Nigeria Proposes Bill to End Discretionary Oil License Awards

By Dulue Mbachu

Jan. 22 (Bloomberg) -- Nigeria proposed to end discretionary awards of oil and gas exploration licenses in new legislation for the country’s hydrocarbon industry.

Licenses will be given through an “open, transparent and competitive” bidding process and “no discretionary awards shall be given under any circumstances whatsoever,” according to the draft bill obtained at parliament in Abuja.

Previous military and civilian governments awarded licenses both on a discretionary basis and through open bidding. President Umaru Yar’Adua, who took office in 2007, has pledged transparency and to end corruption in the oil and gas industry, the mainstay of the country’s economy.

Nigeria holds Africa’s biggest hydrocarbon reserves of more than 30 billion barrels of crude and 187 trillion cubic feet of natural gas. The government is seeking to establish a legal and regulatory framework to ensure it’s managed for the benefit of the Nigerian people, according to the bill.

Nigeria’s oil and gas industry is facing unrest in the southern Niger Delta, where nearly all of the country’s oil is produced. Attacks by armed groups, including the Movement for the Emancipation of the Niger Delta, or MEND, have cut more than 20 percent of exports since 2006.

The proposal also wants separate licenses awarded for the exploration of crude and gas. “Every petroleum prospecting license or petroleum mining lease shall be in respect of either crude oil or natural gas, but not both,” the document said.

New Oil Company

A new national oil company will also be created to prospect for oil worldwide and raise funds from global financial markets. The country will set up a Nigerian Petroleum Directorate to develop policies and strategies for fossil energy and a National Petroleum Inspectorate to enforce policies and regulate technical and commercial aspects.

A National Petroleum Assets Management Agency will monitor and approve costs in ventures in which Nigeria has interests. Five joint ventures with Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA, in which Nigeria has an average 55 percent stake, currently account for most of the country’s oil and gas exports.

Rilwanu Lukman, a former OPEC head who headed the committee that drafted the bill, was in December appointed petroleum minister by Yar’Adua to see through the reform process.

To contact the reporter on this story: Dulue Mbachu in Lagos at dmbachu@bloomberg.net