FG set to lose $2bn in signature bonuses as oil licenses expire

By Odunewu Segun

The Federal Government is set to lose about $2bn in signature bonuses as 51 oil prospecting and oil mining licenses near the end of their contracts without actually commencing operation due to the present economic circumstances, National Daily has gathered

Already the Nigeria Extractive Industries Transparency Initiative (NEITI) has complained in its current oil and gas report that discretionary decision-making and lack of openness drove down competition and returns to Nigeria, including over $2 billion in unpaid signature bonuses.

According to NEITI in its latest report, past upstream licensing processes in Nigeria have fallen well short of best practices and failed to secure maximum value for the country’s assets. The examples of these licenses include the following

Most of these companies whose licenses have expired or will expire soon have not yet signaled interest in renewing them or letting them go. Meanwhile, the Department of Petroleum Resources whose job it is to cater for renewal of licenses have kept mum about the matter.

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For a country who has gone on a heavy borrowing spree, it remains baffling that crude oil production which remains responsible for about 90% of government revenue is still not properly handled. It remains obvious that leakages like this are really biting deep in government coffers.

Efforts to get update from the DPR on the current status of these oil blocks, proved abortive as the agency despite several emails and text messages, which lasted for one month, remained silent.

According to NEITI in its latest report, past upstream licensing processes in Nigeria have fallen well short of best practices and failed to secure maximum value for the country’s assets.

“Many deals fell through, and barely half of the fields auctioned between 2000 and 2007 have seen serious drilling. The stated goal of increasing indigenous participation was not well served. Most of the marginal fields awarded during the 2000s have not produced.”

NEITI said that |past licensing rounds in Nigeria were not tied to any comprehensive asset development strategy or broader economic development plans. It said that Nigeria needs to develop a strategy for managing its natural resource base for current and future generations, and tie each licensing round to that strategy.