• Tuesday, June 18, 2024
businessday logo


DPR concludes marginal fields bid round, awaits Buhari’s consent

Half of marginal field bidders cannot pay signature bonuses

After a three and a half month-long exercise, the Department of Petroleum Resources (DPR) has concluded this year Marginal Fields bid round and it is awaiting the approval of President Muhammadu Buhari who doubles as the minister of petroleum before announcing winners.

The marginal field bid round is one of the options the Federal government is exploring to raise revenue besides depending on monthly crude oil sales, as receipts from oil sales slip into the red zone.

Africa Oil & Gas Report, an energy intelligence publication by a respected analyst, Toyin Akinosho, reported that DPR concluded the analysis of the bids in the last two weeks and it has sent the results to the Minister of State for Petroleum, Timipre Sylva, who is to deliver it to President Muhammadu Buhari, the country’s de facto Minister of Petroleum.

“While the round started with over 500 applications, it closed with at least 100 applications making it all the way, each delivering at least $115,000 to the Nigerian treasury in the process,” the intelligence publication said.

Other sources close to the bid round said some highly contested fields like Egbolom with reserves of about 220 million barrels is expected to attract a minimum of $5Million as a signature bonus (an amount of money paid by bid winners on their marginal fields) while Usoro field on OML 10o and Ugbo field on OML 40 were also among the top contenders for investors.

All efforts to get the reactions from DPR’s spokesman Paul Osu proved abortive, as calls and messages were not responded to as at close of business on Wednesday.

“Nigeria desperately needs revenue from this marginal bid round, the presidency needs to act quickly and allow successful investors kick off operations at the earliest moment,” Niyi Awodeyi, CEO at Subterra Energy Resources Limited said.

The DPR did something different in this year’s bid round to improve revenue levels unlike previous bid rounds; they introduce a signature bonus that varies for each of the 57 fields planned for auction.

This was prompted by an oversight during the 2003 rounds when a flat signature bonus was applied to all fields. It happened that owners of Assaramatoru field and Umusadege fields paid the same signature bonus rate even though there was a huge difference in their production levels.

Assaramatoru field barely produced 1,000 barrels per day whilst Umusadege field was awash with around 20,000 barrels per day consistently for over five years. With more due diligence, the government could have gained a significant amount of money from a higher signature bonus charged to Umusadege.

Awodeyi explained that some of the 57 fields available for auction are in the offshore terrain which constitutes a major challenge for most investors and can affect the chances of achieving first oil within the shortest possible time.

Nigeria has not held marginal field bid rounds since 2003. Twenty-four fields were awarded to 32 companies, some of them two to a field, in 2003.

More than any other time in its history, Nigeria desperately needs revenue from the marginal field bid round as the country is facing a challenging financial situation worsened by the pandemic and unstable oil prices; which makes the implementation of the 2020 budget a “herculean task.”

Data compiled from the breakdown and highlights of 2020 budget performance presented by the Minister of Finance, Budget and National Planning, Zainab Ahmed, showed that in the first seven months of 2020, Nigeria recorded N2.5 trillion in revenue and spent about N6.25 trillion creating a record budget deficit of N3.7 trillion.

“The government needs to take adequate steps as fast as possible, time is running out,” Awodeyi said.