Nigeria: 'Last-Minute' Offer Of 45 Oil Blocks Draws Criticism

ABUJA Apr 04, 2007 (Dow Jones Newswires)

The announcement Tuesday of the 45 oil blocks offered by the Nigerian government for bids has drawn severe criticism from analysts, politicians and economists, who said the "last-minute" offer was unjustified.

Some say the offer of the blocks should be delayed till after general elections scheduled for this month, while some wonder if the lack of security in the Niger Delta and across the country allow a credible award now.

Announcing the offer Tuesday, Energy Minister Edmund Daukoru said the government's plan was to complete the offer process before the expected change of government on May 29.

He also said that winners of blocks are to pay 50% of the signature bonus at the bid conference to be held on May 3. The balance is to be paid before the signing of production sharing contracts. Interested companies are expected to submit their bids by May 1.

The rush in the process has raised questions.

"Why are they doing this, when they know the government is on its way out?" asked a senior official in the Central Bank of Nigeria, the country's central bank, who declined to be named.

"It's unnecessary. It could even be canceled by the next government," said the official.

General elections are scheduled to be held April 14 and 21 for a new government to be inaugurated in May.

To ensure the exercise is completed within the available time, Tony Chukuweke, head of the Department of Petroleum Resources - regulator of the oil industry - said the government scaled down the number of blocks on offer. Both Daukoru and Chukuweke had last year indicated the government might be offering up to 60 blocks in this year's licensing round.

An executive with one of the oil majors in Nigeria said the government hasn't given enough time for the exercise. "They have been doing it before, but I don't think they've done it in one month," he told Dow Jones Newswires.

The oil executive also said he thinks the current state of security in the Niger Delta and turbulence associated with the general elections make acreage awards unattractive now. He said that many of oil majors would probably not bid now because of the situation in Nigeria.

"If I were an investor, I don't think I will bid now for the blocks, because of the security situation and also because the government is changing," said the official. Some of his company's expatriate staff have been victims of kidnapping by Niger Delta militants.

Militants fighting for greater regional control of oil and gas have kidnapped scores of oil workers, most of them foreign, and also released most of them.

Of the 45 blocks on offer, 10 are from the deep offshore region, 11 from the inland basins, and the rest from onshore and continental shelf.

A member of the opposition party - the All Nigerian Peoples Party - said the fast-track approach by the government amounted to an effort "to sell everything before it leaves. We have never had any confidence in this government."

Besides the sale of oil acreages through bid rounds - in 2000, 2005 and a mini-bid round in 2006, the Nigerian government has also privatized previously state-run enterprises as part of its economic reform program.

The oil major executive believes the best time for the block offer would be some time in June or July this year, when the new government takes over.

"When you lose an opportunity, you've lost it. So you leave it," said the central bank official.

Copyright (c) 2007 Dow Jones & Company, Inc.


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