If President Muhammadu Buhari’s hope of generating revenue from a marginal field bid initiated last year is not to be dashed, there is an urgent need for his administration to be innovative about it, as most of the successful bidders who have been sent their first letters by the Department of Petroleum Resources (DPR), are grappling with heavy financial burdens due to COVID-19 pandemic, which has had adverse effects on them.
Cash trapped as a result of the pandemic, a significant number of the winner bidders may not be able to pay the bonuses to which they had made commitment during the various stages of the bid round.
DPR had sent out letters, signed by the Chief Executive Officer of DPR, Sarki Auwalu, to the winners instructing them that they had 45 days to the pay the full signature bonus indicated in their bid to the Central Bank of Nigeria (CBN).
Auwalu had earlier stated that the bid would be rounded up by the end of first quarter of 2021, which is about 20 days away from today while the Minister of State for Petroleum Resources, Timipre Sylva had hoped to generate $520 million from the 52 fields put for sale.
Findings by TheCapital reveal that most of the winners have not been up to task with regards to fulfilling their financial obligations.
A source told TheCapital that the winners have been trying to meet with some influential figures in the corridor of power to help relax the terms and conditions with respect to payments, especially as related to the deadline.
“Some of them are even pushing the option of paying by instalments and extension of deadlines. But it is most unlikely that this administration would agree to that because agreeing to that would send a wrong signal. Emerging a successful bidder largely depends on capacity. So questions will be raised about their capacity and why DPR adjudged them capable in the first place,” the said who craved anonymity said.
DPR had to pair some of the winners together for a single field in order to please as many as possible. Even though this did not go down well with the contenders, in hindsight, it appears DPR saw the future when it took that initiative.
The oilfields had previously been owned by majors Total, Chevron, ExxonMobil, and ENI, all of whom were forced to return the fields ten years after their commercial discovery for lack of sufficient development. These majors will still be part of future discussions with the bid round winners as they are operators of the blocks where those fields are located.
In an interview monitored by TheCapital, Anwalu toed the same line with the Minister when he said “we estimate to have not less than $500 million which is very on the conservative side.”
“In the application, you can see that the application fee and the processing fee is 500 million (Naira) per field. We have 477 applications and the cost of data prying and data leasing is averaged between 65,000 to $115,000 and we have about 477 applications. So, for that, you can see that that is what has already been made out of the process.
“Then, for the signature bonus, you know, since it’s a competition, there are those with big pockets that will put crazy amount, whether it is high or low. So, what we did internally was to look at the Competence Person Report and objectively estimate the average signature bonus on that field. After all, the good and valuable consideration for every asset is being computed by DPR.
So, we use that as estimate to guide us on the average signature bonus that we expect, which some fields are high, some fields are low. So, that is what we put together and we estimate to have not less than $500 million which is very on the conservative side,” Anwalu explained.
