Nigeria not to auction oil blocks

LAGOS – A Nigerian court has told the government not to sell two of 45 oil exploration licences due to be auctioned on Friday until it rules on a dispute with Royal Dutch Shell, court papers showed yesterday.

Shell launched a legal challenge at the Federal High Court in the capital Abuja to stop the government from selling Oil Mining Licence (OML) 13 and 16, pending the resolution of a dispute over the blocks already referred for arbitration. The government had revoked the two licences last October arguing that Shell, Nigeria’s biggest operator, had failed to develop them 18 years after acquiring them.The court is due to give a ruling on a preliminary objection raised by the government on May 17.It had on April 27 asked the disputing parties to maintain the status quo, but the government said in a notice this week that the two blocks would be auctioned on Friday.”An order maintaining the status quo is hereby reaffirmed pending the ruling of the court,” Justice Binta Murtala Nyako ruled on Wednesday.”None of the parties should deal with OML 13/16 as the case may be.”The auction was already controversial because the government of President Olusegun Obasanjo has allocated several companies the right of first refusal, and is holding the auction less than three weeks before he is due to hand over to a new government.Critics say the preferential rights, offered in exchange for promises to invest in Nigerian infrastructure projects, are a possible avenue for corruption as they lack transparency.Obasanjo, who is due to hand over to president-elect Umaru Yar’Adua on May 29, has said Nigeria would no longer award lucrative drilling licences on a discretionary basis and instituted the open auction process in 2005.However, the auctions have drawn widespread criticism that they were neither as transparent as they should be nor as successful in terms of securing investments Nigeria needs.The 2005 auction drew huge bids from unknown companies, many of whom never produced any cash.The 2006 round caused a scandal after a block that was left unclaimed during the public auction later turned out to have been awarded in private to Starcrest, an unknown firm that sold it on for a US$35 million profit.Nampa-ReutersThe government had revoked the two licences last October arguing that Shell, Nigeria’s biggest operator, had failed to develop them 18 years after acquiring them.The court is due to give a ruling on a preliminary objection raised by the government on May 17.It had on April 27 asked the disputing parties to maintain the status quo, but the government said in a notice this week that the two blocks would be auctioned on Friday.”An order maintaining the status quo is hereby reaffirmed pending the ruling of the court,” Justice Binta Murtala Nyako ruled on Wednesday.”None of the parties should deal with OML 13/16 as the case may be.”The auction was already controversial because the government of President Olusegun Obasanjo has allocated several companies the right of first refusal, and is holding the auction less than three weeks before he is due to hand over to a new government.Critics say the preferential rights, offered in exchange for promises to invest in Nigerian infrastructure projects, are a possible avenue for corruption as they lack transparency.Obasanjo, who is due to hand over to president-elect Umaru Yar’Adua on May 29, has said Nigeria would no longer award lucrative drilling licences on a discretionary basis and instituted the open auction process in 2005.However, the auctions have drawn widespread criticism that they were neither as transparent as they should be nor as successful in terms of securing investments Nigeria needs.The 2005 auction drew huge bids from unknown companies, many of whom never produced any cash.The 2006 round caused a scandal after a block that was left unclaimed during the public auction later turned out to have been awarded in private to Starcrest, an unknown firm that sold it on for a US$35 million profit.Nampa-Reuters