Nigeria to grant bitumen concessions, sets date for invitation of bids

The Nigerian government says it will issue a Request for Qualifications in June for bidders interested in receiving concessions to begin the production of bitumen in the country.

Nigeria holds about 42.47 billion tonnes of proven reserves of bitumen, estimated to be the sixth largest in the world, but has not yet exploited the resource, a potential huge source of revenue for the country.

Bitumen is a black viscous mixture of hydrocarbons obtained naturally or as residue from petroleum distillation. It is used for road surfacing, roofing, adhesives, and insulation and is found in Lagos, Ogun, Ondo and Edo States.

After repeatedly failing in the past to harness its bitumen reserves, the government now says it will grant concessions of bitumen blocks to prospective local and international companies in a bid to end the importation of the mineral deposit in the country.

It appointed PriceWaterHouseCoopers as its transaction advisor in November 2021.

The Minister of Mines and Steel Development, Olamilekan Adegbite, at a pre-event press conference in Abuja on Monday, said local bitumen production would save the country’s foreign exchange and generate income for the government. He explained that with the production of bitumen locally in the country, the cost of road construction would ultimately reduce.

“We have a total bitumen reserve size of 42.74 billion metric tonnes, which has remained unexploited for years,” he noted. “This creates a huge opportunity for domestic bitumen production to replace the country’s reliance on imported bitumen.”

Population Concerns

Mr Adegbite said the World Bank projects that Nigeria’s current urbanization rate of 52 per cent will increase by 4 per cent annually.

He explained further that 90 per cent of goods, such as food and building materials, are transported by road to meet the demands of the country’s rising population.

This will increase demand for road infrastructure and put additional strain on the current road network, resulting in higher demand for asphalt for construction and maintenance, he noted.

“Bitumen is a crucial component of asphalt that is used in road construction and once we begin to produce bitumen locally we will have a stable price that does not fluctuate with the exchange rate,” the minister said.

He noted that the nation had a huge infrastructural deficit with regard to paved roads.

“Nigeria currently has 200,000 km of road networks with only 60,000 km worth of road paved which presents an inherent demand for bitumen.

“This considerable road infrastructure deficit presents an inherent demand for bitumen. Hence, the development of bitumen will lead to import substitution, local content development and increased value addition of the mining industry to the domestic economy, thereby creating jobs and generating revenue for the government,” he said.

According to him, the country is now poised to begin the production of bitumen locally as it has appointed a transaction advisor to oversee the process.

He said: “To ensure that Nigeria’s bitumen resources are fully harnessed for industrial and infrastructural development, I constituted a nine-member Ministerial Bitumen Development Committee on 31 January 2020.

“The Committee carried out an inventory of internal existing infrastructure; compiled available geological information, re-established contact with previous interested companies and developed a framework for transparent allocation of the Bitumen resources.

“An important part of the Committee’s recommendations was to finalize the process of engaging a Transaction Advisor to ensure the concession process is open, transparent and in accordance with global best practices as enshrined in the Nigerian Mineral and Mining Act, 2007.”

The minister added that the Bureau of Public Procurement issued a notification of no-objection on June 16, 2021.

Subsequently, he said, the ministry issued a letter of award on November 11, 2021 to PricewaterhouseCoopers to act as its transaction advisor and programme manager to manage the concession of bitumen blocks to potential investors.

Investors

Mr Adegbite said many international and local investors had expressed interest in bidding for the bitumen blocks in the country.

He said: “My office has been bombarded by several interested parties both locally and internationally and I have always told them to wait for when the process is opened for bidding, which would be transparent and in accordance with best international practices.

“There is so much interest in our bitumen because the mineral is of the highest grade and close to the surface which makes mining less expensive.”

He assured prospective investors of the huge local demand for the mineral.

“Finally, I’d like to use this opportunity to encourage everyone to support the government’s strategy for the development of the bitumen resource. All hands must be on deck to build the necessary synergy among all stakeholders to elevate bitumen to a critical resource for the benefit of all Nigerians,” he said.

A representative of PricewaterhouseCoopers, Suleiman Ibrahim, said the organisation has carefully understudied the global best templates to ensure that the project does not experience the pitfalls of the past.

“The marketing plan is critical for the survival of the programme,” he explained. According to him, in no distant time, there will be targeted industry-focused sensitization programme globally to draw the needed awareness.