A Review of the Nigerian Energy Industry

12yrs after, Nigeria resumes licensing round for marginal fields

Diezani-Alison-Madueke 1*To begin rehabilitation on four refineries pre-sale

Oscarline Onwuemenyi

28 November 2013, Sweetcrude, ABUJA – After more than 12 years, the Federal Government has flagged off the second oil marginal fields licensing round aimed at deepening the participation of indigenous oil companies in the upstream sector of the oil and gas industry.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, who declared the bid round open at a press conference held in Abuja on Thursday stated that it is designed to boost the participation of Nigerian indigenous companies in the upstream and to generally increase exploration and production activities in the oil and gas sector to the benefit of Nigerians and the Nigerian economy.

She also announced Federal government’s intention to rehabilitate the four national refineries prior to their sales to the private sector next year.

Alison- Madueke said the bid process will be completed in the next four months.

The minister, who encouraged local companies to form consortia to increase their capacity to win the fields, noted that Nigerian firms which have been operating marginal fields licensed in 2001 have done very well.

According to her, “Over the next two weeks, the Department of Petroleum Resources (DPR) will undertake a road show to different parts of the country about the programme. This will be followed by a three and half months of competitive bidding process in line with the federal government’s commitment to openness and transparency in the conduct of business activities in the country.

“In carrying out the exercise, government is determined to ensure that proper technical and financial due diligence is done on companies indicating interest in these assets. In this regards, government encourages companies where possible to bid in consortia to enable the parties leverage upon each other’s strengths.

Giving details of the licensing round, Mrs. Alison-Madueke stated that a total of 31 fields are on offer with sixteen (16) of them located onshore, while the remaining fifteen (15) are in the continental shelf.

The Minister who said the Federal Government is committed to transparency in the bid process also encouraged companies indicating interest in the assets to form consortia that would enable them leverage upon each other’s strengths.

Giving an update on the last marginal fields bid round which held in 2001, the Minister disclosed that of the 24 fields that were allocated to 31 indigenous oil companies in that exercise, 8 were already producing while the others are at various stages of development.

Alison-Madueke noted that the marginal field operators who currently account for about 1% of the nation’s production have also recorded huge discoveries in excess of 100 million barrels to the nation’s reserve base, adding that of the eight assets that have so far been divested by the IOCs, at least four are held by active marginal field operators, who have continued to demonstrate remarkable technical ability in operating significantly larger assets.

“In their operations, the companies have addressed corporate social responsibility as a critical element, by providing for stakeholder participation as part of their success factors. In addition, their development strategy is in line with the nation’s Gas Flare Policy and global environmental guidelines on Green House emissions, by ensuring full utilization of their associated gas. Indeed, one of them has established a modular refinery for diesel production which is the first of its kind in the country” Alison-Madueke stated.

The Minister explained that the Federal Government is encouraged by the modest achievements of the marginal field operators in line with the objectives of the local content policy to kick off this marginal field licensing round.

She explained that government’s decision to hold the bid rounds was geared towards opening up the oil and gas sector of the industry to a wider participation with a view to creating a robust and virile industry that will positively impact on the lives and living standards of Nigerians.

On the proposed sale of the refineries, Alison-Madueke reiterated government’s stance to move away from managing major infrastructure, adding that government was going ahead with the original plan to rehabilitate the refineries so as to be able to get a premium price from their sale.

The Minister maintained that adequate room has been made in the privatization time-table for engagement with all stakeholders to resolve all labour issues to ensure a win-win situation for all.

The minister noted that government wants to rehabilitate them to ensure that it got some commercial value from the sales.

“We are moving for the privatization of the refineries in the first quarter of 2014. At this point in time the negotiation round for the turnaround maintenance of the Port Harcourt Refinery is now completed.

“We started with the TAM with the original contractors who built the Port Harcourt refinery and this was with the intent on ensuring that the right people carried out this TAM once and for all. Unfortunately the actual negotiation have extremely been a long drawn out one because of the prices they came in with at the get go.

“It has taken a number of months of very aggressive robust negotiation to get to the point with Port Harcourt Refinery where we can actually begin to implement the work. Port Harcourt is now on the move in terms of TAM and once that is close to completion Kaduna and then Warri will continue”, she said.

Alison-Madueke added that “the intent was to ensure that government does not sell the refineries when we do privatized in the worst possible state to ensure that we get some commercial value for these refineries which are still, I think, in very decent shape but need a lot of refurbishments and a lot of update in terms the core technology that they use.

“That is the situation right now but we will kick off the privatization round. We will have all the due discussions and negotiations with the unions in that period of time as well to ensure that we are all working together to make this happen and ensure that it is a win-win situation for all parties at the end of the day.

“But it goes without saying that over the last 20 years government has not done too well at handling major infrastructure and government should not be in the business of handling major infrastructure. So let the private sector come in and let us a little more competitive efficacy in the handling of these major entities for us to the betterment of all the people of our country and our economy.”

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