Nigerian Government to Hold Oil Licensing Round This Year

Total's offshore crude production facility in Nigeria

After nearly five years of expectations, Nigeria’s Federal Government will finally hold an oil licensing bid round this year, Director of Department of Petroleum Resources (DPR), Mr. Osten Olorunsola, has given a firm assurance.

This will also be the first bid round to be conducted by the President Goodluck Jonathan administration.

The Federal Government had shelved its plans to conduct bid rounds in 2009 and 2010 due to the non-passage of the Petroleum Industry Bill (PIB), coupled with pending cases before the courts and arbitration involving multinational oil companies and the government.

These cases, which had to do with the Production Sharing Contracts governing some oil fields, are yet to be thrashed out.

Olorunsola, who spoke at an interactive session with journalists at the weekend, said details of the proposed bid round and the exact date for the exercise would be announced later.

The DPR Director, who is also the Chairman of the Technical Sub-Committee on the PIB, said harmonisation of the various versions of the bill was at an advanced stage.

The committee was recently set up by the Petroleum Minister, Mrs. Diezani Alison-Madueke, to review all versions of the draft bill before the National Assembly to facilitate its quick passage into law.

He said to shore up Nigeria’s oil production, about 38 oil rig licences were issued in 2011 by the agency, leading to the drilling of three exploration wells and 93 development wells.

He revealed that the reserve value for oil as at January 1, 2011 was 31.219 billion barrels, condensate 5.314 billion barrels, while total gas reserve was 182.3 trillion cubic feet (tcf).

“Thirty-eight rig licences were issued leading to the drilling of three exploratory and 93 development wells in 2011. This contributed to an incremental production of 120 KBD (thousand barrels per day) of crude oil in 2011. Reserve values as at January 1, 2011 were 31.219 billion barrels for oil, 5.314 billion barrels for condensate and Total Reserve for Gas, 182.3tcf,” he said.

In the area of downstream performance, he said one licence to operate a 1,000 barrels per day diesel extraction plant was granted to a private company, while six licences for various refinery projects had been issued, which are at various stages of development.

Oil licensing rounds of 2005, 2006 and 2007 saw some efforts at replacing the former discretionary award procedures with a more open and competitive process.

However, the bid rounds were fraught with complaints of irregularities, prompting the Federal Government to revoke some oil blocks awarded during the bidding rounds.

For instance, the Oil Prospecting Licences (OPL) awarded to the Korean National Oil Company after the 2005 bidding round, OPLs 321 and 323, were revoked by the Federal Government in January 2009. The court later quashed the revocation.

Oil majors – Shell, Chevron, Mobil and Agip – did not participate in the 2007 bidding round, which held in the twilight of former President Olusegun Obasanjo’s administration.

In the 2005 bid round, only 30 of the 77 auctioned blocks were awarded to new Nigerian players. Awards were made to Asian oil companies that controversially secured rights of first refusal over some of the prolific oil blocks in exchange for commitment to invest in Nigerian infrastructure projects.

In the 2006 bid round, 18 oil blocks were auctioned and government earned around $292 million in signature bonuses.

Only companies willing to invest significantly in the country’s infrastructure development projects and power structure were pre-qualified to participate.

The blocks that were offered included those from the 2005 bid round, which had not been awarded and others that were voluntarily relinquished by their operators.

The Federal Government raised around $266 million in signature bonuses during the last bid round held in 2007.

Although the bid round attracted the largest Nigerian participation, complaints of irregularities had prompted government to set up an investigative panel in June 2008 to review the bid round.

The probe was extended to the 2005 and 2006 bid rounds, consequent upon which some of the oil blocks awards were invalidated.