The Nation Newspaper

Tag: Oil and Gas

  • CBN warns banks against loans to oil and gas, public sectors

    CBN warns banks against loans to oil and gas, public sectors

    Bankers have got a warning on the dire consequences of the falling oil price on loan advances to the oil and gas as well as the public sector.

    In a letter to all banks signed by Central Bank of Nigeria (CBN) Director, Banking Supervision, Mrs. Tokunbo Martins, the apex bank said the falling oil prices and the potential for a further decline had been a major concern.

    Many states have been unable to pay salaries as banks shut the tap amid dwindling and delayed allocations.

    Mrs. Martins said considering the quantum of exposure to the oil and gas sector, combined with risk management deficiencies revealed by the recent Risk Based Supervision, there is a need to proactively guard against a crystallisation of these risks.

    “The CBN therefore considers it essential to ensure that banks have sufficient capital buffers to mitigate these escalating risk taking activities. Where exposure to the oil and gas sector (as defined by the International Standard Industrial Classification of Economic Sectors as issued by the CBN) is in excess of 20 per cent of total credit facilities of a bank, the risk weight of the entire portfolio in the sector will attract weight of 125 per cent for the purpose of capital adequacy computation,” she said in the letter titled: “Oil and Gas Industry Credit Risk Mitigation”.

    Oil prices have declined from $107.89 per barrel in June to $85.06 per barrel in October, and trading at $57.33 per barrel. The possibility of further decline, Mrs. Martins said, should not be underestimated.

    The CBN director said that a proposed single-factor sensitivity stress test showed that at $70 per barrel, 25 per cent of oil sector loans would become non-performing while 15 per cent of the loans will be nonperforming in the public sector.

    At $65 per barrel, 40 per cent of oil and gas portfolio becomes non-performing and 30 per cent for public sector loans. Also at $60 per barrel, 55 per cent of oil loans become non-performing while 45 per cent of the loans become non-performing in the public sector.

    The test also showed that should oil price fall to $50 per barrel, 65 per cent of the portfolio would become nonperforming in the oil and gas sector, while it is 60 per cent for public sector loans.

    The single-factor sensitivity testing, Mrs. Martins said, is a form of stress testing that usually involves incremental change in a risk factor holding other risk factors content. “Shocks can be assumed to occur instantaneously, and it can be used as a simpler technique for assessing the impact of a change in risks when a quick response is needed. The focus of the sensitivity test is on transmission of crude oil price shock through deteriorating oil and gas, and public sector credit quality, resulting in elevated non-performing loan levels for the aggregate credit portfolio, and a requirement for additional prudential provisioning,” she said.

  • Govt urged to set up fund for operators

    The Federal Government has been urged to set up a special fund for indigenous oil and gas operators.

    The  Managing Director, Del-Sigma Petroleum, Soky Amachree, gave the advice duirng an interview wth The Nation.

    He said the development became imperative to enable domestic operators to improve their operations and compete with their counterparts in other countries.

    He said the International Oil Companies (IOCs) in Nigeria and the local banks needed to evolve a partnership through which they would support their marginal field operators.

    Amachree said many of the marginal field operators were in need of technical and financial assistance, adding that their problems would be reduced once the fund is set up.

    He said such operators go about sourcing funds after their licence had been approved by the government.

  • Nigeria needs to diversify from oil and gas, says Oworu

    The Commissioner for commerce and industry, Lagos State, Mrs Olusola Oworu, has said Nigeria must diversify from oil and gas and focus more on manufacturing in order to create wider base for the economy.

    The Commissioner who represented Governor Babatunde Fashola at the foundation stone-laying of the Lekki Mall by Novare Africa Property Fund, said the decline in the global crude oil price has exposed the risk Nigeria is facing by unduly dependent on oil.

    “The country is totally dependent on oil and gas for its revenue and its foreign exchange, and as you can see the price of oil is falling; from a $100 per barrel to $80 per barrel, so what we are saying now, is that rather than rely solely on oil and gas we must diversify the economy, and one way to do that is to focus on manufacturing. The longer it last a lot of things that we import, we can produce locally,” Oworu said.

    Oworu added: “What we are saying now is that rather than creating jobs in other economy, we must create jobs in our own economy by encouraging our manufacturers to come and setup here in Nigeria and Lagos state in particular. That’s why we have been working so hard to ensure that the environment remains conducive for businesses to come because it’s only the private sector that can drive this development, so we are making sure that things are in place for businesses to come in Nigeria, making sure that Nigeria is a major attraction for foreign direct investment and local investors because Nigerians are the ones that can develop this economy.”

    She further said to promote such development, the government is working with the Lagos Business School to ensure that state remains number one attractive destination for foreign investors.

    Oworu, however,thanked Novare Africa Property Fund for their interest in Nigeria and Lagos in particular.

    In an interview with The Nation, Group Chief Executive Officer (CEO) Novare Africa Property Fund, Mr Derrick Roper, said the Lekki mall is going to change the way people do their shopping in this part of the world and create a formal retail that’s going to be secure and safe for people, adding that families will be able to have access to entertainment, good and cheap quality shopping.

    Speaking on the impact of the mall to the economy, he said “We will be creating a lot of jobs as well for people that live around here, it’s going to be over a 1000 jobs for people that work in the mall in the different shops, on top of that its going to create another 200 jobs for other services to the mall”.

    The mall estimated to cost $83 million was embarked on two years ago, and it’s going take another 18 months for construction to end.

    According to Derrick, when the mall opens in April 2016, it will be the biggest mall in West Africa.

    He further said from a total of 20 hectares of land space, only seven hectares had been used adding that, the company’s plan is to expand the mall in future.

    Also at the event, Chairman Urshday Limited, Dr Fabian Ajogwu, lauded the cooperation received from the Lagos state government.

    He said urged the private enriches the environment with great opportunities for people and makes Lagos state better and indeed a good source of revenue for the state government.

     

  • Different strokes for different sectors

    Different strokes for different sectors

    It was not all that rosy for power, oil and gas in the outgoing year. Though the power sector reform was completed, theft continued to take its toll on the oil sector. AKINOLA AJIBADE reports.

    The year is eventful going by the spate of reforms in the energy sector. Nigeria has just completed the sale of the unbundled assets of the defunct Power Holding Company of Nigeria (PHCN) to 14 companies.

    The assets were sold at N385billion. The sale marked a new beginning in the history of the power sector. The management of the state-owned electricity corporation was shifted to the private sector. Thereafter, the Federal Government handed over the assets to the private investors, signalling the commencement of private-driven electricity activities.

    Though the reforms, which started in 2005 have helped in providing the country with a template on how power sector can be privately run, there are issues. These include payment of severance package to the 48,000 workers of PHCN, infrastructure, insufficient meters, planned increase in tariffs, poor supply and others.

    The petroleum industry has been battling to rid itself of problems, such as oil theft, pipeline vandalism, divestment of shares by the International Oil Companies (IOCs), poor gas supply, and others. Many have gained from the reforms. Others have not.

     

    Power firms’ operation

     

    Infrastructural problems, such as weak transmission, poor distribution network, gas supply, shortage of meters, and frequent drop in water level at the Shiroro and Kainji Dams and drop in electricity megawatts(Mw) are common in the industry. It has been fluctuating between 3,500 and 4,500, thereby affecting power supply.

    The Minister of Power, Prof Chinedu Nebo said the government had improved water supply to the dams, adding that the electricity megawatts stand at 4,000. He said improvement in power generation and distribution would not be sudden, despite the take over of the sector by private investors, urging consumers to be patient with the new firms.

    He also urged consumers to pay their bills and resist the temptation to tamper with the metering system. An official, of the Ministry of Power Nuhu Sada said 2013 would be remembered for the sale of PHCN and the resolve of private investors to improve power supply.

     

    Payment of

    severance package

     

    Payment of N385billion as severance package to workers dominated issues in 2013. It pitched the government against the aggrieved workers. While the government accused the workers of trying to sabotage the reforms, the workers under the umbrella of the National Association of Electricity Workers of Nigeria, alleged that the government was playing politics with their future. This led to protests in Abuja and Lagos and subsequent threat to destroy all power installations in the country.

     

    Sack of PHCN’s workers

     

    The Bureau of Public Enterprises (BPE) sacked about 70 per cent of PHCN, following the payment of their severance package. The workers accused the government of throwing them into the labour market without following due process. The sack resulted in the shortage of skilled manpower in the power sector, and aggravated problems in the industry.

     

    More power stations opened

     

    Recently, the government opened a 434-megawatts power station in Geregu in Kogi State. It is planning to open another sub-station in Yola, Adamawa State. Also, the government has kicked off the process of privatising the 10 new power stations built under the National Integrated Power Project (NIPP) with a road show in Lagos.

    The Chief Executive Officer, Niger Delta Power Holding Company (NPDHC), James Olotu, said the privatisation of the firms had attracted over 40 local and foreign investors. The plants are in Olorunsogo in Ogun State, Omotosho, Ondo State; Ihobvor, Edo State; Geregu Egbema, Imo State; Alaoji, Abia State and Sapele, Delta State. Others are Calabar Power Station in Cross River State and Sapele in Delta State.

     

     

    Oil theft

     

    The oil and gas industry continued to suffer from theft with its attendant oil grant of revenue to the government. Oil giants, such as Shell, Chevron, Mobil are also becoming the major losers. The development stalled exploration, thereby hindering the flow of investment during the year under review. Of note is the divestment of shares by foreign firms, resulting in the sale of oil wells by some of the firms.

    In its third quarter report, the National Bureau of Statistics (NBS) said electricity and oil production challenges have slowed down the growth of Nigeria’s Gross Domestic Product (GDP).”

    Also Federal Government lamented that the country loses between 60,000 and 80,000 barrels of oil per day (bpd).

    President Goodluck Jonathan gave the figure in Abuja, while speaking at this year’s Annual Banking and Finance Conference, organised by the Chartered Institute of Bankers of Nigeria (CIBN).

    The President, represented by the Minister of State for Finance, Dr. Yerima Ngama, said the loss of 80,000 bpd to crude oil theft was minimal, compared to the 400,000 bpd being reported in some quarters.

    He said: “The oil sector has brought nothing to this country than shocks. Even some new shocks that we never thought could be shocks, things like oil bunkering and oil theft. These are shocks because once they happen, they shut down the entire system.

    “Most of the figures you see don’t even represent the theft. They say 400,000 bpd, but that does not represent what is being stolen in this country. What is stolen is between 60,000 and 80,000 bpd. But once they start stealing from your pipelines, do you allow them to continue? No, you shut them down and once you shut down, the entire production stops; so that is also a loss. So, when you see the entire loss, it is mainly because of the shutdowns and not because of the theft. The theft is little, but even that theft, since it is bringing another shutdown, is also a problem.”

     

    Pipeline vandalism

     

    Pipeline vandalism continued to take its toll on the industry, with many operators losing their facilities to fire. Shell Petroleum Development Company (SPDC) shut down its Trans Niger Pipeline on three occasions during the year.

    Its spokesman, Precious Okolobo said the government, as a result of the shut down, was losing about $116.05million(N2.568billion) going by a crude oil price of about $107 per barrel. Okolobo said the fire was discovered within the SPDC Joint Venture (JV) right-of-way at Bodo in Ogoniland in Rivers State.

    Besides, the Nigerian National Petroleum Corporation (NNPC) pipelines were vandalised in Lagos and other parts of the country.

     

    Shale oil

     

    The discovery of Shale Oil in the United States in June shook the country. Being one of the major buyers of Nigeria’s crude oil, the development is expected to further affect the country’s revenue.

    The Organisation of Petroleum Exporting Countries (OPEC), in its 2013 World Oil Outlook considered Shale oil and gas sufficiently important to devote large chunk of its report to a discussion on the new energy source under’’ matters arising’’. OPEC said Shale oil production would have significant impact on crude oil production in the near term, advising Nigeria and other member- states to re-double efforts on oil production.

    The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, said OPEC had initiated a study into Shale and would consider the effect on the global market for OPEC crude ‘’ in the not-too-distant future.’’

    Mrs Alison-Madueke said the development would not have much impact on Nigeria because the country’s crude has the potentials to attract more buyers. Her defence failed to assuage some Nigerians who argue that the dwindling oil revenue affect economic growth, if not checked.

  • Oil and gas stocks lead equities with 69.62% return

    •Costain reassures stakeholders over receivership scare
    •FirstBank confirms acquisition of West African bank

    Oil and gas stocks outflanked the industrial goods stocks to emerge as the sub-sector with the highest average year-to-date return at the stock market in a week that saw four oil and gas stocks among the 10 highest advancers.

    The stock market retained a week-on-week gain of 0.28 per cent last week after a weekend trading session characterised by emerging profit-taking shaved off 0.67 per cent from the market value. The main value-based common index at the Nigerian Stock Exchange (NSE), the All Share Index (ASI), closed the week with a gain of 0.28 per cent at 37,870.87 points compared with the week’s index on board of 37,765.82 points.

    Aggregate market value of all quoted equities similarly inched up from its opening value of N12.067 trillion to N12.100 trillion. But the week was overtly bullish for downstream oil and gas stocks, with the NSE Oil and Gas Index closing with average week-on-week gain of 14.16 per cent. The NSE Consumer Goods Index also rode on the back of gains by Nestle Nigeria and Cadbury Nigeria to close with a gain of 1.82 per cent. The NSE Insurance Index rallied 2.68 per cent while the NSE 30 Index, which tracks 30 most capitalised stocks, mirrored the weekend losses by highly capitalised stocks with a weekly gain of 0.17 per cent. However, the NSE Industrial Goods Index lost 0.98 per cent while NSE Banking Index dropped by 0.34 per cent during the week.

    The bullish performance last week pushed the oil and gas stocks ahead as the best-return sub-sector so far this year, ahead of the long-standing industrial goods sub-sector. Year-to-date analysis showed NSE Oil and Gas Index with a year-to-date return of 69.62 per cent, some eight percentage points above 61.52 per cent recorded by the NSE Industrial Goods Index. Other sectoral indices fell below average return at the stock market.

    While the ASI indicated average year-to-date return of 34.87 per cent, the NSE Consumer Goods Index posted a return of 32.82 per cent. The NSE 30 Index trailed with a return of 32.78 per cent. Financial services stocks were at the lower end of the returns. The NSE Insurance Index opens today with average year-to-date return of 18.46 per cent while the NSE Banking Index opens with 17.42 per cent.

    Total turnover last week stood at 1.83 billion shares worth N22.96 billion in 23,840 deals. The financial services industry remained the most active with a turnover of 1.34 billion shares valued at N12.80 billion traded in 12,795 deals, representing 72.93 per cent of total turnover volume.

    However, Transnational Corporation of Nigeria (Transcorp) of the conglomerate sub-sector was the most active stock. The trio of Transcorp, Wapic Insurance Plc and Zenith Bank Plc accounted for 737.81 million shares worth N5.01 billion in 3,369 deals, some 40.22 per cent of total turnover.

    Meanwhile, the board of directors of Costain (West Africa) Plc has said the management of the construction company remained in control of the operations of the company after it scaled through a receivership scare over indebtedness to First Bank of Nigeria (FBN) Limited.

    First Bank had obtained an order of court for the appointment of a receiver manager for Costain over a trade debt.

    In a regulatory filing at the NSE, directors of Costain stated that the company has since made payment to partially liquidate the debt and both parties have entered into agreements for the complete liquidation of the debt.

    The filing indicated that the receiver manager never acted on behalf of Costain pursuant to the court order and with the terms of settlement being reached; Costain does not envisage the implementation of the order of receivership.

     

     

     

  • Fed Govt targets 500 foreign investors at Onne oil, gas fair

    Fed Govt targets 500 foreign investors at Onne oil, gas fair

    The Federal Government has inaugurated a committee for this year’s international exhibitors for oil and gas in Onne Free Trade Zone with a target to attract 500 foreign investors.

    The Minister of State for Industry, Trade and Investment, Dr. Samuel Ortom, who inaugurated the committee, said the exhibition is slated for between October 24 and 26 in Onne, Rivers State.

    He said: “The government’s target is to create 60,000 jobs through Onne Free Trade Zone. The government is concerned about attracting investment into the country, particularly in the oil and gas where we have a comparative advantage.

    “If we attract more investment it will create multiple opportunities for Nigerians in terms of job and wealth creation. We have over 30,000 people working in Onne as a result of the investment in the zone. We are targeting to double the number of job created.

    The oil and gas free zone had contributed significantly to the development of the economy over the years. As the oil and gas industry continues to play dominant role in the Nigerian economy, the free Zone concept would be central and strategic to defining a sustainable transformation of the national economy.

    He noted that since inception, the Onne Oil and Gas free Zone had made tremendous and sustained progress in foreign direct investment (FDI), revenue generation, technology transfer employment and wealth creation.

    The Chairman, Organising Technical Committee of the forum, Mr Chubuisi Onyebuere, said the committee intended to mobilise over 500 investors operating in the zone, as well as investors from all over the world. We are expanding the available space for exhibition by about 30 per cent, he added.

     

  • Govt urged on private refineries

    An oil and gas expert Mrs. Rageidah Adedimeji said the privatisation of the refineries would create more jobs for youths. Mrs. Adedimeji, Managing Director, Bromshy Communication, spoke at a briefing in Lagos.

    She advised the Federal Government to hasten the privatisation of the three refineries to boost the socio-economic growth of the country.

    She said the development would provide jobs and reduce crude oil theft and pipeline vandalism.

    She said: “If we have more refineries functioning, the country will have enough petroleum products for local consumptions, while we also export outside the country. We need more youth participation in oil and gas sector, this will keep them away from participating in pipelines vandalism and crude oil theft.We need to develop and motivate our youth; they need to use the talent they have got to develop themselves so as to set up their own small scale enterprises,’’

    Mrs. Adedimeji said the firm was partnering with the Petroleum Technology Association of Nigeria (PETAN) to organise a conference on youth training in oil and gas sector.

    She added that the conference would be tailored around five stakeholders in the oil and gas sector.

    “The CEOs of the five companies will use their own backgrounds and success story to develop and motivate the youth on how they have been able to overcome problems relating to their businesses,” she added.

  • Firm holds training on oil and gas

    Operators and regulators in the oil and gas sector have been advised to improve on their document control and management processes to guarantee business efficiency and stem the tide of corruption and inefficiency.

    At a workshop by Young & Bailey Nigeria Limited,a leading  document and electronic content management firm entitled: Document control and management: turning challenges into opportunities, lead paper presenter, Shola Adeola, an Information Technology manager, Shell Nigeria Exploration and Production Company, noted that document control and management requirement is one of the most difficult and ineffectively implemented requirements in the nation’s oil and gas sector, leading to errors, delays, costs, poor records management and non-conformities.

    Submitting that the relevance and impact of proper document control and management processes in oil and gas servicing organiations cannot be over emphasised, Adeola said lack of proper document control can lead to dissatisfaction of contractors, engineers and project managers, thereby resulting invariably in project failures.

    He therefore challenged document control managers in the various spheres of the nation’s economy to update their knowledge base as well as adopt cutting edge, world class solutions in order to protect the integrity of their organisations.

    Managing Director, Young & Bailey, Joseph Munis, said his company organised the free workshop as part of its corporate social responsibility drive that is intended to help Nigeria and businesses in the country improve on their document control and management capabilities.

    According to him, “As the Nigerian partner of Laserfiche and Idocuments”.

  • ‘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.

  • Eland Oil raises N29.5b to buy Nigeria’s OML 40

    Scottish firm, Eland Oil and Gas has successfully raised N29.5 billion (118 million pounds) to buy some shares in Oil Mining Lease (OML) 40 in Nigeria. This was after being listed in the Alternative Investment Market (AIM ) in London, three years after the company was founded.

    OML 40 covers some 500 square kilometres and is located onshore in the Niger Delta and contains light ‘sweet’ oil. Since 1964, 18 wells have been drilled there, with 15 finding hydrocarbons. One field, Opuama, was formerly in production for over 30 years, from 1975 to 2006.

    Eland plans to target production from existing wells at Opuama that will be restarted at an expected initial gross rate of at least 2,500 barrels of oil per day (bopd) in the next six months.

    By late 2013, the company also plans to explore two wells. Within four years, it hopes to reach gross production of 50,000 bopd. The company also seeks to acquire and develop under-exploited upstream assets in Nigeria.

    “OML 40 is an asset with production and exploration potential and with independently certified gross recoverable 2P Reserves of 71.5 million barrels, 3P Reserves of 117 million barrels in the Opuama and Gbetiokun Fields and Mean Contingent Resources of a further 16.7 million barrels in the Abiala and Ugbo Fields,” an official of the company said.

    Expressing his gratitude to the company’s shareholders, Les Blair, CEO of Eland Oil & Gas, said: “I am extremely grateful to the shareholders of the company who have supported us to complete this milestone transaction. The fundraising of £118 million is the largest on an AIM IPO for over three years and highlights the exciting prospects for OML 40 and Nigeria as a whole.”

    The 45 per cent stake acquired by Eland and Starcrest Nigeria Energy Limited in OML 40 was previously held by Royal Dutch Shell, Total and Eni-Agip. Shell owned 30 per cent stake in the joint venture for OML 40 while Total Exploration and Production held 10 per cent and Agip Oil held five per cent and the Nigerian National Petroleum Corporation (NNPC) held 55 per cent.
    The Federal Government and the Nigerian National Petroleum Corporation, NNPC granted all relevant approvals for the sale of the 45 per cent interest to the buyers.
    Shell JV sold the 45 per cent interest in OML 40 to Elcrest Exploration and Production Nigeria (EEPN) for $102 million. EEPN is a consortium of Starcrest Nigeria Energy and Eland Oil and Gas.

    With the purchase, Eland will own an initial 20.25 percent, with 24.75 percent held by its Nigerian joint venture partner, Starcrest. The remaining 55 percent is held by the Nigerian government through NNPC subsidiary – National Petroleum Development Company.

    Commenting on the sale, Shell Nigeria Country Chairman Mutiu Sunmonu said the divestment is part of the company’s strategy to refocus its asset portfolio. “SPDC is positioned well for investment and growth opportunities in all areas, including domestic gas, which will be delivered with the support of our government, partners and the people of Nigeria,” he added.