Who's Afraid of Tony Chukwueke?.....Ijeoma Nwaogwugwu(Allafriacanews)

The 2007 oil licensing bid round has come gone. But like most processes with the potential to make billions of dollars several years down the line, it has been mired in controversy. Shell Petroleum and Development Company (SPDC), for one, got an interim injunction barring the Ministry of Energy and the Department of Petroleum Resources (DPR) from including two oil blocks, OMLs (Oil Mining Lease) 13 and 16, in the 2007 bid round held last Friday. Both blocks had been leased to Shell in 1989, but were revoked last year by DPR for failing to commence production from the blocks believed to be prolific.

DPR had revoked the blocks in compliance with existing regulations that had not been enforced for decades requiring oil companies to bring their concessions on stream within ten years of their conversion from oil production leases (OPLs) to oil mining leases. Although DPR, having obtained a legal mandate from the Ministry of Justice, went ahead to offer the two blocks now carved out as OPLs 2001, 2002, 2003 and 2004 to potential bidders during the bid round, it was cautious enough not declare a winning bidder for any the blocks pending the determination of the law suit brought against it by Shell.

Added to Shell's suit are concerns raised by several individuals within and outside the oil and gas industry over the rush by the outgoing administration to proceed with the licensing round in the dying days of this government. The word on the street is that the bid round would provide an avenue for top ranking officials and their cronies to secure choice oil concessions before the government winds down and is intended to undermine the incoming government of Umaru Musa Yar'Adua.

There is also the niggling issue that has been brought to the fore by multinationals in the sector hiding under the banner of concerned stakeholders about the impropriety of the introduction of the concept of right of first refusal into the bid process. The right of first refusal was first introduced in the 2005 bid round and grants an oil company or bidder preemptive rights over oil blocks it has expressed interest in as long as it can match the highest bid offered by a contending party during the bidding conference. The company is granted the right of first refusal or preemptive rights on certain blocks once it commits to investing additional resources in the establishment of downstream projects in the energy sector and/or non-oil and gas strategic projects such as railroad construction and agriculture.

However, the right of first refusal as a concept has been roundly criticised by oil industry insiders believed to be the oil multinationals who consider it a travesty of justice, as according to them it gives some undue advantage to mainly oil companies from Asia and some Nigerian firms that have committed to building various infrastructure projects in the downstream energy sector and the transport sector. The beneficiaries include Global Steel Holding/Sterling Global of India that is being promoted by Pramod Mittal, brother of the multi-billionaire and international steel magnet, Lakshmi Mittal. Others are two Chinese state-run oil firms ? the Chinese National Petroleum Corporation (CNPC), Chinese National Oil Offshore Corporation (CNOOC), Korean National Oil Corporation (KNOC), ONGC/Mittal and Dangote Oil and Gas, Repsol of Spain and Malaysia's Petronas.

Ironically, the man at the centre of the storm for introducing new rules to the oil licensing rounds is an oil industry insider and a product of the oil majors. Having worked for almost two decades for Shell in Nigeria, Algeria and the UK, Anthony Chukwueke who is currently the Director, DPR is quite conversant with the tricks of the trade and the pressure that can be mounted by the powerful multinationals and their home governments to compel the Nigerian government to do their bidding. But he is prepared to take them on by implementing measures that would reform the upstream and downstream segments of the oil and gas sector.During series of meetings with this writer, he disclosed that those who have taken umbrage with the introduction of the right of first refusal are companies which have the most to lose. The coupling of the lucrative upstream segment of the oil industry, according to him, along with the not-so-lucrative downstream segment characterised by lower profit margins is not an unusual concept that is practiced worldwide.

It is simply a measure designed to develop an integrated oil and gas sector in which investors operate in both segments and create greater job opportunities to unemployed youths in the oil rich Niger Delta region, he explained. In order to ensure that a level playing field is created, companies which have preemptive rights to some oil blocks are expected to match the highest bid for the said blocks, failing which the blocks shall go to the highest bidder. This makes a lot of sense.

But what happens in the event the company with the right of first refusal matches the highest bid for a block, pays the signature bonus and reneges on earlier commitments to invest in the construction of a refinery or power plant? To forestall the likelihood of such an event, Chukwueke indicated specific mechanisms have been built in by the DPR to serve as a deterrent. This entails the deposit of an associated collateral upfront, which translates to $1 million per 10,000 barrels per day capacity for oil projects such as refineries (or per 10 million standard cubic feet capacity for gas related projects such as IPPs and gas gathering and pipeline projects).