Conoil makes historical win of Nigerian offshore oil block

Aug 26, 2005 02:00 AM

With an offer to pay $ 100 mm (N 13 bn), Nigeria's indigenous oil producing company, Conoil Petroleum, made history by becoming the nation's first local operator to be awarded a deep offshore oil block at the 2005 Bid Round Conference conducted by the Department of Petroleum Resources (DPR).
However, as the first stage of the bidding conference came to a close, the Federal Government is assured of over $ 2 bn (N 256 bn) as income from the signature bonuses that would be paid for 30 oil blocks that were allocated.

The huge revenue accruing from the sale of 30 oil blocks is, however, coming against the backdrop of increase in the price of petrol to N 65 per litre from the old rate of N 55.50 and with a possible challenge to the hike by the Nigeria Labour Congress (NLC). Director, Department of Petroleum Resources (DPR), Mr Tony Chukwueke, said that following the trend already witnessed in the bid round, the Federal Government would earn more than the $ 1.0 bn revenue target.
The exercise also witnessed the distribution of Nigerian indigenous firms as Local Content Vehicles (LCVs) to the blocks that were won. The LCVs that clinched slots in the oil blocks include Zenon Jovis Petroleum Development Company, owned by Mr Femi Otedola, Chrome Oil promoted by Sir Emeka Ofor and Obat Oil Petroleum.

The Abuja Sheraton Hotel, venue of the bidding conference was jam-packed with representatives of the over 200 companies that submitted bids, the LCVs as well as local and international observers. The highest single signature bonus offered on a block was $ 310 mm by an Indian company, ONGC Videsh, which it offered to pay on a deep water oil block OPL 323. It was followed by the $ 252 mm from Chasewood Consortium for block OPL 289, which was reserved for investors in refinery and the $ 210 mm signature bonus on OPL 280 by Technical Systems.
Two blocks were allocated in the Chad Basin out of the 12 put on offer. They were OPL 733 clinched by Northern Nigeria Development Company (NNDC)/Energem at the price of $ 510,000 and OPL 723 won by Jevkon Oil and Gas/Great Lake for $ 501,000.

Other block winners that emerged were Centrical-CCC, OPL 283; Walter Smith Petroman, OPL 228; Sapele Petroleum belonging to Senator David Dafinone, OPL 274; the consortium of Oando and Camac International Nigeria, OPL 278; Chinese Petroleum Company, OPL 275; and Nigerian Agip Oil Company (NAOC).
Speaking at the opening of the Bid Conference, Minister of State for Petroleum Resources, Dr Edmund Daukoru said the exercise demonstrated Federal Government's resolve in ensuring that the management of the oil and gas sector is transparent regardless of its operational complexity.

“The oil and gas sector is setting a new benchmark in our reform agenda, as we witness for the first time in Nigeria's history, a process of instantaneous award of oil and gas assets to qualified international and local operators," Daukoru said.
He disclosed that the process being used for the block allocation was inspired by countries such as Brazil and Norway, but has been desired entirely by the Department of Petroleum Resources (DPR). The minister noted that the event attracted a wide variety of oil and gas investors, ranging from the majors to the smaller independents, as well as from countries including China, Malaysia and Korea.

He stated that the Nigerian government found it compelling to grant incentives to investors who were prepared to support the country's drive for improved infrastructure, where many others mainly the oil majors, have been reluctant. Consequently, the government has allowed the highest bidder in two deepwater blocks that will be contested 25 % equity while 65 % would be for downstream investors. The appointed LCV will get the remaining 10 %.
Meanwhile, after weeks of anxiety and insinuations, new pump price for Premium Motor Spirit (PMS) otherwise known as petrol, came into being, with the pump price now N 65 per litre. The 30 % hike in the fuel raise came after the Nigerian National Petroleum Corporation (NNPC)raised its ex-depot price of petrol to N 56.71 per litre from N 43.50. However, due to Presidential directive the price of Kerosene remained at the old rate of N 50 per litre while Automotive Gas Oil (AGO) or Diesel is also not affected by this new price change.

In a swift reaction, however, the Nigeria Labour Congress (NLC) called on Nigerians to reject the new price. NLC said that its National Executive Council (NEC) would hold an emergency session in Abuja on the issue.
NNPC had said that it was subsidising the price of fuel to the tune of N 22 per litre, which amounted to N 600 mm per day. The corporation recorded N 238 bn deficit in 2004, largely due to losses from fuel marketing. With this development, the distribution margin due to the oil marketers, dealers and transporters, has risen from N 6.00 per litre to N 8.29 per litre.

The Petroleum Products Pricing Regulatory Agency (PPPRA) had after its quarterly meeting, granted the NNPC approval to adjust fuel prices in order to continue to supply products into the market with a view to charge price that would enable it recover cost.
The PPPRA also noted that since September 29, 2003 petroleum products traders including NNPC have been enjoined to procure and release products into the domestic market based on cost recovery.

The hike in fuel price, would be the seventh time the Olusegun Obasanjo administration has raised the price of the product since he assumed office in May 1999. Petrol price has since gone up from N 20 per litre to the current price of N 65.00. A survey at the Lagos metropolis showed that most petrol stations within the metropolis have adjusted their prices, but were not selling to motorists. This development has led to long queues of motorists in most petrol stations across the metropolis.
At Oando petrol station in Apapa, it was observed that the station attendants were selling at N 70 a litre while Total filling station also in Apapa was selling at N 68 per litre. A visit to AP station close to Race course in Lagos sold their PMS at N 68 per litre while most of the Conoil stations shut their gates to motorists. But at Conoil oil station in Yaba, fuel was sold at the new price of N 65 per litre and in Iyana Ipaja, AP was selling at N 64 per litre.

Similar report from Abuja, the nation's capital also revealed that petrol stations were not selling to motorists who were anxious to buy the product. A senior manager with one of the downstream players said the adjustment in fuel price was a welcome development, but added that the incentive is not good enough to bring about massive importation of PMS into the country.
The manager said that the event in the international oil market will continue to be the determinant factor for marketers participation in importation drive. According to the manager, since the domestic market is driven by price of crude oil in international market, continued high price of crude in the market will have an upward impact in the price of refined products.

The NLC, which has been in theforefront of opposition to fuel price hike, described the latest increase as totally unwarranted, inconsiderate and involve no constructive appreciation of the impact on the economy and public welfare.
In a statement signed by NLC General Secretary, John Odah, the organised labour called on Nigerians to resist what they termed imposition and the desperation of the Federal Government to sentence the people to penury. The petroleum tanker drivers' Kaduna branch of the National Union of Petroleum and Natural Gas Workers [NUPENG] has in Kaduna decried the latest hike in prices of petroleum products arguing that the act would further impoverish Nigerians.

"The NLC strongly deplores the fresh round of fuel price increases by the Federal Government that took effect from 26 August 2005. The increases are totally unwarranted, inconsiderate and involve no constructive appreciation of the impact on the economy and public welfare, which had already been severely impaired through previous increases that were bereftof rationality and economic logic.”
"Above all, the Federal Government has demonstrated absolute contempt for popular sensibility, public opinion and for the weighty resolutions of the National Assembly, the two chambers of which have repeatedly cautioned against any increase", the Congress said.

Chairman of the petroleum tanker drivers' Kaduna branch of the National Union of Petroleum and Natural Gas Workers [NUPENG], Alhaji Nuhu Mohammed, told in Kaduna that they were awaiting directives from the national secretariat, to proceed on an indefinite strike action.
According to him, "the Federal Government has no justifications whatsoever to continue to hike prices of petroleum products since there has been nothing to show for it in terms of provision of infrastructure and social services for the benefit of the people.”

"Continuous hike in the prices of petroleum products is retrogressive and the masses will continue to bear the negative consequences. At the inception of this administration in 1999, the price of crude oil at the international market was the equivalent of N 16.00 and today it is above N 66.00, yet Nigerians are still worse off.”
"We expected that government would channel proceeds from this high price of crude oil towards programmes that would uplift the standard of living of the people, more so in a democratic dispensation."

Also in a another separate reaction the Moderator of the General Assembly of the Presbyterian Church of Nigeria, the Rt. Rev. U.B. Usung has called on the Federal Government to re-think its planned increase in the pump price of petroleum products to save the nation from further economic and social hardships. This was contained in a message on the increases in which the Presbyterian Church leader lamented the level of suffering by Nigerians and said that if implemented, the increases would worsen the economic situation.
"The same reasons were given for previous price increases, but where have they led us? What we need in this country," the Moderator added, "is the effective management of the vast resources of this nation for maximum results and not decisions and actions that appear more punitive than palliative."

The Rt. Rev. Usung stated that the Government's economic policies so far do not appear to have had any significant improvement in the quality of life of Nigerians and cautioned against any action that would cause a further decline in the living standards of the people.
Meanwhile, a civil society group, Tomorrow People's Forum of Nigeria (TOPFON) expressed strong opposition to the proposed fuel price hike and urged the National Assembly to outlaw the Petroleum Products Price Regulatory Agency (PPPRA) over what it described as the 'disservice' the agency had done to the citizenry of Nigeria since it was set up. TOPFON said that though the price regulatory agency was set up in contravention of the Constitution, Nigerians had tolerated its excesses all these while because it was regarded as part of the reform agenda to bring the country to a strong economic footing.

The group urged Nigerian workers to embark on a sit-at-home nationwide strike if the federal government ignores the opposition of the masses and eventually implements the proposed increase in the price of petroleum products.
"It is totally unconstitutional for the Petroleum Products Price Regulatory Agency to fix prices of essential goods including petroleum products. It is the constitutional duty of the National Assembly under the Exclusive Legislative List (Item 62 E). The action of the PPPRA apart from being a disservice to Nigerians, amounts to insult, disrespect, disregard and usurpation of the powers of the National Assembly and such poses the greatest threat to our nascent democracy," the group declared.

National President of TOPFON, Comrade Emmanuel Igbini, said that with the frequent upward review of prices of petroleum products by PPPRA without a commensurate increase in wages and salaries to cushion the inflationary effects on the Nigerian worker, the price regulatory body had shown it lacked a human face and was only interested in doing the bidding of the powers that created it.
The civil rights group expressed dismay that while crude oil sales were booming in the international market and oil exporting nations were deploying the excess oil wealth to boost social infrastructure and welfare schemes for their citizens, Nigeria the sixth largest exporter of oil appeared interested only in the implementation of policies and programmes that leave its populace in poverty.

TOPFON described as deceptive the usual slogan by the federal government that increase in pump price of fuel was a way of discouraging trans-border smuggling and raising more funds for the government's social development programmes, arguing that the previous increases did not translate to better roads, schools, hospitals and job creation as promised, but monies realised there from were siphoned by politicians and their cronies.
Comrade Igbini advocated that if pump price of petroleum products must be increased at this time the federal government and other employers of labour must be prepared to implement the demands by organised.

Source: This Day
Alexander's Commentary

A Future?

After a long editorial silence, it is time again for a comment on world affairs.

Whilst reading through the m

read more ...
Support Our Work