The forthcoming licensing round for Nigerian oil acreages will be influenced by two new laws : the Public Procurement Act and the Local Content Act.
Both were signed into law after the country’s last competitive bidding round. The PPA came into effect in June 2007, two months after the country’s last acreage sale. The Local Content Law was signed into law in April 2010. Nigeria scheduled a bid round for June 2012, which failed to take place. Still, officials at the Department of Petroleum Resources(DPR), the regulatory agency, insist that the round will be announced sometime later in the year.
The Public Procurement Act sees a licensing round as a disposal of public property and “provides certain rights for bidders in relation to the disposal of public property”, in the opinion of Adeoye Adefulu, partner, Energy Practice Team in the law firm of Odujinrin and Adefulu, based in Lagos. Citing a section of the law which provides that “open competitive bidding shall be the primary source of receiving offers for the purchase of any public property offered for sale”, Adefulu, contends that “this provision recognizes that public property may be disposed by other methods”, but “where other methods are to be used in a licensing round however, the DPR as the procuring entity would need to show, at a minimum, that it has explicitly considered using open competitive bidding and that for good reasons, this method would not be satisfactory”, Adefulu argues. “Where such an explicit process is not undertaken”, he
says “the entire round may be open to an administrative review”.
Since 1999, Nigeria has fitfully expressed the willingness to commit to a course of periodic, open, competitive and
transparent bid rounds, but an overarching sense of patronage and political cronyism has distracted its leadership, such that even within a competitive licence sale, successive ministers have invoked their discretionary powers.
Adefulu, a second generation Lagos based lawyer, thinks that the Public Procurement Act has come to enforce what political will could not bring to bear.
Hetakes the viewthat theNigerian Content Act is also a binding lawon the eagerly awaited bid round. “Nigerian independent operators shall be given first consideration in the award of oil blocks”, Adefulu quotes the law as saying.
While the “first consideration” is not defined under the act, he thinks that “in seeking to award acreage, DPR is required to first look at bids made by Nigerian independent operators”. A fuller text of Adeoye Adefulu’s energy briefing note is published in this edition, from page 24 to 27.