No matter the lenses through which the recent revocation of the licenses of six oil companies by the Department of Petroleum Resources (DPR) is viewed, the action, said to have been based on a presidential directive to recover legacy debts owed by the companies operating the licences would appear overdue. It comes as a reminder not just of the arbitrariness that has characterised the management of the nation’s oil assets, but the contempt by the operators for the rules governing same.
The action would appear as the culmination of events which started in February when the former Minister of State for Petroleum Resources, Ibe Kachikwu, first announced plans to recover the oil licenses of the companies indebted to the government. A request forwarded by the Ministry of Petroleum Resources to the Federal Government for the revocation of five Oil Mining Licenses (OML) would later follow. In what appears to be a first phase of the exercise, five OML and OPL were axed. These are OML 98 operated by Pan Ocean Oil Corporation; OML 120 and 121 operated by Allied Energy Resources Nigeria Limited; OML 108 operated by Express Petroleum & Gas Company Limited and OML 110, operated by Cavendish Petroleum Nigeria Limited, and the oil prospecting licence (OPL) 206 operated by Summit Oil International.
In all, the implication is that these firms took no corrective steps even after the government had signalled its resolve to wield the big stick.
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Without prejudice to the fears being expressed even if in hushed tones about politics driving the action, given the degree to which our governance, business and politics are intertwined, the Federal Government – at least at this stage – cannot be accused of acting without some justification. The cases against the companies would seem well set out: they all were in default in their obligations to the Federal Government. Three of the companies – Pan Ocean, Allied Energy and Express Petroleum would appear particularly notorious, having been indicted by the Nigeria Extractive Industries Transparency Initiative, NEITI, in its 2016 Oil and Gas Audit for failing to make payments to the Nigerian government in 2016.
Pan Ocean – a Joint Venture (JV) partner with the Nigerian National Petroleum Corporation (NNPC), was specifically accused by NEITI of owing the corporation an outstanding $135.8 million. As for Allied Energy – the operator of OML 120 and 121, the company would appear to have bitten more than it could chew: only its OML 120 due to expire is currently producing, the other licence, OML 121 also due to expire at the same time would appear to have been warehoused.
Nigerians are certainly aware of how influence peddling, arbitrariness and other forms of corruption plagued the allocation of the licences in the past. The result is the situation in which entities best described as traders were awarded prospecting licences only to have them warehoused for future private bids even when genuine prospectors with money and requisite know-how could not have them. And simply because the licences were awarded ab initio through the back door, they felt neither the obligations to pay the prescribed statutory fees nor inclination to follow through on the licensing terms.
We understand that more revocations are on the way. Perhaps that has become necessary to sanitise the sector. That being the case, a transparent process should be put in place to remove possible tinge of politics or arbitrariness. Setting out the parameters for the planned corrective actions well in advance will certainly help a great deal if only to disabuse the minds of those who would rather see the exercise as another variant of political vendetta. For, much as the measures being contemplated are necessary and inevitable, a process tainted by politics would only risk a further complication of the problem.
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