Daukoru said Conoil, a co-participant with operators Addax Petroleum and ERHC Energy in Block 4, has already submitted proof of payment for its share. In the non-JDZ round, Chinese and Korean bidders emerged with preferntial rights after they committed to building refining and power genweration facilities and a 1200-km pipeline to Abuja.
Daukoru said those with no cash to back their play by the first week of December would lose their equity rights, another positive development.
Here is the article freshly printed in the Guardian:
Daukoru restates transparency in 2005 oil block allocations
By Yakubu Lawal, Asst. Energy Editor
AHEAD of December date for the signing of Production Sharing Contract (PSC) with prospective investors in the 2005 oil block licensing rounds, the Minister of State for Petroleum Resources, Dr. Edmund Daukoru, said transparency would be the watchword throughout the duration of the exercise aimed at enlisting new players into the upstream sector of the industry.
He said for the Chinese and the Korean firms there has not been any review as far as their participation in the bidding exercise was concerned.
A statement issued by the Deputy Director, Press and Public Relations of the Ministry, Mr. Emmanuel Agbegi, said the government welcomed the bold initiative by local entrepreneurs in the downstream sector to enter into partnership with the majors to invest in the industry.
"However, the Honourable Minister is unaware of a review of the understanding entered into with the China National Petroleum Company (CNPCO) and Korea National Oil Company (KNOC) at this point in time", Agbegi stated.
According to him, at early stage in the process, some of the majors had offered consultancy services only, which government found inadequate to address the necessity for a fully committed core investor.
The statement stressed that should there be a review of any strategic understanding with the Chinese and Korean oil companies, all interested parties would be made aware of such an outcome in line with government's commitment to openness and transparency in all its activities in the oil and gas sector.
The Director of Petroleum Resources (DPR), Mr. Tony Chukwueke, had stated that all the PSC agreements for the licensing round would be signed by the Minister of State in the first week of December 2005, noting that any investor who failed to pay the signature bonus by that day would forfeit the offer, adding that only those who can back their bid with cash that will be given the blocks.
According to him, all those who have submitted performance bond must also back it with cash, stressing that government will not rely on promises as it intends to avoid the mistake of 1993 award.
Following the two companies' response to Federal Government's call to establish Independent Power Plants (IPPs) in Nigeria, South Korean and Chinese companies had participated in the bidding round to be able to get more oil blocks to be in upstream sector of the industry.
Koreans investors, comprising the Korea National Oil Company (KPOC), the Korea Electric Power Company (KEPCO), Daewoo Shipbuilding and Marine Engineering Company and POSCO Engineering and Construction Company Limited, signed on Monday a Memorandum of Understanding (MoU) with the Ministry of Petroleum Resources to among others, build an IPP with generating capacity of 2,250 mega watts of electricity and to construct 1,200 kilometers of pipeline that will transport natural gas from Niger Delta fields up to the Abuja network grid.
For the investment, the Koreans are to get two deep offshore blocks and one shallow water block from the 14 acreage the Nigerian government had earmarked for strategic downstream partners.
The China National Petroleum Company (CNPCO) on the other hand, will get four oil blocks for its willingness to invest in the construction of hydropower plant in Mambila, Plateau State, with over 1,000 mw capacity, as well taking controlling stake in the 110,0000 barrels per day (bpd) Kaduna refinery.
Daukoru had told newsmen before the exercise that the MoU signed with the Korean investors represents a milestone in Nigeria's quest for foreign investment to jump-start her economy.
Describing it as one of the achievements of President Olusegun Obasanjo's drive for foreign investments in the last six years, Daukoru said that the investment relationship entered into with the South Korean was one with enormous potential with immediate benefits for Nigeria.
"They are areas where Nigerian needs investment. They (Koreans) come to us and we offer them opportunities for investment on a win-win basis," said Daukoru.
"Korea consumes as much crude oil as we produce in one day. They consume 2.1 million bpd and our production is slightly more than that at 2.4 million bpd. They need access to crude oil, so we are offering them oil blocks in exchange for them building a pipeline of 1,200 km to Abuja.
"They are also prepared to build power plant that will generate 2,250 mw. That is the immediate package," said the minister.
He said further that Daewoo is desirous to setting up a shipyard somewhere in the Niger Delta, as well as partner the Nigerian government to run a crude oil and Liquefied Natural Gas (LNG) cargo fleet, where the Federal Government will retain some equity initially in trust for the Nigerian company and Korean investors having about 49 per cent equity.
"Also with the Chinese, we recently packaged a deal involving operatorship of the Kaduna refinery plus hydro scheme in Mambila to generate thousands of megawatts of electricity. In exchange for that we are offering them four oil blocks. So I hope all these will send a powerful signal to all others who may be just on the fence about making up their minds," Daukoru said.
Nigeria is currently facing energy problem as electricity generation by the Power Holding Company, which stood at around 3,000 mw is just half of the national power demand put at 6,000 MW.
However, at a meeting held in Abuja with applicants in the 2005 Licensing Round, Chukwueke said Korean and Chinese investors would however, be required to also bid for the blocks already dedicated for downstream investors.
The DPR boss said the implication of this while the Koreans and Chinese will have the right of first refusal, other companies can also bid for the 14 oil blocks but would have to bid higher than what these companies are offering to clinch the blocks.
"The Korean and Chinese are participating in the 14 blocks and other blocks in the open bid. It is clear the government will not award blocks outside of this (2005 Bid) process," he said.
Chukwueke said the deadline for payments for the oil blocks have been further extended by two months to December 15. The deadline had earlier been shifted from October 2 to October 14, 2005. Following the criticism that trailed the high prices offered by the winners of oil blocks awarded at the bidding conference held last August in Abuja, the DPR directed the companies to submit performance bond to indicate their ability to pay the signature bonuses offered.
"The response so far has been largely successful. The companies as at close of business (last Friday), posted bonds worth $1.2 billion out of the $2.6 billion that we expected. If you include the 10 per cent LCV that we did not require to post bond, we will come to 50 per cent of the money that was targeted," said Chukwueke.
He listed indigenous oil producer Conoil, fuel marketing company Oando Plc, India's ONGC and the Korea National Petroleum Company as some of the firms that had submitted proof of payment, adding that the Federal Government had also dropped the idea of granting the right of first refusal to participants at the bid round.
"Majority of the serious players pledged the bonds," he said.
"However, government recognised that bond cost money and that some of the new players in the oil and gas sector required a bit more time to be able to find these bonds. Mr. President has directed and the Minister has instructed me that we have to find a way to ensure that genuine investors who have difficulty posting these bonds have enough time to find them.
"So we have decided that we will give those who have asked us more time, not to find the bond but to bring the money. The period of bind is over. What the bond has served us is now to invite those who have pledged the bond to government to come forward for the finalisation of the PSC agreement.
"The minister has agreed to sign all the PSC agreement in one day. So we are trying to put together a signing ceremony around December 15, that time all the people who have posted bond and all those who have asked for extension should be in position to offer the money. By this, no one will accuse the government of depriving them of the opportunity to participate in this round. So we will give an extra two months for all those who have asked for extension," said the DPR chief.
The results of the bid conference showed that 44 blocks out of the 77 blocks on offer were allocated.
Investors snapped up eight blocks in the deepwater region, which was to fetch about $1.0 billion (N128 billion). Investors won five blocks in the Anambra Basin, two in the Benue trough, while four blocks were won in the Chad Basin. All the six blocks put on offer in the onshore Niger Delta were snapped up, as well as the six acreage in the continental shelf.
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