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‘Government won’t hold bid rounds for OPLs, OMLs without PIB’

By Femi Adekoya and Joseph Onyekwere
11 June 2020   |   3:20 am
Unlike the situation with marginal fields, the Nigerian National Petroleum Corporation (NNPC) has said it would not schedule bid rounds for Oil Mining Licences

Court warns DPR, minister over the auction

Unlike the situation with marginal fields, the Nigerian National Petroleum Corporation (NNPC) has said it would not schedule bid rounds for Oil Mining Licences (OMLs) and Oil Production Licences (OPLs) in the absence of a clear framework like the Petroleum Industry Bill (PIB).
Furthermore, hopes of the law being signed next month may have to wait further, owing to the impact of the COVID-19 pandemic on major activities surrounding the bill.

This comes as the Federal High Court, Lagos yesterday warned the Minister of Petroleum Resources and Department of Petroleum Resources (DPR) not to overreach its order restraining them from taking any step on revoking the Ororo Marginal Field in OML 95 pending a suit challenging its status.

Justice Muslim Hassan gave the warning after being informed that the DPR was allegedly advertising a bidding process for the facility, which may jeopardise the interest of the plaintiff, Owena Oil and Gas Limited.

The judge renewed its order, asking the government to maintain the status quo until the determination of the motion on notice.

Any breach, he added, would be “dealt with.”

The court on May 27 this year granted the order of interim injunction against the respondents following a May 19 motion ex parte filed by the applicant.

Upon resumption of proceedings yesterday, the plaintiff’s counsel Mr. Kemi Pinehiro (SAN), informed the judge that despite the order, the DPR published an advertorial requesting for bids for the marginal field(s) and then sought the court’s protection.
However, the NNPC has warned oil firms that cannot operate under a $10 per barrel production regime already set for 2021 to seek ways out of the industry.
With 57 marginal fields being auctioned by the DPR, many of the industry players, who spoke with The Guardian, feared that Nigeria’s obsolete regulations, especially the non-passage of the PIB, were worsening transparency and fostering uncertainties.

They noted that a harsh operating environment coupled with prevailing realities in the international oil market would create an elusive outlook for licensing rounds.
The Group Managing Director of NNPC, Mele Kyari, while speaking yesterday at the third Nigerian Association of Petroleum Explorationists (NAPE) webinar series, said even as the bid rounds for marginal fields can hold, substantive bid rounds for major blocks cannot be embarked upon without a functional law in place.
“The country needs a softer fiscal environment. Marginal fields can go ahead without the PIB because they are small, but major licences cannot happen. The marginal fields can create opportunities for small companies and that is the major focus of the bid rounds. The objective is not to gather money for the government but empower players,” he added.
The GMD noted that the NNPC remains the only company involved in oil exploration right now, adding that distinct legislation was needed to attract key investments, especially as firms appraise their operations and embrace different measures to hedge the impact of the pandemic.
On lower oil production costs, the NNPC insisted that any company that refuses to cut down cost to the $10 per barrel level would be shown the way out of the industry.
He expressed concerns over the incessant inflation in costs by contractors in the oil and gas industry, noting that some operators were still producing at $93 per barrel in a low oil price regime.
Kyari accused Nigerian oil companies that put in place over-bloated management structures that impact on the cost of production.
He explained that the COVID-19 scourge that brought about oil glut in the international oil market made NNPC sell crude oil with a discount, thus reducing the country’s expected revenue.

This, he said, has made the corporation to have a rethink to insist on cutting down the cost of production, as there are a lot of fraudulent activities going on in the oil and gas industry.
He said the challenges of COVID-19 made it possible for NNPC to take a look at some services they can discard, adding that it was time to infuse cost discipline, shun operational inefficiency, and refocus only on projects that are revenue-driven.
NAPE President, Alex Nachi Tarka, commended Kyari for his efforts in driving reforms in the sector and assured operators that the Association will continue to drive initiatives that will aid the growth of the sector.