• Sunday, December 03, 2023
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The politics of petroleum block ownership in Nigeria


It is very easy to misinterpret the politics of petroleum block ownership in Nigeria because of the intricacies of the oil and gas business.

By way of background, each Nigerian oil block can vary in value from billions of US dollars to zero value and even a negative value to the tune of, say, negative (minus) $50 million. In other words, it is perfectly possible for some owners of oil blocks to actually lose a lot of money running into tens of millions of US dollars during their tenure as owners of the oil blocks. Some oil blocks never become productive. At the same time, some block owners are US dollar billionaires.

Therefore, the real story is not who owns what block or how many blocks are owned by a section of the country since statistically many oil blocks would be worthless and, in fact, a liability, while a few will be worth billions of US dollars; although it has to be said that in a geologically attractive basin such as the Niger Delta, the majority of the blocks will be expected to generate decent returns on investment over the long run.

The crux of the matter is not block allocation by community but the ability of Nigerian National Petroleum Corporation (NNPC) or any successor company to exercise back-in rights to participate as a capex-paying investor in the development of the elephant-sized oil and gas discoveries (worth billions of US dollars) on the more prolific licences awarded to indigenous players. This right, if entrenched in the Petroleum Industry Bill (PIB), will increase the asset base of NNPC or successor company and therefore aid the growth and development of NNPC or successor company and, crucially, its global competitiveness. This back-in right, which is not unusual, should only apply to elephant-sized field discoveries, say, over the 400 mmboe gross recoverable reserves mark.

Implementation of back-in rights by NNPC should generate more revenue for FGN and therefore pave the way for less resistance when it comes to the implementation of necessary subsidy removal on petroleum products and electricity.



Shobo is a consultant for African oil and gas New Ventures with over 30 years experience in the international oil & gas upstream, midstream and downstream sectors