Owners, DPR decline comments on status of blocks
About 51 Oil Prospecting Licences (OPL) and Oil Mining Lease (OML) of different oil blocks have expired between 2010 and March 2017 and this is therefore threatening about $2 billion (N720 billion) in signature bonuses. Another 85 OPL and OML will expire between April 2017 and 2029, according to upstream concession status obtained from the Department of Petroleum Resources (DPR).
Experts believe that the failure to renew the licences is robbing the country of several billions of unpaid signature bonuses.
Already, the House of Representatives has begun its investigation into leakages within the Department of Petroleum Resources (DPR) in respect of ownership, distribution and authenticity of OML, OPL, relinquishment, signature bonuses and bidding process.
About 17 Niger Delta onshore OMLs belonging to the Shell Petroleum Development Company of Nigeria Limited (SPDC) will expire in the next two years.
Shell has decided to be silent on whether they will renew the oil blocks at expiration by 2019 or relinquish interest.
An oil-mining lease is usually granted only to the holder of an oil-prospecting licence (OPL), upon meeting set regulations, and the term of the licence shall not exceed 20 years, and may be renewed in accordance with the Petroleum Act.
Specifically, the Nigeria Extractive Industries Transparency Initiative (NEITI) said in its current oil and gas report that discretionary decision-making and lack of openness drove down competition and returns to Nigeria, including over $2 billion in unpaid signature bonuses.
For example, OPL 204 located onshore Niger Delta, belonging to Africoil and Marketing, whose licence has been issued since 1993, expired since 2010 and there is no information regarding its renewal.
Also, Alfred James Nigeria Limited’s OPL 302, which was awarded in 1991, has expired since 2001. Efforts to get current update on the block, proved abortive.
Continental Oil and Gas’s OPL 2007 expired since October last year while Summit Oil International OPL 206 expired in 2014.
Amalgamated Oil Company Limited’s OPL 425, which was given licence since 1992, is expected to expire by May 23 this year.
OPL 305 and 306, which belong to Crownwell Petroleum Limited will expire in June this year.
Also, KNOC’s deep offshore OPLC 321 and 323 have already expired since March 9, 2016.
None of the owners of the affected oil blocks were willing to respond to The Guardian’s enquiries regarding the current status of their assets.
Efforts to get update from the DPR on the current status of these oil blocks, proved abortive as the agency despite several emails and text messages, which lasted for one month, remained silent.
When contacted, the Head of Public Affairs at DPR, Dorothy Bassey referred The Guardian to the Manager, Public Affairs, Paul Osu who also delegated the responsibility.
The officer complained of difficulty in getting useful information across to The Guardian in the last one month, up to the time of filing this report.
The Corporate Media Relations Manager, Precious Okolobo, also remained silent on the possibility of Shell renewing its licences in 2019.
But Shell said in its yearly report and Form 20-F 2016, released at the weekend that of the Nigeria onshore proved reserves, 164 million barrels of oil equivalent (boe) are expected to be produced before the expiry of the current licences, and 377 million boe beyond.
This means at the end of 2019, the company will either renew the expired licences or relinquish its stakes in the OMLs. The company had in the last two years engaged in divestment of assets in its onshore operations due to militancy and low oil prices.
According to NEITI in its latest report, past upstream licensing processes in Nigeria have fallen well short of best practices and failed to secure maximum value for the country’s assets.
This it said, led to public controversy, including lawsuits, indictments, sackings, cancelled or revoked awards, and legislative probes.
“Many deals fell through, and barely half of the fields auctioned between 2000 and 2007 have seen serious drilling. The stated goal of increasing indigenous participation was not well served. Most of the marginal fields awarded during the 2000s have not produced.”
NEIT said that |past licensing rounds in Nigeria were not tied to any comprehensive asset development strategy or broader economic development plans.
It said that Nigeria needs to develop a strategy for managing its natural resource base for current and future generations, and tie each licensing round to that strategy.
According to the Deputy Director, Emerald Energy Institute, University of Port Harcourt, Prof. Chijioke Nwaozuzu, expired licences have to be renewed, unless the acreage OPL is being explored prior to expiry.
“OMLs can also be renewed by DPR if they are currently in production. What government has to do is to discourage ‘acreage-sitting’. These are operators sitting on their licences without doing anything to explore or develop them. Such licences should be relinquished and bid for in the next licensing rounds,” he added.
A Senior Lecturer (Energy/Oil & Gas Law) at the Department of Public and International Law, Faculty of Law, University of Abuja, Olanrewaju Aladeitan, said that the owners of the expired licences are supposed to apply three months before the final expiration of the oil blocks.
He said that the implication to the economy is that the country may not be able to benefit maximally from any oil block whose licence has expired.
Aladeitan added that it may also rob the country of signature bonuses, which would go a long way to ameliorate the country’s economic challenges.