How we award oil blocks – FG

On March 19, 2013 • In Energy http://www.vanguardngr.com/2013/03/how-we-award-oil-blocks-fg/ As the controversies generated over which region controlled more of Nigeria’s oil assets intensify, the Department of Petroleum Resources, DPR, has said that such controversies are baseless considering that oil blocks are awarded based on bids offered for them globally. Against this backdrop, the industry regulator noted that when such bid rounds are being conducted, the region of the bidders is not one of the prequalification for winning such oil blocks. The Director, DPR, Mr. Osten Olorunshola, who made the clarification last week in Lagos, said, “The Federal Government does not allocate oil blocks and marginal fields to individuals and corporations based on region or where they come from. So, DPR does not ask if an individual is from the North or South when allocating the fields.” Ownership controversies. Pressed further, on which region owned more of Nigeria’s oil assets, Olorunshola, who spoke at the launch of the Nigeria Oil and Gas, NOG Intelligence, a weekly print and online industry newsletter, insisted that “The DPR has no records of 83 per cent Northern ownership of oil blocks anywhere.” According to him, Nigerians currently own 52 per cent of the country’s 173 active oil blocs, while foreign oil companies own 48 per cent. He added that of the total of 388 oil blocks in the country, only 173 of them have been awarded to individuals and corporations, while 215 blocks were yet to be awarded. Broken further, of the 173 so far awarded, Nigerians owned 90 blocks while foreigners owned 83 blocks. He, however, lamented that all the 90 blocks awarded to indigenous players account for only six per cent of the country’s total crude oil production, while the 83 awarded to foreign oil companies account for 94 per cent of the total output. Steering the hornets’ nest The Chairman, Senate Committee on Business and Rules, Senator Ita Enang, a forth night ago steered the hornets’ nest, when he alleged that 83 percent of Nigeria’s oil blocks were in the control of the northern region. This led to a series of claims and counter claims by various groups in the different geographical regions in the country, including activists and non-governmental organisations, NGOs. Many even called for a review of oil block awards. Even newspapers (not Vanguard) went agog with their own versions of the real oil block owners. However, DPR’s recent pronouncements on the issue that Nigerians own 80 oil bocks where foreigners had 83 have nullified every other previous pronouncements on the controversial oil blocks ownership, including the list of 77 oil blocks and their owners recently published by one of the dailies. Analysts are of the view that to end the controversy, the DPR should go a step further to publish the full list of the 173 oil blocks so far awarded, indicating who owned what, whether local or foreign. Poor indigenous output contribution Notwithstanding the fact that Nigerians owned the larger share of the nation’s oil assets, their contributions to total production as revealed by the DPR is abysmally poor. According to data provided by the regulator, Nigerians are producing about 150,000 barrels of crude oil per day, representing six per cent of the Nigeria’s total crude production; while foreign oil companies account for the bulk of 2.35 million bpd or 94 per cent of total output. He blamed this on the lackadaisical attitude of the Nigerian players towards the development of their blocks. He said that majority of them have not commenced any serious production activities on the oil blocks since they were awarded to them. He said, “It appears that people just want to own oil blocks and put it on their complimentary cards. We are not happy with that. It is absurd that six per cent of oil production is coming out of 90 leases. “Government decided to dig deeper as it was not so happy with the performance of the indigenous oil companies. That is the reason why government put in place the Marginal Fields policy,” he noted. He disclosed that about 24 marginal fields were allocated in 2003, and only six fields are doing well, while the rest have refused to develop theirs, adding that many are faced with litigations, funding constraints, non-bankable proposals, and a host of others issues. He said, “The major issue that negatively affected the production capacity of majority of the marginal field owners is the fact that the owners could not access funds. As at 2003, when the fields were awarded, Nigerian banks where in difficult situation, making it impossible for majority of them to give out loans. “Also, another challenge that served as a drawback to the marginal fields programme is the unending litigations by most of the parties the fields were awarded to. The bid rounds brought a lot of litigations, due to the fact that the parties were technically asked to merge before the fields will be awarded to them. Till today, majority of them are still in court and are yet to kick start the process of production on their fields.” The active and producing marginal fields are: • Asuokpu/Umutu field owned by Platform Petroleum • Ibigwe field by Walter Smith and Morris Petroleum • Uquo field by Frontier Oil • Ajapa field – Britania-U • Umusadege field by Midwestern Oil and Gas, and Suntrust • Obodogwa/Obodeti field by Pillar Oil Olorunshola further stated that of the five marginal fields that were awarded on a discretionary basis, only Oriental Energy owners of two of the fields – Okwok and Ebok fields; and Niger Delta Petroleum Development Company, owner of Ogbelle field are involved in active production. He, however, maintained that over the last couple of months, the Marginal Fields programme is gradually living up to expectation, as production is now up to 60 million barrel per day in addition to about 100 million standard cubic feet per day (MMscf/d) of gas. Despite the identified challenges, Olorunshola argued that the marginal fields owners are still breaking new grounds, as they integrating value, unlocking stranded molecules, creating opportunity for employment and empowerment. He further stated that the programme is deploying new technologies, recording unprecedented collaboration and are now handling local communities better than before. Block revocation, new bid rounds underway In view of the poor performance, Olorunshola disclosed that the licences for some of the marginal fields will be revoked. In the revocation of the licenses granted to individuals and corporations, emphasis will be placed on fields that are yet to be developed. As a result, he said the licenses will be revoked next year, and the fields will be taken from the current owners and given to new owners. The DPR boss disclosed that the Federal Government is considering undertaking another bid round for the country’s marginal oil fields, irrespective of whether the Petroleum Industry Bill, PIB, is passed or not. He explained added that this was with a view to streamlining the bid rounds and reducing the process to about seven months from about one year and above in the past. According to him, once the advertisement calling for bids is published in the newspapers, the DPR is targeting 90 days for people to submit their bids, and 60 days for evaluation of the bids. He argued that the period will enable it to properly assess the bids, while expressing the hope that it will record a significant oversubscription. He further disclosed that the DPR is striving to ensure that subsequent bidding rounds are conducted every three years, while making sure that the reserves volume are bankable and the bid rounds are made simpler and transparent.