A Review of the Nigerian Energy Industry

Govt may delay oil licensing until after elections

30 September 2014, Abuja ~ Almost a year after the commencement of a new marginal field licensing round was announced by the Federal Government, there are indications that a fresh process will begin after the elections next year.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had in November 2013 signalled the commencement of the marginal field bid round, with 31 fields on offer, 16 of which are located onshore, while the remaining 15 are offshore.

OPEC Oil Meeting
Mrs. Alison Madueke

The Department of Petroleum Resources had then stated that the bidding process would be completed within five months, commencing in December 2013 and ending in April 2014.

The new licensing round, according to DPR, is aimed at growing production capacity by expanding the scope of participation in the country’s petroleum industry, especially the upstream sector, through diversification of resources and inflow of investments, and to increase indigenous participation in the sector to foster technology transfer, among others.

Marginal fields are oil fields in which the available reserves do not make them commercially viable for the holders of Oil Mining Leases, typically the International Oil Companies, to develop. Such fields are located within the existing OMLs operated by the IOCs and are left dormant for a considerable amount of time.

Energy analyst at Ecobank, Mr. Dolapo Oni, said although Nigeria had strong exploration potential, if the licensing rounds were not conducted soon to meet the large appetite for oil blocks currently from indigenous and foreign firms, the nation could see some of that exploration capital allocated elsewhere, including Liberia, Cote d’Ivoire, Ghana, Namibia and Gabon.

He said in an emailed response, “There are several reasons why there may be a delay, including administrative delays in processing approval, the start of political campaign season, which can delay approvals, and issues around funding structures for marginal fields and which fields should be included in these programme or left out for subsequent programmes.

“We could see the programme re-announced after the elections next year.”

Bala Zakka, an energy analyst and technical director of drilling services, Template Design Limited, said, “The non-completion of the licensing round only displays the cloudy and opaque nature of how licensing and contracting activities are carried out in the Nigerian oil and gas industry.

“That is why potential investors and industry watchers outside the country feel that we lack integrity in our activities in the industry.”

Noting that the Ministry of Petroleum Resources and the DPR were in charge of the bid round, Zakka said it was bad enough that the process was abruptly suspended.

He said, “All of a sudden, they discovered that there were changes that needed to be made. Why didn’t those in charge of it do the necessary things before the beginning of the bid round?”

“The earlier the bid round comes up before the election, the better. Because election is coming up does not mean all other activities will stop. It is in Nigeria that once it is election time, virtually all other activities are affected and that is not good for the economy. Why is it that the bid round will be delayed?”

One major cause of the delay is the selection of the fields to form part of the bid, said Detail Commercial Solicitors in its Nigeria Oil and Gas Guide for August, adding that DPR was still liaising with the various leaseholders regarding the potential marginal fields.

Coming 10 years after the first marginal field licensing round, the announcement of the next round by the minister and subsequent road shows by the DPR generated massive investor interest.

“This licensing round has been highly anticipated and upstream participation has been a key strategic point for most new entrants in the industry,” said CBO Capital in a recent report.

While Nigeria continued to dither on the next marginal fields licensing round, other African countries such as Liberia and Angola are moving ahead with their licensing rounds to ramp up exploration and production.

~ The Punch

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