FG silent as stakeholders seek oil licensing round

As some industry stakeholders continue to look forward to another oil licensing round in the country, the Federal Government has yet to unveil any plans towards awarding licences.

crude oil

Over the past few years, operators and other stakeholders in the oil and gas industry have decried the lack of oil licensing rounds despite the government’s quest to increase the nation’s reserves.

In November 2013, the Minister of Petroleum Resources announced that there would be a marginal bid round, with 31 fields to be put on offer.

Following the announcement, the Department of Petroleum Resources said the process would not take more than six months as it was slated to commence in December 2013 and end in April 2014.

But the bid round did not take place before the President Goodluck Jonathan administration wound up, and nothing has been heard about it since then.

A former Project Director for the Uquo gas field development, a joint venture project by Frontier Oil Limited and Seven Energy, Alhaji Abdullahi Bukar, expressed worry that the industry had not witnessed any major licensing round in recent years.

“If you remember towards December 2013, we were all hopeful that a marginal fields round would be held. It started but it was truncated,” he said in a telephone interview with our correspondent.

Bukar said it was only last year that the reserves of the 2007 licensing round were awarded to a few, adding, “They were all awarded using inland and Production Sharing Contract terms, which make it very difficult to develop any gas and even the oil because the PSC terms that we have now are different from the PSC terms of 2007.”

He said, “So, we look very much forward to having more rounds, more regularly and with proper acreage management controls so that people who get things and don’t do anything with them or don’t go on to develop what has been found should be able to either come to terms with others who want to do it or relinquish them so that others can have a try.”

The Chief Executive Officer, First Exploration and Petroleum Development Company Limited, Mr. Ademola Adeyemi-Bero, has stressed the need for the expansion of marginal fields companies in the country.

“We have to move marginal fields forward. Let’s have another round because there are a lot of us who are willing to participate,” he said while speaking on practical approach to mitigating associated project risk and uncertainties in marginal field development at the conference of the Society of Petroleum Engineers in Lagos last month.

According to energy analysts at Ecobank Capital, a key issue likely to come up over the next few years is the low level of reserve replacement among the local oil producers.

The analysts, in a report co-authored by the Head of Energy Research, Ecobank Capital, Mr. Dolapo Oni, said, “Reserve replacement is extremely low among the Nigerian independents; few are engaged in pure exploration or have recorded discoveries in the past few years.”

They said, “While the situation has been partly due to the lack of licensing rounds by the government, there has also been hesitation from the local oil companies to invest in exploration due to funding issues. Thus, the major route to boosting their reserves is via acquisition of blocks from the IOCs or via marginal field licensing rounds.

“No licensing rounds have been held since 2007. A marginal field licensing round, which was initially planned for 2014, was later suspended and has since remained on the drawing board of the Department of Petroleum Resources.”

The Ecobank analysts said the development threatens the ability of the indigenous segment to continue to boost its share of oil output towards the target of 30 per cent.

“Ramping up output from their oil and gas reserves to enable them remain cash flow positive after servicing their loan commitments translates to a faster reserve depletion rate. This could potentially place the company at the risk of a sharp drop in output after recoverable reserves diminish,” they said.

When contacted, the Head, Public Affairs, DPR, Mrs. Dorothy Bassey, told our correspondent, “When it (licensing round) is going to be done, it is going to be duly announced.

Asked if there is going to be any bidding round soon, she said, “I am not aware. All I know is that when it is going to be up, there is a process that is followed and first will be an announcement. It is not done in secret; it is usually very well-publicised.”

Last month, Uganda announced that it had picked three Nigerian companies for its oil exploration licensing round, inviting them to negotiate for production sharing agreements.

The East African country announced its first competitive bidding round for six exploration blocks, covering a total of 3,000 square kilometres (1,150 square miles), in February 2015.

The country’s Ministry of Energy and Mineral Development said it selected three Nigerian firms, namely, WalterSmith Petroman Oil Limited, Oranto Petroleum International and Niger Delta Petroleum Resources.

Bukar, ex-NNPC board member, said, “Actually, we should be very proud that Nigerian companies have got the technical and commercial know-how to go and bid for licences in other countries.

“But what is needed here is to make sure that, just like those other countries, we too should give incentives that will attract, first and foremost, our own people and others who think that Nigeria’s plans and programmes are credible and are willing to invest,” he added.