Nigeria licensing round fails to attract majors
Nigeria failed to attract any major oil companies to bid for blocks offered in its latest licensing round because the companies fear political uncertainty ahead of a governmental change at the end of the month.
LONDON, May 14 -- Nigeria failed to attract any major oil companies to bid for blocks offered in its latest licensing round because the companies fear political uncertainty ahead of a governmental change at the end of the month.
Tony Chukwueke, director of the Department of Petroleum Resources, Nigeria's oil licensing agency, told OGJ that it leased 18 of the 45 blocks on offer and raised $615 million. Among the companies that acquired acreage were Chinese, Indian, and local Nigerian firms, as well as some from the US and the UK. Those companies dominating the lease round were not well known.
Chukwueke said Nigeria focused on attracting new investors and that the majors, which are already familiar with Nigeria, were welcome to participate if they wanted. "The allocation of blocks is purely a technical matter and Nigeria has always honored its oil contracts even under Sani Abacha, so I don't know why people feel that things will change with the swearing in of the government."
Yorkshire Energy World Ltd. picked up two deepwater blocks was one of the more obscure companies to do so, raising questions about whether it would have sufficient experience to develop the leases compared with more-established companies operating in Nigeria. Sterling Global E&P, Sahara Energy Fields, and Moni Pulo were among the top bidders for onshore blocks in the Niger Delta.
Winning blocks on the Niger Delta Continental Shelf were Moni Pulo Tenoil, Global Energy Co. Ltd., BOC JNHP Consortium, Oilworld Ltd., and Essar Exploration.
Oil majors are concerned about how the incoming government will deal with the continuing attacks by militants on oil and gas infrastructure and the kidnapping of expatriates in the Niger Delta, as they increase pressure on the government to give the local oil communities a greater share of the oil wealth.
When the licensing round was launched, the government negotiated rights of first refusal with 10 companies for 20 blocks, including Chinese and Asian companies, who promised in exchange multibillion investments in downstream infrastructure. However, many of these companies did not participate because they were worried that contracts may not be concluded before President Olusegun Obasanjo transfers power on May 29 to his chosen successor Umaru Yar'Adua.
In the bidding round that took place in Abuja on May 11, eight blocks with right of first refusal (ROFR) were won outright by other bidders. Another four are expected to be concluded May 15, Chukwueke added, as the government has given those companies with ROFR 48 hr to bring the outstanding difference between their bids and that of the highest offer if they are to secure the blocks.
For the remaining eight blocks with ROFR along with the other blocks that didn't attract any bids, all of these will be offered again in Nigeria's next licensing round, which would be held in the next year or two, Chukwueke said.
Opposing oil companies to the system of ROFR have criticized it because they claim it has undermined the government's claims of openness and transparency. In his opening remarks, Minister of Energy Edmund Daukoru said the system had been previously introduced in 2005 and that the critics were "creating confusion, with the intension of driving away competition and investors."
Oil and gas analysts attributed the lack of interest to the timing of the round. Nigeria's latest auction has fallen between April's presidential elections and May 29, the swearing in of the new administration.
Contact Uchenna Izundu at firstname.lastname@example.org.