Nigerian marginal fields licensing round could face legal challenges
Published on Monday 1 June 2020 Back to articlesThe 2020 marginal field licensing round, which is offering 57 fields in order to boost government revenues, could face legal hurdles from a group of marginal field holders whose licenses have been revoked. On 3 June a Lagos court will hear a petition from the aggrieved marginal field operators who are demanding that the judge stops the government from offering their licenses to new owners.
The companies challenging the government’s decision to revoke their licenses include: Bayelsa Oil, Eurafric Energy, Del-Sigma Petroleum, Movido E&P, Sogenal, Goland Petroleum and Independent Energy, Bicta Energy and Management Services Limited, Sahara Energy Limited, and Africa Oil.
They claim that they stood to lose as much as US$450 million on their respective fields before the licenses were revoked. Local banks will be negatively impacted by the decision to revoke the licenses because around US$$350 million of the total sum that has been spent so far developing the wells were loans from local banks. These debts will become distressed if the government’s decision to revoke the licenses is allowed to stand.
The operators also claim that Minister of State for Petroleum Resources, Timipre Sylva, misadvised President Muhammadu Buhari into approving the revocation of the licenses because it was incorrect that no work had been done on the fields and many had already started exploratory activities. They also warn that Nigeria is exposing itself to litigation from their foreign investor partners if the revocation is allowed to stand.
In April, the president gave his approval for a new marginal field licensing round to held with 57 licenses now on offer if the owners of the 11 revoked licenses are unable to get the courts to reverse the government’s decision. The controversy surrendering the revocation could dampen the bidding for the new licenses if the government decides to proceed without first resolving the issue of the 11 revoked licenses.
Local banks — already hurt by the revoking of the licenses — are unlikely to support any buyer that wins a bid for any of the new licenses. This will defeat the government’s main purpose for holding the round which is to raise funds to plug its 2020 revenue shortfall. No licensing round has taken place since 2002 and the cloud of uncertainty over global oil prices has already overshadowed the proposed sale. The licensing round is, however, likely to proceed because the Federal Government needs the money.
This excerpt is taken from Nigeria Politics & Security, our weekly intelligence report on Nigeria. Click here to receive a free sample copy.