The Nation Newspaper

Category: Energy

  • FirstBank finances N750b oil and gas projects

    FirstBank of Nigeria Plc has advanced credits in excess of N750 billion to finance various oil and gas projects, indicating that the confidence in bankrolling such deals by banks is on the rise.

    The bank’s Executive Director, Kehinde Lawanson, disclosed this at the just concluded offshore technology conference in Houston, Texas.

    Highlighting the contributions of the financial institutions to the energy sector and commitment to developing local capacity, he said out of FirstBank’s N1.5 trillion loans and advances, over 45 per cent went to oil and gas.

    “If you look at the loans and advances component of our balance sheet, we are very close to about N1.5 trillion and I can say confidently that over 45 per cent of this money went to the upstream, midstream and downstream of the petroleum industry. FirstBank also finances 40 per cent of petroleum imports into the country,” he said.

    Showcasing the strength of FirstBank to investors and operators at the confab, Lawanson said the bank has since 1958 been financing projects for international and Nigerian oil companies.

    He said the bank was lender and arranger of hybrid loans in excess of $225 million for cash call and other working capital financing for Shell Petroleum Development Company; syndicated a medium term loan facility of $225 million for pipeline construction and completion of a gas central processing facility at Uquo marginal field for Seven Energy and its subsidiary, Accugas Limited.

    FirstBank is also part of the syndicate that refinanced the $550 million facility used to acquire 45 per cent interests from oil mining leases (OMLs) 4, 38, 41 from Shell and Seplat. These oil wells produce combined average of 55,000 barrels of oil per day (bopd) and 125 million standard cubic feet per day (mmscf/d) of gas from the assets.

    Other projects financed wholly or partly by FirstBank include the $100 million 128km gas pipeline to Unicem cement plant in Calabar, Cross River being handled by East Horizon Gas Company; co-lender of $289 million to Atlantic Energy for working capital and payment for 55 per cent interests of National Petroleum Development Company in OMLs 26, 30, 34, 42; sole financier of the $15.15 million facility for acquisition of two vessels by Fymak Marine and Oil Services Nigeria Limited; and provided part of the bridge loan financing for the acquisition of ConocoPhillips’ divested interests in OMLs 60, 61, 62, and 63.

    Lawanson, however, explained that the bank doesn’t engage in speculative financing or high risk venture for fear of losing depositors’ money. He said in the oil and gas industry, the bank finances only confirmed producing assets and doesn’t get involved in exploration, which is the primary step to finding oil.

    He said: “The assets that we have created in terms of loans to the oil and gas sector are doing very well. For instance, in FirstBank, our non-performing ratio in total loans is less than three per cent. That is comparable with any bank internationally. We don’t provide loans for development, we provide loans for production. In other words, even where we are funding marginal fields, or some of the oil mining lease (OML) assets, we ensure that they are already in production. So, we can fund increase in production, equity acquisition but we normally don’t do speculative financing. So we have to be sure that you have actually discovered oil and in production.

    “In continued financing of marginal fields and other assets in the oil and gas industry, we put our money where we are sure of the cash flow. When the company is already in production, you are sure of the cash flow, so all that we finance essentially is either acquisition or capacity increase. Companies that we put our money in are companies that we are sure of their cash flow. “

    On financing of high risk ventures, he said the bank cannot afford to bet the monies of the banking publics in Nigeria on risks that it cannot guarantee safety. There is no bank except the CBN that prints money; every bank intermediates, in other words, you identify people with surplus funds and partner them, he added.

    He explained that even in global financing, when there is high risk entity, there are ways of structuring these high risk entities. He said it is either you look for venture capital or equity financing in such deals. Mr Lawanson said: “We cannot afford to put the money of the Nigerian banking public at risk. There are different areas you can play that are in tandem with risk appetite of depositors and that is where we go. First Bank has been in existence for over 118 years and we don’t want to tell a depositor who wants his money stories. We cannot afford that and that is the reason in our risk profiling, we have decided which segments that will not endanger people’s deposits. Anybody who has very high venture, there are players in the market place to partner with them. Nothing stops such persons from going to the IOCs with deep pockets to be their partners.

    “On interest rate, you heard the testimony that the managing director of Seplat gave. Beyond Seplat because of our conservatism, we allow them (our clients) to do the speaking themselves because some customers want confidentiality. They don’t want their transactions in public domain. There are many companies that have got in excess of what we provided Seplat.

    “Borrowing abroad is not profitable because when they compare it with all kinds of commissions and arrangements, their interest rate becomes comparable to the ones that we provide locally in Nigeria. We are relatively low cost bank and that is why we are attractive to Nigerian business people and community.”

    Corroborating Mr Lawanson, Managing Director of Seplat Petroleum Development Company, Mr Austin Avuru, said his company is one of the beneficiaries. He said it secured interest rate of between eight and nine per cent. He, however, explained that getting such facilities depend on the company’s credit rating.

    He said other banks, which are big players in oil and gas project financing with friendly interest rates, include Skye Bank and United Bank for Africa.

  • Oil theft in Niger Delta abating, says Shell chief

    Oil theft in the Niger Delta region is abating, the Managing Director of Shell Petroleum Development Company Limited (SPDC) and Country Chair of Shell Companies Nigeria, Mutiu Sunmonu, has said.

    Mutiu, who said this to reporters during the Offshore Technology conference, however, didn’t give figures or percentage level of decrease in the volume of crude being stolen or saved. The Shell chief said he was unable to determine the amount of stolen crude because of the ongoing repairs of the Nembe Creek Trunk Line (NCTL).

    He confirmed that the security agents are assisting Shell in the provision of security the company and staff.

    He said: “If you have been following my statements in the media, certainly oil theft was on the increase a few months ago, but I can also tell you that I have also seen increased attention by the government security agencies, the joint task force (JTF), and the Navy. They are really moving in to stem the tide. I wouldn’t say I’m happy but at least I can see improvement in responsiveness of government security agencies to the menace.

    “I think the joint security team is getting more effective. We are having almost a daily discussion with them and they do give us good report on their efforts so far. I have been in the discussions with the chief of naval staff and chief of army staff and they have all given their commitment to work with the oil companies to stem the tide and we are seeing progress, but like I tell you, this is a very big operation. So, I’m not expecting solution overnight, but what I’m expecting is that the government’s security agencies will really keep at what they are doing now. If they keep at it for a while, I’m sure we will begin to see a significant reduction.

    “Unless you are in the creek, you may not be able to appreciate what the government’s security agencies are doing, because there is hardly any day that they are not foiling attempts, arresting vessels and destroying illegal refineries.

    “For instance, in a place such as Bodo, in a week or two weeks ago, they foiled over 30 different attempts by crude oil thieves wanting to add additional tapping points to our line. So, we see all these successes everyday, but I will be able to say the number of barrels reduction in stolen crude when our Nembe Creek Trunk Line is up, but right now that line has been down and we are removing the bunkering points. Once the bunkering points are removed, and the line is up and running, we will then be in a position to judge how much oil we are still losing, but right now whatever figure I give you will be artificial.”

    Sunmonu also said the increasing declaration of force majeure by Shell may continue until the company substantially recovers from frequent attacks of its facilities. “You need to see this kind of force majeure for some time until we fully recover because even with all the efforts that the government’s security agencies are putting in, there are some steps that we need to take together jointly in order to make sure that the effect are not continuing.

    “The force majeure you have seen us declare is for us to remove some of the very bad bunkering points that have been put on the line because if don’t remove those bunkering points even if you have the entire Nigerian Army in the creek, you will still continue to see crude being stolen. So, our initial attempt is to remove those bunkering points to complement what the security agencies are doing.

    There has been a recent upsurge in crude theft on the NCTL, resulting in frequent production shutdown and massive oil spills blighting the environment of the host communities.

    Shell said between February 22 and 25, 12 flow stations were shut by safety systems three times due to oil theft. The oils giant loses about 80,000 barrels of oil daily to oil theft.

  • DPR: Indigenous firms supply 12% of crude oil

    Nigerian oil companies contribute only 12 per cent of the total 2.5 million barrels of oil produced in the country, the Department of Petroleum Resources (DPR) has said.

    Its Director, Osten Olorunsola, said it is erroneous for some people who say that production from marginal fields contribute 12 per cent of the total national oil production, adding that marginal fields contribute far less than that volume.

    He said: “It is incorrect to say that the 12 per cent contribution is from marginal fields. The 12 per cent you mentioned is not from marginal fields, it is from all indigenous producers, including the National Petroleum Development Company (NPDC). The marginal fields’ production is far below that. The marginal fields are doing only 50,000 barrels per day out of 2.5 million barrels.

    “Therefore, their cry for more is legitimate. It is the right thing to do. After 50 years of production in Nigeria, we cannot be going about to say that the indigenous production accounts for only 12 per cent. It should be far more than that. Even the government’s policy of encouraging indigenous participation is in that direction. They should all be supported.

    “If you look at the marginal fields specifically, nine out of 24 are already producing today. Another four or five will soon start to produce. Some of the marginal fields that would come on stream include Sogenal while Frontier has just come on stream. They are producing and they are all doing pretty well. Don’t forget that the first four or five years, they all had issues. It was a new law that came up. So, you don’t expect them to start from day one to produce.

    “They had all sorts of issues like funding. Most of the banks in Nigeria did not know how to fund long term projects like oil and gas because it is not an ATM where you put in your card and get money immediately. They needed time to understand the industry before putting in their money to support any investment in that direction. The second was that they also needed to build capacity. They needed to get the right people to help them to move the huge capital in the right direction.

    “The third issue was that quite a few of them had some litigation among themselves as regards partnership issues. Some of them went to court. Now they are all coming out of court gradually, we will see a lot of actions going forward.”

    On another marginal fields bid round, the DPR chief said the agency is working through it. He said some of the things the Department is basically looking at are that most of the fields that probably will come out in the next round are in assets that they are still trying to renew for the licence holders.

    He said:”If they don’t renew the licences, there is no point going ahead with fields people don’t even have titles to. Some of those fields are within leases that are going through renewal right now. You need to renew the leases first before you give out the fields within the leases to other people as marginal fields. That’s what we are doing basically. The leases have expired. We have to do one thing first. It is like building a house without putting a foundation. You do the foundation first before you start raising the walls. Some of the lease holders have applied for renewal and the government is going through the process of renewing them,” he said.

    The marginal fields’ owners he said are doing marvellously well. “They are already in that direction. If you go to some of the marginal fields in Nigeria, you will be shocked by what you see. What some of them have put on ground will rival any international company in the world. I have been there myself. I am not talking of pictures,” he added.

  • ‘Why marginal fields fail’

    Lack of technical competence, knowledge of business, operating environment and financial capacity are causes of the failure of the marginal fields programme of the government, the Managing Director, Treasure Energy Resources Limited, Rivers State-owned oil and gas company, Dr. Eddie Wikina, has said.

    In statement, he said the success rate of the fields is less than 30 per cent as only seven out of the fields have managed to develop and attain production.

    The producing marginal fields are owned by Platform Petroleum Resources, Energia Limited, Mid Western Oil and Gas Company, Britannia- U, Walter Smith Petroleum Oil Limited, Niger Delta and Pillar Oil Limited.

    Dr. Wikina said the full potential of the programme is not yet achieved.

    He said the award of the marginal fields was based more on political patronage and considerations rather than on business relevant issues.

    The Treasure Energy Resources boss stressed the need for the government to shun any interference and allow experts to run the business.

    He urged the government to ensure that dormant oil fields held by major oil companies are released for development and oil production.

    “They basically have political patronage and this cannot bring oil from the subsurface. They are not ready to spend money on technical experts but run on boards that are based on family affiliations with no oil and gas experience,” he said.

    He said the government must shun political sentiments in the next marginal fields bid round. He said consideration must be given to qualified companies and indigene persons to oil producing states.

    Treasure Energy Resources chief said the Nigerian content rule must be enforced to ensure that operating companies established functional offices with decision authority within the state hosting the marginal fields or close to the areas of operations.

    According to him, failure to do this would mean denying the host states and areas of operations economic development.

  • Experts make case for skills devt centre

    The International Association of Drilling Contractors (IADC), Nigerian chapter, has called for the establishment of a training centre to enhance the acquisition of skills in the oil and gas industry.

    The training centre is expected to serve as an avenue where operators and service providers would acquire relevant skills that would help them advance the technology required in the industry and to further harness the local content development initiative.

    The Nigerian chapter has also set up a committee to exchange ideas on the modalities, location of the institute, people to be involved, the kind of training that would be offered in the place, cost and the expected time to realize the project. The committee is to report back to the management of the IADC Nigeria, which would then bring it to the general body.

    Speaking with The Nation during the IADC technical session in Lagos, the Operations Manager, Oando Energy Services, Mr. Valentine Iheasirim, said establishment of such training centre has become necessary because the current school curriculum does not fully prepare those who are trained to be petroleum, electrical, mechanical engineers and other similar fields of study to deal with the challenges of the drilling industry.

    He said building such institutions would provide opportunity for the young university graduates to obtain in-depth knowledge that would make them to be relevant in the sector.

    Mr Iheasirim also said the Petroleum Training Institute (PTI) set up in Effurun, Delta State, decades ago, has failed to attain the purpose for which it was established. This, he noted, account for the reason there is huge knowledge gap in the industry.

    He said as drilling contractors, the training institution will help to foster competency in the individuals to manage key positions in the sector.

    He said: “We can set up a training school that would specifically address certain areas such that the young man who comes out of the university can enrol in the training school and maybe within two or three months, get the necessary skills, which can make us use of in the field. It gives him a faster head start.”

    The expert said membership of IADC is not only for drilling contractors, but also for service companies and operator companies, such as Shell, ExxonMobil, Chevron, Agip, Total and Addax.

    Iheasirim said the IADC forum gives members the opportunity to thrash out problems, challenges and brighten ideas on how to resolve them.

    He called for the cooperation of the operators and regulators, including the Department of Petroleum Resources (DPR), National Petroleum Investment Management Services (NAPIMS), Nigerian Content Development and Monitoring Board (NCDMB) and other relevant agencies in the country.

  • ‘Sanity returns to downstream sector’

    ‘Sanity returns to downstream sector’

    The downstream sector of the petroleum industry associated with sharp practices, which led to a probe by the House of Representatives Ad hoc Committee last year, is witnessing sanity following on-going reforms, writes EMEKA UGWUANYI Asst Editor (Energy).

     

    Background

    The probe in downstream sector of the petroleum industry carried out by the House of Representatives Ad hoc Committee on Fuel Subsidy regime last year unveiled the rot in the sector.

    Some marketers were indicted and summoned by the Economic and Financial Crimes Commission (EFCC). While some of the indicted marketers have been cleared, others are still being interrogated by the anti-graft agency. Many marketers were said to have made claims from the petroleum subsidy fund without importing products.

    The Petroleum Products Pricing Regulatory Agency (PPPRA), however, said the situation has changed as the sector operates in line with global best practices, adding that any marketer that doesn’t play by rule will be kicked out.

     

    PPPRA’s initiative

    The Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley, told The Nation that the agency has done a lot by making sure that procedures are properly followed to ensure transparency and accountability.

    He said: “Today, you cannot claim subsidy without proof that you have 80 per cent truck-out of the product out of your facility. This does not involve the importer reporting to us, because we have independent inspectors monitoring that system. There are numerous checks and balances that we have put in place that have actually brought clear sanity to the downstream sector.

    “Also, you cannot discharge without an international independent inspector, which is among best practice anywhere in the world. The idea is working and it was introduced when I came in as the Executive Secretary. The Ministry of Finance also changed their auditors. We have Dafinone and Co., handling the final check before they (marketers) are paid, and we have Afemike and Co., at all the terminals also confirming that what our inspectors said came in and what the Navy and Customs confirmed are authenticated by their own inspectors.”

    He said as a result of the reform and sanitisation, the number of marketers was reduced from 128 in 2011, to 39 by the end of last year. He explained that the number was reduced to 32, but because new filling stations were licensed as new participants were given permits to import fuel, the figure rose to 39. He noted that despite proposals from some quarters that 10 to 15 marketers can serve the country, he was not opposed to many players, but stated that they must abide by the rules of the game.

    “I am also not averse to the number of players increasing, because people have suggested that we don’t need more than 15 companies to bring in products, but my stand on that is very clear. These are Nigerian entities and we are 100 percent local content.

    “All those bringing in the products are Nigerian companies and in a country where unemployment is 23 per cent, if anybody decides to do the business, he will not run it alone, he will employ Nigerians. We are ready to welcome new entrants into the business as long as they are willing to play by the rules. The number of players can swell but that should be based on companies that have been verified and it can also go down, because we suffer no fool. Once we catch you on the other side, we take you out.

    “The final thing we want to do, which I hope will be done by end of this month, is to publish the list of international suppliers into this market. That is ready, but I have to run it by my boss. Once it is ready, you cannot bring products into this country without those companies. The reason is that they are fully documented.

    “What we have done here in the downstream, is to make sure that the companies are known accredited suppliers. And that is what we are taking to the international territory. Nigeria is not a place where any and every company can come and bring in product, because if you don’t have international reputation and there is any issue, you go underground.

    “This initiative is important because before you come in, we bring you into Abuja, take you through the riot act and the rules of the game. We have documented the processes and procedure so that whoever comes after me doesn’t rewrite the genetic code, because if you deviate from it, you are inviting trouble.”

     

    Achievements

    Stanley said that as a result of the sanitisation of the downstream sector, PPPRA saved N1.09 trillion on fuel subsidies last year. He said that the stringent measures and controls being applied in the petroleum products marketing and distribution arm, helped the agency to contain subsidy payment to N1 trillion as against N2.09 trillion spent in 2011.

    He said PPPRA as any other industry regulator, is the final arbiter when it comes to any of the sectors that are being regulated. He noted that although regulators are protected by immunity and cannot be sued, they are run by people with the highest level of integrity knowing that the decision they take are in the best interest of the citizenry.

    He said: “The regulators have to protect investment and consumers; therefore, we cannot go away from a standard template that ensures transparency and creates a level playing field, which will boost the confidence of investors coming into the business.”

    He said his appointment was the outcome of a comprehensive reorganisation of the downstream oil and gas sector, which was carried out to ensure greater transparency, accountability, effectiveness and efficiency as well as good governance, consistent with general public’s expectations, adding that companies must stick to these ideals at all times.

    He said in view of the mandate given him by the government, he has carried out some restructuring in the agency, including staff redeployments and organisational structure realignment, proper tracking of vessels, personnel training in competency building courses and automation of operations, among others.

    He explained that following the restructuring and strengthening of the rules, there is improved compliance to guidelines and policies by marketers and the Nigerian National Petroleum Corporation (NNPC). This development, he added, has resulted in the achievement of 67 per cent reduction in the number of participants in the subsidy scheme, from 128 marketers in 2011 to 39 by end of 2012.

    He said the ultimate goal is to make the sector self-financing and self-sustaining to support a more robust national economy. “The maintenance of product supply stability in the last two years of my administration cannot be divorced from the wide industry networking capacity and expertise of the agency’s chief. The ground rules have been set, if any participant violates it, the person will be sent out.

    “The refineries are not working as expected due to several problems and challenges. The refineries are not yet there, currently Warri and Port Harcourt refineries are down and Kaduna produces just about 1.2 million litres daily.”

    On the performance of the refineries, the PPPRA assigned zero per cent to it, just to be on the safe side. “So, whatever the refineries produce in a day is regarded as a bonus to us. The refineries are still being bedevilled by lack of crude supplies, breakage of lines, equipment breakdown and until we do a thorough overhaul of the refineries, the supply of the refineries into the mix will probably not be more than 10 per cent.”

    But the Nigerian National Petroleum Corporation (NNPC) said the Kaduna, Warri and Port Harcourt refineries produce at not less than 60 per cent each. The Group Executive Director, Refining and Petrochemicals (NNPC) Anthony Ogbuigwe, said Kaduna Refinery operates at 65 per cent, Warri Refinery at 63 per cent and Port Harcourt Refinery at 66 per cent of their installed capacities.

    He said the three the refineries process 10.23 million litres of premium motor spirit (petrol), 5.53 million litres of dual purpose kerosene and 8.016 million litres of automotive gas oil (diesel) daily.

    Ogbuigwe said: “I can tell you with every sense of responsibility that contrary to the news making the round, all our refineries are doing very well. The major components and various units of Fluid Catalytic Cracking Units, (FCCU), Crude Distillation Unit (VDU) and Vacuum Distillation Unit (DDU) of all the refineries are working well. In fact, these refineries have been running consistently for over three months now.”

    He explained that the stability in supply of petroleum products is attributable to the performance of the refineries, adding that the scheduled turn around maintenance (TAM) of the refineries are on course. He said the Port Harcourt refinery has taken delivery of some of the components for its rehabilitation. “I can tell you that five shipments for the TAM of Port Harcourt Refining and Petrochemical Company have arrived,” he added.

    He decried the incessant pipeline vandalism and crude oil theft, stressing that the menace is a big threat to the nation’s oil and gas industry. He called on stakeholders in the petroleum industry and Nigerians to team up with the NNPC in finding a lasting solution to the threat to enable the refineries to run without shutting down. The Federal Government allocates 445,000 barrels of crude daily to the three refineries.

  • ‘Retailers not liable for off-spec cooking gas’

    he Liquefied Petroleum Gas Retailers Association of Nigeria (LPGARAN) has absolved its members of responsibility of marketing off-specification liquefied petroleum gas (LPG), which the group referred to as Niger gas.

    They condemned the action of some unidentified persons who used the social media network to accuse their members of being responsible for selling the Niger gas to Nigerian consumers.

    The National President of LPGARAN, Michael Chika Umudu, and the National Secretary, Ayobami Olalekan Olarinoye said that the dissemination of such malicious information by unscrupulous competitors was aimed at discouraging members of the public from patronising LP Gas, which is also known as cooking gas.

    The group was accused of selling cheap but dangerous high-propane cooking gas allegedly imported from Niger Republic in their retail shops but absolved owners of LPG refilling plants. “The information is intended to scare members of the public away from gas retailers in order to achieve the selfish ends of its authors who doctored a story by the media and disguised under it. It is untrue and should be disregarded,” the group said.

    On how the problem started, LPGARAN explained that the two major elements that make up LPG (cooking gas) are propane and butane. Propane, they said, has high pressure but it is about 45 per cent cheaper than butane, which has low pressure but very costly. The group said that at a stakeholders’ meeting held in February this year, the Standard Organisation of Nigeria (SON) reached an agreement will all players that the composition of LPG should have more butane than propane.

    LPGARAN said it members insisted on 20 percent propane and 80 percent butane but SON put a limit of 30 percent propane, which no player should exceed but some continue to import LPG with very high propane content.

    SON’s prescription of 30-70 percent composition of propane and butane, LPGARAN said, was based on the hot weather and the state of most of the gas cylinders in Nigeria, which are aged and unsuitable for LPG with high propane content. Because propane exerts much pressure on the cylinder, aged cylinders such as the ones used in Nigeria, are very susceptible to explosion. To be on the safe side, SON directed that marketers import LPG with more butane content or at most 30 per cent propane and 70 per cent butane but some marketers disregarded this and continued to import LPG with high proportion of propane, the group said.

    According to LPGARAN, the former President of National Association of LP Gas Marketer (NALPGAM) had in an interview condemned the continued importation from Niger Republic of LP Gas with very high proportion of propane, highlighting the danger in such products but dishonest competitors chose to accuse retailers.

    It said: “The Niger gas is a very high pressure LP Gas which is capable of causing incessant explosion of cylinders, pipes, and rubber hose. Indeed, there is increase in reported incidents of explosions since some LP Gas depot operators began to import the gas about two years ago.

    “LPGARAN for about two years now has been raising the alarm on the danger that Niger Republic gas poses to members of the public and market operators. The association has reported this to the Nigeria LP Gas Association (NLPGA) led by Alhaji Awalu Ilu. LPGARAN has been calling on LP Gas plant operators to stop patronising the depot owners who import the Niger gas because gas retailers buy their gas only from gas plant operators and not from depots.

    “Just early this year, February 7th and 8th, Standard Organisation of Nigeria (SON) hosted LP Gas Technical Committee Meeting in Lekki, Lagos State, with priority on issues bordering on quality of LP Gas. More than any other group or persons present at the meeting, National President of LPGARAN, Michael Chika Umudu, and National Secretary, Ayobami Olalekan Olarinoye, condemned in strong terms the continued importation of the Niger Republic gas and demanded that regulatory agencies only allow for production and importation of LP Gas with lowest possible propane content. We specifically demanded for not more than 20 per cent propane and not less than 80 per cent butane.”

    Umudu said the debate on this particular issue took more than 50 per cent of the time spent in the two days event. Virtually all major stakeholders including NLPGA, LPGARAN, NALPGAM, SON, DPR, NNPC, PPMC, Local Refinery managements as well as depot owners and representatives of LP Gas engineering companies were present at the meeting. At the end of the meeting, he said that it was generally agreed that only LP Gas with low propane content should be allowed for domestic related consumptions. Regulatory agencies were consequently asked to streamline and enforce the decision.

  • ‘IOC’s divestments will create prospects for local firms’

    Oil and gas experts have called for fair and effective legal and regulatory framework in the medium and long term to enhance investments and growth in the sector.

    They frowned at the prolonged reforms of the government through the non-passage of the Petroleum Industry Bill (PIB).

    Speaking at the ESQ Energy and Oil and Gas Summit in Lagos, the Managing Partner, Caxton-Martins (a service commercial law firm), Sola Adepetun, said: “The legal and regulatory atmosphere of uncertainties and legal risks is unsustainable and the PIB must be enacted expeditiously to provide the needed legal solutions.”

    Adepetun, who spoke on The evolving legal and regulatory framework governing the Nigerian petroleum industry: Examining the challenges, risks and opportunities, explained that if the PIB cannot be enacted expeditiously enough, a review of relevant existing laws and regulations should be carried out in the short to mid-term to effect required amendments, new regulations and guidelines.

    The Executive General Manager, Public Affairs and Communications, Total Upstream Companies, Chidi Momah, said the IOCs support the PIB and believe there is need for reforms as the Act is over 40 years. He, however, noted that there were concerns if the PIB will achieve the stated aim that will enable IOCs in Nigeria to move forward.

    The Legal Adviser, Mart Resources Inc., an independent Canadian oil and gas firm, Mrs. Asiyah Alao-Mutallab, advised that with the increasing divestments from IOCs, Nigeria needs to look at how to attract foreign investors and keep them.

  • Wanted! A competent national oil firm

    Wanted! A competent national oil firm

    Globally, national oil companies are getting more integrated for increased economies of scale with their exploration and production (E&P) subsidiaries playing in different countries, such as the multinational firms. The Nigeria Petroleum Development Company (NPDC), the E&P arm of the Nigerian National Petroleum Corporation (NNPC), shouldn’t be an exception, writes EMEKA UGWUANYI Assistant Editor (Energy).

    Background

    Any oil producing country strives to optimise the benefits of the hydrocarbon resources for the extant and future generations. Nigeria shouldn’t be the exception. In the over 50 years of crude oil production, the country has nothing to show for it, a development condemned locally and internationally. Qatar, a small Middle East country, has an integrated national oil company and all the subsidiaries are doing well- creating value for the citizens and operators. Nigeria can make NNPC and its subsidiaries profitable.

    For instance, Brazilian national oil firm, Petroleo Brasileiro SA (Petrobras), which is an equivalent of NPDC, divested its interests in all the oil and gas assets in Nigeria to create more value for Brazilians. The company expects to earn over $5 billion from the deal.

    According to Reuters, the decision to sell the Nigeria assets marked a retreat away from foreign markets to enable the company concentrate on oil assets development in Brazil to realise the government’s goal for Brazil to become self-sufficient in energy.

    With the divestment, Petrobras, the report said, can focus more on exploring for oil in a vast deep sea region off the coast of Brazil known as the subsalt, believed to hold billions of barrels of high-quality oil. The report noted that despite cash flow being crimped by falling output, the government refused on anti-inflation grounds, to let Brazilian gasoline and diesel prices rise in line with world prices. This has forced Petrobras to subsidise consumers even as its debt rises above its internal limits.

    An industry operator noted that the essence of maintaining national assets, such as NNPC and NPDC is that unlike the privately owned firms that are often interested in maximising profits for the owners, the country falls back on these national firms in times of difficulty and challenges for the benefits of the citizenry.

    The operator said those against the development of the NPDC into a big company that can compete with other multinationals locally and internationally, don’t mean well for the country. He said as the government creates environment and policies that promote the development of private sector oil firms, it will also ensure that companies such as NPDC are robustly developed because it is the company owned by Nigerians.

     

    Establishment, growth of NPDC

    The Nigerian Petroleum Development Company (NPDC) is the exploration and production arm of the NNPC, established in 1988 to enable the NNPC to meet its objective of being a major player in the upstream sector of the oil and gas industry.

    However, over the years, the company could not realise its objective as a result of lack of cooperation from past administrations, which actually stripped the company of some of its very prolific acreages.

    But with the encouragement from the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, and the support of the Presidency, NPDC has gradually begun to grow to realise its objectives. Asset stripping, which almost compelled the company to close shop has stopped.

    In 2010, the Minister gave the NPDC a target to produce 250,000 barrels per day by 2015 when its production was just 65,000 barrels per day. It produces 130,000 barrels per day representing a 100 per cent growth. Bulk of this growth in production came from assets divested by Shell, which it held in joint venture with the NNPC on behalf of the Federal Government. While Shell sold the stakes it had in these assets with other international oil companies, the petroleum minister handed NNPC’s stakes in these assets to NPDC. They include Oil Mining Leases (OMLs) 4, 26, 30, 34, 38, 41 and 42.

    The Managing Director of Shell Petroleum Development Company and Chairman, Shell Companies in Nigeria, Mutiu Sunmonu, during the divestment said the sales were competitively and transparently carried out in line with international best practices. Besides, he stated that companies were given preference as part of contribution to developing indigenous E&P companies.

    Alison-Madueke noted that efforts to make NPDC attain the 250,000 barrels per day production were on course. She explained that with such production level, the company can exist on its own, be able to seek loan from any financial institution in the world, bid for acreages and produce oil from any part of the world just like the multinational oil firms.

    NPDC is embarking on aggressive drilling programme. For instance, it has successfully drilled two new wells in its OML 119. The wells, Okono 6 and 7 are producing 12,000 barrels per day. They are situated in an area where most of the wells produce an average of between 2,000 and 3,000 barrels per day.

    The minister had also told reporters that NPDC’s plans is to drill more wells this year, adding that additional two rigs would be deployed for operation in addition to the two the company currently has on site. She said the target is to drill 40 wells in the next five years as part of NNPC’s growth projection.

    As part of the growth efforts, NPDC is carrying out well repair and maintenance activities aimed at boosting reserves. For instance, the company carried out repairs on some of its wells in OML 26 in June last year. This helped to double production from those wells contributing to the company’s current 130,000 barrels per day production.

     

    Gas production

    NPDC is putting measures in place to boost gas production especially for supply to power plants. The Phase 1 of the Oredo Gas Handling Facility situated near Ologbo in Oredo oil field was completed this year and supplies 65 million standard cubic feet per day of gas to the Nigerian Gas Company for transmission to power plants. During the inauguration, the minister assured that the second phase of the project would be completed before end of this year. It is expected to produce additional 100 million standard cubic feet per day.

    The second phase will also come along with the completion of the Liquefied Petroleum Gas (LPG) processing component, which will deliver about 4,000 metric tons of LPG to enhance the campaign to get every home to adopt LPG as its domestic cooking fuel and stop the trend of deforestation arising from the use of firewood.

    NPDC Managing Director, Victor Briggs, said: “The only way we can increase our production is really by going out there and do the work. It is either you are repairing a well that has gone down because there are technical issues or you are drilling a well. I consider Okono 6 and 7 a success because the two wells combined are delivering over 12,000 barrels per day and that by any standard is significant especially in an area where most of the wells around are producing an average of 2,000bpd to 3000bpd.

    “Under the leadership of the former Managing Director, who is now Group Executive Director Exploration and Production, Abiye Membere, our production grew from between 60,000bpd and 65,000bpd to about 130,000bpd. That is about 100 per cent growth. For us to meet the 250,000bpd target by 2015 we will have to do another 100 per cent growth from our current production. And that is what we are trying to do. First, we tried to repair some of the wells to restore their production capacities. For instance, in OML 26, between when that asset was handed over to NPDC in June and now the production of that field was doubled. All of these have added up to the 130,000bpd production that we are talking about today. To meet the 250,000bpd target by 2015 means doubling our production as I said earlier, but I am confident that we will meet the target because we have the resources and the reserves are there, and we have the people. Everything is therefore set for us to meet the target.

    “While we are drilling to increase our production, we are also working hard to boost our reserve because this is what ensures sustainability. For instance, in one of our wells in Okono, we are drilling deeper to assess its greater potential. That drilling is going on very well as at today; if we find what I think we will find, and I think we will find it, that will give us more reserves in that field.”

  • Group makes case for skills devt centre

    The International Association of Drilling Contractors (IADC), Nigerian chapter, has called for the establishment of a training centre to enhance the acquisition of skills in the oil and gas industry.

    The centre is expected to serve as an avenue where operators and service providers would acquire relevant skills that would help them advance the technology required in the industry and to further harness the local content development initiative.

    The chapter has also set up a committee to exchange ideas on the modalities, location of the institute, people to be involved, the kind of training that would be offered in the place, cost and the expected time to realise the project. The committee is to report to the management of the IADC Nigeria, which would then bring it to the general body.

    The Operations Manager, Oando Energy Services, Mr Valentine Iheasirim, said establishment of the centre has become necessary because the school curriculum does not prepare those who are trained to be petroleum, electrical, mechanical engineers and other similar fields of study to deal with the challenges of the drilling industry.

    He said building such institution would provide opportunity for the young university graduates to obtain in-depth knowledge that would make them to be relevant in the sector.

    Mr Iheasirim also said the Petroleum Training Institute (PTI), Effurun in Delta State, decades ago, has failed to attain the purpose for which it was established. This, he noted, accounts for the reason there is huge knowledge gap in the industry. He said as drilling contractors, the training institution will help to foster competency in the individuals to manage key positions in the sector.

    He said: “We can set up a training school that would specifically address certain areas such that the young man who comes out of the university can enrol in the training school and maybe within two or three months, get the necessary skills, which can make us use of in the field. It gives him a faster head start.”

    The expert said membership of IADC is not only for drilling contractors, but also for service companies and operator companies, such as Shell, ExxonMobil, Chevron, Agip, Total and Addax.

    Iheasirim said the IADC forum gives members the opportunity to thrash out problems. He called for the cooperation of the operators and regulators, including the Department of Petroleum Resources (DPR), National Petroleum Investment Management Services (NAPIMS), Nigerian Content Development and Monitoring Board (NCDMB) and other relevant agencies in the country.

    “The NCDMB’s idea of pushing for local content and indigenisation of some activities is the right way to go, but we also need to support that with competency. Through IADC, we are driving strongly to see if affected members including international oil companies, drilling contractors, regulators, can come together and identify the problem and fashion out ways to solve it,” he added.

    He said that Oando has acquired three drilling rigs that are actively working, adding that the fourth rig is in the pipeline.