By Blessyn Okpowo
Earlier in the week, a national daily went to town with what I consider the news of the week; that the federal government has set guidelines for the Bid Round for the award of 46 Marginal Oil Fields by the end of the year or early next year. Put in plain language, what this simply mean is that the federal government intends to sell 46 Oil fields by the end of the year. Actually, this news is not new for a,t the annual Offshore Technology Conference held in May in Houston, Texas USA, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu had announced that the Bid Round will hold in December 2017. So, barring any unforeseen changes, the sale of the Oil Fields will take place in three months time.
But the high point in the report as published by Thisday Newspaper is the cheering news that the federal government is considering setting aside, a number of the oil fields for sale exclusively to companies own by indigenes of the Niger Delta. According to government’s thinking as reported by the newspaper, this is one of the strategies aimed at bringing about lasting peace in the region. In other words, if people from the region own some of the oil fields, they will become stakeholders in the industry who will help to ensure that peace reigns and the oil companies operate under and safe and peaceful atmosphere. Commendable strategy!
But as the popular saying goes, “success is when opportunity meets preparation”. The question therefore is, how prepared are the people of the Niger Delta to take up the opportunity being presented by the federal government for them to won a piece of the action? Do they really know what this means? Information they say is power. How much information do they have about these 46 marginal fields that will be put up for sale in December, information that will put them in a good stead to bid, win and own Oil Fields? How many of them actually know what it takes to own and operate an oil field? These are the pertinent questions that needs to be answered if Niger Deltans must enter into the mainstream of ownership and operator-ship of the oil and gas industry for which they have complained of being excluded for so long.
Even with the irony that a people who have for long been complaining of been marginalized in the ownership of oil blocks in their region are now being brought on board through the offer to buy marginal fields, I believe it is a bold move by the federal government at addressing the issue of marginalization in the Niger Delta and the people of the region must take full advantage of this opportunity.
Now, what is a marginal oil field? How is the bidding round conducted? What are the requirements to qualify to bid for these fields? These are some of the questions that we will attempt to provide answers to.
Simply put, a marginal oil field is an asset within an Oil Block. It is usually carved out of an Oil Block and relinquished by the Operator of the Oil Block to the federal government. For instance, you can have an oil block operated by Exxon Mobil and within the block, there will be marginal fields operated by other companies; usually indigenous companies. The idea of marginal oil fields was introduced by President Olusegun Obasanjo as a way of encouraging Nigeria companies to participate in the Oil and Gas Industry. Since the introduction of the concept, several oil companies have been operating their fields very successfully. Some of the successful companies operating marginal fields are: Energia Limited, Midwestern Oil and Gas, Oriental Energy Resources, Niger Delta Petroleum, Platform Petroleum, Waltersmith and Britttania U. etc.
When a major oil company relinquishes an Asset, (marginal field), the federal government will add that asset (marginal field) to what is referred to as “The Basket”. This is done until there are enough assets and oil blocks in the basket. Bid Rounds are then conducted, usually every ten years to sell these blocks and marginal fields. So between one bid round and the next, there are usually enough fields, and sometimes oil block that are offered for sale.
Another way through which the government populate “The Basket” is through the retrieval of Oil Blocks and Marginal Fields from those who won licenses but were unable to develop such blocks and bring them to production within ten years. Usually, when the federal government awards you a licenses for an oil block or a marginal field, it is for an initial tenure of ten years. Within that ten years, a holder of a license is expected to develop the field/block and bring it to production. Where such a holder of a license is unable to achieve the target but can show sufficient evidence to prove that he or she has done substantial work and made huge investment, the license can be extended by between one or five years. Where little or no work has been done, the government will retrieve the block and put it back in “The Basket” to be budded for in the next bid round.
The responsibility of preparing the oil blocks and marginal fields for bidding lies in the domain of the Department of Petroleum Resources (DPR) while the power to allocate and approve an oil block or a marginal field license lies with the President of the Federal Republic of Nigeria who can sometimes act through the Minister of Petroleum Resources.
In the second part of this article, we shall look at the criteria for qualifying to Bid for the Oil Blocks and Marginal Fields and process involved.