The outgoing Nigerian government launched a last-minute auction of 41 oil-exploration licences on Friday, ignoring a court order not to sell two of them and widespread criticism over timing and transparency.
Most Western oil majors, which have pumped the bulk of Nigeria’s crude output for the past five decades, kept away from the sale in which 10 pre-selected investors had already been given preferential bidding rights.
”A lot of Western oil companies backed out because all the prime acreage has gone to Indian and Chinese companies on right of first refusal,” said a senior Western oil executive, who did not wish to be named because of company rules.
”The other apprehension is the next administration. What will they change or revoke?” he said.
President Olusegun Obasanjo is due to hand over to president-elect Umaru Yar’Adua on May 29.
The Department of Petroleum Resources (DPR) has said it wanted to sign production sharing contracts with successful bidders before that date — giving itself just 18 days to achieve what took six to nine months after previous bid rounds.
Some investors have expressed concern that the new administration might overturn some of the deals made in the dying days of Obasanjo’s government, although Yar’Adua’s entourage tried to reassure them.
One adviser to the president-elect said some allocations could be set aside if due process had not been followed and no binding agreement signed but Yar’Adua would respect any legal obligations agreed by the current government.
Ten investors, including firms from fast-growing energy consumers China and India, obtained preferential rights on 20 exploration blocks in exchange for promises to invest in Nigerian railways, refineries and chemical plants.
They each have right of first refusal on between one and three areas located onshore in the Niger Delta, on the continental shelf just off the coast or in deep water. The DPR classifies most of these blocks as ”highly prospective”.
Asian firms
Firms that have been given preferential rights include China’s CNOOC, China National Petroleum Corporation and ONGC Mittal, an Indian joint venture between Oil and Natural Gas Corporation and steel magnate Lakshmi Mittal.
Others include Korea National Oil Corporation, Malaysia’s Petronas, state-owned investment vehicle Mubadala of Abu Dhabi, Spain’s Repsol, Britain’s Centrica and private Nigerian industrial conglomerate Dangote.
Analysts say the decision to grant priority rights to some companies after bilateral negotiations undermines the stated purpose of the auction, which is to introduce transparency into how Nigeria sells drilling rights.
They also say Nigeria will find itself in a weak position if the hoped-for investments do not materialise as the promises made by the companies are not binding enough.
Another controversy has marred preparations for the sale. A court ordered the government earlier this week not to sell two of the blocks, which were taken back from Royal Dutch Shell last year, but authorities said they would ignore this.
The government had revoked the blocks, Oil Mining Licences 13 and 16, arguing that Shell had failed to develop them 18 years after acquiring them. Shell is contesting the revocation.
The licences have been split up and they now appear as blocks 2001, 2002, 2003 and 2004. All four are on the list of blocks on which companies have preferential bidding rights. — Reuters