October 18, 2021

TrustTV

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How DPR created N235bn income stream with oilfield licensing

As COVID-19 took a toll on the world economy along with oil price glut, Nigeria’s revenue sources were greatly affected.

However, Nigeria, through the Department of Petroleum Resources (DPR), created a N235 billion (or $500 million) revenue stream from issuing 57 marginal oilfield licences, delayed by previous governments.

Daily Trust analysis indicates that as of June 1, 2021, the federal government granted licenses to Nigerian investors for 57 marginal oilfields in the country’s oil-rich Niger Delta region.

Director of the Department of Petroleum Resources (DPR), Mr Sarki Auwalu, who announced the awards in Abuja, said the 57 marginal fields offered spanned land, swamp and offshore locations.

The award came barely one year after DPR opened the bid, at the peak of the COVID-19 pandemic in 2020.

At the presentation of letters to the winners in Abuja, on May 30, 2021, the DPR Director further explained that a total of 591 firms submitted their Expression of Interest forms, out of which 540 were pre-qualified, while 482 were bids submitted by 405 applicants.

In the end, 161 companies were shortlisted as potential awardees, out of which 50 percent have met all conditions and therefore, were eligible for awards.

However, for oil and gas stakeholders, one of the major conditions for the award of the new acreages to participants is the payment of signature bonus.

With 50% of leases already paid for, it is expected that the government would have raked in about $250 million in signature bonuses so far, while looking forward to harvesting additional $250 million from other winners who could not pay on the day of the award in the weeks and months.

To curb the domineering of the oil sector by International Oil Companies (IOCs) revise this situation and learn from the experience of countries with strong representation for indigenous local participation such as Norway and Brazil, Nigeria adopted the Marginal Fields Programme (MFP) allocating marginal oil and gas fields to Nigerian enterprises.

This agenda was further boosted by local content provisions in a Nigerian Oil and Gas Industry Content Development Act 2010 (the Local Content Act).

For the federal government, raking in an estimated $500 million in signature bonuses from the winners of the marginal oil blocks at a time of acute foreign currency scarcity is no mean feat, aside the project’s complementary role in job creation even if at least half of the awards could come on stream immediately.

For President Muhammadu Buhari, who had set the target of pulling 100 million citizens out of poverty over the next 10 years, the new marginal oil fields awards can be a greater enabler for realizing that dream given the multiplier economic outcomes of every oil and gas investment.

As an Opportunity House and Business Enabler – DPR brought its supervision and monitoring expertise in petroleum industry operations to bring transparency to bear on the processes leading to the award of the acreages to the delight of participating entities.

On strategies for crude oil and gas reserve growth against which the 57 licenses were doled out, Auwalu, listed Deep Drilling, Target By-Passed accumulation, Migration of P3 to P2 (& P1), Improved Oil Recovery (IOR), Enhanced focus on sustainable, FDPs, Frontier Exploration and Bid Rounds.

The outlook over the three year period of 2021-2024 is to boost the nation’s crude production capacity by an additional 600kbpd.

This initiative is also expected to expand local refining capacity through empowerment of modular refineries, integrated refinery complex, impact of price freedom, zero routine flare for new developments, gas flare commercialisation, gas processing plants, central processing facilities, fertilizer plants and petrochemicals.

DPR also seeks through ongoing reforms, to encourage the development of Gas Based Industry, Gas Pipelines and Flare Gas Capture

For instance, at the signing ceremony of the Pre-Front-End Engineering Design (FEED) for the first-of-its kind Floating LNG Project in Nigeria recently, Auwalu had expressed his delight at the event that came following the issuance of the License to Establish the flagship FLNG project by the Department of Petroleum Resources in February this year.

Auwalu said, DPR, under the supervision of the Minister of State Petroleum Resources,  Timipre Sylva, has continued to implement policy and regulatory reforms driven by commitment to attract new investments, create value and improve the contributions of the Oil and gas sector to Nigeria’s GDP.

“With the commencement of preliminary engineering of this Liquefied Natural Gas project, the drive by Mr. President and the Minister to make the 2021 – 2030 Nigeria’s decade of gas is fast becoming a solid reality.

“Our Licenses, Permits and Approvals will continue to serve as stimulants for value addition and enablers of development,” he said

In addition to creating the much desired jobs, communities in the oil bearing areas of the country stand the chance of enjoying a much higher standard of living through the wealth that would be generated from the investments.