Hot property

Published: 01-FEB-01

Some of the world's most sought after oil blocks were awarded recently in Nigeria's new competitive bidding process

US oil major Chevron and its allies won the most sought after oil block in Nigeria recently as the country handed out acreage seen as some of the world's hottest exploration property.

The awards of the eight blocks were made following a competitive bidding process intended to mark a break with murky past practices in which former ruling generals farmed out licences to themselves and cronies on a discretionary basis.

But among oil industry officials during the latest round of awards, there were allegations of continuing political interference as well as some unease at the manner in which separate bidders had been lumped together in joint ventures.

The licences on offer were among 22 blocks handed out previously to front companies connected to officials of the past military regimes of generals Sani Abacha and Abdulsalami Abubakar. President Olusegun Obasanjo cancelled the awards and promised to level the playing field soon after being elected as Nigeria's first civilian president last year.

Malaysia's Petronas and Brazil's Petrobras were among successful bidders entering the Nigerian industry for the first time. Among other winners were a mixture of both established and hitherto little-known indigenous companies.

Nigeria aims to increase its reserves from 25 billion to 40 billion barrels in the next few years, with production tar- gets rising from 2.2 million to 4 million barrels per day.

The expansion programme has been helped by technological advances. Companies are able to move deeper into West Africa's oil-rich offshore waters where drilling was previously unprofitable, and away from the swamps of the Niger Delta where community unrest and crime have hampered development.

In the allocations announced by Presidential Adviser on Petroleum and Energy, Chief Rilwanu Lukman, eight blocks were awarded to 14 oil firms, including six established multinationals in Nigeria, as well as lesser known local and foreign companies.

Fourteen available blocks have yet to be allocated either because they are subject to litigation or because there were insufficient bids, Lukman said.

"Based on the estimates of premium payments expected from the companies to which the offers were made, a total of about $900 million is expected to accrue to government.''

Lukman said the government viewed the acreage bidding process very seriously as its failure could undermine the efforts being made to attract investors in the economy as well as scuttle the efforts aimed at realising the stated reserve and productivity goals.

He said the former practice of discretionary allocations "resulted in government not realising the full potential of revenue from the blocks". Figures pro- posed by bidders as premium payments to the government had been important in evaluating the bids, but were not the determining factor, he said.

Among other considerations, the government also looked at evidence of the company's technical capability, environmental policies, commitment to projects of national and strategic interest and amounts dedicated to social projects.

Chevron Corp won the bid to operate the choice offering - deepsea OPL250 - in alliance with Shell unit SNEPCO, Ocean Energy and Brazil's Petrobras.

Shell, Nigeria's top oil producer, suffered a major setback after losing the bid to operate the block.

"We worked very hard (for the bid)," Chevron Nigeria's Managing-Director Ray Wilcox said. "One of the criteria was very clearly companies who have a lot of experience in deep offshore.

"We've got tremendous experience in the Gulf of Mexico, Angola and other major parts of the world. There will be high risk, but hopefully there will be higher rewards. We look forward to making some very big discoveries," he added.

Shell Nigeria's Deputy Managing- Director Egbert Imomoh declined immediate comment, saying: "We are still to study the details." The Nigerian government defended the award of OPL250 to Chevron, even though it bid far less than Shell. Shell had bid $200 million compared with Chevron's bid of $60 million.

An official statement said the choice of Chevron was in line with the government's policy considerations and its higher weighting of technical ability over financial value. One of the government's broad policy objectives was "to expand the scope of participation in Nigeria's oil industry and diversify the sources of investment and funds. ' '

In a number of cases the company with the best financial offer did not have the best technical offer and vice versa, it said. Officials of Petrobras, which also won the joint bid to operate deepsea OPL324, were jubilant. Brazil's soccer legend Pele was in Nigeria in October to push for the Petrobras bid.

Lukman played down any constraints posed by quota restrictions of the Organization of Petroleum Exporting Countries (OPEC) of which Nigeria is Africa's top member, and he the secretary-general.

"We have to plan for an eventual increase of quota which is bound to come with higher international demand that we can see on the horizon over the next few years," he told reporters.

Other major winners included ExxonMobil unit Esso and Italy's Agip, another major player in the Nigerian oil industry, which got OPL244.

It will operate this on behalf of state- owned Nigerian Petroleum Development Co, a unit of state oil giant NNPC. Another multinational, Phillips Petroleum, won block 318 where it will be the operator.

Block 242 went to an indigenous firm, Obekpa, but the operator of the concession will be decided later.

Nigeria Today Online

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