Marginal Field Bid Round Failure Raises Concern Among Investors

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Chika Izuora

— April 24, 2014

There is uneasy calm in Nigeria’s oil industry following inexplicable reasons trailing the federal government’s lack of political will to conduct marginal field bid round since the last quarter of 2013.
The industry regulator, the department of petroleum resources (DPR), has also failed to disclose the identities of 31 onshore and off-shore fields for sale.
The federal government had indicated that it would conduct the exercise in March, 2014.
The minister of petroleum resources, Mrs Diezani Alison-Madueke, had announced on November 28, last year that the bid round would be completed by March, 2014, but the failure to meet the deadline has further fuelled speculation that government has a sinister motive to auction the field to its political allies controlling major indigenous oil firms.
Also, the failure of the DPR to release the lists of oil fields that are available for sale is putting prospective buyers in the dark and eroding transparency in the process.
Industry sources have accused the regulator of deliberately flouting the guidelines ostensibly to use the exercise as a platform to raise money for politicians toward the 2015 general elections.
At an energy forum in Lagos recently, some investors accused the DPR of not implementing the guidelines for the fields, saying the agency is being used by the federal government to woo politicians with oil blocks ahead of the 2015 polls.
For the first time in 12 years, the federal government kick-started the process for the second marginal field licencing round, offering 31 onshore and off-shore fields. Some operators have expressed fears that their technical partners may become apprehensive and withdraw their funds. Already, some insist that some oil mining leases in which politicians in the opposition and the ruling party have larger stakes but which cannot be verified by Leadership are now in circulation among oil companies.
Among the lists obtained by Leadership from some operators include the Uzuaku field on Oil Mining Lease (OML) 11 in Ogoni land, the Egbolom field on OML 23 that was previously operated by Shell in Rivers State, three offshore fields on OML 100 (Usoro, Ikong, Ibiom) and two on OML 67 (Amaniba and Ekpat).
Spokesperson for the DPR, Paul Osu, had earlier confirmed his agency’s failure to make the list available as promised but explained that the delay was caused by some reasons which he declined to mention. According to him, the list will be uploaded on the agency’s website when it is ready but said it was not made available in January as promised by the director, DPR, for some inexplainable reasons. Osu, however, denied knowledge of the list in circulation.
The executive vice chairman, Terra Energy Services Nigeria Limited, Akin Adetunji, however, said that the DPR should explain why the list has not been published.
Another player in the industry, who spoke on condition of anonymity, said, “There is much confusion with the constant shift in date by the minister and I want to tell you that there are companies which won the bid in the last exercise but could not deliver.
“They realised they had no financial ability to manage the assets and are waiting for the fresh bid round to identify those that could engage them in farm-in-farm-out arrangement, but government is playing hide and seek game.”
Meanwhile, a report obtained by LEADERSHIP on the marginal field operations showed that 17 oil blocks are currently redundant 11 years after they were awarded. The 17 marginal fields were awarded in 2003 but were not productive.
The fields were awarded by the DPR but the regulator is now threatening to withdraw them, a decision that led to scheming by the owners of the oil blocks.
The report showed that owners of the redundant oil blocks from 2003 bid round are afraid that the DPR might withdraw their ownership of the blocks for the new bid round, which was expected to take place this year. The operators have besieged the presidency to avert the withdrawal of their licences.
The marginal fields in Nigeria evolved from the Petroleum Amendment Act 1996, which introduced paragraph 16A into the First Schedule to the Petroleum Act. This amendment provided that the holder of an OML can farm out any marginal field which lies within the OML.
Also under the amendment, the president may cause the farmout of a marginal field, which has been left unattended for a period of not less than 10 years from the date of the first discovery of the marginal field.
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