Indigenous and foreign oil firms have an opportunity to get oil blocks as Nigeria plans to sell not less than two billion barrels of oil reserves before the end of the year. The bid round is expected to fetch more than $10 billion for the federal government. “There will be a bid round this year that will include small or marginal fields. But there will be big ones as well… I would predict a couple of billion barrels of reserves,” said Emmanuel Egbogah, special adviser to the president on petroleum matters. The bid round is expected to be dominated by home-grown oil companies and Asian groups who have been longing to have a big share of Africa’s biggest energy industry. Nigeria is the sixth largest producer of crude oil in the world. The number of blocks to be offered for sale is yet to be known.
Companies from the western countries are unlikely to participate because, most of the blocks are those they relinquished sometime ago, which were deemed to be uneconomic to exploit. They are also reluctant to increase their holdings in Nigeria due to the uncertainty of the government’s Petroleum Industry Bill, which is currently awaiting passage by the National Assembly. United States-based Chevron is expected to follow ExxonMobil, its counterpart, in paying hundreds of millions of dollars to renew some expiring leases on prime Nigerian blocks. Anglo-Dutch Shell, which, like the two US groups, operates a joint venture with the federal government, is also in negotiations to renew its leases. Peter Voser, the new chief executive, has ruled out fresh expansion. “Nigeria is still a heartland for Shell, but we no longer depend on it for our growth aspirations,” he said. Penultimate Friday, Shell said it planned to sell three licences to a consortium led by Nigerian companies.
In the forthcoming bid, oil blocks that went unsold in three previous bid rounds could also be available as well as others not previously offered. It is expected that many of the blocks outside the Niger Delta basin would be put on offer in the new bid round. “It offers a great opportunity for other outsiders and indigenous companies to participate,” Egbogah said. Nigerian companies such as the London-based Afren and Oando, which are seeking a London listing, have lower viability thresholds than the western groups and are seeking to expand. Chinese companies are equally keen to have substantial holding in Nigeria’s oil industry. Last year, CNOOC, a Chinese state-owned energy group, proposed buying six billion barrels of reserves or one-sixth of Nigeria’s total for about $50 billion.
Previous bid rounds were held in 2005, 2006 and 2007, but they were fraught with complaints of irregularities. The 2007 round was done in a rushed manner during the last days of former President Olusegun Obasanjo’s tenure. This prompted the Yar’Adua administration to revoke some of the licences. For example, OPLs 226, 2005 and 2006 belonging to India’s Essar Exploration and Sterling Global Resources Limited were revoked following investigation that neither Essar nor Sterling had met the prequalification requirements to take part in the bid round, nor did they submit a formal bid.
In the 2007 bid round, 45 blocks were put on offer. Many of the winners were consortiums that comprised local and foreign companies.
In the 2006 bid round, only companies which gave commitments to build infrastructure were prequalified. 11 companies made commitments to invest $2 billion in infrastructural projects. However, none of the winners had invested in any infrastructural programme which was a pre-condition for the offer.
