Efforts by Shell Petroleum Development Company to conclude the sale of four of its onshore oil blocks in the Niger Delta that were tendered last year would have to wait for a few more months before the sales get the final nod, as the Nigerian National Petroleum Corporation may elect to exercise its preemptive rights in the blocks.
Shell had tendered four of its blocks - Oil Mining Leases 30, 34, 40 and 42 - to bidders last year in a bid process that attracted at least 30 consortia comprising local and foreign oil firms.
Top on the list of interested bidders include Consolidated Petroleum; African Petroleum in conjunction with Mid-Western Energy; Nestoil in partnership with Polish-based Kulczyk Oil Ventures Inc; Eland-Starcrest Consortium; and India's Essar Energy Plc.
Others are UK-registered Afren; Seven Energy in partnership with oil services firm Petrofac; Niger Delta Exploration & Production Plc; Vertex Energy; Shoreline Energy Intern-ational, supported by UK-based Heritage Oil; and Oando Group Plc backed by China's Addax Petroleum and Perenco, an Anglo-French company.
NNPC's move to exercise its rights is coming on the back of an agreement reached by Shell and the Neconde Consortium penultimate Friday for OML 42.
The consortium comprises NestOil Plc, a foremost indigenous oil and gas company belonging to Dr. Ernest Azudialu; Aries Exploration and Production Limited, a member of the Yinka Folawiyo Group; VP Global Limited, a special purpose vehicle fully owned by the community where the block is situated; and Kulczyk Investments Nigeria BV/Kulczyk Oil Venture Nigeria, the Nigerian subsidiary of a Polish-based international investment group.
But Neconde along with the Eland-Starcrest Consor-tium, which signed an agreement with Shell for OML 40 last month, would have to wait a while before transfer of rights in all four blocks to third parties can get final approval because NNPC has not waived its own rights to take up the 45 percent stake offered by Shell and its partners - France's Total and Italy's Eni.
All the blocks are governed by a joint operating agreement (JOA), in which NNPC holds 55 percent, Shell - 10 percent, Total - 10 percent and Agip - 5 percent.
Minister of Petroleum Resource, Mrs. Deziani Alison-Madueke, is said to have advised NNPC to acquire the 45 percent in the blocks as specified under the JOA on behalf of its upstream subsidiary, Nigerian Petroleum Development Company.
Ministry sources conversant with the minister's instruction confirmed that this means all negotiations and preliminary agreements reached by Shell and the bidders would have to be put on hold pending the NNPC's decision on the blocks.
Throwing more light, a ministry official explained that should NNPC decide to exercise its rights, the corporation and/or its exploration and production subsidiary would have to match the offers made by the bidders for the blocks.
This, he explained, will entail Shell giving it a specific period within which NNPC/NPDC will be expected to match the offers.
"It is only when NNPC fails to match the offers within this period that Shell can proceed to tie up loose ends in the sale of the blocks.
"It is at this stage that Shell can sign a share sale agreement transferring its rights to a third party, which would in turn sign a JOA with NNPC," the source said.
He disclosed that the bidders were already in know that there was a possibility that this could happened because Shell had informed them from the outset that the deals will be subject to regulatory (petroleum ministry) and NNPC approval.
But industry sources have expressed reservations over NNPC's capacity to match the offers made by the bidders, some of which are staggeringly high.
Conoil is believed to have offered $1.295 billion for OML 30, followed by $850 million offered by AP. Oando also made an offer of $760 million for the same block, along with a contingent offer to increase it to $1 billion.
"NNPC," explained one source, "is badly run and operates at a deficit, which is an open secret.
"Even NPDC, which should have been its flagship subsidiary, has a comparatively modest output of some 70,000 barrels per day from nine oil concessions (and working interest in another nine non-operated blocks); and reserves of 365 million barrels.
"Like the holding company, NPDC is not profitable, a situation that defies all explanation given that oil prices have been selling at relatively high prices for over a year.
"I don't know how NNPC or NPDC will come up with the money to take up 45 percent in one of the blocks, not to talk of all four," said one industry source.
The source added that the situation makes it all the more imperative that the Petroleum Industry Bill is passed urgently to fast-track the restructuring of NNPC and strengthen its capacity to raise money from local and international markets.
Meanwhile, the agreement reached by Shell and Neconde on OML 42 is the second signed by the Dutch multinational in recent weeks.
OML 42 is located onshore in swampy terrain in Shell's western operations near its Forcados terminal in Delta State. Its biggest oil fields are Odidi and Jones Creek. Others include Batan and Egwa.
Currently one of the fields produces some 20,000b/d, but full production in the block is expected to resume after repairs of vandalized facilities have been effected.
Nestoil and its partners will be expected to sink more oil wells to maximize output from the fields.
At the signing of the Agreement for Assignment (AFA) with Shell, managing director of Shell, Mutiu Sunmonu, congratulated the consortium for its tenacity, which has seen it through to become the most preferred bidder in a very rigorous bid process.
Being the first step in the entire approval process, managing director of NestOil, Dr. Ernest Azudialu, thanked Shell for its support and the confidence it has reposed in the company over the years.
He disclosed that but for the confidence Shell had in Nestoil, which provided the company openings in the oil and gas industry, the story would probably be different today.
Azudialu added that as the company continues to grow, it will also be expanding into other ventures, revealing that Nestoil had established two subsidiaries, Century Power Generation Limited (CPG) and Time Power Global Dynamics Limited (TPGD), as strategic business units to invest in Nigeria's power generation and distribution sectors.
Others areas will be in the area of commercial and social services such as provision of potable water, specialist hospitals, independent power projects, and ensuring the judicious utilisation of water under the control of the river basin authorities in the region.