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var sbtitle3994=encodeURIComponent(Obasanjo cr...Read the full article.

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That threat by the unnamed adviser to the President-elect, may if carried out, mark the beginning of the long awaited "Levi Mwanawasa syndrome" which may lead to discoveries of titanic proportions. :mad: :mad:

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This "fire sale" of oil blocks flies in the face of agreements already made through a proper bidding system earlier. The blatant descrimination in favour of friends of the President has provoked lawsuits from the oil majors. This will have long-term deleterious effects on the Nigerian oil industry as unknown and incompetent 'local companies' without any track record or expertise have been awarded trophy blocks.The oil market reporter, Platts, disclosed that:

ExxonMobil sues Nigeria over auctioned oil blocks

Platts 22/5/07

ExxonMobil has sued the Nigerian government over the auction of its offshore oil block at the recently held bidding round, according to petition papers made available by the company on Tuesday.

In a suit filed in an Abuja court, ExxonMobil asked the court to direct the government to reverse its sale of Oil Mining Lease 69, which was auctioned to Tenoil Petroleum and Energy Services in the 2007 licensing round held on May 11. Energy Minister Edmund Daukoru and the Justice Minister Bayo Ojo were also named as defendants in the lawsuit.

ExxonMobil, which became the second multinational oil company to challenge Nigeria over the award of some oil blocks at the licensing round, said the auction of OML 69 was “done in flagrant disobedience of subsisting order of the court." Before the auction, the court had granted an order that embargoed the sale, ExxonMobil said, adding that it had the "rights, interest and legitimate expectation on OML 69 by the federal government" via a deed dated March 11, 1971.

Shell had also sued the Nigerian government over the revocation of two of its oil blocks, OML 13 and 16, and subsequent auction of the acreages at a bidding round. Both Shell and ExxonMobil were among oil majors and large independents that stayed away from the latest licensing round in protest against the grant of preferential rights on some of the blocks to Asian and Nigerian indigenous companies. Controversy continued to trail the licensing round as indigenous producer Conoil had threatened last week to sue the Department of Petroleum Resources over its refusal to award it rights to two oil blocks, OPL 290 and 2007, won by the company.

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=ocnus;177667>This "fire sale" of oil blocks flies in the face of agreements already made through a proper bidding system earlier. The blatant descrimination in favour of friends of the President has provoked lawsuits from the oil majors. This will have long-term deleterious effects on the Nigerian oil industry as unknown and incompetent 'local companies' without any track record or expertise have been awarded trophy blocks....

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Can someone please call this Ocnus of a fellow into order in this village?

Methinks his condescending and unbriddled arrogance in his comments about Nigerian affairs are totally unbecoming!

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Tisha,

Ocnus is entitled to his opinions as you are entitled to yours - provided the rules of engagement are not flouted. There's nothing arrogant about ocnus sharing his views on Nigeria, just as we freely share opinions about other countries here and elsewhere. In fact, most of his posts are VERY enlightening.

Back to the topic....

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=Big-K;177712>Tisha,

Ocnus is entitled to his opinions as you are entitled to yours - provided the rules of engagement are not flouted. There's nothing arrogant about ocnus sharing his views on Nigeria, just as we freely share opinions about other countries here and elsewhere. In fact, most of his posts are VERY enlightening.

Back to the topic....

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...merci big k...i have cautioned big tisha that old age no bi sign of wisdom...now we dey see'm....:D :D :D

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=ocnus;177667>This "fire sale" of oil blocks flies in the face of agreements already made through a proper bidding system earlier. The blatant descrimination in favour of friends of the President has provoked lawsuits from the oil majors. This will have long-term deleterious effects on the Nigerian oil industry as unknown and incompetent 'local companies' without any track record or expertise have been awarded trophy blocks.The oil market reporter, Platts, disclosed that:

ExxonMobil sues Nigeria over auctioned oil blocks

Platts 22/5/07

ExxonMobil has sued the Nigerian government over the auction of its offshore oil block at the recently held bidding round, according to petition papers made available by the company on Tuesday.

In a suit filed in an Abuja court, ExxonMobil asked the court to direct the government to reverse its sale of Oil Mining Lease 69, which was auctioned to Tenoil Petroleum and Energy Services in the 2007 licensing round held on May 11. Energy Minister Edmund Daukoru and the Justice Minister Bayo Ojo were also named as defendants in the lawsuit.

ExxonMobil, which became the second multinational oil company to challenge Nigeria over the award of some oil blocks at the licensing round, said the auction of OML 69 was “done in flagrant disobedience of subsisting order of the court." Before the auction, the court had granted an order that embargoed the sale, ExxonMobil said, adding that it had the "rights, interest and legitimate expectation on OML 69 by the federal government" via a deed dated March 11, 1971.

Shell had also sued the Nigerian government over the revocation of two of its oil blocks, OML 13 and 16, and subsequent auction of the acreages at a bidding round. Both Shell and ExxonMobil were among oil majors and large independents that stayed away from the latest licensing round in protest against the grant of preferential rights on some of the blocks to Asian and Nigerian indigenous companies. Controversy continued to trail the licensing round as indigenous producer Conoil had threatened last week to sue the Department of Petroleum Resources over its refusal to award it rights to two oil blocks, OPL 290 and 2007, won by the company.

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Ocnus, is it possible to have access to the owners/shareholders of the indigenous companies that were awarded the oil blocks?

Generally Nigerians, except a few, are clueless regarding the state of our oil resources. How a few individuals are cornering every sector of the economy is beyond me.Our intelllectual elites for obvious reasons have shied away from that aspect since some benefit from some of the deals going on.Some would rather co-opt a few ignorant ones to write letters on their behalf.It would be nice to have information on the local players and what value they would adding.

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=UncleTisha;177686>Can someone please call this Ocnus of a fellow into order in this village?

Methinks his condescending and unbriddled arrogance in his comments about Nigerian affairs are totally unbecoming!

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It is the tragedy of the country that a foreigner knows more than our intellectuals/letter writers know about our country.Possibly they know, but choose not to mention it. I think this man his doing all us a favour about the state of the business dealings going on, at least he has his sources and most of his information have been accurate.He might not be doing it for altruistic reasons but he is sure getting the work done.

I haven't seen him mention he will condescending yet like a professor I know, but the information he has provided has been of immense value, and is making some of us look life fools and lost souls. While we are busy struggling to survive and eating off the crumbs from the masters table in overseas country, foreigners are busy becoming zealous about our country for its lucre. This is the tragedy of modern day Nigeria.

Some folks will protest in George Bush about this very soon.

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=ocnus;177667>This "fire sale" of oil blocks flies in the face of agreements already made through a proper bidding system earlier. The blatant descrimination in favour of friends of the President has provoked lawsuits from the oil majors. This will have long-term deleterious effects on the Nigerian oil industry as unknown and incompetent 'local companies' without any track record or expertise have been awarded trophy blocks.The oil market reporter, Platts, disclosed that:

ExxonMobil sues Nigeria over auctioned oil blocks

Platts 22/5/07

ExxonMobil has sued the Nigerian government over the auction of its offshore oil block at the recently held bidding round, according to petition papers made available by the company on Tuesday.

In a suit filed in an Abuja court, ExxonMobil asked the court to direct the government to reverse its sale of Oil Mining Lease 69, which was auctioned to Tenoil Petroleum and Energy Services in the 2007 licensing round held on May 11. Energy Minister Edmund Daukoru and the Justice Minister Bayo Ojo were also named as defendants in the lawsuit.

ExxonMobil, which became the second multinational oil company to challenge Nigeria over the award of some oil blocks at the licensing round, said the auction of OML 69 was “done in flagrant disobedience of subsisting order of the court." Before the auction, the court had granted an order that embargoed the sale, ExxonMobil said, adding that it had the "rights, interest and legitimate expectation on OML 69 by the federal government" via a deed dated March 11, 1971......

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Obasanjo and his henchmen will forever cover their heads in shame for the unbelievable events of the last eight years in general and that of the last three months in particular....The arrogance of auctioning national assets brazenly to cronnies without following the deu process is so revolting that it is a matter of time such actions elicit a confronting revolt...These events cant last...time will tell..,

But mauling over this "deed" between ExxonMobil and the Nigerian government, a deed that was signed on March 11,1971, that is couple of days after the Nigerian - Biafran war, I am starting to wonder wether this "deed" is not one of the agreements that did Nigeria in???:confused1 :confused1 :confused1 , ..Looks to me like this is one of the "compensational measures" , activated by an over excited thirty something year old military buffoon, a nonentity of a Head of State named Gowon, to thank some devilish multi - nationals and their imperialistic mother states for an endless supply of bullets and bazookas that wasted millions of innocent Nigerian lives in order to keep an unworkable union (that seems to work only for the ExxonMobils of these world) together,....deeds that share a family resemblance with the kind of agreement that forced the good people of Bakassi to become Camerounians overnight before our very eyes!:mad: Is it not high time we clean up some of these "deeds" of evil???

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Felix, you almost beat me to it…

Background reading:

Who’s Afraid of Tony Chukwueke?
Behind The Figures By Ijeoma Nwaogwugwu,Email:ijeomanwaogwugwu@thisdayonline.com, 05.14.2007

The 2007 oil licensing bid round has come gone. But like most processes with the potential to make billions of dollars several years down the line, it has been mired in controversy. Shell Petroleum and Development Company (SPDC), for one, got an interim injunction barring the Ministry of Energy and the Department of Petroleum Resources (DPR) from including two oil blocks, OMLs (Oil Mining Lease) 13 and 16, in the 2007 bid round held last Friday. Both blocks had been leased to Shell in 1989, but were revoked last year by DPR for failing to commence production from the blocks believed to be prolific.
DPR had revoked the blocks in compliance with existing regulations that had not been enforced for decades requiring oil companies to bring their concessions on stream within ten years of their conversion from oil production leases (OPLs) to oil mining leases. Although DPR, having obtained a legal mandate from the Ministry of Justice, went ahead to offer the two blocks now carved out as OPLs 2001, 2002, 2003 and 2004 to potential bidders during the bid round, it was cautious enough not declare a winning bidder for any the blocks pending the determination of the law suit brought against it by Shell.
Added to Shell's suit are concerns raised by several individuals within and outside the oil and gas industry over the rush by the outgoing administration to proceed with the licensing round in the dying days of this government. The word on the street is that the bid round would provide an avenue for top ranking officials and their cronies to secure choice oil concessions before the government winds down and is intended to undermine the incoming government of Umaru Musa Yar'Adua.
There is also the niggling issue that has been brought to the fore by multinationals in the sector hiding under the banner of concerned stakeholders about the impropriety of the introduction of the concept of right of first refusal into the bid process. The right of first refusal was first introduced in the 2005 bid round and grants an oil company or bidder preemptive rights over oil blocks it has expressed interest in as long as it can match the highest bid offered by a contending party during the bidding conference. The company is granted the right of first refusal or preemptive rights on certain blocks once it commits to investing additional resources in the establishment of downstream projects in the energy sector and/or non-oil and gas strategic projects such as railroad construction and agriculture.
However, the right of first refusal as a concept has been roundly criticised by oil industry insiders believed to be the oil multinationals who consider it a travesty of justice, as according to them it gives some undue advantage to mainly oil companies from Asia and some Nigerian firms that have committed to building various infrastructure projects in the downstream energy sector and the transport sector. The beneficiaries include Global Steel Holding/Sterling Global of India that is being promoted by Pramod Mittal, brother of the multi-billionaire and international steel magnet, Lakshmi Mittal. Others are two Chinese state-run oil firms ? the Chinese National Petroleum Corporation (CNPC), Chinese National Oil Offshore Corporation (CNOOC), Korean National Oil Corporation (KNOC), ONGC/Mittal and Dangote Oil and Gas, Repsol of Spain and Malaysia's Petronas.
Ironically, the man at the centre of the storm for introducing new rules to the oil licensing rounds is an oil industry insider and a product of the oil majors. Having worked for almost two decades for Shell in Nigeria, Algeria and the UK, Anthony Chukwueke who is currently the Director, DPR is quite conversant with the tricks of the trade and the pressure that can be mounted by the powerful multinationals and their home governments to compel the Nigerian government to do their bidding. But he is prepared to take them on by implementing measures that would reform the upstream and downstream segments of the oil and gas sector.
During series of meetings with this writer, he disclosed that those who have taken umbrage with the introduction of the right of first refusal are companies which have the most to lose. The coupling of the lucrative upstream segment of the oil industry, according to him, along with the not-so-lucrative downstream segment characterised by lower profit margins is not an unusual concept that is practiced worldwide.
It is simply a measure designed to develop an integrated oil and gas sector in which investors operate in both segments and create greater job opportunities to unemployed youths in the oil rich Niger Delta region, he explained. In order to ensure that a level playing field is created, companies which have preemptive rights to some oil blocks are expected to match the highest bid for the said blocks, failing which the blocks shall go to the highest bidder. This makes a lot of sense.
But what happens in the event the company with the right of first refusal matches the highest bid for a block, pays the signature bonus and reneges on earlier commitments to invest in the construction of a refinery or power plant? To forestall the likelihood of such an event, Chukwueke indicated specific mechanisms have been built in by the DPR to serve as a deterrent. This entails the deposit of an associated collateral upfront, which translates to $1 million per 10,000 barrels per day capacity for oil projects such as refineries (or per 10 million standard cubic feet capacity for gas related projects such as IPPs and gas gathering and pipeline projects).
So for instance, a bidder that has committed to the construction of a 100,000 barrels per day refinery would have to demonstrate its seriousness towards the construction of the downstream project by depositing $10 million. If the bidder fails to commence the construction of the project(s) within 18 months of the execution of a production sharing contract, the funds will be forfeited to the Federal Government. In addition, the oil block will be revoked by DPR for non-compliance with agreement.
That being the case, what exactly do the so called 'concerned stakeholders' in the oil gas and sector who have been advertising in all the major dailies have against these measures designed to encourage development in the downstream energy sector and other strategic sectors? It is an incontrovertible fact that save for the 60,000 barrels per day old Port Harcourt refinery built by Shell in the 1960s, no other oil major has indicated interest in the establishment of refineries in this country. Even Exxonmobil which promised to build an independent power plant in Bonny in 1998 is yet to commence the construction of the 400 MW plant.
The reluctance by the oil majors to invest in downstream operations has its reasons. The first being that profit margins are rather thin in downstream operations; the second is the lack of proper deregulation of the pricing regime for petroleum products sold in the country; and the third is that liquefied natural gas projects are mostly targeted at the export market and not for domestic consumption. The outcome is that refineries, petrochemical and fertilizer plants, and gas gathering schemes with the potential to create employment opportunities for several thousands of Nigerians are not being invested in.
Meanwhile, the grossly inefficient Nigerian National Petroleum Corporation (NNPC) prefers to import all its petroleum products rather than ensure that its refineries function. The downside of this regime is that Nigeria is being starved of a sustainable downstream segment with the potential to export extra capacity to neighbouring West Africa. The other potential danger to Nigeria is that high oil prices continue to make alternative energy fuels like ethanol attractive to produce. So if Nigeria falls short of fully exploiting its hydrocarbon potential, the country will be the biggest loser for it.
The fact is that the implementation of the right of first refusal provides the perfect chance for the country to develop both the downstream and upstream segments simultaneously. The upstream oil and gas sector which has been dominated by the oil multinationals is very insular and has always shown a preference for investing only in projects with huge profit margins, especially in times of high oil prices. Worse still, the majors would on occasion sit on dormant oil blocks such as Shell's OMLs 13 and 16 that are non-producing, preferring instead to trade on their reserves in order to shore up the value of their shares in international stock markets where they are listed.
It is this sort of detrimental habits the DPR is trying to stop by enforcing existing rules and regulations in the oil sector through the revocation of oil leases, and offering them to other companies that are eager to exploit them and at the same time invest in the downstream sector. Moreover, the joint venture programmes that cover almost 90 per cent of all activities in the Niger Delta are beginning to lose the appeal they once held for the oil companies. Community disturbances, hostage takings and general insecurity in the region have compelled the oil firms to migrate their operations to the deep water basins where they enjoy very attractive frontier terms under the production sharing contracts entered into with NNPC in 1992.
But all this is about to change under DPR. The industry regulator has in the last two years pushed NNPC to renegotiate the terms and conditions contained in the PSCs such that Nigeria derives maximum value from its hydrocarbon resources. As a result, production costs that are biddable have been capped under the new PSCs, and profit sharing between the oil company and the Federal Government is now applicable from the minute the oil blocks start to produce.
Previously, the Federal Government was not entitled to a share of the profits until the oil majors as the sole risk takers in the development of the oil blocks had recovered their cost of production which, curiously, keeps mounting long after expenditure should have ordinarily dwindled. Also, royalties that were not being paid by the oil firms under the first batch of PSCs signed in 1992, have been introduced since 2005.
The reforms being introduced by Chukwueke since his appointment to head DPR have been far reaching indeed. It has ruffled the feathers of the oil giants and even NNPC that has been getting away over the years with the discretionary allocation of crude oil sales to well connected commodity trades and Nigerians. It has engendered competition during the oil licensing rounds which by Friday had garnered an additional $615.45 million in the form of signature bonuses into the coffers of the Federal Government.
Prior to the introduction of the competitive tender process and right of first refusal in 2005, oil blocks were awarded on a discretionary basis. The fight to revert to pre-2005 conditions is starting to gather momentum and is bound to get dirtier. But for the sake of his country, Chukwueke needs to trudge along undeterred by side distractions. Let's just hope the government has the good sense to stand firmly by him all the way.

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Ocnus raised several issues:
(i) transparency of the bidding process
(ii) granting of concessions to unknown and incompetent 'local companies'
(iii) lawsuits from the oil majors

I have serious concerns about the first issue; I have reservations about the second issue; I am irritated by the third. Here’s why.

ISSUE 1: This is a no-brainer; we definitely cannot afford to award blocks to cronies via fraudulent means. Very terrible strategy!!

ISSUE 2: It is risky to grant concessions to ‘untested’ local companies. My reservations: even if you say they are unknown (is Conoil unknown?), how can you tell that they are ‘incompetent’? It can be argued that oil exploration is technical bla bla bla but didn’t so-called oil majors start from somewhere? They can always have technical partnerships – Globacom, an ‘unknown, incompetent’ company has a successful telecoms operation in Nigeria; Dangote, a TRADING company built and has commissioned a world class, $1bn cement factory. Oil exploration is not rocket science; if not now, when will local companies start building capability? Besides, the world is a global village, and technical expertise can be easily obtained.

Without prejudice to issue 1, local companies should be actively encouraged!!

ISSUE 3: As highlighted in the pasted report, any oil company, major or not, that fails to develop its reserves should have them revoked. Mobil has the licence since 1971, according to Ocnus. Did you read that? 1971!! 36 years ago.

Mobil failed to develop this block – just kept it on its books to make its financial status, in terms of reserves, look better. The implication – Nigeria loses revenue that would accrue from the exploitation of this oil field. Now, the same Mobil that is sitting on Nigeria’s oil reserves is not prepared to go into any venture that is not ‘profitable’ – power supply, refinery etc. What the govt has now said is – you can’t eat your cake and have it: either you invest in ‘unprofitable’ ventures that the country needs, or you leave our oil!! Its time for Nigeria to use what we have to get what we want!!

Now, what will be the effect of the lawsuits? I think the FG should ‘encourage’ Mobil to withdraw the suit like Russia did with Shell (more about that below). Nigeria is too big a market to ignore in terms of oil exploration – even during Abacha’s regime, Mobil et al were doing business in Nigeria. Its time we put our interests first, not that of Mobil or any other corporation.

Now, before you guys ask for my head about going back on contracts that are clearly not in the national interest, what happened between Russia and Shell in the Sakhalin-II project is instructive. Shell doubled cost estimates after signing the deal – this is LEGAL - but it means reduced profit for Russia. Russia then withdrew environmental permits, citing dangers to ‘salmon streams’ – perfectly LEGAL too!!

There was some noise about ‘long-term deleterious effects on the oil industry’ but Russia knew it was in its interest to have a bigger stake in the project due to Shell’s cost overruns. In the end, Shell was ‘encouraged’ to negotiate and the Russian govt company Gazprom took over 51%.
Ref: http://en.wikipedia.org/wiki/Sakhalin-II

Moral: National interest comes first!!! If Mobil and other oil majors are not interested in developing infrastructure in Nigeria, then they are welcome to stay away from oil bidding rounds; if they have reserves that they are ‘sitting on’, they should give such up for companies that are interested in infrastructure projects. Chikena.