Indigenous oil firms that transferred the majority shareholding of their oil blocks to foreign companies under the sole risk terms and marginal field programme are to forfeit them to the federal government. Such blocks will be acquired to the Nigerian National Petroleum Corporation (NNPC).
The sole risk contract was put in place by the federal government in 1990 to assist Nigerian companies with limited capital to participate in the exploration and production (E&P) of crude oil and natural gas, especially in the offshore terrains.
Oil industry sources said the NNPC is to acquire a majority interest in the oil blocks awarded these Nigerian oil firms under favourable conditions by the federal government to check the carefree sales of their interests to foreign companies under the pretence of securing technical partners. The sources noted that only six out of 50 Nigerian companies awarded blocks have started production of crude oil since the introduction of the sole risk programme in 1990 and marginal field programme in 2001. These include Express Petroleum, Dubri Oil, Consolidated Oil, Atlas Petroleum, Express Petroleum, Amni International Petroleum Development Company and Moni Pulo Petroleum Development Company.
The sole risk contract also allows these companies to carry out exploration and development of their blocks without the oversight of the NNPC. �The abuse of these policies by Nigerian companies have led to contribution of only five percent to Nigeria�s daily production capacity of crude oil by these companies, compared with the federal government�s target of 20 per cent�, the sources said.
The introduction of this policy led to the award of 24 marginal fields in 2003 to encourage participation of Nigerian companies in the upstream sector of the industry. These fields were confiscated from multinational oil firms after they had been abandoned for several years because the fields had low level of production capacity – below 10,000 barrels per day (bpd). The capacity was considered unprofitable by these multinationals.
It is envisaged that the acquisition would check the erosion of the Nigerian content policy by the action of the Nigerian oil firms.
Tony Chukwueke, director, Department of Petroleum Resources (DPR), confirmed at the Nigerian Content seminar organised by the Nigerian Association of Petroleum Explorationists (Nape) in Lagos yesterday that the NNPC is to acquire interest in these blocks under the sole risk terms, using the corporation�s backing regulation put in place by the federal government in 2003.
The regulation permits NNPC to farm-in into any oil block belonging to Nigerian oil firms operating under the sole risk contract. This, he said, would ensure that what exists as regulation now is actually enforced to improve participation of genuine Nigerian companies in the oil and gas industry so as to improve technology transfer and ownership of hydrocarbon assets.
�It is unfortunate that four out of the six Nigerian companies producing crude oil in the industry now have dominance of foreign management and board of directors, contrary to the aims and objectives of the sole risk programme�, he said.
Industry analysts said the new position of the federal government would reduce the number of Nigerian companies hawking oil blocks abroad. �This is a good policy for the first time in the last 50 years of crude oil exploration and development that will increase the contribution of the industry to gross domestic product presently put at 12 per cent�, he said.
Chukwueke said most of the operators of marginal fields have also joined the bandwagon of Nigerian companies selling their equity to foreign companies immediately after the award was approved in order to quick returns in a short term period. Besides Platform Energy and Niger Delta Exploration and Production Company, he said most of the marginal field operators have been lobbying the DPR to secure approval to obtain foreign technical partners so as to sell their interests.
�We have been very careful to grant fresh approval of technical partners for marginal field operators when it became clear that they had no genuine intention than to sell the fields for money. The hawking of the 10 per cent local content vehicle approved during the 2005 licensing round came to the knowledge of and displeasure of Mr. President, which resulted in the suspension of the programme during the mini licensing round this year �, he said.
Financial Standard