Nigeria has finally embarked on a sell-off of oil fields no longer wanted by oil majors, but the timing is terrible.
Appointed in December by President Buhari, the new head of the DPR, Sarki Auwal as set up the entire program for the sale of marginal oil fields, i.e. those not developed ten years after their discovery. While the timetable is likely to change because of the Covid-19 pandemic, everything is now ready and discussions with interested firms continue despite the health crisis.
Which fields are involved?
The names of the 52 marginal fields the DPR wants to put up for sale are contained in a document dated late March, a copy of which Africa Intelligencehas obtained. Delayed for almost a decade, the whole process, up to the point final contracts are signed, is expected to take six months. Twenty-two of the fields were previously owned by Shell subsidiary SPDC 12 by Chevron , two byENI subsidiary Nigerian Agip Oil Company , 11 by Mobil and five by Total
No company will be able to apply for more than three fields. The pre-qualification jury will consist of three members of the DPR, one from the NNPC, and one from the major that operated the field up for sale. Auwalu wrote in mid-March to Minister of State for Petroleum Resources Timi Sylva with all the information about this process and to ask his permission to get the ball rolling.
Sylva responded promptly, giving his OK in early April. Nigeria’s economic woes encouraged quick action: the country has sought $3.4bn in emergency assistance from the IMF because of the sharp drop in crude prices since February.
Negotiations, however, could be pushed back by several months because of the Covid-19 crisis. Qualifications are now expected in late August or September and contract signatures around December.
How much will the state reap?
The DPR expects the federal government to gain as much as $520m from signing bonuses and tender candidates’ various expenses. Some $2m per oil field will have to be paid upon registration, $3m for the tendering process, and $25,000 for the consultation of geophysical data available by block.
Who can apply?
Marginal fields are reserved for Nigerian firms. The aim is to foster the emergence of local leaders in E&P. In most cases, the majors who failed to develop these marginal fields left them intact because their reserves were too small in terms of the requisite investment. Crude prices, which have ranged between $20 and $35 per barrel over the past three months, won’t make the sale any easier, and most Nigerian firms have had cashflow problems since the onset of the Covid-19 crisis.
