As the oil Nigerian industry prepares for the commencement of the marginal oil fields bid round announced by the federal government, a coalition of Civil Society Organizations (CSOs) and the Media have called on President Muhammadu Buhari to publicly declare that he will not invoke his discretionary powers as Minister of Petroleum Resources to influence outcomes before, during or after the bid rounds.
The groups which are working to promote transparency and accountability in Nigeria’s oil sector say this has become necessary in view of the fate suffered by oil bid rounds in the past because of the provisions of the discretionary powers of the minister to award or revoke bid licenses as contained in the Petroleum Act.
The public declaration they say is critical to rebuilding the confidence of serious investors to participate in the bidding process trusting that the outcome will not be subject to any boardroom intervention outside strict adherence to approved bid guidelines and rules.
In their presentations during an online workshop, oil sector experts explained how previous marginal oil fields licensing rounds failed to realize any of the set objectives because of investors concerns over the existing regulatory laws and discretionary powers of the petroleum minister.
“Evidence abound in several industry data to show that Nigeria has not been able to collect more than $750 million in signature bonuses from the various bid rounds,” a communiqué issued at the end of the workshop stated.
E360 learnt that of the 175 marginal oil field licenses issued by the Nigerian government between 2000 and 2007, only one has been developed into commercial production.
With Nigeria’s daily oil production, which has declined from about 2.3 million barrels per day (bpd) in 2014 to 1.6m bpd in 2019, further worsened by the current impact of the Covid-19 on the global oil market, the sector faces a bleak future unless reforms are urgently implemented, key of which is to repeal the provisions granting discretionary powers of award to the petroleum minister in the existing Act.
According to the communiqué, previous bid rounds in Nigeria revealed a sharp decline in interest from serious investors, local and foreign, in the country’s marginal oil fields. In 2005, only 57 percent of the oil blocks offered for auction secured at least one bid, the number dropped to 40 percent by 2007.
“Many of the serious investors were concerned about the law regulating operations in the oil industry. They complained that the legal framework cedes too much power to the Minister of Petroleum Resources to award or revoke licenses based on his or her discretion,” the communiqué revealed.
It was gathered that many of the serious investors opted out of the process as they felt the licensing bid rounds were mere cosmetic processes for government officials to reward their allies and associates with oil assets.
“As such, transparency in the oil bidding processes was sacrificed on the altar of political patronage. Yet, this is the major issue Nigerians crave for, especially with the recent Presidential approval to auction some marginal oilfields under the current administration,” the communiqué jointly signed by Peter Egbule, for coalition of CSOs and Bassey Udo, National Coordinator, Media Initiative on Transparency in Extractive Industries (MITEI), read in part.
Furthermore, for Nigeria to deliver the next oil licensing bid round that will not only meet globally acceptable standards, but also realize set national objectives to increase oil revenues, boost reserves and raise daily oil production capacity, the group urged government to present Nigerians with evidence of a comprehensive national economic development plan detailing how the expected signature bonuses would be utilized; a national data repository, to be used as the single source of verified data open to all parties in the bid; a widely published information on the value of assets to be included in the basket on offer; as well as the terms governing the licensing round.
Also they recommend that during the bidding process, Nigerians should be presented with evidence of stringent selection criteria, comprehensive details of all prospective bidders, and measures to effectively monitor the bid process to ensure successful firms pay their signature bonuses in full into government designated accounts.
As it should not be business as usual, the group also recommends that post-bid, government should draw down on the performance bonds and enforce the drill-or-drop clause in the law and reclaim any license(s) from non-performing winning bidders.