Lekoil plc, an Africa-focused oil and gas exploration and production company with interests in Nigeria and Namibia, says navigating through the maze of regulatory approvals in Nigeria represents its biggest challenge in taking the Ogo fields, offshore Lagos, to production.
Lekan Akinyemi, the company’s CEO, told BusinessDay that the slow pace of getting approvals due to over-centralisation of regulatory approvals in Abuja has been its biggest challenge stalling a plan to invest $1bn in developing the field.
“Slow pace of regulatory approvals has been the single biggest challenge that I faced since I returned to Nigeria to start Lekoil. The single biggest challenge we have faced as a company has not been technical, it has not been money, it has been regulatory approvals,” Akinyemi said.
Wood Mackenzie, a leading energy research organisation, said the Ogo field which lies in the Keta-Togo-Benin Basin discovered in 2013, yielded a P50 reserves estimate of 770 mmboe, well in excess of the pre-drill 200 mmboe estimate. The field was the third largest oil discovery in the world in 2013 and the largest discovery in Nigeria within the past 10 years.
The slow pace of regulatory approval is at the heart of the company’s recent legal case against the government. Lekoil applied for Ministerial Consent to acquire 23 percent participating interest in OPL 310 block, in Ogo fields, from Afren Nigeria Holdings in 2016, but the consent was neither given nor denied.
In May 2017, Yemi Osinbajo, then acting president, issued an executive order which among other things provided that any application not approved or rejected by a government agency or official within the agency’s specified timeline shall be assumed to have been approved. Relying on this provision, the company proceeded to complete the acquisition.
However, a Federal High Court in Lagos last week ruled that the acquisition still requires consent from the Minister of Petroleum Resources. Based on the judgment, OPL 310 interest is still held by the seller, Afren Investments Oil and Gas Nigeria Limited. Lekoil still holds a 17.14 percent participating interest in the block.
“We have the Ogo consent which has been pending for three years and this is an asset we have spent over $100 million of our money and the other entity we bought has spent $100 million, so between us there is over $200 million spent but still there is no regulatory approval so we cannot move forward,” Akinyemi said.
Renewal of oil leases and organising licensing rounds which are almost routine processes in other countries have suffered undue complications in Nigeria. Analysts say this speaks to a need for deep reforms in Nigeria’s oil and gas sector.
“If a petroleum sector law were in place, the process of licences would have been clear as we will know who has the authority to issue them. Now investors do not know whether to proceed with the previous regime or if something else will happen,” Chuks Nwani, an energy lawyer, said.
In January, the Department of Petroleum Resources (DPR) was compelled to initiate an accelerated lease renewal programme to raise money for government and provide cover for critical industry players whose leases had expired.
Prior to the renewal of 22 leases in January, the DPR had said that 53 oil leases comprising Oil Mining Leases (OMLs) and Oil Prospecting Licences (OPLs) would expire by June 2019, leaving a climate of uncertainty over a sector responsible for 85 percent of Nigeria’s revenue.
Operators say this uncertain climate is putting their businesses at risk as their bankers are threatening foreclosures to recover their loans due to lack of clarity over the future of the assets. One operator compared their situation to driving without a licence, in a car that is not yours.
Akinyemi said the ruling had provided some sort of clarity in that regard.
“The point of the court case was always to create clarity around some situations where you have ambiguity. Now whether we agree with the ruling of the judge or not, at least there is some clarity right now,” he said.
Akinyemi canvassed for a decentralised approval process that will hasten the process and prevent a situation where several assets are locked in a country where the economy is crying for investment.
“If you go the NNPC GMD’s office, the number of people waiting to see him on a whole variety of issues is huge. We need to decentralise the system. Why can’t we have folks that will give approvals in Bayelsa State have an office there or in Rivers or Edo and break it down in such a way that you have more input in the system?” he said.
Akinyemi also said the government has made considerable progress on oil sector reforms, “and we cannot belittle them, but since this is a global business, the reality is we are not doing enough”.
ISAAC ANYAOGU
