• ‘Nation risks being hugely shortchanged’ • How govt should handle it, by stakeholders • Reps move to check crude oil theft
Stakeholders, including civil society organisations, have raised the alarm that the country risks being greatly shortchanged in the way the Federal Government is renewing licences for 42 oil blocks held by international and indigenous companies. The Petroleum Act of 1969, as well as the Petroleum (Drilling & Production) Regulation of 1969 (as amended in 2001), authorises the minister of petroleum resources to renew oil licences once statutory payments in terms of applicable royalty, concession rentals and fees are paid.
But the stakeholders argued that renewing the licences without passing the Petroleum Industry Bill (PIB) remained a major setback for the country.
Some civil groups, including the Policy Alert and Human and Environmental Development Agenda (HEDA) which noted that eagerness to encourage investment had led the Federal Government to negotiate lower rates for taxes and royalties, thereby shortchanging the country of enormous revenues, said Nigeria must no longer be in a hurry to renew or re-award the licences of expired oil blocks.
The blocs include 35 oil mining licences (OML) and seven oil prospecting licences (OPL), some of which expired between August and September this year, while others are due to expire this October.
A former Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had told The Guardian that all oil blocs that were due for renewal would be approved by the first quarter of the year, adding that over $2 billion was generated from the renewal to enable the country to finance its budget. Earlier this year, the Federal Government said there were no irregularities in the ongoing renewal of the licences.
In a document obtained from the groups yesterday, they insisted that the Federal Government must exhibit the highest standards of transparency, fairness and accountability in the entire process.
They demanded publication of the rules for the award of the various licences, including timelines and application requirements, clear technical and financial criteria against which companies are being assessed, and information about appeal processes. For the process to follow international best practice, the groups urged government to publish the names of all the companies applying for the oil and gas prospecting and mining licences, including during prequalification.
They also asked government to request and disclose information on the beneficial owners of bidding companies and use the information to screen applicants for conflicts of interest and corruption risks at the point of prequalification or prior to licence award.To them, there is the need for oil communities to be carried along on the awards, especially on matters that directly concern the community, including community development agreements as well as documents on environmental and social impact assessments (ESIAs) and environmental and social management plans (ESMPs) for all future licences.
“Government must publish the current and historic owners and operators of all oil blocks, including marginal fields and transferred licences, and the total reserves of oil and gas, including total amounts recovered thus far and total revenues outstanding.“There is the need to disclose for each oil block licence awarded, the full text of the main agreements/contracts, as well as annexes and amendments in user-friendly and machine readable formats in line with Nigeria’s open contracting commitments at the 2016 U.K. Anti-Corruption Summit and the Open Government Partnership (OGP).”
According to them, Nigeria has lost billions of dollars in potential revenue due to the continued refusal of government to conduct an open and competitive bid round for oil blocks in the country.“The country especially missed the opportunity of conducting a licensing round during the oil boom years of 2010 to 2014. In the last 12 years, no competitive oil licensing round has been held for Nigeria’s oil blocks, and even those before that period were riddled with controversy. The executive discretion, cronyism and lack of openness that have characterised decision-making around the award of blocks over the years have driven down competition, fuelled massive corruption and adversely affected returns to Nigeria from the sector,” the groups said.
The Chief Executive Officer of Degeconek and former president of the Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, said there was the need for improvement in the processes of the renewal and re-award of oil blocks, insisting the country could be shortchanged if the process was not scientifically proven.
Calling for adequate capacity for the DPR, Adesanya noted that there was the need for accurate and detailed data that would enable government to negotiate and get the best value for Nigerians on the rent collected from the process.He also asked DPR to pay attention to mandatory work presentation, which is made yearly by the oil firms to determine the value of the blocks.“It is from that opportunity that clear rent value can be determined. Instead of a flat rent, the process should be based on what the opportunities or potential are. That way, Nigeria will benefit the more.
There is the need for fairness and transparency,” Adesanya said.Professor of Geology, Nuhu Obaje, had earlier told The Guardian that poor acreage evaluation in the country, created challenges for oil blocs allocation.Projecting that legal tussles might ensue should the prevailing challenges remain unaddressed, Obaje said the gaps in acreage evaluation played some roles in the challenges the country was facing in the controversial Malabu oil deal, as well as the rift between Famfa Oil and Agbami.
The Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, said that ongoing licence renewal presented the government an opportunity to fix the mistakes that were made when the blocs were awarded.
According to him, the government must check for technical as well as financial capacity, and must not offer or renew the licences of companies that have not made the best of the offer.The Head, Public Affairs at DPR, Paul Osu, stated that the early renewal policy introduced by Kachikwu helped in addressing some of the issues in the process.
According to him, there is a new angle to the process, where people are able to renew early instead of waiting for the blocs to expire.The document obtained from the civil organisations, which cited the Department of Petroleum Resources (DPR) 2017 oil and gas annual report, listed the licences as OML 29, OML 117, OML 18, OML 114, OML 24, OML 116, OML 40, OML 42, OML 26, OML 34, OML 64, OML 65, OML 66, OML 30, OML 115, OML 4, OML 38, OML 41, OML 11, OML 17, OML 20, OML 21, OML 22, OML 23, OML 25, OML 27, OML 28, OML 31, OML 32, OML 33, OML 35, OML 36, OML 43, OML 45 and OML 46. Others are OPL 322, OPL 2012, OPL 247, OPL 2005, OPL 2006, OPL 281, and OPL 248.
Meanwhile, the House of Representatives has restated its resolve to tackle crude oil theft in the country and also ensure that revenue derived from petroleum products is remitted to the Federal Government for development projects.The chairman of the ad hoc committee on crude oil theft, Peter Akpatason, who reaffirmed the resole yesterday at the inaugural meeting of the panel, decried the age-long menace allegedly perpetrated by cartel.
Akapatason, who doubles as the deputy leader of the House, lamented the alarming rate of oil theft in recent time and recalled that the Federal Government under the leadership of former President Olusegun Obasanjo set up a committee to look into oil theft in 2001, which reported that the stealing by a group of highly placed persons posed a threat to the oil sector. He said the committee would kick off its investigation from the perspective of the 2001 report to determine those perpetrating the act and put in modalities to put a stop to it.