Nigeria Gets Tough With Slow-Pay, No-Pay Bidders

Demonstrating a new resolve to remove corruption, favoritism and speculation from the bidding process for its rich oil concessions, Nigeria today withdrew awards from dozens of companies who had won equity in the licensing of 44 onshore and offshore blocks - excluding the Joint Development Zone - but did not pay signature bonuses by the Dec. 15 deadline in its 2005 Licensing Round.

Only 12 of the 44 winning bidders turned up with cash at showtime.

Such companies in the past have preferred to invest the relatively small amount required for a bid, and then when awarded the property either sit on it until nearby properties suggest it may be valuable, allowing them to sell it, or let it lie fallow when no buyers appear.

ThisDay Online, which tends to outshine most other newspapers on oil industry coverage, also said that Nigerian Presdent Olusegun Obasanjo had to withstand a lot of pressure from well-connected and well-heeled bidders who nonetheless didn't want to put up the bonus fees.

One exception was billionaire Mike Adenuga, Jr.'s Conoil Corp., which paid a $100 million bonus in full for OPL Block 257.

Here is the ThisDay Online story:

2005 Bid Round: 32 Firms May Lose Licenses
Conoil redeems $100m performance bond
By Mike Oduniyi, 12.18.2005

Indications emerged weekend that about 32 firms awarded oil blocks at the 2005 Bid Round, may lose the licenses following their inability to meet the deadline for payment of the signature bonuses posted on the blocks.

Ministry of Petroleum Resources also disclosed that at the expiration of the deadline Thursday, indigenous oil company, Conoil Producing Limited had redeemed its $100 million (N13 billion) Performance Bonds for its deep offshore block OPL 257.
THISDAY checks revealed that of the 44 companies that won bids at the licensing round conducted last August, only 12 met the deadline with confirmed payment for signature bonuses amounting to about $1.2 billion (N156 billion).

This fell short of the $2.6 billion (N338 billion) the Federal Government had hoped to earn from the award of the 44 oil blocks, going by the signature bonuses the companies had posted.

Ministry officials informed that many of the indigenous companies that snapped up oil blocks at the auction were in the pack of defaulters and the Presidency was said to have presently come under intense lobby by the companies, which have influential people as backers, to retain the licenses.

“The deadline for payment closed on the 15th (December). A significant number of the 12 companies that posted the performance bond have paid up,” a senior ministry official disclosed.

"Some other winners paid half of the signature bonuses and were requesting that payment for the signature bonus be staggered, but that decision will be taken by the Minister (of Petroleum Resources) after consultation with the President," the official added.

The results of the bid conference had shown that investors snapped up eight blocks in the deepwater region, which was expected to fetch about $1 billion (N128 billion). Firms also 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 acreages in the Continental Shelf.

Many of the blocks went to indigenous operators and there had been speculations that these locals would not be able to meet up with the outrageous amount they had quoted in winning the blocks.

Already, failure to pay up had resulted in postponement of the signing of the Production Sharing Contract (PSC) agreement with the block winners on three occasions.

Given the guidelines issued by the Department of Petroleum Resources (DPR), on the licensing round, companies that failed to pay for the blocks would forfeit them while the acreage will be returned to the pool of blocks for auction at the next licensing round.

Meanwhile, the Petroleum Ministry has confirmed that Conoil, owned by Dr. Mike Adenuga (Jnr.), has paid in full its $100 million signature bonus for OPL 257.
The company, which made history when it became the first indigenous oil firm in the country to win deep offshore blocs at the 2005 Bid Round, had earlier posted the performance bond for the block through its Paris based banker, BNP Paribas with Performance Bonds No GADE4043822 and GADE10-4383.

“Conoil led the pack of companies who posted bond, to pay up,” an official said, adding, “it confirms the Federal Government’s position that it did not used local firms to raise the price of the blocks and that there are serious Nigerians that can pay the money they put on the table."

http://www.thisdayonline.com/nview.php?id=36035