Marginal field bid winners grumble, say loans tied by slow exercise

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Emmanuel Addeh in Abuja

Some Nigerian indigenous oil entities that won the marginal fields tender that commenced in 2020, have expressed concern over the concern expressed over the delay in the process.

According to THISDAY, their grouse was that the program, intended to drill more oil and boost the country’s revenue, had yet to start nearly a year after the official award certificates were handed over.

On May 30, 2021, the then Department of Petroleum Resources (DPR) had announced the conclusion of the exercise, the first exercise since 2003, with the presentation of letters to the winners in Abuja by the industry regulator.

The regulator had leased 57 marginal fields covering land, marsh and offshore, with 161 companies ultimately shortlisted to advance to the final stage from 591 entities that had applied for pre-qualification.

Some of the winners at the time included: Matrix Energy, AA Rano, Andova Plc, Duport Midstream, Genesis Technical, Twin Summit, Emadeb Energy, Bono Energy, Deep Offshore Integrated, Oodua Oil, MRS and Petrogas.
A number of others who made it through the hurdle were: North Oil and Gas, Pierport, Metropole, Pioneer Global, Shepherd Hill, Akata, NIPCO, Aida, YY Connect, Accord Oil, Pathway Oil, Tempo Oil, Virgin Forest, among others. .

The head of the DPR, now the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Sarki Auwalu at the time said the exercise was worth around $500 million in signing bonuses.

However, speaking to THISDAY over the weekend, a number of winners denounced the slow pace of events, pointing out that they had continued to pay heavy interest on borrowed loans to pay for transactions, despite the fact that the loans have been unproductive for more than a year.

The first sign of contention reportedly arose when the regulator insisted on a joint recipient agreement, in which strange business associates were forced into talks to go through the process as partners of the farm-out agreement.

THISDAY understood that they had to establish what was considered a “Special Purpose Vehicle” (SPV) and then begin a co-operation of the assets.

It was further understood that while the formation of SPVs has been problematic, the issue of ownership sharing as well as the fate of mergers where some parties had not yet fully paid remain unresolved.
In other cases, entities forced into co-ownership of assets have complained about the outright non-payment of bonuses by their associates.

With Nigeria unable to meet its Organization of the Petroleum Exporting Countries (OPEC) production quota, the drivers of the program had raised hopes that drilling would soon resume.
In cautious terms, in the last round of OPEC data releases on its member countries’ production levels, Nigeria was losing at least 300,000 barrels due to its failure to pump as much as the oil cartel would like.

“About 200 billion naira is currently suspended for more than a year since we paid this money. My company invested billions in this transaction. For more than a year, we have been paying close to N200 million a month in loan interest.
“Just calculate that a year from now and you will have an idea of ​​how much capital is tied up and how much interest is being paid on that total sum of N200 billion.

“We are even told now that there is no more farm-out. How will investors see what is happening and will they still have the courage to come and invest in our climate? the offer holder who declined to be named pointed out.
Prior to the promulgation of the PIA 2021, fields were classified as marginal when they were not considered by licensees for immediate development due to an assumed marginal economy under prevailing conditions or left unattended for more than 10 years.

They also included assets that tenants were considering leasing due to portfolio rationalization or those that the President may, from time to time, identify as such.

THISDAY learned that while signing bonuses for 119 awards were fully paid, nine awards were partially paid, and 33 awards were yet to be paid last month, a situation that partially inhibited the fiscal year-end.
But for those who failed to pay kobo after the statutory 45 days expired, the NUPRC said bids have returned to status quo, revealing that the round of bids concluded in 2021 has so far yielded more. of N174.944 billion.

A second winner, who also complained that the process was becoming unnecessarily slow, said that while some progress had been made, the company was waiting for the real work to take off, which is to find the “first oil” now that the oil prices are high.
He too complained that paying interest on non-performing loans would ultimately have a negative impact on business entities.

In a meeting a few weeks ago, the new Director General of NUPRC, Mr. Gbenga Komolafe, told the companies that since taking office, the challenges surrounding the effective start of the program had been a key exercise in which he had Spent her time to resolve herself.

” I will tell you why. I realize that as stakeholders, as beneficiaries, we have tied up your capital, and I’m very careful about what we call the cost of capital.

“It is really very painful that you have tied up your capital for so long and expected the commission to take prompt action in this regard and I want to tell you that it really bothered me and that we have doing everything we can within the committee that will take the exercise forward to its conclusion.

“So that’s a question that’s been very relevant to the commission, to make sure that we complete the exercise. With the funds that you’ve tied up, the cost of this exercise is very huge capital, that even for the entire banking sector, it is very important and we cannot continue to delay the completion of this exercise,” he noted.

He explained that he had received numerous petitions on the issues, but noted that the commission cannot reverse the model that has been rolled out, “because it is too late in the day” as it was inherited from the former program managers.

“It’s a contract and they paid, it means they accepted the model for the conduct of the exercise. It is too late in the day to reverse the process. Complaining after the fact will not help anyone,” he stressed.

He said that after the SPVs, the International Oil Companies (IOCs) have been contracted, after which the winners of the bids will be awarded Oil Exploration Licenses (PPLs) to begin the real oil exploration work.

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