2012 Oil Bloc Sale: Before The Market Day?

The announcement that after nearly
five years of near-zero serious
exploration activities in the nation’s
upstream oil sector, the Federal
Government has finally decided to
hold an oil bloc licensing round this
year would have been greeted with
a loud applause but for the fact that
Nigeria as a nation has not been
very fortunate in having leaders
with keyed-in initiatives for a
turnaround.
We have leaders ranging from those
who had too much money but never
knew what to do with it to those
who fought corruption in the day
time and in the night seasons
corruptly devoured our treasury.
And now, we have those who never
seem to have a single idea on what
to do on anything and have
embarked on eternal planning
exercise through outsourcing of
almost all the executive functions to
committees and panels in the name
of carrying everybody along.
It would be recalled that the 2005,
2006 and 2007 licensing rounds
were marred by series of allegations
ranging from outright fraud to
voodoo award of licenses to traders
and housewives. We were told then
that only companies willing to invest
significantly in the country’s
infrastructure development projects
and the power sector were pre-
qualified to participate. But this
turned out to be a big lie.
Awards were made to Asian oil
companies that controversially
secured rights of first refusal over
some of the prolific oil blocs in
exchange for commitment to invest
in Nigerian infrastructure projects.
The very lucrative oil blocs
preferentially allotted in the 2005,
2006 and 2007 licensing rounds
were based on the fact that all the
recipients agreed to invest in the
downstream sector. Some promised
to invest in refineries, railways,
power, roads and the Nigerian leg of
the Trans Saharan Gas Pipeline.
At the time, some stakeholders
complained that most beneficiaries
of the federal government’s Right of
First Refusal policy were companies
whose credentials and antecedents
were highly questionable.
True as alleged, since they got the
offer, none of the companies given
oil blocs based on the rights of
refusal principle of backward
integration did or is trying to do
anything either in the nation’s oil
downstream sub-sector or other
infrastructural developments as
mandated in the oil-for-
infrastructure agreement.
Traditional upstream oil majors –
Shell, Chevron, Mobil and Agip
amongst others did not participate
in the last and controversial 2007
bidding round, which held in the
twilight of former President
Olusegun Obasanjo’s
administration. Their excuse was
that the bid processes were not
transparent. However, it was said
later that the traditional European
and American actors in the nation’s
oil sector opted out of the bid round
because of alleged government’s
undue tilt towards the Chinese and
Indian new entrants. Also, the
western operators disdained the
idea of oil –for-infrastructure.
The question is: has the federal
government recovered all the
acreages awarded under the oil-for-
infrastructure deals as almost all the
awardees including some
indigenous Nigerian traders and
PDP chieftains/ financiers failed to
meet the conditions for such
awards?
And, do we trust the current
minister of petroleum who is or
rather was a Shell director not to be
biased in handling the licensing
exercise to favour the traditional
western IOCs?
As a responsible nation that wants
to do business both with the
traditional European and American
oil operators and the Asian new
entrants, it behooves our
government to ensure that all the
controversies including litigations
arising from the discredited 2006
and 2007 oil bloc award exercises
be effectively and fairly addressed.
If not, the same controversies and
allegations that marred the last
exercise may also show up this
time.
For instance, it has been recently
alleged that the traditional western
operators were bent on discrediting
the Indian, Chinese and Korean
firms in the forthcoming exercise by
making false presentations to the
federal government. According to
insinuations, the well-established
Western oil companies were not
happy with the threats posed by the
forays being made by the Chinese,
Indians and Koreans into Nigeria’s
oil sector.
Also, we need to address the serious
allegation or rather the perception
that traditional European and
American multinational operators in
the nation’s oil sector have a hidden
agenda in the forthcoming bid
round as they were allegedly
responsible for the clamour or rather
pressure to reverse whatever was
done in the controversial oil-for-
infrastructure licensing rounds of
the Obasanjo era.
From all indications, there is an
obvious misrepresentation of the
issues and facts of the struggle for
the soul of the nation’s oil sector by
the eastern and the western
interests. This would not in any way
help the nation in its avowed
determination to reposition its oil
and gas sector as each of these
foreign groups may want to
undermine the other at the expense
of Nigeria.
Let’s not forget that plans to
conduct bid rounds in 2010 were
aborted under frivolous excuses of
the non-passage of the Petroleum
Industry Bill (PIB), coupled with
pending cases before the courts and
arbitration involving some
multinational oil companies and the
government. Most of these cases,
which had to do with the Production
Sharing Contracts governing some
oil fields, are yet to be thrashed out.
So what are we going to do about
them?
Another issue is whether the federal
government is going to go ahead
with the licensing round without
resolving the serious controversies
surrounding the renewed effort to
re-package the PIB.
Neither the federal government nor
any of its agencies has addressed
the issue of alleged hijack of
government control of the oil sector.
It has been seriously alleged that
our current Petroleum Minister,
Diezani Allison-Madueke and the
new director of the Department of
Petroleum Resources (DPR), Osten
Oluyemisi Olorunsola are both from
Shell Petroleum Development
Company of Nigeria. And these are
the two critical determinants to
what goes in and comes out as the
repackaged PIB. The duo is also the
sole determinant on who gets what
oil blocs in the forthcoming licensing
round.
Except we are saying that the
proposed 2012 oil bloc award will be
to compensate the traditional
international oil operators (IOCs)
whose agents have be positioned in
government to work for their
interest. Otherwise, we must thread
with caution.

IFEANYI IZEZE IS AN ABUJA-BASED
CONSULTANT ON STRATEGY AND
COMMUNICATION (iizeze@
yahoo.com; 234-8033043009)