ONGC Mittal under scanner in Nigeria

ONGC Mittal under scanner in Nigeria
17 Nov, 2007, 0128 hrs IST,Rajeev Jayaswal, TNN

RIYADH: ONGC Mittal Energy (OMEL) — a joint venture between ONGC and LN Mittal group — seems to be have run into trouble in Nigeria. The new government in that country has decided to review oil block contracts awarded by the previous regime following allegations of irregularities.

According to top Nigerian officials, there are apprehensions over licences won by OMEL.

Based on the apprehensions, the company’s deals in the country are under scanner. According to official sources, the deals under review include two blocks — 285 and 279 — awarded to OMEL.

Confirming the move to ET, Nigeria’s minister of state for energy (petroleum) Odein Ajumogobia said, “We are reviewing award of blocks by the previous government. There were complaints about the procedure used in awarding some of the blocks, and we are now investigating that.”

He, however, did not specify the identity of the blocks. Official sources, however, said that the two blocks awarded to OMEL are also under review, he said.

While there was no formal confirmation about the identity of the blocks and the companies involved, industry sources said some domestic and foreign entities that obtained licences to explore oil in the energy-rich African nation through ‘back door’ may end up losing them.

OMEL had won rights to explore in OPL 279 and OPL 285 in 2005 after committing investment of $6 billion in an 1,80,000-barrels-per-day greenfield refinery, a 2,000 mw power plant and a railway line running from east to the west of Nigeria. OMEL paid a signature bonus of $50 million for OPL 285 and $75 million for OPL 279.

OMEL was given preferential bidding rights for another block (OPL 250) in another licensing round that happened just before the change in the government. The company, however, did not submit a bid for the block.

Preferential bidding rights are like the first right of refusal where the company has the right to match the highest bid for the block and bag the exploration acreage. It is understood from the sources that OMEL did calculate the political risk and opted out of the deal.