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Marginal Field Bid Winners Grumble, Say Loans Tied Down by Slow Exercise

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Some Nigerian indigenous oil entities that won the marginal fields bid round which kicked off in 2020, have expressed concern about the expressed concern about the delayed process.

 

 

Their grouse, THISDAY gathered, was that the programme, meant to drill more oil and boost the country’s revenue, was yet to effectively take off almost a year after they were officially handed award certificates.

 

On May 30, 2021, the then Department of Petroleum Resources (DPR) had announced the conclusion of the exercise, the first exercise since 2003, with the presentation of letters to the bid winners in Abuja by the industry regulator.

 

The regulator had put up 57 marginal fields spanning land, swamp and offshore for lease, with 161 companies eventually shortlisted to advance to the final stage from 591 entities that applied for pre-qualification.

 

 

Some of the winners at the time included: Matrix Energy, AA Rano, Andova Plc, Duport Midstream, Genesis Technical, Twin Summit, Emadeb Energy, Bono Energy, Deep Offshore Integrated, Oodua Oil, MRS and Petrogas.

 

A number of others that succeeded in crossing the hurdle were: North Oil and Gas, Pierport, Metropole, Pioneer Global, Shepherd Hill, Akata, NIPCO, Aida, YY Connect, Accord Oil, Pathway Oil, Tempo Oil, Virgin Forest, among others.

 

Head of the DPR, which has now transformed into the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Sarki Auwalu had at the time, stated that the exercise was worth roughly $500 million in signature bonuses.

 

However, speaking to THISDAY at the weekend, a number of the award winners, decried the slow turn of events, stressing that they had continued to pay heavy interests on the loans that were borrowed to pay for the transactions, despite that the loans have been unproductive for over a year.

 

The first sign of discord was said to have arisen when the regulator insisted on a joint awardees arrangement, wherein strange business bedfellows were forced together to begin discussions to go through the process as partners on the farm-out agreement.

 

THISDAY gathered that they were to establish what was regarded as a “Special Purpose Vehicle” (SPV) and thereafter begin a joint operatorship of the assets.

 

It was further understood that while the formation of the SPVs have been problematic, the issue of equity sharing as well as the fate of mergers where some parties had yet to fully pay up remain unresolved.

 

In other cases, entities that were compelled to co-own the assets, complained about the outright non-payment of the bonuses by their partners.

 

With Nigeria unable to meet its production quota from the Organisation of Petroleum Exporting Countries (OPEC), the drivers of the programme had raised the hope that drilling will soon be boosted.

 

Put conservatively, at the last round of the release of OPEC data on production levels of its member nations, Nigeria was losing at least 300,000 barrels by its inability to pump as much as the oil cartel would want.

 

“About N200 billion is currently hanging for over one year that we paid this money. My company invested billions in that transaction. For over a year, we have been paying close to N200 million a month as interest on loans.

 

“Just calculate that in a year and you will have an idea how much capital is tied down and how much interest is being paid on that whole sum of N200 billion.

 

“We are now even being told that there is no more farm-out. How will investors see what is happening and still have the courage to come in and invest in our clime?” the bid holder who declined to be named stressed.

 

Prior to the enactment of the PIA 2021, fields were classified as marginal when they were not considered by licence holders for immediate development due to assumed marginal economics under prevailing conditions or left unattended for more than 10 years.

 

They also included assets that leaseholders considered for farm-out due to portfolio rationalisation or those which the president may, from time to time, identify as such.

 

THISDAY learnt that while the signature bonuses for 119 awards were fully paid, nine awards were partly paid for and 33 awards had yet to be paid for as at last month, a situation that partly inhibited the close-out of the exercise.

 

But for those who did not pay a kobo after the expiration of 45 statutory days, the NUPRC stated that the bids had been reverted to status quo, disclosing that the bid round concluded in 2021 had so far yielded over N174.944 billion.

 

A second bid winner who also complained that the process was becoming unnecessarily slow, stated that although some progress had been made, the company was waiting for the take-off of the real work, which is to find “first oil” now that oil prices are high.

 

He, too complained that paying interest on loans that were not performing would ultimately negatively impact the business entities.

 

At a meeting a few weeks ago, the new Chief Executive of the NUPRC, Mr. Gbenga Komolafe, told the companies that since he took office, the challenges surrounding the actual take off of the programme had been a key exercise that he had devoted his time to resolving.

 

“I’ll tell you why. I realise that you as stakeholders, as awardees, we have tied down your capital, and I am very mindful about what we call the cost of capital.

 

“It’s really very painful that you have tied down your capital for this long time and that you expect the commission to take prompt action in that respect and I want to tell you that it has really bothered my mind and we have been doing everything possible within the commission that will progress the exercise to conclusion.

 

“So, it is an issue that has been very germane to the commission, to ensure that we bring the exercise into conclusion. With the funds that you have tied down, the cost of this exercise is very huge capital, that even for the entire banking industry, it is very significant and we cannot continue to delay in the completion of this exercise,” he noted.

 

He explained that he had received lot of petitions on the issues, but noted that the commission cannot reverse the model that was deployed, “because it’s too late in the day” as it was inherited from the former managers of the programme.

 

“ It’s a contract and they have paid, it means they have accepted the model for the conduct of the exercise. It’s too late in the day to reverse the process. Complaining after the fact will not help anybody,” he pointed out.

 

He stated that after the SPVs, the International Oil Companies (IOCs) were being engaged after which bid winners will be given Petroleum Prospecting Licences (PPLs) to commence the real work of finding oil.

Culled from THISDAY

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