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2007 Oil Bloc Award: Still On The Right Of First Refusal Abberration By Ifeanyi Izeze
To say that the Right of First Refusal (ROFR) clause introduced by this administration into bidding exercise for award of oil blocks is an aberration of the gospel of this government may sound as an understatement. Actually, the initiative could best be described as a perverse incentive to undeserving select few especially those fronting for officials of the present administration.
The outgoing government no doubt has recorded many firsts in its peculiar effort to reform business activities in the nation’s oil and gas industry. The government successfully upturned existing records as the administration that gave out the highest number of oil blocs than the cumulative awards since independence. And in all the awards, no single company that has money to invest and produce crude oil was awarded a single acreage or even half of it.
As was rightly pointed out by a group of oil and gas industry stakeholders, “The first and only time this concept of Right of First Refusal was introduced in the world, was in the Department of Petroleum Resources (DPR) mini-bid round of 2006.” This represents another first by this government in its management of the nation’s oil and gas matters.
As part of the transparency and accountability doctrine of this government it is imperative for DPR to highlight how much money has truly been invested in each project as promised by these voodoo investors who used such excuse to grab and warehouse lucrative oil blocs, as it seems since then that many investors are re-using the same promises on the same projects to extract even more oil blocks from the Nigerian people through our leaders.
The fraudulent give-away of Nigeria’s lucrative oil blocks have now been shifted to May 11, 2007. In all, 45 oil blocks are dangled for the bonanza which the Federal Government claimed was aimed at increasing the nation’s crude oil reserve to 40 billion barrels and producible capacity of 4.5 million barrels per day of crude oil by 2010. In addition, it will help “build infrastructures for economic and industrial development of the country”. Meanwhile, prospective investors have indicated their interest in 20 out of the 45 oil blocks on the buffet and interestingly, all the 20 are situated in the prolific deep and shallow water frontiers. Nobody is going to the Chad, Anambara, Bauchi or Benue basins.
In the forthcoming send-off and transition handover of the remaining lucrative acreages in the nation’s prolific frontiers (offshore), successful bidders would be required to pay 50 per cent of the signature bonus upfront to the federal government coffer. However, this stringent order would not apply to some anointed few.
The real crux of the matter is that the Presidency has favoured some selected companies by granting them right of first refusal or rather exclusive rights to certain oil blocs on parade. The highly favoured companies include Dangote Exploration and Production Company, a subsidiary of Dangote Group. The company was given the right of first refusal on OPL 274 and had equally expressed interest in OPL 2007 and 290.As part of the concession, Dangote agreed to build 300, 000 barrels per stream day refinery and 5000MW independent power plant. The company has already committed millions of dollars as wager on its promised investment. This is however very commendable and an outright show of patriotism and genuine desire to do business with the federal government in the crucial oil and gas sector.
However, Pramod Mittal’s Global Steel ERM that got Ajaokuta and Delta Steel under mysterious circumstances without paying a dime was also granted right of first refusal on OPL 225 and 275 and second right of first refusal on OPL 226 and 290. Mittal’s company rather than bring Ajaokuta Steels Plant back onstream has been mining the high grade Itakpe iron ore for export and on f-o-c basis. This same company got the right of first and second refusal on high -prospect acreages by promising the federal government that it would construct a 550 metric tones per day offshore gas gathering facility, 550 MW independent power plant (nowhere) and a compressed natural gas facility in Lagos and Abuja without due consideration to where the natural gas feedstock would come from. If this is not fraud, how else can anybody describe such promise?
In addition, another Mittal’s business interest, Oil India Gas Company Mittal (ONGC/Mittal) has also been granted right of first refusal on OPL 250 by pledging to construct Lagos- Benin- Onitsha- Owerri railway lines.
Korea National Oil Corporation (KNOC) accepted to construct Port Harcourt- Maiduguri railway line and as a result was granted the right of first refusal on OPL 2002, 2003, 2005 and 2009.
Remarkably, China National Oil Corporation (CNOC) Nigeria also has right of first refusal on OPL 2005, 2006 and 2009 and second right of first refusal on OPL 226, 231, 2001 and 2011. Another subsidiary of the Chinese Government oil and gas interest, China National Petroleum Corporation (CNPC) which agreed to revamp the Kaduna refinery has right of first refusal on four oil blocs in addition to the four given them in the 2006 mini-bid round making it seven in all.
Other companies granted rights of first refusal on lucrative oil blocks include Statex Global Exploration and Production and Repsol Nigeria Limited. While Startex has right of refusal on three lucrative blocks (OPL 275, 2004 and 2008), Repsol’s privilege also covers three lucrative blocks- OPL 231, 2002 and 2003.
Commendably, my earlier position on the 2007 bid exercise was supported by the group referred to as Concerned Stakeholders in Nigerian Oil and Gas Industry which in an advertorial in the Guardian of Thursday May 3, 2007, point- blankly expressed their discomfort with the entire exercise especially the ‘right of first refusal’ clause in the bid exercise which they described as an “administrative misdirection that can only have negative consequences for the Nigerian economy. This group comprises all the current active and serious players in addition to serious-minded and genuine intending new entrants.
According to the stakeholders’ group “As an aspect of the bidding process, the introduction of Right of First Refusal offers a preferential canopy to undeserving sacred cows at the expense of national interest.”
It would be gross national irresponsibility to ignore the serious matters arising from this concept of grabbing oil blocks which the outgoing administration introduced in their wisdom or otherwise. First, bidders with the Right of First Refusal waiver are exempted from making the mandatory 50 percent deposit of the signature bonus necessary to support the bid. Such advantage to only a select few would enable those anointed bidders not to pay about $25 million which represents about 50 percent of the signature bonus for deep offshore oil bloc. Granting ROFR to about 20 oil blocs on parade means that Nigeria would out rightly loose over $500 million just because managers of the nation’s oil industry want to favour some of their cronies.
“The inclusion of the Right of First Refusal may hold ominous promise for the 2007 bid round in the eyes of some government officials but for an administration that has adopted and declared an open competition policy in all its activities the inclusion of ROFR thus makes a mockery of the much-lauded policy of the Obasanjo administration,” this was the assertion of the stakeholders’ group.
The Concerned Stakeholders in their protest against the concept and its indiscriminate application highlighted some serious aberration in the entire exercise. For example, Global Steel and Sterling Global are one and the same company owned by one man, Pramod Mittal. “The group do not have the technical know how to either fulfill any of their challenging promises to Nigeria or even develop the blocs at hand. Global Steel lacks the financial capacity to make the envisaged investment of $2 billion to justify the ROFR conferred on them.
“China National Petroleum Corporation (CNPC) and China National Oil Company (CNOC) are part of the vast empire of State Owned Enterprises (SOEs) of the Chinese Government. The Chinese Government despite benefiting from an over-pay-out of over $2 billion for the Nigerian Railways, the Nigerian rail system is still the same shape as the Chinese met it. In 2006, they got four lucrative oil blocs based on the ROFR that was hinged on their promise to invest $2 billion to revamp the Kaduna Refinery. Their track record for investment is embarrassing, not a single kobo has been invested in the Kaduna Plant. This repetition is very dubious to say the least, and a very disappointing sign for transparency and accountability in the process.” Today, the Kaduna refinery is as dead as the Chinese met it.
To grant ONGC/Mittal ROFR on OPL 250 in exchange for a promise to build a railroad is scandalous. Reason: This same company in the 2006 mini-bid round promised to invest $6 billion in a refinery, IPP Project, and the same railroad and got away with two lucrative acreages- OPL 279 and 258.
The big question is: Why is this government that has just few days to quit office be hell-bent on emptying the remaining lucrative oil blocs and dashing them to voodoo investors who have never drilled nor produced crude oil from a single well? This is a big assignment and an urgent one too for the Nigerian Extractive Industry Transparency Initiative (NEITI) and their parent body, EITI.
Also, whatever strength that remains with the National Assembly should be muzzled together by the leadership to cancel this privilege or out rightly stop the entire award exercise.
Needless to say that the Concerned Stakeholders, though they have their peculiar problems also, actually spoke the minds of Nigerians when they declared that the Federal Government should review the 2007 bid round right away by canceling all the Right of First Refusals, and extending the bid exercise to a latter date with a view to attracting genuine investors with integrity and the love of the country at heart. In addition, serious- minded Nigerian investors the likes of Dangote should even be encouraged by the government by letting them and they alone enjoy such privilege and financial leverage as entrenched in the Right of First Refusal clause as against this wave of Asian madness. |