The Brazilian government last week confirmed 10 international oil companies had agreed to pay $2.2 billion for drilling rights in 12 of the 36 offshore blocs on sale at the country’s 16th bid round, with oil companies once again paying record signing bonuses for areas holding subsalt potential in the Campos Basin.
Some of the world’s largest oil companies – ExxonMobil, Chevron, Shell, BP, Total and five others – won oil exploration blocks in what was the first of three bidding rounds this year.
Brazil’s gain is Nigeria’s loss as Africa’s biggest oil producer has failed to hold bid rounds for over a decade. Stakeholders say Nigeria’s delay in conducting the much-awaited oil licensing rounds has led to significant revenue loss, particularly estimated signature bonuses of N112 billion, at a time government is relying more on borrowing to finance key projects.
Brazil’s crude and condensate output hit an all-time record high, rising by 214,000 bpd to average 2.99 million bpd in August. One the other hand, Nigeria boasts of an average of 1.8 million bpd, according to data from Organisation of Petroleum Exporting Countries (OPEC).
Brazil has conducted 14 bidding rounds over a period of 18 years, earning over $5 billion from signature bonuses alone, while Africa’s biggest economy has been struggling to conduct a licensing round in the last 12 years.
“Nigeria could have sold stakes in its Joint Ventures and other oil assets and raised well over $5 billion. We’re still sitting on our hands now while other countries like Brazil, Uganda, and Dominican Rep are auctioning oil assets,” Dolapo Oni, an international oil and gas expert with an understanding of Nigeria’s energy industry, tweeted.
According to Brazil’s National Petroleum Agency, the sale underscored oil companies’ confidence in Brazil’s Campos and Santos basins that cover most of the country’s current oil output, including the massive subsalt frontier. Brazil sold 10 of the 13 blocks on sale in the Campos Basin, while two of the Santos Basin’s 11 blocks further to the south were sold.
Total led a consortium that edged out a rival bid from Brazilian state-led oil company Petrobras and Norway’s Equinor for the Campos Basin’s C-M-541 block, which was considered the bid round’s most attractive acreage.
According to the results of the bid rounds, French’s Total, Qatar Petroleum and Malaysia’s Petronas offered a signing bonus of $972 million for the block, which was less than Petrobras and Equinor’s $994 million signing bonus. The two signing bonus offers were the highest ever made for a single block, according to Brazil’s National Petroleum Agency.
Total’s group, however, pledged to drill two wells in the block versus Petrobras and Equinor’s single-well commitment in a move that tipped the bidding in its favour.
In Nigeria, stakeholders in oil and gas industry are still left guessing about when a major licensing round or at least a marginal fields bid round will be held amid a lull in exploration activities.
Out of 390 oil blocks in the country, 211 are yet to be allocated by the Federal Government, according to data obtained from the Department of Petroleum Resources.
Ayodele Oni, energy partner at Bloomfield Law Practice, said the government loses a huge amount of revenue daily by not conducting a licensing bid round but this loss is not truly only accountable to the protraction in conducting a bid round.
“Nigeria has lost more from non-producing marginal field licences which it has estimated could cumulatively produce an average of 90,000 bpd of crude,” Oni said.
The country has seven basins, namely, Anambra, Benin, Benue, Bida, Chad, Niger Delta and Sokoto.
In Anambra, 12 out of 19 blocks have not been allocated; in Benin, 39 out of 50 are open; in Benue, 41 out of 43 are still idle, while none of the 17 blocks in Bida has been allocated, the DPR data showed.
In Chad basin, 40 out of 46 blocks are open; in the oil-rich Niger Delta, 34 out of 187 blocks are still idle, while Sokoto’s 28 blocks remain unallocated.
Early this month, Timipre Sylva, minister of state for Petroleum Resources, disclosed that the Federal Government plans to conduct oil blocks bid rounds in 2020.
“There have been no bid rounds in Nigeria since 2007 and we think that it is due for us to have a bid round in Nigeria. It is too early to talk about it now, but I will tell you later,” Sylva told Bloomberg.
Sylva’s predecessor foresaw Nigeria attracting some $48 billion worth of oil and gas investment between 2019 and 2025 while Shell alone recently announced plans to invest more than $15 billion across 24 oil and gas projects from Nigeria’s swamps to the deep offshore over the next five years.
Oil remains the heartbeat and chief source of income for Africa’s biggest economy, accounting for a whopping 85 percent of export revenue. However, in the last 12 years, Nigeria’s oil reserves and daily production had remained almost stagnant hovering in the region of 37 billion barrels and 2 million barrels per day (bpd), respectively, data from OPEC showed.
A 10-year target set by the Federal Government to boost crude oil reserves to 40 billion barrels and daily production to 4 million barrels by 2020 is becoming unrealistic as analysts say corruption and government shenanigans have decreased growth in the sector.
