The Department of Petroleum Resources (DPR) has revealed that Nigeria is expected to earn about $500 million from the signature bonuses to be awarded for 57 marginal oilfields in the country.
This follows the bid round processes for the marginal oilfields which commenced in June 2020 and would be concluded by the end of the first quarter of 2021.
This disclosure was made by the Director of DPR, Mr Sarki Auwalu, a Director in DPR, while speaking on an Arise Television Programme on Friday, February 5, 2021, in Lagos.
Auwalu pointed out that the objective of the exercise was to deepen the participation of indigenous firms in the upstream sector of the oil industry and provide opportunities for technical and financial partnerships for investors.
What the DPR Director is saying
The DPR boss said that out of the over 600 companies that applied for pre-qualification, 161 were successful and shortlisted to advance to the next and final stage of the bid round process.
Auwalu said, “For the signature bonus, what we did internally was to look at the Competent Person Report and objectively estimate the average signature bonus on that field.
“Some fields are high while some fields are low. We estimate to have not less than $500 million which is very much on the conservative side.’’
He noted that this amount is different from the funds already generated by the agency through the applications and data leasing for the marginal oilfields applicants.
He said the DPR had also gotten approval for the signature bonuses to be paid in either Dollars or Naira to simplify the process for Nigerian companies and reduce pressure on the country’s external reserve.
He said, “Immediately after the payment of the signature bonuses and compliance with the farm out agreement and farm out demarcation area, we will issue the award and bring the companies together for them to arrange how to enter the fields.
”We hope to finish the entire programme before the end of Quarter 1 this year. Going forward, we will give about 90 days during which the Oil Mining License holders will have discussions because no two fields are the same so that we allow these assets to be developed.
”We believe it will increase the reserves of this country as well as provide a lot of stimulants to the economy.’’
He explained that the DPR had learnt from the mistakes made in previous marginal oilfield bid rounds, adding that the 2020 exercise would be devoid of such issues leading to lingering litigations and unproductivity.
While noting that the agency had put measures in place to ensure that the awardees would be credible investors with technical and financial capability, Auwalu said the DPR ensured due diligence on all the applications with the assistance of the Nigerian Financial Intelligence Unit, the Department of State Security and the Federal Inland Revenue Service.
What you should know
- It can be recalled that in June 2020, the DPR announced the commencement of the 2020 marginal oilfield bid round, 18 years after the last bid round was conducted and is opened to indigenous oil & gas firms and investors interested in participating in the exploration and production business in Nigeria.
- The DPR later disclosed that it had shortlisted 161 successful companies, from a list of over 600 companies that applied for pre-qualification, to advance to the next and final stage of the bid round process for 57 marginal oilfields in the country.
- Marginal fields are known oil or gas discoveries on an International Oil Company (IOC)-owned block, where there has been no activity in at least the last 10 years. With the agreement of the IOC, the DPR carves out a piece of land surrounding the discovery and this becomes a Marginal field.