For investors dreaming of picking up stakes in Nigeria ’s juicy upstream oil and gas sector, this is good news. The Federal Government plans to hold a fresh licensing round this year, three years after the last effort, which was embroiled in controversy.
According to Emmanuel Egbogah, special adviser to the president on energy, blocks holding as much as two billion barrels of reserves would be on offer. "There will definitely be a bidding round this year with both onshore and offshore fields," Egbogah said, adding: "It will be something not less than two billion barrels." The bids, the presidential adviser also disclosed, would include oil licenses relinquished by western majors.
A top Department of Petroleum Resources, DPR, official, who pleaded anonymity, confirmed the plan, but said the Federal Government was still to decide on the number of leases and the particular ones that would be bided for. The licensing round would be the first by the three year-old Umaru Yar’Adua regime. The preceding regime of President Olusegun Obasanjo held three bidding rounds, the first a huge success; and the other two raking up serious controversies, leading to the cancellation of some of the sales by President Yar’Adua. One of the controversies involved the award of drilling rights on Oil Prospecting License, OPL, 291, to an unknown local company, Starcrest Nigeria Energy, outside the open auction process without formal announcement. The award of the acreage to the company for a $55 million signature bonus became public when the company sold a 72.5 per cent share in the contract to Canadian-listed Addax. Addax was to disclose later that it agreed to pay the $55 million bonus in full to Starcrest, a further $35 million fee and foot the company’s exploration and development costs.
For the likes of Russian and Asian companies that have for long been angling for a major stake in the Nigerian oil and gas sector, the planned bidding round could be the opportunity. The Russian company, Gazprom, for instance, has shown keen interest in opportunities in Nigeria ’s oil and gas sector. Officials of the company, who arrived the Federal Capital, Abuja , in December 2007, were upbeat about the prospect of their company holding a stake in the Nigeria oil and gas industry. In talks with Nigerian oil industry officials, the Russians tried to convince them to forget the Americans, Indians and Chinese and look up to them (Russians) for better partnership. As an evidence of its interest in Nigerian opportunities, Gazprom has since invested $2.5 billion in a joint venture with the Nigerian National Petroleum Corporation, NNPC, which is expected to handle geological exploration, production and transportation of hydrocarbons, and construction of a system for collecting and processing associated gas along with construction of electric power facilities in the country. The Chinese and Indians have also been unrelenting in their quest for opportunities in the nation’s oil and gas sector.
China particularly is currently seeking to own significant chunk of Nigeria ’s oil resources. Two months ago, Egbogah disclosed that China was ready to invest $50 billion to acquire six billion barrels of Nigeria ’s oil. "We have been in negotiations with the Chinese since August of last year. There might be a revised offer, but I am not in a position to confirm that," he said last week. A delegation led by China 's Foreign Minister, Yang Jiechi, was in Nigeria last month to discuss upstream co-operation. He, however, said at the end of the visit that the oil relationship of the two countries was still at early stages. In September last year, China National Offshore Oil Corporation, CNOOC, identified 23 licences in Nigeria in which it would like to buy stakes, including 16 operated by Shell, Chevron and ExxonMobil. All expired last November and were up for renewal.
A DPR official, however, is of the view that in as much as the Russian and Asian companies are interested in Nigeria , the next bidding round would not be limited to them. “Companies from elsewhere across the world would be welcome to bid for blocks when the offer opens. It will be a level playing ground, and, hopefully, it will be transparent,” he said. Ahead of the bids, Shell, Nigeria's oldest foreign oil partner, has announced plans to sell its stake in three onshore oil mining leases, which were not currently producing, to a consortium consisting of two local companies and France's Maurel & Prom. The agreement, which includes 30 wells with a production capacity of 50,000 barrels of oil equivalent per day, would still have to be approved by the Federal Government. Egbogah is happy about the development. "I think what Shell is doing is good. If you are unable to operate or no longer think it's economical, it's best to relinquish them," Egbogah stated. "Shell has taken the lead and we encourage others to follow," he also said. Leases released by the western players in this process would form part of the oil licenses for the oncoming bidding round. That much Egbogah has indicated.