Nigeria Offers Marginal Oil Field Permits to Local Investors
LAGOS (Capital Markets in Africa) — The Nigerian government launched a bidding round for domestic companies aimed at bringing marginal oil fields to production.
Africa’s largest crude producer is offering 57 onshore and shallow offshore permits, the Department of Petroleum Resources said on its website on Monday. Inviting bids from “indigenous companies and investors,” the statement didn’t specify when the fields will be allocated.
The bidding round faces opposition from companies that had their permits for 11 of the fields revoked in April and put up for sale. Lagos-based Owena Oil & Gas Ltd. and two other firms have obtained court injunctions suspending the revocations until their lawsuits contesting the legality of the DPR’s decision are resolved.
Marginal-field licensing rounds are a government initiative to increase domestic participation in oil exploration and production in the West African nation. Twenty-four permits were allocated in Nigeria’s only other auction 17 years ago.
Most fields up for sale are those that oil majors such as Royal Dutch Shell Plc haven’t developed. The DPR recently revoked other permits from Nigerian companies that were awarded in 2003, claiming the firms failed to develop the assets. Marginal fields produced about 3% of Nigeria’s total oil output, or almost 65,000 barrels per day, in 2018, according to DPR data.
The companies who had their permits revoked wrote to President Muhammadu Buhari on April 9 asking him to reverse the terminations. They sought to “correct the impression that the affected fields have been left fallow and undeveloped since they were awarded,” according to the letter seen by Bloomberg and verified by the Marginal Field Operators Group, an umbrella group established to represent the companies.
Spokesmen for the presidency and the DPR didn’t immediately respond to requests for comment.
The firms said in the letter they have invested about $450 million in the assets over the past 15 years, bringing some of them to the early stages of production.
Almost 80% of the financing has been raised in Nigeria and the DPR’s decision “immediately creates additional non-performing loans for the local banks who are already grappling with huge exposure to the energy sector,” according to the letter.
Source: Bloomberg Business News