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Concerns mount over transparency of Nigeria’s 2020 Marginal Fields’ Bid Round

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.

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.

Source: This Day