Lagos — More than seven months after the Nigerian government awarded eight oil blocks to 16 firms, the parties are yet to reach agreement on several keys issues, thus delaying licensing of more oil blocks.
The government announced the result of the bids last December, but a senior government official told allAfrica last week in Abuja that the government and the oil companies are "still in negotiations." Bids were first invited in March 2000 and the submitted bids were made public in July.
The government had said in March last year that oil block licensing would be an annual event and that the next round of licensing would commence as soon as government reached agreement with the companies. But with the delay in reaching conclusions on the Year 2000 Licensing Round, there are indications that this year's Round may be affected.
The delay aside, the disagreement is also holding up payment of the revenue accruing from the awards. Government is expected to receive about $900 million from the awards.
Government had invited bids for 22 offshore oil blocks, half of them located in the deep offshore region. But only eight of these blocks were awarded to companies - Oil Prospecting Leases (OPLs) 214, 242, 250, 318, 320, 324, and 229.
Although the official did not disclose the areas of the disagreement between the government and the oil companies, an industry source said it had to do with demands by the Nigerian National Petroleum Corporation (NNPC) for a review of the existing Production Sharing Contract between it and its Joint Venture Partners.
The source, close to the Department of Petroleum Resources, regulator of the Nigerian oil and gas industry, said NNPC believes that the current PSC agreement with oil companies is too old and needs amendment to take into account recent developments in the oil industry.
Andrew Uzoigwe, Executive Director in charge of Exploration and Production, at NNPC, expressed the same view last week in Abuja, at a press conference preceding a workshop on local content and indigenous participationin the oil and gas industry in Nigeria.
"The JVs are governed by the Joint Operating Agreement (JOA). In this context, we recognise the agreement is probably overdue for review as its provisions in some areas are no longer in tune with present aspirations of the nation... it makes only cosmetic provisions for the growth of local content and participation of indigenous firms," he said.
The Nigerian government, represented by the NNPC, holds an average of 57 percent in joint venture projects it has with seven oil producing companies, six of them being multinational oil companies. These joint ventures account for about 98 percent of Nigeria's crude production.
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Financial contributions to these projects, as well as sharing of crude oil from them, are based on partners' equity holding.
In the guidelines that announced tender for the blocks, government offered various tax incentives to prospective investors. It stated that tax allowance in the deep offshore and inland basin would be 50 percent while offshore operations in water of depth of over 200 metres would attract 20 percent.
It also announced that operations in offshore areas of water depth of between 100 metres and 200 metres would attract 15 percent.
Nigeria plans to raise its crude reserves from the current level of 27 billion barrels to 30 billion barrels by year 2003, and 40 billion barrels by year 2010.
The government says the the planned increase in reserves is expected to come mainly from the deep offshore region. Most of the blocks in subsequent licensing rounds are expected to come from this region.
