The Department of Petroleum Resources, (DPR) yesterday said the Federal Government stands to rake $500m from the ongoing signature bonuses to be awarded to 57 marginal oil fields in the country.
A Director of DPR, Sarki Auwalu, who disclosed this, said the amount would come in form of application fees and processing fees.
Auwalu, who spoke in a live programme on Arise TV, said the DPR had also gotten approval for the signature bonuses to be paid in either USD or Naira to simplify the process for Nigerian companies and reduce pressure on the country’s external reserve.
Giving a further breakdown of the figure, Auwalu said, “the application fees and processing fees were $5million per field. We have 477 applications and the cost of data buying and data leasing is an average between $65,000 and $115,000 and we have about 477 applications, so that is what has already been made for the processing.”
He explained that the department decided to use average signature on the oil fields in order to calculate what is being expected
“And for the signature bonus, it is a competition, there are liars that will quote crazy amounts whether it is high or low, so what we did is to look at the CPE reports, that is the Competence Person Report and objectively estimate the average signature bonus on that field after all, the good and valuable consideration for every asset is being computed by DPR, so we use that to guide us on the average signature bonuses we expect . Some fields are high, some fields are low, so that is what we put together. We estimate not to have not less than $500 million and this figure is on the very conservative side,” he stated.
On the timeline for the exercise, the DPR chief said the department will not waste time in arranging how operators would enter the fields as soon as all arrangements have been completed.
He said, “Immediately after the payment of the signature bonuses and compliance with the farm out agreement and farm out demarcation area, we will issue the award and bring the companies together for them to arrange how to enter the fields.
” We hope to finish the entire programme before the end of Quarter 1 this year. Going forward, we will give about 90 days during which the Oil Mining License holders will have discussions because no two fields are the same so that we allow these assets to be developed.
” We believe it will increase the reserves of this country as well as provide a lot of stimulants to the economy.’’
He explained that the DPR had learnt from the mistakes made in previous marginal oilfield bid rounds, adding that the 2020 exercise would be devoid of such issues leading to lingering litigations and unproductivity.
While noting that the agency had put measures in place to ensure that the awardees would be credible investors with technical and financial capability, Auwalu said the DPR ensured due diligence on all the applications with the assistance of the Nigerian Financial Intelligence Unit, the Department of State Security and the Federal Inland Revenue Service.
He said, “The criteria was very open, the companies are exclusively marginal fields for Nigerian companies and one of the key criteria for prequalifying any company is that it must have impeccable evidence that you include the people of the community, you have a spread of Nigerian outlook of the company and strong financial base and we did a lot of due diligence on all the companies that applied.
“We contacted relevant government agencies like the financial intelligence unit, department of state, Federal Inland Revenue to really help us to qualify and validate all the information supplied by the applicants. And we put it on a portal that is up and running which every applicant can see and seek for information with regards to the application because we provide robust guidelines in which people will have a transparent information about all the companies.
“More importantly, we emphasise on community involvement because if you don’t have host, you cannot really operate. We guarantee free operation as the community are fully involved with each and every applicants so that is what gives us confident and where we are now, out of above 300 companies , the 161 shortlisted we are hoping to give them account because this is the first time in this nation where we seek approval to allow the acquisition cost to be paid in naira which makes people buy it for Nigerian companies