09 September 2017, Sweetcrude, Abuja – The process for the award of contracts and licenses for oil and gas prospecting in Nigeria is historically tainted by corruption and collusion. A recent Benchmarking Report from the Nigeria Natural Resource Charter (NNRC) determined that the process is ruined by a high degree of uncertainty and political influence, a factor that has hampered the growth of the sector and the economy in general.
The report, presented by the Nigerian Resource Governance Institute, NRGI, the Centre for Public Policy and Advocacy, CPPA among others, which summarises the benchmarking of Nigeria’s petroleum sector governance against the 12 precepts of the Natural Resource Charter, notes that, “For instance, where a company is perceived to have the best qualifications, based on the criteria set by, for example, the Department of Petroleum Resources (DPR), such a company may not emerge as the final bid winner. The predictability of the contractual process is significantly diminished as a result.”
The report further highlighted the fact that 67 per cent of marginal fields allocated in the 2003 licensing round is yet to produce a single barrel of oil, more than 10 years later.
It added that “Some licensing activity took place during the 2012-2014 period. On 28 November 2013, the Federal Government of Nigeria (FGN) through the minister of petroleum announced the opening of second marginal oil field licensing round, with a total of 31 fields on offer – 16 of them located onshore, and the remaining 15 on the continental shelf.”
Meanwhile, fresh data emanating from the Department of Petroleum Resources, the agency burdened with the duty to implement technical issues of policy, regulatory control, and licensing operations has shown that about 47 more oil blocks will be due for renewal during the election year if 2019.
This has raised worries that the government in power may unwittingly have been presented with tools to rev up its political patronage machine during a very opportune time.
In its 2017 Resource Governance Index released in June, the Nigerian Resource Governance Institute (NRGI), stressed that the weakest link in Nigeria’s oil and gas value realisation component is licensing.
The index measures the quality of resource governance in 81 countries that together produce 82 percent of the world’s oil, 78 percent of its gas and a significant proportion of minerals, including 72 percent of all copper.
The index scored Nigeria’s licensing process 17 out of 100, placing it among 89 country licensing assessments.
“This score and ranking reflect high levels of opacity in key areas of decision-making, including qualification of companies, process rules, and disclosure of terms. The Nigerian government does not regularly publicly disclose government socials, financial interests in the extractive sector or the identities of, beneficial owners of extractive companies, though it has made some early commitments to do so with the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP). The government has committed to disclosing all oil, gas and mining contracts in its “seven big wins” policy strategy and as part of its OGP action plan, but thus far, it has not disclosed contracts”, NRGI said.
The index also faulted the government’s revenue collection transparency. “Despite some progress in the transparency of revenue collection over the past five years, tracking payments from oil and gas companies remains challenging”, it said.
The NNRC benchmarking report lamented the fact that the preparatory activities and road shows following the announcement of the 2013 marginal fields, did not lead to any allocations as the government chose to repeatedly delay the proceedings and ultimately to postpone the round altogether.
The report further stated that sector roles under the Ministry of Petroleum Resources are either not explicitly known or are so fluid that the same function may cut across multiple agencies, giving rise to confusion and conflict of interests.
“In monitoring and regulating the industry, for example, the DPR is not effectively independent and empowered to execute its oversight functions. Its decisions often conflict with the interests of NNPC especially since NNPC is involved in both the regulatory and commercial aspects of the industry.
“For other companies operating in the industry, regulatory complications and compromises arise from the lack of adequate influence and capacity for the DPR to carry out its duties without bias,” the report noted.
In general, the report disclosed that situation in the Nigerian oil sector did not record any significant change from when the last report was presented, noting that all the indicators used in measuring Nigeria’s performance remained the same.
“Since 2012, there has been no progress made with respect to the Petroleum Industry Bill, PIB. The Bill’s provisions are not in an ideal form, and it is stalling for a number of reasons including disagreements over its fiscal provisions, especially allegations of being a revenue bill; lack of resolution of challenges of policy discretion; and other regulatory issues with its proposed institutions,” the report stated.
Mr. Dauda Garuba, Nigerian Program Coordinator, NRGI, submitted that the release of the report will help shape discussions ahead of the 2019 elections, entrench change and accountability in the polity.
According to him, the Charter is designed to see how countries rich in natural resources are managing the resources for the public good.
Continuing, he said, “The latest benchmarking exercise is not just another index of information; rather, its goal is to help Nigeria improve governance of the oil and gas sector and provide key stakeholders with a tool for action.”
A former Executive Secretary of NEITI, Mrs. Zainab Ahmed, who is currently the junior minister of Planning and Budget told our correspondent in an interview that the Federal government in the past was not amenable to opening up the licensing registers and contracts of oil and gas companies to the public.
She said, “The major challenge we had in implementing EITI in Nigeria in the past was our inability to open up the licensing registers of the oil and gas companies; our inability to open up and put in the public domain operating contracts for the oil and gas sector.
“So we extracted the requirements from the standard and designed a special template to be able to capture key information from those contracts and we send these requests to the companies and to DPR (Department of Petroleum Resources). We got those key information we thought was vital from the contracts and from the licences from both the DPR and the companies. In that regards we have been able to meet the requirements of the standard albeit in this round about manner,” she stated.
Ahmed added that, “But it cannot continue to be like that and they will accept it because everybody knows the contracts are not in the public domain. Everybody knows the licence register is not something you can sign up to our website and access. Subsequently, we must as a country make sure that these things happen. In Ghana, Liberia, Gambia and a lot other very small countries you can actually click on a website and see these information but it is not so in Nigeria.”
The former NEITI boss further noted that the lack of will to take remedial actions by the concerned government agencies was disturbing.
She, however, posited that the President Muhammadu Buhari government has shown the political will to open up the extractive sector for enhanced public scrutiny through reforms and its commitment to pass the Petroleum Industry Bill (PIB).