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FG, PwC insist on ESG principles for bitumen block allocation

Bitumen deposit

. Say $25m capital base, technical expertise top priorities

Clara Nwachukwu

The Federal Government and its transaction consultants, manager, PricewaterHouseCoopers (PwC), say strict environment, social and governance (ESG) principles will be observed in the forthcoming bid round for bitumen block allocation in Nigeria.

The decision follows growing concerns on environmental degradation and climate change due to the impact of mining activities (hydrocarbons and solid minerals) on global warming and the need to keep temperatures 1.5 degrees Celsius, compared to pre-industrial levels.

In addition, interested investors in the bidding conference must have proven balance sheet assets above $25 million as, plus the technical and financial capability to execute feasibility studies.  

These are among the criteria for prospects interested in participating in the bitumen conference scheduled to hold in November.

The parties explained that “The Nigeria government seeks suitably qualified local and international investors with prerequisite experience, technological expertise and financial capacity to carry-out bitumen development to a meaningful extraction-level.”

The criteria were unveiled during the Virtual Clarification Session for Competitive Tender Process for the Selection of Bidders for the Development of Nigeria’s Delineated Bitumen Blocks, organised by the Ministry of Mines and Steel Development and PwC on Tuesday.

The government and PwC said strict compliance to stipulated conditions are not only to ensure transparency in the bid conference but also guarantee that only capable investors are awarded exploration rights for Nigeria’s bitumen resource estimated at about 42 billion barrels, which have remained largely unexplored since its discovery in the early 1900.

The Nigeria government seeks suitably qualified local and international investors with prerequisite experience, technological expertise and financial capacity to carry-out bitumen development to a meaningful extraction-level.

ESG principles

Specifically, the Director, Capital Projects and Infrastructure, PwC, Suleman Ibrahim, said: “The competitive tendering of delineated bitumen blocks would be in line with extant ESG-related policies and regulations in Nigeria.”

He noted that “In addition to financial performance, competitive advantage and value creation, mining requires due considerations to Environmental Social and Governance (ESG) issues.”

He listed the issues covered in mining to include:

  • Environmental – pollution and contamination of air, water, noise and soil pollution, biodiversity, resource efficiency, water and waste management, climate change and greenhouse gas (GHG) emission, and environmental compliance
  • Social – human rights, land use, community displacement and resettlement plan, labour practices (including forced and child labour), health, safety and security of workers and communities, community relations/indigenous people, grievance mechanism, and mine closure/after use
  • Governance – Board structure and diversity, regulatory compliance, ethics, anti-bribery and corruption, and accountability and transparency.

Ibrahim further said that such ESG issues will be in line with relevant Nigerian laws and regulations including the Revised Climate Change Policy Climate Change Act 2021, and Nigeria 2060 Net-Zero ambition as well as international protocols such as the 2015 Paris Agreement, the Un Sustainable Development Goals (SDGs), which the country is signatory to.

The competitive tendering of delineated bitumen blocks would be in line with extant ESG-related policies and regulations in Nigeria.

Application Guidelines

Between now and November when the process is expected to conclude, various activities have been planned and application procedures released.

The Mining Cadastre Office (MCO) under the Solid Minerals Ministry will guide the competitive bidding of the bitumen blocks in line with extant laws and application guidelines.

The Nigerian Geological Survey Agency (NGSA), another agency under the Ministry, will provide relevant and up-to-date geosciences information necessary for minerals economic development.

Under the guidelines, investors applying for the mineral lease, must submit requirements (feasibility study report, quarry plan/design, evidence of financial capability, regulatory documents, and application fee for the mineral title).

The MCO will review the application and issue license to the best qualified applicant.

The Office also reserves the right to revoke a license in the event the investors do not meet the basic requirements.

Investment incentives

To ensure smooth take-off of exploration of the bitumen reserves, which have been found in four states of Ogun, Ondo, Edo, and Lagos, the government is willing to give various incentives to investors. These include:

  • Accelerated capital allowance of up to 95% on qualifying capital expenditures when determining taxable profits;
  • Annual capital cost indexation to mines starting production within five years;
  • Import waivers – exemption from payment of custom/import duties in respect of plants, equipment and machineries imported specifically and exclusively for mining operations;
  • Tax deductibility of environmental cost – allowance for mining companies to set up a tax deductible reserve for environmental protection, mine rehabilitation, reclamation and mine closure costs;
  • Tax relief period for up to three years from the date of commencement of operation and subsequent extension for another two years under specific conditions;
  • Foreign exchange access – mining companies are permitted by the CBN to retain and use the foreign exchange derived from their mining operations and activities; and,
  • Expatriate quota – provision of expatriate quota/resident permit for approved expatriates.

There is a huge network of roads that are unpaved presenting an opportunity for locally-utilized bitumen.      

Process management

According to the process managers, the Competitive Tendering Process has been divided into three parts.

Preparation & Outreach – Conduct Press Release/Conference Conduct local sensitization and international road shows.

Tender Management – RFQ go live and Clarification Session; Submit, review and Shortlist RFQ; Issue RFP Document to prequalified bidders; Conduct pre-bid conference for interested bidders; Conduct site visit (if required); Receive proposal submissions for Evaluation; Notify Successful Bidders.

Negotiation & Selection – Negotiate and Select; Submit Final Recommendation; Finalise bidding Agreement/Bid Security Format; Sign bidding Agreement.

According to the PwC, the bidding process will span across 7 months from May to November, for announcement of preferred and reserve bidders, and afterward complete negotiations.

Prior to conclusion of negotiations, PwC expects applicants to register at, bitumen.ngsa.gov.ng and by Friday August 5th, all enquiries concerning the process be sent to the Bitumen Committee and Transaction Advisors/Programme Managers through the email: ng_mmsd_bitumenlicenseprocurement@pwc.com

Economic diversification

Earlier, the Director-General, MCO and Chairman, Bitumen Committee, Obadiah Simon Nkong, said the government, in its determination to diversify the revenue and economic base, has identified the mining sector as one of the strategic industries for rapid growth and development.

He said bitumen is one of the seven strategic solid minerals with proven reserves of 42 billion barrels, others being Gold 50,000 ounces; Iron Ore 3 billion metric tonnes (mt); Lead/Zinc 10 million mt; Coal 600 million tons; Limestone 568 million tons; Baryte estimated 7.5 million tons.

He informed that Nigeria ranks 6th in bitumen reserves in the world, after Canada (1), Venezuela (2), Kazakhstan (3), Russia (4), and USA (5), respectively.

Nkong also said the bitumen exploration will boost domestic bitumen production and import substitution, especially as the country imported about $13 million worth of the product in 2020.

Furthermore, he noted that with over 200,000 km of road network in the country and only 30% (60,000km) are paved, “There is a huge network of roads that are unpaved presenting an opportunity for locally-utilized bitumen.”

He added that this is particularly important as the Highway Development and Management Initiative (HDMI) Programme will facilitate the development of parts of Nigeria’s 35,000km of federal highway network through the bidding of 12 major roads under the scheme, covering the six geopolitical zones of the country.

On his part, the Director-General, NGSA, Abdulrazak Garba, assured that the Agency has already carried out the necessary environmental impact and hydrological survey for the bitumen blocks on offer to guide investors on their investment and exploration decisions.

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