Federal Government Sets Bid Guidelines for Award of 46 Marginal Oil Fields

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Oge Obi
In readiness for the marginal oil field bid round scheduled to take place later this year or early next year, the Federal Government through the Department of Petroleum Resources (DPR) has set the guidelines, Orient Energy Review gathers.The exercise will see potential investors scramble for the available oil acreages.

It was also gathered that DPR is considering setting aside some of the oil blocks for discretionary award to firms owned by Niger Delta indigenes, in order to sustain the peace in the oil-rich region and give its citizens a sense of ownership in Nigeria’s oil wealth.

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The FG under the former President Olusegun Obasanjo had initiated efforts to enthrone transparent and competitive rounds in the award oil acreages on a discretionary basis, a process that was frequently abused by past military administrations.

According to a DPR source, the current bid round has at least about 25 promising marginal fields, that if developed could produce from 5,000 to 10,000 barrels per day of oil equivalent (bpoe).

DPR records also showed that of the 30 marginal fields awarded from 1999 to date, only nine fields are producing, while 21 are at different stages of development. The companies producing from the nine oil acreages are Platform Petroleum, Walter Smith Petroman and Morris Petroleum, Frontier Oil Limited, Britania-U, Midwestern Oil and Gas and Suntrust, Pillar Oil, Energia Limited and Oando, Oriental Energy, and Niger Delta Petroleum Resources Limited.

Under the guidelines, interested investors are required to pay $50,000 each for a Competent Persons Report (CPR). At this stage, investors will be require to provide details of their shareholding structure, names of their directors, track record in the oil and gas sector, audited financial statements, partnership and/or collaboration with indigenous firms, and financial resources to bid and pay for the oil acreages.

After the CPR stage, investors will be expected to pay $15,000 as data mining fees. This is said to enable them gain access to the relevant data on the acreages that will be placed on offer.

The information accessible to the investors at this stage include, the size of the fields, seismic surveys, and past appraisals conducted by IOCs, among other relevant information.

Thereafter, the DPR will commence technical evaluation of the bids and investors that fail to meet the criteria will be dropped at this stage, while those that passed the technical evaluation process will be invited to submit their commercial bids in a process that will be open to the public.

The oil acreages which will go to the highest bidders will require winners to pay for the oil acreages within a stipulated timeline. And where a bidder fails to meet the payment terms, the second bidder (reserve bidder) will be invited by the DPR to take up the block.

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According to a DPR source who prefers to remain anonymity, successful bidders in the forthcoming exercise will be expected to confirm their willingness to pay $300,000 as signature bonus. A process the FG is expecting to realise $200 million to $300 million from.
He hinted that indigenous companies must have “at least 51 per cent of the beneficiary interest in the company, must be registered solely for exploration and production business”.

“This is to avoid the mistakes of the past where companies with no track record in E&P operations were forced into marriages even when they were not compatible.
“The signature bonus shall be paid within 90 days of the date of the award. Any successful company that fails to pay the signature bonus at the expiration of the 90 days will be issued a revocation notice, which shall last for 30 days.

“If the company still fails to pay at the expiration of the 30 days, the allocation will be automatically revoked and it will be offered to the bidder that came second in the bid round,” the DPR source explained.

The bidders will also be expected to submit their Nigerian content plan to demonstrate the commitment of the company in local manpower development and patronage of indigenous service providers.

Explaining further on the government’s reason for setting aside some of the oil acreages for discretionary awards, a senior official of the DPR said it was aimed at paving the path for ownership of oil assets by Niger Delta companies.

“No decision has been made on how many marginal fields will be set aside for discretionary awards, but the intention is to allow individuals from the Niger Delta to own them.
“It is not being done for political reasons, but to pave the path for ownership by Niger Delta individuals. The intention is to ensure that people from the region own the oil assets, even if it means holding a separate bid round for Niger Delta-owned companies, he said.

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