Interested stakeholders that want to participate in the proposed marginal fields bid round to be organised by the Federal Government have been advised on how they could become successful and avoid the problems those that participated in the previous bid are currently encountering.
Consequently, areas where they should look at critically and avoid the pitfalls that previous participants in similar exercise fell into have been highlighted.
According to Folake Elias-Adebowale, Partner, Udo Udoma and Belo Osagie Chamber, she highlighted three major things that must be done by investors in marginal oil fields to be successful at the end of the day. These areas are: they must do their homework very well, know their partners and they must try to ensure that they set the right foundation before they finalise their agreement on commercial terms.
She said it has become expedient to ask participants to take caution while forming partnership in respect of owning and operating marginal oil field, be it technical or financial while she shared some general lessons from the previous exercise.
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She advised would-be participants to do their homework well. Doing homework well, she said, covers many things such as the conduct of due diligence on the asset, their partners, self capabilities adding that it is important that they also base their plans and strategies in tested, quality data; ensure that the sources of such data are appropriate, accurate and comprehensive.
“Seek support to help you prioritise risks; understand the legal framework and any requirements that apply to you or your partners or your project or project company””, she said
Folake Adebowale who was the guest speaker at the Nigerian Marginal Oil Filed Workshop organised West Africa Energy in conjunction with MNL in Lagos, said probably the most important item is for the investors to know their partners.
Beyond the impact of the global oil economy, price volatility, and the resulting economic and currency uncertainties and technical and other capacity issues, she said, what seems to be the foundation of all successful collaborations is ‘knowing your partners’.
“Thorough due diligence on prospective partners is absolutely essential not just so that you can strategise to demonstrate technical and financial capacity to meet bid round criteria, but are absolutely vital to technical success of the project and achieving an equable balance in your relationship with your partners. All of these factors are necessary to ensure the long term efficacy of the operations and the achievement of targets”, she said.
She further stated that before the investors finalise their agreement on commercial terms, they must try to ensure that they set the right foundation: “ from due diligence to identify strengths weaknesses opportunities and potential threats, to negotiating legal agreements, assessing financial arrangements, establishing effective corporate and governance structures to regulate your interactions, for anticipating challenges and addressing upfront how you may need to approach and resolve disputes with your partners, and for ensuring that each party performs its obligations and providing consequences where there is a failure in this respect”
For all of these things, she said it pays to use advisers who are experienced in their respective fields – legal, financial, technical, tax, and others. This way, for instance, parties can exhaustively anticipate and can plan to address disputes. The risk of those sorts of issues arising should in any case be mitigated by the other preceding ‘’lessons’’ mentioned earlier.
Olusola Bello
