Energy - News - Oil & Gas - May 20, 2020

Oil bid round: CSOs demand beneficial ownership among bid conditions


Civil society organizations demand the Federal Government to ensure details of the beneficial owners of prospective bidders are included among key conditions for those interested in participating in the licensing round for the marginal oil and gas assets planned for later this year.

Rising from a one-day online workshop on “Urgent Case for Reforms in the Petroleum Industry”, the groups said demanding the disclosure of beneficial owners information would promote transparency in the process and encourage serious bidders to show interest in the bid.

The workshop held on Wednesday in Abuja was hosted by the Media Initiative on Transparency in Extractive Industries (MITEI), a non-profit group of media practitioners committed to the promotion of transparency in the extractive industries.

Facilitated by the Facility for Oil Sector Transformation (FOSTER II), the workshop was attended by representatives of other groups, including Public-What-You-Pay.

Beneficial ownership principle

Beneficial Ownership disclosure is a principle by the global Extractive Industries Transparency Initiative (EITI) for all its member-countries to ensure information about the ultimate beneficiary(s) of the ownership of assets in the extractive industries are disclosed to the public.

As at April 2017, Nigeria was among the 25 African countries that expressed commitment to disclose the natural beneficial owners of the companies bidding for, operating or investing in the extractives sector.

In December 2019, Nigeria became the only country in Africa, Asia and the Americas to actually open a Beneficial Ownership Register for the extractive industries, outside the United Kingdom, Netherland, Denmark and Ukraine.

At the unveiling of the register by the Nigeria Extractive industries Transparency Initiative (NEITI), the Nigerian government said the register aligned with the anti-corruption mandate of the President Muhammadu Buhari administration.

Also, the government said the opening of the register was in fulfilment of the commitment by the President at the London Anti-Corruption Summit in 2016 towards a transparent exploitation of the country’s extractive industries assets.

On Thursday, the Minister of State for Petroleum Resources, Timipreye Sylva, announced the Federal Government is planning to hold another oil licensing round to auction marginal oil assets in Nigeria.

It will the first of such exercise in recent history since the last bid round was held in 2007, almost 13 years ago.  

Case for beneficial ownership disclosure

At the workshop, the lead energy expert and Senior Partner, Energy & Commercial Contracts, Primera Africa Legal, Israel Aye, highlighted the negative impact of awarding the country’s oil and gas assets to persons whose identities and capacity are unknown to the public.

He blamed such awards on the discretionary powers exercised by the Minister of Petroleum Resources under the Petroleum Act, saying steps must be taken to define due processes and procedures in the Petroleum Industry Bill (PIB) to ensure transparency and accountability, to end arbitrariness and abuse.

“The absolute powers granted the Minister of Petroleum Resources to grant the licenses for the oil assets arbitrarily should be removed,” Mr Aye said.

He lamented that at the moment if the Minister cancels any oil license for whatever reason, there is no room to seek redress, as the Department of Petroleum Resources (DPR) lacks the legal backing to enforce its guidelines.

For a transparent oil licensing round that will help realise the national objective of increase oil output, he said there must be a framework for the granting of licenses to guide and regulate the entire process. 

“Nigerians must demand that Beneficiary Ownership disclosure must be included as one of the intrinsic requirements and conditions spelt out in whatever guidelines the DPR will be putting out for the bidders. This is the only way we can guarantee only serious investors with genuine plan and capacity to exploit the national asset for the benefit of the all Nigerians will be attracted to participate,” he said.

Framework for transparent fuel pricing

In the downstream sector of the petroleum industry, Mr Aye said Section 6(1) of the Petroleum Act, which empowers the Minister of Petroleum Resources to fix petroleum products prices, must expunged and replaced with a framework for price modulation under a deregulated petroleum products market.

He said what the country needs is a framework that would moderate the price modulation mechanism by the Petroleum Products Pricing Regulatory Agency (PPPRA).

“We need a framework that prescribes the role and responsibilities of each institution taking decisions at every point in the petroleum producing pricing process. We need a framework that show how the pricing template was arrived at, the intervals of the price modulation adjustments, whether monthly, quarterly, weekly or daily.

“There must be an agency legally empowered to handle the responsibility of modulation of petroleum products prices in the country outside the NNPC, which should be allowed to face its responsibility of handling the operations side of the business.

“We must demand for an open and transparent process to handle all the issues in the price modulation value chain to remove arbitrariness and exploitation,” the energy expert said.

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