‘Why FG must include BO details as requirement for licensing round’
• Stakeholders highlight steps to improve licensing round in Nigeria
As the Federal Government concludes plans to host licensing round for marginal oil and gas assets later this year, stakeholders in the industry have insisted that the inclusion of Beneficial Ownership details of bidders would improve the process.
Being a mandatory initiative introduced by the Extractive Industries Transparency Initiative (EITI), Beneficial Ownership disclosure is a principle that aims at ensuring information about the ultimate beneficiary(s) of the ownership of assets in the extractive industries are disclosed to the public.
Nigeria had in December last year, complied with EITI’s directive to ensure that all extractive countries operate a register on beneficial owner of natural resources assets.
The Minister of State for Petroleum Resources, Timpre Sylva had disclosed that the Federal Government would unfailingly conduct a bid round for marginal oil fields before the year runs out, adding that the country would afterwards, prepare a general licensing round.
But industry stakeholders, including Civil Society Organisations (CSOs) as well as other energy experts, highlighted the negative impact of awarding the country’s oil and gas assets to persons whose identities and capacity are unknown to the public.
The industry players, who spoke at an online workshop on “Urgent Case for Reforms in the Petroleum Industry” insisted that demanding the disclosure of beneficial owners information would promote transparency in the process and encourage serious bidders to show interest in the bid.
Speaking at the event, which was hosted by Media Initiative on Transparency in Extractive Industries (MITEI) and facilitated by the Facility for Oil Sector Transformation (FOSTER II), an energy expert and Senior Partner, Energy & Commercial Contracts, Primera Africa Legal, Israel Aye, said steps must be taken to define due processes and procedures in the Petroleum Industry Bill (PIB) to ensure transparency and accountability, to end arbitrariness and abuse.
Aye said: “Nigerians must demand that Beneficiary Ownership disclosure must be included as one of the intrinsic requirements and conditions spelt out in whatever guidelines the DPR will be putting out for the bidders. This is the only way we can guarantee only serious investors with genuine plan and capacity to exploit the national asset for the benefit of all Nigerians will be attracted to participate,”
According to him, absolute powers granted to the Minister of Petroleum Resources to grant the licenses for the oil assets arbitrarily should be removed from extant law.
Aye stated further that if the Minister cancels any oil license for whatever reason, there is no room to seek redress, as the Department of Petroleum Resources (DPR) lacks the legal backing to enforce its guidelines.
The legal practitioner added that a transparent oil licensing round that would help realise the national objective of increase oil output must come under a framework for the granting of licenses to guide and regulate the entire process.
In an attempt to ensure transparency in award of oil blocks, the forum also recommended that there was need for Nigeria to conduct oil licensing bid round that would not only meet globally acceptable standards, but also realize set national objectives to increase oil revenues, boost proven national oil reserves, and raise the country’s daily oil production capacity.
The experts asked President Muhammadu Buhari, who is also the Minister of Petroleum Resources to publicly declare that he would not invoke discretionary powers as Minister of Petroleum Resources before, during and after the bid licensing process.
“This public declaration is critical to rebuilding the confidence of serious investors to participate in the bidding process trusting that whatever will be the outcome will not be subject to any boardroom intervention outside strict adherence to approved bid guidelines and rules,” the group said.
The experts also noted that before the commencement of the bidding rounds, Nigerians should be presented with evidence of comprehensive national economic development plan detailing how the expected signature bonuses would be utilized in implementing the plan to the benefit of overall industry development and growth as well as a national data repository to be used as the single source of verified data open to all parties in the bid;
They also canvassed that the country publishes information on the value of assets to be included in the basket of assets to be put on offer, in order to eliminate arbitrage opportunities resulting from information asymmetry and disclosing terms governing the licensing round, and to ensure it was transparent, clear and easily understandable by all parties and Nigerians so that the government’s management of the process can be tracked by interested members of the public.
Similarly, during the bidding process, the group said Nigerians should be presented with evidence of stringent selection criteria during the bidding process to limit the exclusive pool to only firms with the requisite financial and technical capabilities; comprehensive details of all prospective bidders on a medium easily accessible by members of the public; measures to effectively monitor the bid process to ensure successful firms pay their signature bonuses in full and into government designated accounts.
After the bid, the group said: Government should draw down on the performance bonds of any firm that fails to commence work on the oilfield within the period to be specified in the bid guidelines; government should enforce the drill-or-drop clause in the law and reclaim any license(s) from non performing winning bidders and oversight of the processes should be provided by the National Assembly, auditing by the Nigeria Extractives Industry Transparency Initiative (NEITI), and continuous monitoring before, during and after the bid process by civil society organizations and the media.”