Posted by By Mike Oduniyi on
Nigeria will earn $2.63 billion (N336.64 billion) from the auction of oil blocks to local and foreign companies during the recently concluded 2005 Bid Round.
Nigeria will earn $2.63 billion (N336.64 billion) from the auction of oil blocks to local and foreign companies during the recently concluded 2005 Bid Round.
The income represents the signature bonuses that would be paid for the total of 44 oil blocks which were eventually sold at the bid conference held late last month in Abuja.
However, in response to the controversy that is trailing the award of two deepwater blocks to the Korean National Oil Company (KNOC), the Federal Government said yesterday that the allocation was done in national interest.
Briefing newsmen in Lagos yesterday on the outcome of the bid conference, the Director, Department of Petroleum Resources (DPR), Mr. Tony Chukwueke, said the task before his department now was to ensure that revenue from the signature bonuses offered on the blocks, were actually collected.
Chukwueke said all the winners have been given October 2, as deadline, to show proof of their ability to pay the various signature bonuses offered for the blocks, through the presentation of bank performance bonds.
According to him, the government would consider the awards now as being tentative "because we have to certify the ability of the winners to pay the signature bonus that they have offered to put on the table."
The Production Sharing Contract (PSC) agreement, which will govern operations in the blocks, would be signed only with awardees that presented the bank guarantee, he said.
According to the DPR boss, the demand for guarantee was to ensure that the winners have the money they quoted ready, and to correct the impression currently circulating within the oil industry that the government had used local firms to raise the price of the blocks
"We have to ensure that we are not just using Nigerians to impose unrealistic prices for the blocks we have offered. We also want to ensure that indeed these Nigerians are serious and can pay the money they put on the table," the DPR director said.
"If by the time we had set for them, that is October 2, which is the PSC signing date according to the guidelines, they will have to show us proof that they can pay that signature bonus. And then 30 days after that signature bonus must be with government,.
"The challenge is to ensure that we collect all the revenue for government that have come out of this process and we are going to try to do that," he added.
Industry officials had described as outrageous, the $200 million bid offered by indigenous firm, Sapele Petroleum for OPL 274 as well as the $252 million offered by another local firm, Technical System Engineering Limited on OPL 280. The results of the bid conference released yesterday showed that 44 blocks out of the 77 blocks on offer, were allocated. Investors snapped up eight blocks in the deepwater region, which fetched about $1.0 billion (N128 billion).
Further breakdown showed that investors won five blocks in the Anambra Basin, two in the Benue trough, while four blocks were won in the Chad Basin. All the six blocks put on offer in the onshore Niger Delta were snapped up, as well as the six acreage in the Continental Shelf.
Chukwueke said the contentious deepwater blocks, OPLs 321 and 323 awarded to the KNOC, were done in line with the national interest of the country.
"The main reason which our president wanted them (the Koreans) is to invest in our downstream, which is strategically important to us and which we have had difficulties finding companies to do in the past," he said.
KNOC had exercised its right of first refusal to win the two blocks originally won by India's ONGC at an offer of $310 million for OPL 323 and $175 million for OPL 321.
The Koreans won the rights after it signed an agreement with the Nigerian government to invest up to $6 billion in the construction of a 2,000-mega watts independent power plant, a ship yard, a rail transport system and a gas pipeline.
Major oil companies, which believed the KNOC was handed undue advantage in bidding for the two choice blocks, later bidded very low prices for other deepwater blocks and consequently lost.
Explaining the poor performance of the oil majors, Chukwueke said the companies wanted to limit their exposure in Nigeria, especially after the Federal Government reviewed the fiscal terms governing the PSC agreement for the 2005 bid round.
"A lot of oil majors have worldwide portfolios and a lot of them consider exposure in certain countries and the amount of exposure their portfolio can manage. Some of the major companies think their exposure to Nigeria is large, that the risk may be a bit unacceptable and they can better consolidate on what they have.
"In case of Nigeria, we came up with new fiscal term that give a bit of a higher take to the state that it originally enjoyed and you would expect them to be the first to jump at it. I have presentations from ExxonMobil and Chevron, which bid prices that were quite low and they lost, clearly it is a problem of a case of managing their exposure in Nigeria," he said.