Posted by From Mike Oduniyi in Abuja on
The Federal Government will on August 26 award licenses to about 47 oil blocks under the 2005 Bid Round, that is expected to throw up new players in the nation's petroleum industry and also stimulate investments in the downstream sector.
* Disqualifies 34 applicants
The Federal Government will on August 26 award licenses to about 47 oil blocks under the 2005 Bid Round, that is expected to throw up new players in the nation's petroleum industry and also stimulate investments in the downstream sector.
Already, the Department of Petroleum Resources (DPR) has commenced issuing of bid certificates, to invite qualified companies, which include local and foreign firms, to the bid conference that would hold on the set date.
However, of the 370 applications received for the oil block offers, 34 largely from Nigerian indigenous companies wishing to acquire the 10 percent equity in the blocks, were disqualified.
The Federal Government actually put on offer a total of 75 oil blocks, including the 14 blocks that have been dedicated to downstream investments. According to a DPR release on the qualifications yesterday, all the 12 blocks would be awarded in the deep offshore while the six blocks in the continental shelf will also be awarded.
Six more oil blocks in Niger Delta onshore will be awarded, while 13 of the 14 blocks dedicated to downstream investors will also be awarded. Licenses to five blocks each in the Anambra and Chad Basins will be allocated. The DPR said no qualification was made for the 12 oil blocks offered in the Benue trough as no application was received.
A further breakdown of the DPR qualification showed that of the 13 blocks that would go to "strategic downstream partners" six would be competed for by eight companies including local firms, wishing to invest in the Port Harcourt and Kaduna refineries, another four blocks for Independent Power Plant (IPP) investors to be vied for by six companies, while three blocks will be competed for by three multinational oil companies.
The department said of the 120 Nigerian companies that applied as Local Content Vehicles, 26 were disqualifed based on "wrong information submitted". "The LCVs were prequalifed on finance, technical and status of the promoters. The qualified LCV applicants have been directed to match themselves into groups of between two and five, and come up with one vehicle within the next two weeks," said the DPR.
Speaking on the Bid Round yesterday in Abuja, Minister of State for Petroleum Resources, Dr. Edmund Daukoru, said that the licensing round represents the opportunities for Nigeria to open up the new frontiers in the inland and deep offshore areas, while providing opportunities to diversify operatorship in the nation's hydrocarbon basins especially by players other than the oil majors.
Daukoru said that for the exercise, strategic efforts were made by the government to introduce innovations that would enhance evaluation of the blocks by the prospective investors.
"The bidding conference (to announce winners and issue the license) will be held on August 26th 2005 and the government is committed to ensure that it sets a new reference in transparency," said the minister.
"The commercial bid process for the 2005 Bid Round would be fully computerised to enable on-the-spot digital analysis," he added.
The exercise represents a major platform for the goverment to realise its ambition of raising the country's crude oil reserves to 40 billion barrels by 2010. Acording to Daukoru, additional reserves base needed to be built from new discoveries first, for the country to maintain its position as a global energy player, and most importantly to meet the rising global demand which has witnessed an annual consumption growth rate of two percent.
Also speaking at the Conference, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Engineer Funsho Kupolokun, said that sustained exploration actitivies in the nation's deepwater since the 1990s resulted in the discovery of about 6 billion barrels of crude and 20 trillion cubic feet of gas, representing about 16 percent and 10 percent respectively of Nigeria's oil and natural gas reserves.
Kupolokun who spoke on the challenges facing the nation's oil industry in the first quarter of the 21st Century, said in the area of field development in the region, of the 13 oil fields so far discovered, only one has been put into production.
"There is therefore the existing challenge of significantly reducing the gestation period for such ventures from the current world average, which today stands at about 5-7 years. This would require an overall improvement in technology, techniquues and contracting strategy," he said.
In the next 20 years, according to the NNPC boss, oil exploration and production activities in the country would face challenges including improving the success ratios of the deep offshore exploration, accelerating the development of already discovered deep water fields, cost-effective harnessing of natural gas resources of the deep/ultra deep waters, increasing local content in the execution of projects and adequate funding of upstream activities.
Kupolokun said although about $5 billion is required to fund Joint Venture (JV) operations annually, the funding was inadequate.
"In the face of competing needs for government funds, there exists already a funding gap which will need to be sourced through alternative funding,'' he said.
The GMD said projects such as Shell's EA, TOTAL's Akogep and ExxonMobil's Yoho were all funded through alternative funding and have proved quite successful.
He said the NNPC and its JV partners would continue to go for alternative funding when such need arise.
He said the NNPC has embarked on a transformation project to promote high ethical standards and prepare the corporation to face future challenges in a competitive environment.
The NNPC boss said the exercise which began a year ago would transform the corporation into a world class oil and gas company operating appropriate procedures.
According to him, impediments to gas development are being addressed with a bill on the new gas act on its way to the National Assembly.
'The bill, if passed into law will encourage investment in the gas sector,'' he said.
On manpower development in the NNPC, Kupolokun said 600 graduates have been employed this year while 800 to 1,000 more would be employed between now and 2007.
According to him, 50 world class professionals have also been employed to assist in strengthening the NAPIMS and NPDC (investment and exploration arms of the NNPC).
Kupolokun reaffirms the corporation has subsidised fuel consumption in the country to the tune of about $2 billion.
According to him, current pump prices are not cost effective and not in the interest of the corporation.
"If we must continue to be in a position to supply products in an uninterrupted manner, we need to recover costs at the pumps,'' Kupolokun said.
He said the nation's four refineries were operating at over 70 per cent capacity.