For so long has Nigeria had oil as the mainstay of her economy. How well has crude oil served Nigeria since its discovery? Not so well as corruption and sabotage have seen the country and its citizens wallowing in abject poverty, infrastructural deficit and wanton corruption.
In a bid to harness the full potentials of the natural resources Nigeria is adequately blessed with, a non profit policy institute, the Nigeria Natural Resource Charter (NNRC) was established. This organization saddles itself with the responsibility of effectively managing natural resources for the good of all and sundry. To achieve this, the organization prescribed twelve (12) precepts which, if put into use, would help in developing the natural assets latent under ground to generate wealth and visible development for the teeming populace. The 12 Precepts address the issues of legal framework, transparency, licensing, taxation, local impacts, state-owned enterprises, investment, growth, public spending, private sector, extractive companies and the roles of the international community.
Precept 1 focuses on strategy, legal framework and institutions. It seeks to ensure that resource management should secure the greatest benefit for citizens through an inclusive and comprehensive national strategy.
Precept 3 which talks about the government encouraging efficient exploration and production operations applies here. It is expected that the government being an unbiased umpire should allocate these marginal oil fields to local oil companies that have shown capacity to develop them to productive capacity. Little has changed from the last benchmarking report of 2017 with respect to exploration, licensing and monitoring operations.
Despite having marked improvements in the areas of collection and disclosure of data of interested parties, legislation has been a major impediment. The refusal of the President to accent to the Petroleum Industry Bill (PIB) which houses the Petroleum Industry Administration Bill (PIAB) means the President, who doubles as the incumbent Minister of Petroleum, still possesses discretionary powers to award licenses to whosoever he deems fit. This singular action cannot produce the level of competition needed to make the most of the marginal fields auction which is getting competent local companies to get licenses that would further develop our local oil industries. It is also worth noting that no bid was held during the review period. Without appropriate legislation backed regulation, future auction could still be abused.
Theoretically, marginal oil fields are oil fields that are considered not commercially viable enough for the huge oil companies to invest in but, according to the Petroleum Amendment Act, marginal fields are fields where oil discoveries have been made but left unattended to for a period of 10 years from the date of discovery. To this end, there are several fields that have been declared marginal, many of them unallocated.
Marginal fields auction is a bidding exercise carried out by the Department of Petroleum Resources (DPR) on behalf of the government. The exercise involves only indigenous oil companies, as the marginal oil fields are designed to help the indigenous oil companies grow, considering the fact that they do not have the wherewithal to rub shoulders with the multinationals when it comes to full blown oil exploration in the country. The marginal oil fields comes as a due compensation which gives them a sense of belonging.
The last marginal oil field auction took place in 2003 where 24 fields were awarded to 32 companies and that was 17 years ago, which means another exercise is long overdue. The issue worth musing over is how well those companies fared on the marginal oil field. The idea of them taking over the field is to develop it to production capacity which would in turn generate revenue for the government; but reports have it that very few of those fields were even developed, as many were left unattended to.
Another issue with the acquisition of these fields, which are meant to be a playground for local oil players, is the fact that some indigenous companies would go into the auction not with the intention of winning to develop the fields but to win and then sell to foreign investors. In short, they are only acting as proxies for their own inordinate interests.
Now that the DPR is gearing up for another auction with 57 marginal fields from land, swamp and shallow water terrains to choose from, the government through its governing agency must do things differently to achieve optimum results. Crude oil is no longer the expensive necessity it used to be in the global market. It is now a dispensable luxury that consumers have started finding a way around. To this end, the government must make the most of opportunities to maximize revenue from this particular natural resource and that is by ensuring a thorough bidding process which compels the winner to develop the fields.
The usual practice of a window period of 10 years before declaring a marginal field dormant and then revoking the license before putting it up for another auction should be discarded. It should not take a decade to gauge the seriousness of an investor, that is too long a period to wait, seeing the unstable nature of the price of crude oil in the global market. It is a known fact that the essence of the marginal fields auction is to strengthen local content by encouraging local players, but stringent measures should be put in place to ensure that only serious players are allowed on that field.
Furthermore, to make the most from our marginal oil fields, we need to whittle down the effect of politics. Those fields are for serious and interested investors not to curry or return political favours .
The government should as a matter of urgent importance adopt the recommendations of the Benchmark Exercise Report (BER) as it was carried out by seasoned experts and people of impeccable character since the government cannot continue to do the same thing and expect different results. If they must achieve a better result with the marginal fields auction, things must be done differently.
The government agency in charge of organizing the auction, the Department of Petroleum Resources (DPR), has called for bids and up for grabs and allocation are 57 marginal oil fields. The DPR has lined up several statutory payments amounting to 115,000 dollars and 5million Naira respectively. All these payments are to be paid before the bidding and they are non-refundable. While all these payments are not out of place as it would weed out the weak and unserious local investors. When the stakes are high, only the strong makes a claim.
The auction is good but it could be better if the issues militating against a successful auction are adequately addressed. With the Covid-19 pandemic that has affected global oil prices and consequently, the nation’s economy, the country is being forced into a sale of her assets to raise revenue. This could be counterproductive as prospective buyers could sense the desperation and under-price the marginal oil fields. A desperate government in dire need of funds might be forced to settle for a knockdown price.
Another issue is the delayed passage of the PIB. In recent days, there seems to have been progress with the passage of the PIB as a draft seems to have moved from the Executive to the Legislature. This is definitely a leap forward. But would the Marginal Fields Auction wait for the passage and signing of the bill into law before the auction is concluded? If the auction goes ahead under the current terms, the President and Minister of Petroleum, which in this case is the person of President Muhammadu Buhari, would still be wielding enormous discretionary powers and the marginal fields might just be falling into the hands of people not competent enough to develop it.
With the Covid-19 pandemic and the delayed passage of the PIB, this might just not be a good time to have another round of marginal oil fields auction.
Kolade Omotoso is an Ibadan-based Journalist and a public affairs analyst.
