Some oil exploration and development licences held by international operators in the Niger Delta near their expiration but the Federal Government of Nigeria does not seem in any hurry to renew them.
Mele Kyari, the group managing director of state-owned Nigerian National Petroleum Corporation (NNPC) told a delegation from Italy’s Eni that the government would prefer to have the NNPC’s E&P arm, Nigerian Petroleum Development Company (NPDC), take on operatorship of several of these blocks, industry sources say.
A total of 42 oil block licences held by some international and indigenous operators will expire this year, data obtained from the Department of Petroleum Resources as of January 2019 showed.
Thirty-five Oil Mining Leases and seven Oil Prospecting Licences will expire at different times this year, with most of them falling due for renewal in June.
In May, the Federal Government had revoked six oil mining leases of independent indigenous producers for non-payment of royalties and some industry watchers had accused the FG of applying double standards as it applied different and milder sanctions on other companies that committed the same offence, some claim.
“In terms of correctness the government acted within the scope of the laws governing the petroleum sector and each breach has a corresponding penalty. Remember also that the minister possesses discretionary powers to revoke or withdraw oil licences” said Ayodele Oni, an energy partner at Bloomfield Law Practice.
At the peak of the controversy, an industry source close to Pan Ocean Oil Corporation had told BusinessDay that a meeting was slated for stakeholders to have discussions with then Minister of State for Petroleum Resources, Emmanuel Ibe Kachikwu on the way out the situation.
But in this case with international operators, the NNPC has owed its major partners accumulated arrears in cash calls to the tune of $5 billion. The state-owned oil company has paid off the bulk, leaving some $3 billion outstanding. These major partners include Shell, ExxonMobil, Chevron, Total and Eni.
Kyari assured Eni that cash call prepayments for key projects that had been suspended for the past three months would be released once “pending issues” were resolved.
“The money is there, it is ready and we will pay as soon as the issues are resolved by the end of the week,” Kyari said.
The NNPC owns 55 per cent of the Joint Ventures with Shell, and 60 percent of all the others and the JVs are jointly funded by the private oil companies and the Federal Government through the corporation.
Nigeria’s oil and gas production structure is split between JV (onshore and in shallow waters) with foreign and local firms and Production Sharing Contracts in deep water offshore.
In the last eight years, Nigeria’s oil reserves and daily production have stagnated, hovering in the region of 37 billion barrels and two million barrels of production per day (bpd) respectively in the last five years, as data from the Organisation Petroleum Exporting Countries show.
A 10-year target set by the Federal Government to boost crude oil reserves to 40 billion barrels and daily production to four million by 2020 is becoming unrealistic as analysts say corruption and government shenanigans have decreased growths in the sector.
“Just like savings and earnings, the oil reserves, and daily production are vital to creating energy security, increasing the income from crude oil, boosting economic development and showcasing an index that is capable of wooing investors into the country,” Adeoluwa Martins, Lagos based oil and gas analyst told BusinessDay.
