The Petroleum Industry Bill (PIB) which was newly-drafted, if passed into law by the National Assembly, will stop all forms of discretionary award procedure in the allocation of oil leases.
Oil licensing rounds of 2005, 2006, and the last one, which held in 2007 saw some efforts at replacing the former discretionary award procedures with a more open and competitive process. These efforts yielded only little results as those bid rounds were fraught with irregularities, due to the granting of pre-emptive rights to some entities, who had promised to invest in Nigeria’s downstream petroleum industry.
This prompted the Federal Government to revoke some oil blocks awarded during the bid rounds.
A major contentious clause in the original bill presented to the sixth assembly provided that the Petroleum Minister has the power to revoke an oil block licence and re-allocate it to any company the minister deemed a good company.
But a copy of the draft bill recommended that "there shall be no grant of discretionary awards", but the grant of a petroleum prospecting licence or a petroleum mining lease shall be by open, transparent and competitive bidding process conducted by the Nigerian Petroleum Inspectorate, which shall be the successor to the assets and liabilities of the Petroleum Inspectorate of the Nigerian National Petroleum Corporation (NNPC); Department of Petroleum Resources of the Ministry of Petroleum Resources and the Petroleum Pricing Products Regulatory Agency.
The draft oil reforms bill also provided some parameters to determine the winning bidders. It also provided that oil bid rounds would be monitored by the Nigeria Extractive Industries Transparency Initiative (NEITI).
The draft provides that the winning bidder shall be determined on the basis of the following bid parameters: single bid parameter, which can be based on a signature bonus; a royalty percentage in addition to the relevant subsisting royalty percentage and a work commitment in terms of number of wells to a specified minimum depth during the initial exploration period; or unit works. It also recommended a combination of the parameters, based on a point system that is self-assessable by the bidder in such a manner that the bidder will bid the respective points and the highest points determine the winning bidder.
And also the draft bill recommends that where the minister directs for a call for bids, the Inspectorate shall establish the technical, legal, economic and financial requirements as well as the minimum experience and capacity necessary for prospective licensees, lessees, and contractors, which shall be contained in guidelines prepared by the Inspectorate and approved by the Minister, and licensees, lessees and contractors shall be chosen in accordance with the guidelines.
The Federal Government had shelved its plans t to conduct bid rounds in 2009 and 2010 due to the non-passage of the PIB, coupled with pending cases before the courts and arbitration involving multinational oil companies and the Nigerian Government. But the Director of the Department of Petroleum Resources (DPR), Mr. Osten Olorunsola, who spoke at a recent interactive session with journalists, had given a firm assurance that a new licensing round would hold this year.