Investor apathy delays Nigeria’s oil blocks sale

…Regulator says auction attracted huge interest

Nigeria’s planned auction of oil blocks has been delayed due to a lack of enthusiasm from investors, casting doubt on the government’s strategy to boost crude production and revenue.

This comes despite assurances from the Nigerian Upstream Regulatory Commission (NUPRC) that the auction has attracted significant interest from potential buyers.

However, sources have revealed a different story, citing concerns about the lack of deepwater fiscals, the addition of more blocks to the auction pool and a possibility centre on a potential administrative error.

“Investors are hesitant due to the lack of clarity surrounding deepwater oil well fiscal terms. Without a clear understanding of taxes and royalties, companies may be unwilling to commit to bids,” a source who pleaded anonymity said.

Read also: Nigerian oil production disrupted as Aiteo shuts down 150,000 bpd field

Nigeria’s offshore domain is one of the most fertile hydrocarbon provinces in the world, yet assets with 13 billion barrels of oil equivalent resources remain untapped in the waters of Nigeria’s oil-rich coast.

Another source, who is also a bidder, said NUPRC’s decisions to add more oil blocs would necessitate extending the timeframe to allow interested parties sufficient time to analyse data and conduct due diligence.

“NUPRC may have restarted the pre-auction roadshow prematurely, necessitating adjustments to compensate for the misstep,” he added.

Africa’s biggest oil producer opened this year’s licensing round on April 29 seeking to deepen exploitation of the country’s estimated 37.5 billion barrels of crude oil and 209.26 trillion cubic feet of natural gas reserves.

Initially launched with 19 onshore and deepwater blocks in April, BusinessDay, on Tuesday, reported that the NUPRC added 17 deep offshore blocks to the 2024 licensing round, which Komalafe said was due to heightened investor enthusiasm.

“We have undertaken more exploratory activities and as a result acquired more data to expand the offer and extend the deadline. This has given rise to tremendous interest from investors,” Gbenga Komolafe, head of NUPRC, said on Tuesday.

He also announced an extension of the registration deadline by 10 days, with bid submissions now set to open on July 8 and close on November 29. The goal is to maximise the exploitation of Nigeria’s significant oil and gas reserves, estimated at 37.5 billion barrels of crude oil and 209.26 trillion cubic feet of natural gas.

Also, to enhance attractiveness, the NUPRC reduced entry fees, known as signature bonuses, from around $200 million per field to $10 million.

Read also: Nigeria oil production slumps to 1.25m bpd in May

Komolafe said the process promises transparency and fairness, with online submissions available through the regulator’s website. Bidders have the flexibility to lease single units of oil blocks or opt for clusters.

Nigeria, a member of the Organisation of the Petroleum Exporting Countries (OPEC), has seen its oil production decline from around 2 million barrels a decade ago to just over 1.3 million barrels per day.

The S&P Global Commodity Insights, a market intelligence agency, in a report, stated that deepwater projects hold the key to Nigeria’s production growth and ultimately, stability, saying if properly implemented, the Petroleum Industry Act (PIA) could transform the fiscal side of the Nigerian oil industry.

“The deepwater projects that are due to start between 2025 and 2030 are estimated to hold recoverable resources of 2.3 barrels. Without the sanctioning and commissioning of currently unsanctioned projects, Nigeria’s overall production will likely decrease from the end of the decade,” the report said.

—