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FG Lost $6bn to DPR’s Poor Administration of Divested Oil Blocks

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  • FG Lost $6bn to DPR’s Poor Administration of Divested Oil Blocks

The federal government lost an estimated $6 billion as a result of the Department of Petroleum Resources’ (DPR) poor administration of the expiring oil blocks, which were sold by the international oil companies (IOCs) between 2010 and 2015 to local firms, Nigerian exploration and production (E&P) operators have said.

The Nigerian operators have, however, stated that all hope is not lost, as the country could earn over $3 billion from the next wave of asset sales if the DPR manages the outstanding onshore oil blocks set to expire soon properly.

DPR has also admitted that it was not prepared to develop the necessary guidelines for the asset divestment programme by the IOCs, as the exercise came as a “shock” to the agency, pointing out that it has learnt some lessons for future exercise.

In the first acquisitions by Seplat Petroleum Development Company Plc and First Hydrocarbon Nigeria in 2010, the IOCs raked in $471 million.

The IOCs were also paid $3.979 billion in the second divestment exercise between 2011 and 2012 by Eland Oil, Starcrest, Neconde Energy, Heritage Oil, Shoreline Energy, ND Western and Oando Energy Resources.

Under the last divestment programme between 2014 and 2015, the IOCs smiled away with $5.954 billion from Seplat, Erotron E&P, Newcross Petroleum, Crestar Integrated Natural Resources, Aiteo Group, Taleveras, Tempo Energy, Belemaoil, West African E&P, and First E&P.

But speaking in Lagos recently at the maiden edition of the Aspen Energy Roundtable, the Nigerian independents argued that 60 per cent of the $10.404 billion paid by the local operators to acquire assets from the IOCs would have gone into the federal government treasury if the DPR had better managed the licences covering the divested oil blocks.

In a keynote speech, the chief executive of Seplat Petroleum Development Company Plc, Mr. Austin Avuru stated that 70 per cent of the money used to acquire the assets came from Nigerian banks.

“The first $471 million was in 2010 and it involved Seplat and OML 26 (First Hydrocarbon), the second was also $4 billion and the third one, which was the most recent was almost $6 billion and you can see the implications of all these.

“So, if you put all these together, you are talking of over $10 billion in spend to acquire these assets. They all usually come to about $2 per probable barrel and about $4-$6 per proven barrel in terms of oil.

“It is not small money and 70 per cent of this money came from Nigerian banks,” Avuru explained.

The Seplat boss, whose company is listed on both the Nigerian and London Stock Exchanges, added that 60 per cent of the monies paid to acquire the assets would have gone into the federal government treasury if the DPR had handled the lease administration properly.

“That is another discussion entirely but I can tell you that 60 per cent of those money would have gone to the DPR if it handled the lease administration properly.

“But this is all the money that we, as Nigerian companies using Nigerian banks, paid to the IOCs and they took the money away. I think that will be a lesson for the next lease administration and bid rounds and renewals because if you have a title to these leases, especially leases that are due to expire and if you don’t take the title, the one who has the title will sell that title for all of this money,” Avuru explained.

The nine Oil Mining Leases (OMLs) – 18, 24, 25, 26, 29, 30, 34, 40, and 42, sold by Shell and its partners between 2011 and 2015 would expire in 2019.

Avuru said there were issues in the administration of the country’s oil and gas resources, which he described as wasting resources, adding that the country’s resources should be administered to ensure that “maximum value is captured without expropriation”.

“We are the victims knocking our heads together and paying three times more for these leases because we have no option. There are no leases available. So we knock our heads together and then the IOCs are smiling.

“We could have paid one third of what we paid to the government and everybody will be happy,” Avuru added.

The Seplat CEO, however, stated that there were still about $12 billion in assets in the portfolio of IOCs that will be divested, adding that the federal government could earn over $3 billion if the DPR manages the licences properly.

“There are still about $12 billion of the IOCs’ portfolio that could still be divested, given the right opportunities, depending on how DPR plays it.

“There could still be $3 billion cash available to DPR, depending on how the DPR handles the administration of those leases that are due to expire,” he said.

Shell’s 17 onshore oil blocks would expire in 2019.

In his contributions, the Managing Director of ND Western, which paid $600 million for OML 34, Dr. Layi Fatona, noted that the federal government did not create the environment for the IOCs to plough back the money realised from the sale of the assets.

Fatona also noted that some of the assets were over-priced but exonerated the IOCs, as the transactions were based on a willing buyer-willing seller basis.
He blamed the government for not creating the environment for the oil majors to reinvest in the country.

“But the most important thing is that when you look at the spending, all of the money came mostly from the Nigerian banking system. And I ask a pertinent question: should we call this capital flight?

“All that money that was taken from the Nigerian banking system by essentially indigenous E&P companies and paid to the IOCs left the shores of this country?
“How much of this money ended up as a backward reinvestment in the Nigerian petroleum industry?” he asked.

“So it is not about capital flight, it is about the fact that we have failed holistically to create the environment where the seller of an asset who makes a profit believes sufficiently in this society and puts all the money back into the system,” he said.

In her response, the Head of Upstream Monitoring and Regulation at DPR, Pat Maseli admitted that the regulatory agency was not prepared for the divestment programme at the outset.

“For the divestments and all that, that came – you know, it came as a shock. Will I say as a shock – we were not really prepared as regulators to develop the guidelines.

“But we have learnt our lessons and we are progressing them and making them better,” she said.

She added that the agency had also learnt its lessons in the marginal bid rounds.

“By the time we have the next bid round, it will be better than the previous ones, where we had forced marriages and it was not working and people were just rent seekers. This time, it is going to be different,” she added.

However, in her remarks, a former President of the Commonwealth Lawyers Association, Boma Ozobia said the IOCs should not be accused of capital flight for selling their assets.

“If you are talking about capital flight for someone who has made an investment and is exiting, you are approaching it in the wrong direction – you are going to put me off from coming back into your jurisdiction to invest again because the idea of making the investment is that I can exit at some point,” she said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Equatorial Guinea to Launch Vision on Post-COVID Energy Transition Plans with Report and Film

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The Africa Energy Series (AES): Equatorial Guinea 2021 campaign – comprising a report and a documentary – will serve as a critical tool to navigate the energy investment landscape in one of Africa’s more mature petroleum producing markets; Equatorial Guinea has largely been able to sustain its pace of engagement with global investors in the face of COVID-19, forecasting $1.1 billion in FDI in oil and gas activities in 2021; The third edition of the AES: Equatorial Guinea 2021 report will be released at Africa Oil & Power’s U.S. Africa Energy Forum 2021 networking event in Washington, D.C. this July.

Africa Oil & Power is proud to announce the upcoming launch of its Africa Energy Series (AES): Equatorial Guinea 2021 investment report and documentary, as part of a multimedia campaign set to champion the domestic energy sector and shape the West and Central African energy narrative.

The dual-language publication will target key developments driving a post-COVID-19 recovery in Equatorial Guinea – namely, the growth of petroleum and power industries; regional gas monetization initiatives; a clean energy transition; the impact of environmental, social and governance criteria; and expansion of the national diversification agenda.

A 30-minute documentary will provide a visual complement to the publication, featuring first-hand interviews with government officials, private sector players, industry regulators and energy experts discussing Equatorial Guinea’s unparalleled ambition and future plans.

“From spearheading regional gas monetization initiatives to drilling new exploration wells as early as Q2 2021, Equatorial Guinea continues to cement its reputation as a progressive, dynamic force on the African energy stage,” said H.E. Gabriel Obiang Lima, Minister of Mines and Hydrocarbons. “The Africa Energy Series publication in conjunction with a detailed documentary format, gives us the voice to showcase the depth of our full-stream investment opportunities to a global audience.”

Since the onset of COVID-19, Equatorial Guinea has been proactive in safeguarding opportunities for foreign investors and continuing to drive capital into its hydrocarbon resources. In February, Chevron achieved first gas flow from the successful execution of its Alen Gas Monetization project, a $475-million investment representing the first phase of Equatorial Guinea’s Gas Mega Hub masterplan.

The Ministry of Mines and Hydrocarbons is currently promoting several capital-intensive projects – including the construction of modular oil refineries, a gold refinery, liquefied petroleum gas strategic tanks, a urea plant and the expansion of a compressed natural gas project – which are open for investment. Last December, the Ministry of Mines and Hydrocarbons announced a forecast of $1.1 billion in foreign direct investment in oil and gas activities in 2021.

Active in Equatorial Guinea since 2015, AOP released its first AES documentary on the country in 2016, followed by investment reports in 2018 and 2019.

The AES: Equatorial Guinea 2021 investment report will be launched at the U.S. Africa Energy Forum 2021 online seminar and in-person networking event in Washington, DC. (July 12). The documentary will be launched at the U.S. Africa Energy Forum conference in Houston (October 4-5) and broadcast globally on news networks.

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U.S. Africa Energy Forum 2021 Launches: Promotes U.S. Role as Primary Investor in African Energy

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The U.S. Africa Energy Forum 2021 – organized by Africa Oil & Power, in partnership with the African Energy Chamber’s U.S.-Africa Committee – will foster alignment between U.S. and African governments’ energy policies and highlight African oil, gas, power and renewable projects across the energy value chain for U.S. investors; the multi-day forum unites U.S. and African policymakers, energy executives and industry leaders to create new linkages and foster discussions that drive long-term policy formation and project execution; the in-person, two-day summit and gala dinner will be hosted in Houston, Texas (October 4-5, 2021) and an online seminar and in-person networking event will be held in Washington D.C. (July 12).

Africa Oil & Power (AOP) and the African Energy Chamber are excited to announce the launch of the first-ever U.S. Africa Energy Forum (USAEF). This event aims to create deeper cooperation between the U.S. and Africa on energy policy, to reach alignment on long term sustainability goals, to stimulate greater American investment in the African oil, gas and power sectors, and to engage and reposition the U.S. as the primary partner of choice for African energy developments.

Under the theme “New Horizons for U.S. Africa Energy Investment” the forum will explore diverse foreign investment and export opportunities across the continent, including natural gas as a vital fuel for the energy transition; energy storage and battery minerals; Africa’s place in global energy supply chains; the benefits of the African Continental Free Trade Area; evolving energy technologies and how they relate to the future role of petroleum resources; and on-and off-grid power developments.

An online seminar and in-person networking event will be held in Washington D.C. on July 12, 2021, building up to the in-person U.S. Africa Energy Forum summit and gala dinner, to be hosted in Houston, Texas, on October 4-5, 2021. Africa Oil & Power and the African Energy Chamber invite all U.S.-based companies with an interest in engaging with African industry leaders and project developers to participate in the USAEF Houston summit.

This initiative comes at an important juncture in U.S.-Africa relations. The Biden Administration’s announcements of its intentions to proactively build a stronger U.S.-Africa partnership coincides with the fact that African projects are seeing rising interest from U.S. companies and lending institutions alike. The USAEF event is thus dedicated to enabling dialogue between its participants that advances these developments.

“Our mission has always been to showcase the resource potential that Africa has to offer while at the same time showing its growing preference for sustainable energy policies and technologies. Toward that end, we hope it becomes evident that Africa does not just want investment capital: it wants smart capital and an accompanying partnership with the investors,” says James Chester, Senior Director of Africa Oil & Power. “The U.S. Africa Energy Forum represents the first-of-its-kind opportunity to catalyze U.S. participation in Africa’s energy transformation – via technology, policy support, capital injection and skills development – and turns a new page in the chapter on global energy investment.”

In partnership with the African Energy Chamber’s U.S.-Africa Committee, AOP will introduce American companies to African opportunities and advance an agenda of sustainable, long-term investment in African energy and other sectors by U.S. organizations.

“The rise in support from the U.S. to the continent is a credit to Africa itself, which is increasingly viewed as a favored destination for global investors, multilaterals and export credit agencies,” says Jude Kearney, President of Kearney Africa and former Deputy Assistant Secretary for Service Industries and Finance at the U.S. Department of Commerce during the Clinton Administration. “Africa continues to command a healthy share of global FDI in oil and gas industries. It has for decades shown that investment in those sectors is favorable compared to other jurisdictions and can be successful by many measures. Even as Africa and the rest of the world wrestles with a global pandemic, Africa’s energy sector shows vitality and resiliency – not only in hydrocarbons but in regard to new opportunities in mining, liquefied natural gas, and agriculture.”

Both African governments and private sector sponsors of African energy projects value highly the combination of investment and partnership that US investors famously convey. The USAEF seeks to enable successful partnerships between its participants such that the energy development goals of U.S. investors and strategic partners and their African counterparts can be achieved.

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Angola’s Petroleum Agency Outlines Timeline for Ongoing Bid-round

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Angola’s National Oil, Gas and Biofuel’s Agency (ANPG) has outlined its timetable for the evaluation of its ongoing 2020 bid round, as interest in the acreage on offer continues to grow.

In line with its statutory duties as national concessionaire in charge of the attribution of petroleum exploration blocks, the ANPG has sought to adjust its processes to remain competitive in the current market environment, which is dominated by concerns around COVID-19, long-term demand considerations and stiff competition from new and promising frontiers like Guyana and Suriname.

The ongoing bid-round is a manifestation of Angola’s strategy for the continuous attribution of petroleum concessions 2019-2025 which was approved and codified by Presidential Decree no. 52/19, of 18 February 2019. The aim of the strategy is to provide access to promising acreage to competent explorers in an effort to increase geological knowledge about Angola’s hydrocarbons potential and ultimately increase proven reserves.

A hybrid online and physical roadshow for the current bid-round is scheduled for April 6 in at the Talatona Convention Centre in Luanda. This event will provide the opportunity for investors to engage with the agency regarding the blocks on offer, the data packages and the accessibility studies, as well as touch upon environmental, logistical and local content issues.

This will kickstart a series of both digital and in-person roadshows and technical presentations to promote the blocks to be awarded in key international markets. The acreages on offer include:

  • Three blocks of the lower Congo onshore Basin CON1, CON5 and CON6
  • Six of the Kwanza onshore Basin (KON5, KON6, KON8, KON9, KON17 and KON20)

In line with the provisions of Presidential Decree No. 86/18, of 2 April 2019, which establishes the rules for the organization of bid rounds, the ongoing 2020 bid round will unfold as follows:

  • Tender Launch
  • Proposal submission
  • The opening of offers from potential suitors in a public setting
  • The evaluation and qualification of proposals
  • The submission of the evaluation report to the Ministry of Mineral Resources and Petroleum and Gas
  • Contract negotiation with the winners of the bid-round
  • Signature

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