financial capacity. After that, those that were successful were now able to bid for the assets.
“And for once, there was no leakage. I think the DPR managed to keep the process very secret,” Okoroafor said.
Despite the shortcomings of previous exercises, awarding of marginal oilfield bid licenses remains a positive move for the nation’s oil and gas industry.
No room for delays
Nigeria cannot afford to delay award for the oilfields again. Else, it risks being blown away from the scheme of things in view of recent developments in the oil sector within the African continent. The country currently holds the largest oil and gas reserves in sub-Saharan Africa and the 9th largest reserve in the world, with an estimated 37 billion barrels of oil and 203 trillion cubic feet of gas, according to Statista.
Few decades ago, only a handful of African countries bore the title of oil producing nation. Today, most African countries have either found oil on their territories or have begun production in commercial quantity.
Amid the volatility of the price of oil, the industry in Africa continues to witness more activity driven by licensing rounds. Nearly all hydrocarbons-bearing nations have either launched, are planning, or have recently concluded bidding rounds on substantial acreages.
Recent exploration successes (in Egypt, Senegal), perceived stability in operating environments (Mauritania, Morocco, Ghana) and a return of confidence in established producing provinces in West Africa (Gabon, Equatorial Guinea) are opening up these countries for investments. All these have grave consequences for Nigeria’s positioning in the global energy market.
Between 2013 and 2019, when Nigeria could not hold the planned marginal field bid round, dozens of bidding rounds had closed, with Equatorial Guinea Licensing Round leading the African continent.
In response to a wave of new exploration interest, ongoing efforts to further explore its offshore territory, and revive the country’s energy sector, Equatorial Guinea, late 2019 launched its licensing round and subsequently announced successful bidders.
In terms of acreage, the country’s licensing round offered the highest among all rounds in the word. Three major oil firms, ExxonMobil, Ophir and Nigerian energy group, Taleveras, won oil blocs in the country. The West African nation’s competitive bidding round was declared a success by industry analysts and watchers.
Delaware-headquartered Vaalco, along with partners, Levene Energy and GEPetrol, were awarded four of the nine blocs. Noble Energy, GEPerol, Lukoil, and the Africa Oil Corporation – all took one bloc, each, with GE, with another joint venture of Nigeria’s WalterSmith, Hawtai Energy taking the final joint venture.
The Republic of Congo is another country that has gone ahead to launch an aggressive onshore-offshore licensing round to grow its oil reserves. The country is the fourth largest Sub-Saharan producer of oil, with an output of over 200,000 barrels of oil per day (bpd), according to BP statistics, its proven oil reserves amounted to 1.6 billion barrels. Congo-Brazzaville is even expected to leapfrog Equatorial Guinea, and become the third-largest producer in the region, largely due to a $10-billion Total E&P Moho Nord project, the largest oil project in the country’s history launched in 2013 with potential to increase Congo’s production by 50 per cent.
Egypt, North Africa region’s oldest upstream sector, continues to attract new interest with a spate of recently-announced deals despite the impact on investment by slowing oil prices over the past years.
Shell had, a few years ago, announced 142 billion cubic metres of natural gas discovery in Egypt’s Western Desert, with the possibility of more reserves to be recovered, representing one of the largest finds in the region in recent years. This follows another discovery by the Egyptian General Petroleum Corporation (EGPC) that could yield 2.2 million barrels of oil, and nearly 311.5 million cubic metres of gas in the Western Desert, which are already responsible for nearly half of Egypt’s total oil production of 723,000 barrels per day.
The country followed up the discoveries in 2016 with an International Bid Round, in which 11 blocs were offered for oil and gas exploration in the Western Desert and the Gulf of Suez. The bids were worth a total minimum investment of $200 million, $68.2 million signature bonuses, and the drilling of 33 exploration wells. Security approvals related to these areas have been finalised. Although the continuous decline in oil prices has slowed the process.
After fine-tuning its petroleum law, and working towards ramping up its relationship with investors, Uganda opened its door to more companies, following a licensing round that commenced in 2016. The country subsequently signed two oil production sharing agreements with companies, including a Nigerian firm that won its oil bloc bidding rounds.
This came after the country held its first competitive oil exploration licensing round, with three Nigerian firms getting through to final negotiations for the award. Elsewhere, smaller African countries are doing enough to develop their oil reserves.
The first offshore licensing round in war-torn Somalia was formally launched in February 2019. Although border disputes with Kenya and non-passage of hydrocarbons legislation into law has deferred the full opening of bids.
Available data suggested these offshore areas held 1 billion barrels of oil. A further survey revealed much larger volumes, with contemporary estimates suggesting Somalia’s offshore acreage holds up to 30 billion barrels.
Enough of the pull him down syndrome
Looking at what far smaller countries in Africa are achieving, it is high time that fraudulent businessmen, politicians and their media collaborators realised that this dirty game, in the name of politics, is seriously de-marketing the country in the eyes of the world in terms of investment destination. The worst thing is that the outside world would not know that these unfounded allegations are mere politics. People around the world would assume that all that they read in the media are the real happenings in the country. However, It is high time that this pull him down syndrome is stopped. The thinking is that all hands must be on deck to build an industry that should attract the much desired potential investments from both local and foreign investors.