•Say persons with proven technical, financial capacity should be considered
Players in the Nigerian oil and gas exploration and production sector have advised the current President and Petroleum Minister, Bola Tinubu, to conduct a much better bid than the last exercise to guarantee immediate development of the assets.
They specifically suggested that marginal fields must be given to persons with robust oil and gas exploration and production experience and proven technical and financial capacity to develop the assets upon receipt.
The players warned that the federal government should avoid using the bid exercise as a mere money making venture but to support awardees to achieve first oil production faster.
The stakeholders gave the advice in separate chats with THISDAY, following last week’s announcement of a forthcoming fresh marginal field bid round by the Minister of State for Petroleum (Oil), Senator Heineken Lokpobiri.
Those who spoke to THISDAY on the matter included the Manager in charge of New Business at Falcon Corporation Limited, Mr. Oladeji Olaoti, Chief Executive Officer of Gasavant Africa Limited, Mr. Emeka Iheme and the Subsurface Manager, Energy and Mineral Resources Limited, Mr. Collins Ibekwe.
During his tour of Waltersmith’s refinery in Imo State last week, Lokpobiri had revealed that Tinubu had approved the conduct of fresh marginal field bid round, adding that the exercise would “take place soon”.
The new bid round will be coming barely three years after about 57 marginal oilfields were put up for sale in 2020 and the process effectively concluded last year, amid many of the awardees still struggling to move to site for development of their assets due largely to funding and regulatory challenges.
The marginal field exercise is exclusively reserved for Nigerian companies as the federal government through the policy offers opportunity to local firms to participate more actively in the country’s oil and gas exploration and production space.
Speaking to THISDAY, Ibekwe observed that the last bid round was poorly done and will probably never make any significant progress beyond what the successful bidders have been able to achieve at the moment.
With the high oil price at the moment, he said now is the best time to do a marginal oil field bid round, with the proviso that the authorities get it right this time.
Further expressing his misgivings on the 2020 marginal field bid round, Ibekwe posited that “the last government used it to obtain raw cash from bidders.”
“The 2020 bid round was unfortunately a bad one. First, the Competent Person’s Report exaggerated the value of the assets. Based on that false value, huge signature bonus was extracted from the awardees.
“That cost front-loading of the assets rendered most of them sub-commercial. So, most of the awardees will not make progress without government returning their money to them. Unfortunately, that government is not here anymore. I doubt that this government would want to take up that responsibility,” he said.
Explaining that oil and gas business, particularly the exploration and production sector was a capital intensive business, the manager said all over the world, it’s a business that serious minded intellectuals thrive in if given the opportunity.
He advised that government must change the wrong award criteria so that only technical competence and experience determine who to be awarded, adding that government should drop the outrageous signature bonus to zero dollars or to an amount so minimal that anyone could afford it.
Criticising the wrong notion of marginal field bid round as an immediate revenue generating exercise, Ibekwe described the situation as short-term focused and lack of understanding of an oil field being called marginal.
“The word marginal comes from the phrase ‘commercially marginal’. That means that it’s not expected that there will be a lot of profit made by developing the asset. There’s a chance that even at zero signature bonus, no profit is made from developing the asset.
“So front-loading the asset with high signature bonus is not wise at all. It’s tantamount to killing the asset before it takes off. A wise government will allow many marginal field operators to thrive through low initial cost burden.
Their survival will add a lot of oxygen to the economy. That exposed the level of incompetence of those that managed the process,”he added.
In his opinion, Manager, New Business, Falcon Corporation Limited, Mr. Oladeji Olaoti, advised that the proposed fresh marginal field bid round must be done in a cost efficient and fair manner to avoid dis-incentivising those that have robust industry experience with proven technical and financial capacity to develop the assets.
“So, how it will be done is the most important. Will it be fair? Will it be cost efficient? I hope it will not be too expensive, so that we are not dis-incentivising those that have capacity to play in that place. These are the things that come into play,” Olaoti said.
He warned government to be wary of portfolio investors and middlemen hanging around in the industry so that the fields would not be awarded to them and end up remaining undeveloped years after award.
On his part, Iheme, who expressed his support for the proposed fresh marginal field bid round, said it was imperative as it would give the current government an opportunity to have a better exercise after the widely-flawed 2020 bid round conducted by the last administration.
“Everyone knew that the last exercise was messy. It had a lot of problems, ranging from multiple awardees to people who knew next to nothing about the oil and gas industry being awarded fields. They rushed to collect the fields without developing them till now.
“So, I think we need a fresh bid round now so that some of our partners who have interest in the assets can bid and create value out them. And we want a better exercise now.
“So, the government should give opportunity to people that have the technical and financial capacity to get these assets and develop them without further delay,” Iheme said.