Uncertainty as deadline for marginal field signature payment passes

There is uncertainty around the fate of marginal fields that investors bid for but have been unable to pay the required signature bonus as the April 21 deadline passes.

Nigeria’s oil and gas regulatory agency, the Department of Petroleum Resources (DPR), has yet to confirm if it would extend the deadline for payment of signature bonus for the assets awarded in the ongoing bid round for marginal fields.

One of the investors told BusinessDay that operators are not certain of the next step as the DPR is yet to state its position. However, some say that over half of the bidders may have paid.

There were 161 companies that were pre-awarded stakes in 57 fields with signature bonuses tied to the percentage allocated to each company.

Some companies have been scrambling in the past few weeks to raise the money for signature bonuses. The DPR, in a bid to ensure that all the fields are developed, decided to merge bidders, with some up to five in a field.

However, the fusion of several bidders with different operational plans, financial resources, and development plans could result in a fractious relationship that may yet derail the plans.

Each of the 57 fields has more than one allottee and the partners on each field are expected to jointly create a Special Purpose Vehicle to operate the asset.

Signature bonus per field ranges from $5 million to $40 million, and while the size of the bonus is expected to correlate with the overall economics of the field, there are concerns about how to arrive at the numbers.

The DPR says it is trying to raise $500 million from the sale of the marginal fields and this objective could influence the decision on whether to extend the process or not.

Raising capital to finance the fields is an uphill task in a world where funding for oil projects is drying up and major funds are exiting fossil-fuel projects.