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How we award oil blocks FG

on March 19, 2013 / in Energy 8:25 am / Comments


As the controversies generated over which region controlled more of Nigerias oil assets
intensify, the Department of Petroleum Resources, DPR, has said that such controversies are
baseless considering that oil blocks are awarded based on bids offered for them globally.
Against this backdrop, the industry regulator noted that when such bid rounds are being
conducted, the region of the bidders is not one of the prequalification for winning such oil
blocks.
The Director, DPR, Mr. Osten Olorunshola, who made the clarification last week in Lagos,
said, The Federal Government does not allocate oil blocks and marginal fields to individuals
and corporations based on region or where they come from. So, DPR does not ask if an
individual is from the North or South when allocating the fields.
Ownership controversies
Pressed further, on which region owned more of Nigerias oil assets, Olorunshola, who spoke
at the launch of the Nigeria Oil and Gas, NOG Intelligence, a weekly print and online
industry newsletter, insisted that The DPR has no records of 83 per cent Northern ownership
of oil blocks anywhere.
According to him, Nigerians currently own 52 per cent of the countrys 173 active oil blocs,
while foreign oil companies own 48 per cent.
He added that of the total of 388 oil blocks in the country, only 173 of them have been
awarded to individuals and corporations, while 215 blocks were yet to be awarded.
Broken further, of the 173 so far awarded, Nigerians owned 90 blocks while foreigners
owned 83 blocks.
He, however, lamented that all the 90 blocks awarded to indigenous players account for only
six per cent of the countrys total crude oil production, while the 83 awarded to foreign oil
companies account for 94 per cent of the total output.
Steering the hornets nest
The Chairman, Senate Committee on Business and Rules, Senator Ita Enang, a forth night
ago steered the hornets nest, when he alleged that 83 percent of Nigerias oil blocks were in
the control of the northern region.
This led to a series of claims and counter claims by various groups in the different
geographical regions in the country, including activists and non-governmental organisations,
NGOs. Many even called for a review of oil block awards. Even newspapers (not Vanguard)
went agog with their own versions of the real oil block owners.

However, DPRs recent pronouncements on the issue that Nigerians own 80 oil bocks where
foreigners had 83 have nullified every other previous pronouncements on the controversial oil
blocks ownership, including the list of 77 oil blocks and their owners recently published by
one of the dailies.
Analysts are of the view that to end the controversy, the DPR should go a step further to
publish the full list of the 173 oil blocks so far awarded, indicating who owned what, whether
local or foreign.
Poor indigenous output contribution
Notwithstanding the fact that Nigerians owned the larger share of the nations oil assets, their
contributions to total production as revealed by the DPR is abysmally poor.
According to data provided by the regulator, Nigerians are producing about 150,000 barrels
of crude oil per day, representing six per cent of the Nigerias total crude production; while
foreign oil companies account for the bulk of 2.35 million bpd or 94 per cent of total output.
He blamed this on the lackadaisical attitude of the Nigerian players towards the development
of their blocks. He said that majority of them have not commenced any serious production
activities on the oil blocks since they were awarded to them.
He said, It appears that people just want to own oil blocks and put it on their complimentary
cards. We are not happy with that. It is absurd that six per cent of oil production is coming
out of 90 leases.
Government decided to dig deeper as it was not so happy with the performance of the
indigenous oil companies. That is the reason why government put in place the Marginal
Fields policy, he noted.
He disclosed that about 24 marginal fields were allocated in 2003, and only six fields are
doing well, while the rest have refused to develop theirs, adding that many are faced with
litigations, funding constraints, non-bankable proposals, and a host of others issues.
He said, The major issue that negatively affected the production capacity of majority of the
marginal field owners is the fact that the owners could not access funds. As at 2003, when the
fields were awarded, Nigerian banks where in difficult situation, making it impossible for
majority of them to give out loans.
Also, another challenge that served as a drawback to the marginal fields programme is the
unending litigations by most of the parties the fields were awarded to. The bid rounds brought
a lot of litigations, due to the fact that the parties were technically asked to merge before the
fields will be awarded to them. Till today, majority of them are still in court and are yet to
kick start the process of production on their fields.
The active and producing marginal fields are:
Asuokpu/Umutu field owned by Platform Petroleum
Ibigwe field by Walter Smith and Morris Petroleum

Uquo field by Frontier Oil


Ajapa field Britania-U
Umusadege field by Midwestern Oil and Gas, and Suntrust
Obodogwa/Obodeti field by Pillar Oil
Olorunshola further stated that of the five marginal fields that were awarded on a
discretionary basis, only Oriental Energy owners of two of the fields Okwok and Ebok
fields; and Niger Delta Petroleum Development Company, owner of Ogbelle field are
involved in active production.
He, however, maintained that over the last couple of months, the Marginal Fields programme
is gradually living up to expectation, as production is now up to 60 million barrel per day in
addition to about 100 million standard cubic feet per day (MMscf/d) of gas.
Despite the identified challenges, Olorunshola argued that the marginal fields owners are still
breaking new grounds, as they integrating value, unlocking stranded molecules, creating
opportunity for employment and empowerment.
He further stated that the programme is deploying new technologies, recording unprecedented
collaboration and are now handling local communities better than before.
Block revocation, new bid rounds underway
In view of the poor performance, Olorunshola disclosed that the licences for some of the
marginal fields will be revoked. In the revocation of the licenses granted to individuals and
corporations, emphasis will be placed on fields that are yet to be developed.
As a result, he said the licenses will be revoked next year, and the fields will be taken from
the current owners and given to new owners.
the DPR boss disclosed that the Federal Government is considering undertaking another bid
round for the countrys marginal oil fields, irrespective of whether the Petroleum Industry
Bill, PIB, is passed or not.
He explained added that this was with a view to streamlining the bid rounds and reducing the
process to about seven months from about one year and above in the past.
According to him, once the advertisement calling for bids is published in the newspapers, the
DPR is targeting 90 days for people to submit their bids, and 60 days for evaluation of the
bids. He argued that the period will enable it to properly assess the bids, while expressing the
hope that it will record a significant oversubscription.
He further disclosed that the DPR is striving to ensure that subsequent bidding rounds are
conducted every three years, while making sure that the reserves volume are bankable and
the bid rounds are made simpler and transparent.

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