Oil and Gas News

China National Offshore Oil Corporation (CNOOC)’s effort to buyoff 23 prime blocks currently owned and operated by Shell, Chevron, Exxon Mobil and Total

China National Offshore Oil Corporation (CNOOC), is said to be discussing with   the Federal Government to acquire some oil blocks, which are presently belong to the

multinational oil and gas companies. Some energy experts, say the attempt will fail.

For the experts in the oil and gas industry, the Chinese firm’s effort to buyoff 23 prime blocks currently owned and operated by Shell, Chevron, Exxon Mobil and Total, is a mission impossible. Reason: the Chinese firm does not have the manpower, technique and competence.

Besides, experts noted that the relinquishment process of oil blocks, from the original owners to new ones, would not  allow the Federal Government  to easily part away with the blocks.

Some of these blocks, which the Chinese had indicated interest in , according to sources, had originally expired last November  and December, which Chevron and ExxonMobil had been awarded  a year extension. Shell, it was gathered, was seeking a court injunction to allow it continue operations while it challenged the expiration of its blocks.

The former President of Nigerian Association of Petroleum Explorationists (NAPE), Mr. Emmanuel Emu, who is equally the General Manager, Exploration of BG Nigeria Limited, emphatically stated: “It is not possible for the Federal Government to relinquish those blocks and give them to the Chinese firm because there is a process of doing so. If a block is not performing, you cannot just come and take it away and give it to another person.

“There is what we call a relinquishment process. That block has to be relinquished first  before it can become open again for bid. If it is not relinquished, that block will still belong to the original owner. It is just like a plot of land, which you cannot just  take and give to somebody else.

“The relinquishment process is based on the government regulation before the block can be relinquished. Let me take deepwater for example. Deepwater has an expiration period of 10 years for exploration, while the development period is for 20 years, which is 30 years combined. What happens is that after 10 years of exploration, the Production Sharing Contract (PSC) stated that you must relinquish 50 per cent of the acreage. Then, you can look at the areas in the acreage, which you feel are not attractive enough you carve them out and give them back  to the Federal Government.
“The Federal Government can now decide to put those areas, which you have relinquished, in the basket again for another round of  bid  for new comers . So, that is the process of relinquishment,” he explained.

The firm, China National Offshore Oil Corporation (CNOOC), sources disclosed, had sought for the licenses –18 onshore and five offshore – which contained an estimation of six billion barrels of oil and would be the same as one of every six barrels of proven oil reserves in the country that was put at about 36 billion barrels.

The oil reserves of these blocks, sources disclosed, far surpassed the blocks containing some 4.7 billion barrels of oil, which China had acquired across Africa in its global drive to secure vast amounts of oil to fuel its mushrooming economy.

Another Chinese oil company, Sinopec, had made incursion into Nigerian oil and gas industry through the acquisition of Swiss oil producer, Addax Petroleum Corporation, in August this year for $7.24 billion. Sequel to this, the Chinese firm acquired Addax’s high-potential operations in Nigeria and Gabon, as well as Iraq, which industry experts described as China’s most expensive overseas energy acquisition to date.
The negotiations for the oil blocks, a source said, were revealed in a letter from the office of President Umaru Yar’Adua to CNOOC’s representative, a company named Sunrise, which was August 13.

The source said: “The overall value of the Chinese offer is not disclosed, although some details suggest a figure of about $30 billion. Some oil sector executives said the total on the table was $50 billion.”
The current President of NAPE, Mr. Victor Agbe-Davies, who is also the General Government, Emerald Energy Resources Limited, pointed that even though the Federal Government needed to develop the nation’s gas reserves to a target of 40 billion barrels and four million barrels per day production, reclassification of the oil blocks should be done within the context of the law.

Agbe-Davies  said: “When companies are invited into the country, they have to go through the processes like what other companies went through. And that is the main focus. It is not that somebody will come and take somebody’s  concession and give it to the Chinese. No, that will not happen.

“There are legal structures and agreement, whether you have an Oil Prospecting Licence (OPL) or Oil Mining Lease (OML). There are laws biding and governing the operations of these blocks and I believe the Federal Government  is in favour of due processes. So, the Federal Government will not just take somebody’s concession and give it to the Chinese firm.

“If you have open acreages and maybe you have mini bidding round, the Federal Government can go into an agreement because of something the  Government wants you to do for the country. The government  must like you to do something for the country before it can come into an agreement to the extent of giving you an oil block concession.

“If the blocks are still under licence,  Government would not take them from the owners. I believe the Federal Government will respect the laws because it is the law of the country. If  these licences are still in operations, either the OPL or OML, government is not going to take them from the companies that are having them now,” he added.

What might be the interest of the Federal Government, according to sources, may be the Chinese oil firm’s offer, which was said to be far above those offered by the Western companies had offered sto extend their licenses.

ExxonMobil, it was gathered, had offered $78 million to renew three 40-year leases that would be due to expire soon, while the Federal Government demanded $2.5 billion, which is about $2.422 billion short of what the government demanded, making the blocks up for grabs “to the highest bidder.”

The Managing Director of Subsurface Consultants Nigeria Limited, Mr. Jasper Nwachukwu, kicked against the Government’s plan to part the blocks to the Chinese firm, stating that the Chinese did not only lack the manpower, they also they did not have the technique and competence to explore and develop those blocks.

Nwachukwu said: “Though the Federal Government has the right to reclassify the blocks, it will not be a wise decision to give the blocks to the Chinese firm. The Federal Government can reclassify the blocks, particularly if the company holding the block has defaulted over the years or due to the expiration of the block because the law says after 10 years the block can be reclassified and reallocated to the people who can operate it.

“That is the law and I do not  have quarrel about that,but to give the blocks to the Chinesefirm, I do not buy that. I cannot encourage Chinese people to acquire 23 blocks. If it is just one block, that may be all right. I do not understand the mentality of an average Chinese.

“Apart from this, they do not have any human relation. They use you as if you are animal. This may be because they have a country with billions of people and if 1000 people die it does not matter to them. Yet, it is not as if they know more than the people they want to take their blocks from.

“Chinese people are copiers. They copy virtually everything they can find. If anything goes wrong with things you are copying you may not know how to go about it. Chinese people cannot get 23 blocks at the same time. They do not have the manpower, they do not  have technique and they do not have the competence.

“Have they done that in their own country, let alone Nigeria? I will strongly insist that they should not be given 23 blocks. The Federal Government can give them one or two blocks. Unfortunately, they want the biggest OML  which is OML 11. It  is the biggest OML we have in the Niger Delta, from Port Harcourt to Akwa Ibom. That is the OML that covered the Ogoni area.

“I think it is not fair for the Chinese to come here and start throwing money around. We do not want people who will only come and start building shops and wells around.  We want people who will really make impact in the oil and gas industry,” he stressed.

Already, Shell had said that it would counter any move made by the Federal Government to hand control of its oil fields to Chinese oil companies.

Shell’s Chief Finance Officer, Mr. Simon Henry, while reacting to this, said: “One thing you probably will have seen, and can be sure of, is that both ourselves and the industry will defend our interests.”
The Minister of State for Petroleum,

 Mr. Odein Ajumogobia, at the OTL African Conference, however, disclosed that no decisions had been made on the block and negotiations were ongoing with CNOOC and other oil companies in the region, but sources said the government was determined to give out the blocks to the Chinese.

IHS Global Insight Africa energy analyst, Mr. Thomas Pearmain, and Asia Pacific energy analyst, Thomas Grieder, while looking at the implications of granting such offer to Chinese firm, said the deal, if successful, would make China increase its energy security. -compassnews.net

Tags: Chevron, China National, CNOOC, Corporation, Exxon Mobil, Offshore, oil, shell, total