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Nigeria loses billions of dollars to prolonged bid rounds

Billions of dollars have been lost due to government’s inability to conduct bid rounds for major and marginal oil fields, former co-founder and Executive Director, Pillar Oil Limited, Seye Fadahunsi, has said.

Fadahunsi could however, not give a specific figure, but he maintained that the figures run into billions of dollars. “This is what the country could have been able to add to the economy over the last 12 years, especially from proper licensing rounds of blocks that are fallow,” he said.

He explained that blocks are amass of fields. “Imagine what the country could do with that, that’s why companies like Proton, Seplat, and the ND Western now have blocks, producing about 90,000, 70,000, 50,000 barrels per day respectively. It’s a substantial production and a major addition to the economy,” he said, adding: “They were only able to do that because there were assets available for them to bid and win.”

“Some of them are producing about 300million standard cubic feet of gas a day, that’s a lot. Imagine what that could do to the power sector and to the industries,” he said.

The last marginal field bid round was in 2003 while the last bid round for blocks was in 2007. Fadahunsi said it was too long, noting that if some people are not given the opportunity, they wouldn’t be where they are today.

“It should be open and done regularly. There should be a bid round every three years because you need the bid round to increase your capacity. For those who have proven themselves, they need to be able to grow by acquiring additional fields and the new ones need to be led into the industry. Keep in mind that oil could finish one day, it’s a limited resource and one day it would finish,” he said.

Marginal fields are located onshore and in the shallow waters. Statistics show that there are about 200 marginal oil fields in Nigeria. In 2003, the government awarded 24 out of these. Currently statistics show that nine out of these 24 are productive while the others are under-utilised.

Consequently, reports show that the marginal fields only contribute a minimal 2.1 per cent to the total crude oil production and 67 per cent of marginal fields allocated in the 2003 licensing round have not produced a single barrel of oil.

Marginal fields are oil fields that have been discovered by major international oil companies (IOCs) in Nigeria in the course of exploring for larger acreages and which have not been developed for more than 10 years. When identified, the IOCs may decide to farm out this field to another company to exploit as a sole risk venture. This means the contractor would bear all the costs and risks of exploitation and earn the entire rewards from exploitation.

The President, by the provisions of the Petroleum (Amendment) Act of 1996 also has the power to declare a field as a marginal field where a discovery has been made in such a field, but has been left unattended to for 10 years. The major reasons for awarding marginal fields are to create new and diverse investment and boost reserves.

According to the Nigerian National Petroleum Corporation (NNPC), Nigeria has about 200 oil fields branded as marginal due to location and distance to existing facilities and low ranking in the investment portfolio.

Industry analysts argued lack of funding leads to underutilisation of leases and government’s inaction in conducting bid rounds is holding back investments in Nigeria’s 200 marginal fields, which many industry analysts say could speed up the country’s drive to increase crude oil production and revenue.

Fadahunsi explained that another implication of not having another bid round was that people, who have the skills would not have the opportunity to deploy those skills, adding that it has a ripple effect on employment.

According to him, each of the service companies could employ up to 60 people and when added up all, would come up to a large ecosystem of employment. Also, if these fields are put into production, they will increase Nigeria’s production capacity.

“If about 20 of them come on stream and are doing about 3000 to 4000 barrels daily, that gives almost 70,000 barrels per day. It contributes to the economy, and keeps people employed,” he said, adding that not having another bid round is not to anybody’s benefit.