Marginal Field Bid Rounds: Group Faults DPR’s Guidelines

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By Akanimo Kufre (The New Diplomat’s A/Ibom|C/River Correspondent)

Policy Alert, a civil society organization has faulted the recently released guidelines by the federal government for approving bid rounds for marginal fields acquisition in Nigeria, the first in about 18 years.

In May 2020, the Department for Petroleum Resources, (DPR) issued guidelines on which the process would be based.

However, Policy Alert, a civil society organization working to promote economic and environmental justice in Nigeria, has picked holes in the guidelines for the oil and gas marginal field bid rounds being used by the Department for Petroleum Resources, DPR for its ongoing pre-qualification exercise.marginal fields

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Speaking during a meeting with representatives of oil and gas host communities in Uyo, Wednesday, Policy Alert’s Programme Lead for Extractives and Open Data, Mr Iniobong Usen, expressed concern on the continued relegation of community rights to the background in Nigeria’s oil and gas business, adding that the current marginal bid rounds was a missed opportunity to prioritize the development of host communities as a precondition for awarding oil and gas exploration and production licenses.

“In a feeble attempt to address the development of host-communities, the Department for Petroleum Resources, DPR Guidelines for the ongoing marginal field bid rounds state that “consideration shall be given for host community/state participation, as well as commitment to social project and/or proposal aimed at the socio-economic development of the populace.

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“This language is rather minimalist and non-committal, provides too much latitude to potential awardees, and would end up encouraging them to pay lip service to the rights of communities.

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“Owing to the unrestrained underdevelopment and degradation of host and impacted communities, it is our view that the DPR should have put in place a more stringent prerequisite regarding the development of host communities which legally mandates oil and gas companies to create and implement development agreements with host communities. Given that the bid round is happening within a challenging post COVID-19 economic context, with downward oil price trends, reduction in global consumption, and other market factors, leaving community development considerations to the discretion of awardees as the DPR Guidelines have done at a time like this poses a serious risk as such social and community considerations may be pushed to the backseat by the successful bidders. With government policy looking in the direction of reduced production costs, it is important to forestall any situation that could result in social tensions with host communities and invariably spike production costs.” Mr Iniobong Usen said.

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Accordingly, the Department for Petroleum Resources, DPR guidelines states that license holders shall be responsible for community development activities as well as managing interfaces and relationships with host communities.

“The Federal government of Nigeria cannot completely absolve itself of its responsibility to develop host communities of oil and gas producing assets in Nigeria. While awardees should be obligated to engaged with their host communities, what the Community Development/Relationship requirement in the DPR guidelines does is to transfer the obligation of government to develop host communities to oil and gas companies. The Nigerian government collects taxes, royalties, fees, and production entitlements from oil and gas companies, hence, it cannot abdicate its role as the principal duty bearer with regard to host communities.

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“It will be necessary for the DPR to adopt higher standards in the community engagement requirements for the ongoing pre-qualification of companies. This would promote host community participation, commitment to social development, protection of the local environment and conflict mitigation. If the Nigerian government really intends to promote investments and maximize revenue from the oil and gas sector, it needs to provide a peaceful and secure environment for investors to do business. To make matters worse, the current uncertainty around the Petroleum Industry Bills, especially its host and impacted communities component, remains a huge disservice to the communities. A peaceful and secure business environment can only be attained if the communities and ecosystems hosting Nigeria’s oil and gas assets are respected and accorded a fair share of benefits from their natural resources.” Mr Usen observed.

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Essentially, the Federal Government introduced the marginal field to promote marginal field operations and indigenous participation in the Nigerian upstream oil and gas sector; boost production capacity, and increase the country’s oil and gas reserves. However, these objectives may be seriously undermined if the agreements fail to protect the rights of host communities and they are unable to access their fair share of benefits from oil and gas resources.

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The last biding for marginal oil field was conducted in 2002 and stakeholders suggested that opening for bid could raised funds for post COVID 19 boost to sector.

But the implementing agency announced that the bid round exercise is open to indigenous companies and investors interested in participating in exploration and production business in Nigeria.

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For the 2020 oil bid round exercise, DPR announced that a total of 57 fields located on land, swamp and shallow offshore terrains are on offer.

According to the post on DPR website, it added that the exercise which will be conducted electronically, will include expression of interest/registration, pre-qualification, technical and commercial bid submission and bid evaluation.

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From the DPR guidelines on the 2020 oil bid round exercise, and payment by interested bidders shall attract non-refundable chargeable fees as follows, Application fee of N2 million per field, Bid Processing Fee of N3million per field, Data prying fee of $15,000 per field, Data Leasing fee of $25,000 per field, Competent Persons Report of $50,000 and $25,000 for Fields Specific Report.

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With the above, interested bidders are expected to pay a total of $115,000 in statutory fees and another N5 million in local currency.

At the official exchange rate of $360/$1, the 57 oil fields on offer gives N2,364,800,000 including the N5 million payment.

The agency added that all application fees and processing fees are expected to be paid into the Treasury Single Account (TSA) while Signature Bonuses are expected to be paid into the Federation Account.

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Also, fees for data leasing, data prying, Competent Persons Report (CPR) and Field Specific Report should be paid into the National Data Repository (NDR) account for repayment.

The approved guidelines added that applicants must show evidence of technical and managerial capability and must also demonstrate the ability to fully meet the objective of undertaking expeditious and efficient development of a Marginal Field.

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