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Oil Majors Lose Bid for Lease Renewal

27 Feb 2013

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Dizeani Allison Madueke. Petroleum Minister

•New licences to hold after PIB passage

Chika Amanze-Nwachuku and Ejiofor Alike
with agency report
Efforts by multinational oil companies to get the Federal Government to renew their oil block licences may have been thwarted as government is said to have shelved the idea until the Petroleum Industry Bill (PIB) is passed.

Also, the award of new oil exploration licences will have to wait until the oil and gas industry reform bill is signed into law, Bloomberg reported Tuesday.


THISDAY gathered from sources in the Petroleum Ministry that the Federal Government has decided that oil leases can only be renewed after the passage of the PIB, which will usher in new fiscal terms.

“I don’t think further renewal of oil licences can be feasible again, because we want the PIB to be passed,” a source said Tuesday. 
Exxon Mobil in November 2009 signed 20-year oil licence renewals on its Nigerian onshore assets producing around 550,000 bpd, but other oil majors have been negotiating terms with the government.

Shell and Chevron have been lobbying the government since 2009 to renew their oil licences, which had expired since November 2008. Shell had sought to renew five of its leases - Oil Mining Leases (OMLs) 71, 72, 74, 77 and 79 - while US oil giant, Chevron, was said to have approached the government in 2008 and was on the verge of sealing the deal when the late President Umaru Musa Yar’Adua took ill and was flown abroad.

Former Minister of State for Petroleum, Mr. Odein Ajumogobia, had confirmed in 2009 that the ministry was in talks with Shell on five of its OMLs, following the company’s decision to withdraw the law suit it instituted against the Federal Government in November 2009.
However, THISDAY gathered that the Federal Government has decided “issues of new and old oil blocks licences” will now wait until the PIB is passed.

Its initial plans to hold oil bid rounds in 2010 and 2011 were not feasible owing to the delay in the passage of the PIB by the last National Assembly.

Hoping that the bill would be signed into law before the end of last year, Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, had fixed December 2012 and January this year as possible dates for new oil licensing rounds, but the government’s inability to get the lawmakers to pass the bill stalled the move.

The minister had, while announcing the December date, disclosed that licence renewal talks with Shell and Chevron over existing onshore fields were in their final stages.
Bloomberg reported yesterday that Nigeria would not award new oil exploration licences until lawmakers pass the reform bill now before the National Assembly.

The last licensing round was held on May 11, 2007 by the administration of former President Olusegun Obasanjo, less than three weeks before the May 29 handover date to the then incoming administration of Yar’Adua.

The bid round was largely boycotted by big foreign players due to concern that the late Yar’Adua might not honour agreements reached with the outgoing government.
Local and foreign investors said the bid round should have been left for the incoming administration to handle.

Since the controversial exercise was conducted, the country has not organised a new licensing auction as the non-passage of the PIB has stalled new investment decisions and created uncertainty in the operating environment in Nigeria’s oil sector.

“You need firm commitment and firm predictability of the law,” the newswire quoted the Department of Petroleum Resources (DPR) Director, Osten Olorunsola, to have said in an interview in Abuja. “We have to wait for the bill to be passed,” Olorunsola added.

Controversy had trailed the first PIB draft submitted to the National Assembly in 2008 during the late Yar’Adua administration.

A new draft was reintroduced by President Goodluck Jonathan in July, which raised government’s stake in crude oil sale, fuelling fresh protests from international oil companies (IOCs).
Fiscal provisions in the bill seek to raise Nigeria’s share of revenue to 73 per cent from 61 per cent, Alison-Madueke said on September 28, according to Bloomberg. 

Companies including Shell and Exxon Mobil have criticised the fiscal terms in the bill as likely to make investment in offshore oilfields unprofitable. Most have held back on funding more exploration while Shell and ConocoPhillips have sold some of their onshore assets to Nigerian companies, Bloomberg reported.

“The major concern is that oil production has remained virtually stationary over the past few years due to the lack of investment in the sector which partially reflects the uncertainty surrounding the bill,” Samir Gadio, a London-based emerging-markets strategist at Standard Bank Plc, told Bloomberg.


Tags: News, Nigeria, Featured, Dizeani Allison Madueke, Oil Majors

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