Concerns Mount over Transparency of 2020 Marginal Fields’ Bid Round

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•Nigerians bid to sue Shell in UK over oil spills
•Deutsche Bank completes $3bn export credit deal for NLNG

Ejiofor Alike in Lagos and Emmanuel Addeh in Abuja with agency reports

Industry players have expressed concerns about the transparency and credibility of the 2020 marginal fields’ bid round process being handled by the Department of Petroleum Resources (DPR), Nigeria’s oil and gas regulatory agency.
It was gathered that the federal government is targeting to raise over $500 million from the bid round in terms of signature bonuses from the 57 fields, which will be auctioned.

This came just as some Nigerians have asked British judges to give them permission to sue Royal Dutch Shell Plc in London for the environmental damage caused by the oil giant in Niger Delta.
Besides, Deutsche Bank Luxembourg SA has completed a $3 billion export credit agency (ECA)-backed hybrid corporate financing for Nigeria LNG Limited.

The entire process for the 2020 bid round schedule, according to the DPR, is supposed to start from June 1, commencing with the official announcement, to August 9, when payment of application, bid processing fee and submission of technical commercial bid will take place.
Industry sources told THISDAY that though a lot of efforts appeared to have gone into making a success of the latest round, which is coming about 17 years after the last one, many questions remained unanswered by the managers of the process.

To erase any lingering doubts about the transparency of the process, the sources noted that the DPR must show that those who are eventually selected have the cash and technical capacity to do business in the sector.
They also sought to know in clear terms , the pre-qualification criteria and how they will be weighted in selecting those that will participate at the application stage.

The industry players said they were also concerned whether the process is being independently handled by the DPR devoid of any political manipulations, given that during the last bid round, a total of 24 fields were given out, with only nine operational till date and 15 abandoned due to political interference.
“Some level of transparency will be required in the assessment during the pre-qualification assessment and the assessment of the technical and commercial submissions, to ensure that only the most qualified entities with the requisite (financial and technical) capacity are selected.

“Moreover, it is unclear what the actual pre-qualification criteria are and how these will be weighted in selecting applicants that will participate at the application stage.
“With the large number of submissions received by the DPR at this pre-qualification stage, it is essential that only companies with the capacity and financial reach are pre-qualified with verifiable sources of funding and funding access.

“This is essential so the government also meets with its objective of achieving a production target of 3 million barrels per day by 2023, by getting these assets to production swiftly and the country earns the accompanying royalties and taxes for the respective fields.
“If this pre-qualification criteria are not strictly adhered to, it will open the door to a political crony system and insider dealing that have hitherto plagued the previous award system, thus stalling any meaningful development on the assets” they stated.

According to the sources, the most troubling issue on the minds of applicants is how the technical and commercial bids will be assessed.
“Will there be a role for the licence operators, which for the marginal fields are largely joint venture concessions of the national oil company – Nigerian National Petroleum Corporation (NNPC) or its upstream subsidiary – the Nigerian Petroleum Development Company (NPDC).

“Or even their International Oil Company (IOC) Joint Venture (JV) partners (Shell, Mobil, Chevron and Agip) or in some cases like the IOC divested assets – the indigenous independents who took over these divested licences from the IOC’s?
“A role for these operating entities in the assessment of the technical submissions adds an additional layer of credibility to the process, as they have historical understanding of the licence and the fields and can immediately assess the feasibility or not of a submission,” the operators noted.

They also sought to know if independent agencies like the Nigeria Extractive Industry Transparency Initiative (NEITI) will be given a line of sight of how the process is handled from end to end, noting that it is important to give every participating entity a fair chance and ensure there are no loopholes, which parties can circumvent to gain undue advantage.

The industry players called for clarity in the criteria which will be utilised to segment non-performing technical submissions, even if they offer a higher commercial premium in the form of signature bonuses and how the feasibility of commercial submissions will be assessed.
They said: “What forms of commercial security will be acceptable? How will access to funding be assessed to mitigate secondary ‘marketeering’, where politically connected groups for example, secure the award then shop around marketing the same awarded asset to raise the money required for the signature bonus payment?”

The industry sources also raised issues over the legal challenges of revoking 11 marginal fields, adding 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.

“If so, the possibility that the entire process could be stalled or go through the protracted issues of litigation, with the risk of not completing within the defined timelines exists,” the sources said.
A transparent and independent process, they stressed, would ensure that the emerging entities from the process are those with not only both the technical and financial capacity to handle the task ahead, but also entities with verifiable sources of funds.
“If the government is intent on re-writing the relative failure of the first process two decades later, and intends to have a 90 to 100 per cent production commencement rate at the end of the first five years of this award, the ability of the process to adequately address the above unresolved questions and the steps taken in handling this process will form a critical element of that success,” they added.

Nigerians Bid to Sue Shell in UK over Oil Spills

Some Nigerians have asked British judges to give them permission to sue Royal Dutch Shell Plc in London for the environmental damage caused by the oil giant in Niger Delta region.
Bloomberg reported that lawyers for residents of the crude-rich region believe a landmark UK Supreme Court ruling last year against a London-based miner should set a precedent.
Shell, which has blocked the suit twice from entering British courts, said the litigation should be heard in Nigeria.
The UK’s apex court had ruled in April 2019 that a group of Zambians could proceed with their court action against Vedanta Resources Plc for the pollution caused by its copper-mining unit.

A partner at Leigh Day representing the Nigerian claimants, Mr. Daniel Leader, said the English courts should hold the oil major to account in their jurisdiction “for the devastating damage Shell has caused to their communities over many years.”
Thousands of spills largely caused by sabotage have destroyed the fishing and farming communities in the Niger Delta, including more than 40,000 people from the Bille and Ogale communities who are trying to force Shell to pay compensation and clean up.
Shell Petroleum Development Company (SPDC) has maintained that most of the spills are caused by oil theft, pipeline sabotage and illegal refining.

SPDC said it saw a 40 per cent rise in spills over 100 kilogrammes related to theft and sabotage last year compared to 2018.
Following an earlier hearing in the UK, the judge said “the court has to be very careful before passing qualitative judgments on the legal systems of other sovereign nations.”
He said he’d seen no evidence the Nigerian judiciary wasn’t taking “concrete and effective steps to improve the speed with which cases such as this one are dealt with.”

But Day said there is “sadly no prospect of justice in Nigeria.”
The accusations brought by the communities should be dealt with in Nigeria, where judges have local knowledge and where the justice system is capable of dealing with the claims, SPDC’s spokesperson said.
“Whether Royal Dutch Shell is responsible for the devastation of the Niger Delta has been one of the most prominent global environmental controversies for decades and this case goes to the very heart of that issue,” Nigerians’ lawyer, Richard Hermer, said in court.

Their case “relies on RDS’s own published materials, claiming to investors, shareholders, consumers and the public-at-large that it acts to prevent or minimise precisely the type of damage sustained by the claimants,” he said.
Shell’s lawyer, Peter Goldsmith, said: “There’s no evidence that RDS did in fact take over, intervene, control or supervise the relevant operations” of the Nigerian subsidiary, which has over 3,000 employees of its own and assets worth billions of dollars.
Although two English courts ruled the Ogale and Bille communities failed to show that Royal Dutch Shell had sufficient control over SPDC, the Supreme Court’s subsequent dismissal of Vedanta’s bid to prevent a trial in the UK has provoked new hope.

Deutsche Bank Completes $3bn Export Credit Deal for NLNG

Deutsche Bank Luxembourg SA has completed a $3 billion export credit agency (ECA)-backed hybrid corporate financing for NLNG.
NLNG is a joint venture owned by Nigerian National Petroleum Corporation (NNPC), Shell, Total and Eni – to develop the NLNG Train 7 Project.
According to a statement, Deutsche Bank Luxembourg S.A. acted as Global Facility Agent, International Commercial Bank Facility Agent, K-SURE Facility Agent, SACE Facility Agent, K-Exim Facility Agent and Intercreditor Agent.
The statement added that this first hybrid corporate financing for development of an LNG project in Africa sets the benchmark for future LNG facility financing globally.
White & Case LLP advised Deutsche Bank Luxembourg S.A. on the deal.

FG Moves to Review Domestic Gas Pricing Framework

The federal government yesterday moved to review the prices of domestic gas in furtherance of its plan to encourage the penetration of LPG and CNG, which is expected to serve as alternatives to petrol.
A statement in Abuja by the Special Assistant on Media and Public Affairs to the Minister of State Petroleum Resources, Mr. Julius Bokoru, said the minister, Mr. Timipre Sylva, reiterated the plan of the federal government during the virtual inauguration of a committee on Gas Sector-wide Review of the domestic gas pricing framework.
Sylva noted that the committee was charged with the responsibility of evaluating and reviewing the prices of gas in order to align with the current realities.

He emphasised the need for an appropriate pricing system that would be of advantage to the manufacturing industry, for ordinary Nigerians and would boost activities in the gas industry.

‘’Without appropriate pricing, we can’t have it right. We have to ensure that gas becomes affordable. That is the only way our country can thrive. It is sad to note that we sell gas cheaply to investors while the price is high in the domestic sector to the extent that some Nigerians say diesel is cheaper than gas.

‘’Once we solve the issue of gas in Nigeria, we would have solved a lot of problems in the country. Luckily for us, gas is something we have in abundance,’’ he added.
According to him, members of the committee are to review domestic gas price and benchmark, make recommendations for appropriate gas price for the respective gas sectors, make evaluations, technical suggestions and has 30 days to submit their recommendations.