EXTRACT: Two blocks taken away last year from Royal Dutch Shell, Nigeria’s largest producer, were offered up in this round as four blocks. But the winners can be declared only if a legal challenge brought by Shell is dismissed in court this week.
THE ARTICLE
By Dino Mahtani in Lagos
Published: May 14 2007 03:00 | Last updated: May 14 2007 03:00
Nigeria’s outgoing government has failed to raise interest from big oil companies in its latest oil licence auction, with industry executives fearful of contracts being revoked after the new government is sworn in.
Last Friday’s auction, where only 18 of 45 blocks offered were auctioned, was the third of its kind since 2005. Nigeria hopes oil companies will develop auctioned blocks in coming years to boost its reserves and production.
The government had privately negotiated preferential rights on oil blocks for 10 companies, including large state-owned oil and gas companies from China and India, in exchange for promises of billions of dollars of investment in infrastructure.
But many of these companies were scared off by concerns that contracts might not be tied up before President Olusegun Obasanjo handed over power on May 29 to Umaru Yar’Adua, his successor. “They were scared off by all the things people have said,” said Tony Chukwueke, Nigeria’s oil industry regulator.
Instead, the bidding was dominated by little-known companies which may, with their limited experience, find it harder to develop oil blocks than more established companies operating in Nigeria.
The auctions have been criticised by some industry figures who say the preferential rights negotiated for some companies have been against the spirit of “open” licensing rounds. Past rounds have been subject to political interference, with blocks or stakes in blocks in effect being reserved for companies with connections to government.
Western oil majors, which have dominated production in Nigeria for decades, had avoided bidding in all the rounds, although Asian companies had participated in the two previous rounds.
Despite the shortfall in interest from Asian companies, the government nevertheless raised more than $600m (€444m, £302m) from this auction, above its target of $500m.
Only three blocks of the 45 auctioned raised more than $100m each. Dangote, a Nigerian conglomerate with close ties to the ruling party, is expected to exercise its rights this week by matching bids on two of the blocks. The third was won by little known Yorkshire Energy World.
Two blocks taken away last year from Royal Dutch Shell, Nigeria’s largest producer, were offered up in this round as four blocks. But the winners can be declared only if a legal challenge brought by Shell is dismissed in court this week. ends
Copyright The Financial Times Limited 2007
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