FG’s Marginal Fields Awards: Taming the vultures

As the Department of Petroleum Resources (DPR) recently released guidelines for the award and operations of marginal fields in Nigeria, in the second marginal fields bid round, fears of likely political interference is rife and negative feelings rise as dodgy ‘vultures’ who secure and resell awards are circling. DIPO OLADEHINDE reports

Discussions surrounding the 2020 marginal fields awards have again brought to the fore the need to ensure transparency in the entire process to avoid the mistakes that bedeviled the only such exercise which was conducted about 17 years ago, under the Olusegun Obansanjo administration.

Those who are insistent on the removal of the usual opacity around such business deals overseen by agencies of government, say if Nigeria must get global respect, it must earn it through such activities as the next bid rounds, which ordinarily draws the attention of the international business community.

Currently overseen by the Department of Petroleum Resources (DPR), headed by Mr. Sarki Auwalu, the agency recently announced commencement of the marginal fields bid round for 2020.

Vultures which are already gathering around are not tamed, highly connected individuals who secure the award can then shop around marketing the same awarded asset to raise the money required for the signature bonus payment.

It subsequently released the criteria and procedure for the process, dubbed the ‘ guidelines for the award and operations of marginal fields in Nigeria’, in the second marginal fields bid round, after the award of 24 fields to 31 indigenous in 2002/2003.

However, out of the 24 fields, as of today, it was learnt that only nine are operational due to the alleged choice of unqualified persons and companies to run them, with about 15 now fully abandoned.

In 2013, the federal government also failed to successfully see through a planned bid round, despite having released the guidelines to oversee the process at the time.

The most basic definition of a marginal field in the country as is any field that has been discovered and has been left unattended for a period of at least 10 years, from the date of first discovery or anyone socalled by the President of Nigeria.

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In essence, they are non-producing or un-appraised fields within the oil and gas acreage already covered by a petroleum licence, which the licence holders have considered as not being profitable for development. The federal government intends to sell 57 of such fields in the current round of bids.

In what has been described as a bold move, however, the government announced that the bids are only open to wholly or substantially indigenous companies.

The process of getting a marginal field can be quite tortuous. To pre-qualify, an interested party is expected to submit a field-specific technical and commercial bid based on relevant and available data. They will, among others, pay the statutory fees which include the amount for data prying, data leasing, competent persons report fees and field specific report fees.

The DPR will then evaluate the bids which give preference to companies who demonstrate financial, technical and managerial capacity or the ability to manage or develop in that direction in the short term and recommend awardees/preferred bidders to the Minister of Petroleum Resources, and subsequently to the President.

In essence, companies that are awarded fields are expected to immediately pay the signature bonus specified in the award, as a necessary condition for release of the field, among other requirements.

As it stands, the federal government appears to be desperate to sell out the fields to shore up its dwindling revenues and could rake in about $5.7billion if the process starts and ends as planned.

But before the big dough starts rolling in, interested bidders are expected to cough out non-refundable chargeable fees as follows: application fee of N2 million per field and bid processing fee of N3 million per field.

Others are data prying fee of $15,000 per field, data leasing fee of $25,000 per field, competent persons report of $50,000 and $25,000 for fields specific report.

With the above, interested bidders are expected to pay a total of $115,000 in statutory fees and another N5 million in local currency.

But there already fears that what is currently happening to the power sector which seems not to have made any substantial progress since its privatisation years ago, may be replicated in the latest bid rounds, if the process is not well handled or if political interference is allowed to come to play.

With the entire process for the 2020 bid round schedule, having commenced since June 1, a lot of efforts appears to have gone into making a success of it, however, the DPR, experts say, must show that those who are eventually selected have the capacity to deliver.

Already, industry players are seeking some clarity concerning the pre-qualification criteria and how they will be weighted in selecting applicants that will participate at the application stage.

They are also worried about whether the process will be independently handled by the DPR devoid of any political manipulations and it is yet unclear what the actual pre-qualification criteria are and how these will be weighted in selecting applicants that will participate at that stage.

There are fears that if the prequalification criteria are not strictly adhered to, it will open the door to a political crony system and insiderdealing that has hitherto plagued the previous award system.

Furthermore, there are worrisome concerns that if the process does not run transparently and the vultures which are already gathering around are not tamed, highly connected individuals who secure the award can then shop around marketing the same awarded asset to raise the money required for the signature bonus payment.

Industry players have also raised issues over the legal challenges of revoking 11 marginal fields, disclosing that there are legal arguments around the government’s ability to also include recently revoked marginal fields in this process, given that there have been injunctions on the inclusion of the revoked fields.

As it is, the transparency and integrity of the process will be a key ingredient to engender confidence of investors and a litmus test for the widely acclaimed integrity of President Muhammadu Buhari.

On this, the government must do all within its power to ensure that the bid round meets international best practices and ensure the emergence of companies with proven track record of technical/ commercial competence and financial capacity of winners to deliver.

The federal government must avoid allocation of fields to politicians who have no track record of performance and who in nearly all cases never develop these fields many years after purportedly winning them. At the end of it all the country ends up the loser for it.

Accordingly, it must also be emphasised that the states where these fields are located need to be carried along and given a sense of belonging or the same issues that led to the Niger Delta crisis will ressurrect.

Overall, the companies who can develop these fields and add value to national wealth creation should be the overriding criteria to win and the agency handling the process, should be compelled to ignore political interference from Abuja in carrying out the bid round.

But the Director of DPR, Auwalu, has assured Nigerians and the international business community that the federal government will ensure maximum transparency throughout the process. Auwalu said that it was understandable why Nigerians seemed to be impatient about the upcoming award of the fields, adding that for 17 years, the country had not had any such rounds.

“There are lots of questions on marginal fields but people need to know that this is an opportunity for Nigerians. Marginal field is not something we can shroud in secrecy.

“Nigerians deserve to know because this has been 17 years that it was last done. So people are hungry. They will be given the opportunity to prepare and participate” he assured.

He also dispelled insinuations the federal government was desperately in need of money and so would flunk the process just for quick cash.

On this, he says: “If we want to raise funds, we could have asked the NNPC to divest from some assets to raise money. We need serious investors and that is why we are not imposing high costs on the forms; it has taken 17 years to get to this point.”

To avert situations where investors are edged out of deals after securing the oilfields, the DPR said it had activated sustainability plans for the marginal field programme.

Auwalu posited that the conditions put in place will protect the interest of all investors, stressing that any disagreement arising among awardees and their partners postaward would first be referred to the Nigerian Oil and Gas Alternative Dispute Resolution Centre in DPR.

He acknowledged that the success of the bid round conducted in 2002/ 2003 was endangered with litigations and other challenges, which hampered the development of some of the awarded 24 marginal oilfields to the detriment of the nation.

“We have learnt from the mistakes made in the past, and have come up with workable solutions to ensure that the objective of the development of our marginal fields is achieved.

“This time around, our awardees will be credible investors with technical and financial capability.

“There are also the post-general award conditions. This deals with transfer of interest post-award. It means awardees cannot transfer more than 49 per cent interest to another party post-award.

“The conditions also include termination of rights of interest holders, which gives the minister the power to withdraw the interest of a party who fails to meet its obligations in terms of joint awardees” he noted during a webinar.

Another key issue which seems not to be under consideration in the current process is an alleged deal negotiated with the Niger Delta militants during the Umar Yar’adua administration’s efforts to return peace to the region.

He was said to have agreed with the agitators that 10 per cent of royalties were supposed to go to the oilbearing communities under trusts and offering residents of the region 10 per cent of all oil and gas ventures in an effort to end the unrest that had hampered oil production.

He eventually directed the Ministry of Petroleum to document the plan, which eventually found its way in the draft Petroleum Industry Bill (PIB), which has been in the works for a while.

Added to that, oil industry experts have warned that the rush to sell off the marginal fields may backfire if all the issues are not first sorted out.

Mr. Joe Nwakwue, National President, Society of Petroleum Explorers (SPE), Nigeria, faulted the timing at a time the Covid-19 has left businesses gasping for breath.

He insisted that the government should take time and review the existing laws, address other challenges facing the programme and bemoaned the likely political interference in the entire chain, including fiscal uncertainty and poor regulation that could negatively affect the process.

More importantly only fields should be should to only competent and proven investors with capacity to add value and whose foreign partners must be proven with a track record of performance.