PIAB – Who issues Petroleum Licences?

Under the provisions of the Petroleum Act, the Minister of Petroleum Resources has the absolute discretion to award oil prospecting licences and oil mining leases. The PIAB in its section 8 provides for a process through which the Commission may award upstream licences.¬†Petroleum licences may only be awarded through an “open, transparent and competitive bidding process” by the Commission. The Bill goes on to provide details of what is required to conduct such a bidding process including announcements in the newspapers, detailed rules, public opening of bids, etcetera.

There are few exceptions to the award of licences through a bidding process. Under section 8 as well, the President may direct the Commission to negotiate and award petroleum licences to qualified investors outside of a bid process. The President may only direct the negotiation of such awards for “strategic and bilateral” considerations only. It is not entirely clear what would constitute a “strategic and bilateral” consideration. One may suggest that this would be limited to State to State deals.

In addition, the award of petroleum licences to existing holders of OPLs who would ordinarily convert to oil mining leases, will not require a bidding process. Holders of these licences would be converted to petroleum licences commencing in the Production Period once they have achieved the necessary conditions for conversion.

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