The Nation Newspaper

Tag: oil assets

  • Reps to introduce legal framework for decommissioning of oil assets

    Reps to introduce legal framework for decommissioning of oil assets

    The House of Representatives is to put in place legislation that will provide statutory authority and legal framework for the decommissioning of oil assets in the country. 

    Chairman of the House Committee on Petroleum Resources (Upstream), Alhassan Ado Doguwa, who disclosed this said the legislation will seek to put in place a commission that will oversee the decommissioning of oil assets—an issue that has sparked concern among host communities and stakeholders in the industry.

    Doguwa said the House Committee on Petroleum Resources (Upstream) and the Special Committee on Crude Oil Theft have resolved to jointly introduce five bills aimed at addressing key challenges affecting Nigeria’s oil industry.

    Doguwa spoke at a joint meeting on Tuesday, stating that the proposed bills are part of a legislative intervention to support national efforts in securing oil and gas assets and curbing crude oil theft.

    He revealed that one of the bills under the Petroleum Resources (Upstream) Committee is being championed by the Speaker of the House. 

    “The decommissioning process is a major policy priority of the current administration, but there are gaps in oversight. That’s why the Speaker and other leaders of the House have shown interest in backing legislation that provides statutory authority and legal framework for a commission to manage this process, while also ensuring that the interests of host communities are taken into account,” Doguwa said.

    He explained that each of the five bills under consideration will be sponsored by different members of the committees, but will collectively be presented as committee-driven legislation to reflect the collaborative effort and seriousness of the intervention.

    “These bills will bear the names of different committee members, but they are not individual efforts. They represent our collective commitment to addressing the challenges in the sector and fulfilling the expectations of the leadership, government, and the Nigerian people”.

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    According to Doguwa, one of the bills seeks to establish a National Commission that will be empowered to prevent and prosecute pipeline vandalism and other oil sector-related crimes.

    “The Committees and indeed the entire House are deeply concerned about the increasing insecurity and criminal activities around oil-producing areas. This intervention is a legislative response intended to complement government efforts in protecting these critical national assets,” he said.

    Doguwa explained that the two committees—Petroleum Resources (Upstream) and the Special Committee on Crude Oil Theft—share similar jurisdictional focus, particularly on crude oil production and export.

    “In my view, these two committees essentially deal with the same core issue: crude oil. While one focuses on the theft and security aspect, the other covers the drilling and export processes. That’s why we’ve decided to meet jointly and work together on these legislative proposals,” he said. 

  • CBN directs banks to cut appetite for govt’s securities, oil assets

    The Central Bank of Nigeria (CBN) yesterday directed commercial banks to moderate their appetite for investing in government securities and oil and gas assets.

    Government securities include Federal Government of Nigeria (FGN) Bonds and Treasury Bills (TB).

    Its  Deputy Governor, Edward Lametek, who spoke at the last Monetary Policy Committee (MPC) meeting released by the apex bank, said moderating demand for government securities and oil assets  assist the lenders to rebalance their portfolios.

    According to him, banks also needed to lend more to the economy for sustained economic growth.

    He said the CBN’s  interventions in agriculture have clearly shown the immense prospects with properly directed credit.

    He said: “Deposit Money Banks (DMBs) need to step up credit delivery to the growth poles – agriculture, manufacturing and services. The last couple of months have witnessed a sustained improvement in banking sector resilience – industry capital adequacy and liquidity ratios have grown, while the non-performing loans (NPLs) ratio is on the decline.

    “This should translate to improved intermediation to be relevant. While monetary policy has to accommodate the need to sustain current improvements in banking industry Financial Soundness Indicators (FSIs), the DMBs would need to moderate their appetite for government securities and oil & gas assets in order to gradually re-balance their asset portfolios.”

    He said developments in the inter-bank market somehow suggest that the sterilisation actions of the bank have remained very effective in reining-in excess liquidity.

    Lametek said it is important that such actions should continue to be a component of monetary management in this year as liquidity threats do not appear to be abating any time soon. Keeping domestic liquidity in check is important not only for inflation, but also for the stability of the naira exchange rate.

    “Overall, my assessment is that risks to inflation have remained tepid notwithstanding the year-on-year increase in headline inflation in December 2018. This could change depending on the short to medium-term evolution of fiscal policy. Given elections in February and March, the fiscal outlook should become clearer as from April 2019,” he said.

    According to him, the outlook for economic growth is a bit dicey concerning given the indications from the oil sector (especially the volatility in crude prices) and sluggish consumption demand.

    “I view the balance of risks to economic growth tilting to the downside, which suggests that there is a more urgent need to support growth or in the minimum delay any policy action that might further tighten credit conditions. It is important to stress nonetheless that a supportive monetary policy orientation alone will not be sufficient to lift economic growth to the historical levels of 5-6 per cent. Other policies of government, particularly fiscal and sector policies have to be in the same mode,” he said.

    Also, a member of the MPC, Adenikinju Festus, said with respect to the banking and financial system, there is positive trend in all financial system indicators (FSI) between November last year and January this year.

    He said the NPLs ratio continues its downward trend, capital adequacy ratio of the banking sector improved three consecutive months, liquidity ratio inched northward, aggregate assets and deposits of the banking sector also rose over the same period.

    However, the monetary authority should not lower its guard and must continue to monitor the banks and implement policies to consolidate and further improve the FSI.

    “Aggregate credit expansion to the real economy continues to pose serious challenges. Net credit growth to the private sector is lower than provisional benchmark for 2018. The high-interest rate spread and the high lending rates are challenges that require new and innovative approaches,” he said.

    According to him, the proposed National Microfinance Bank, strengthening of existing Micro Finance Banks, and other initiatives by the CBN to promote financial inclusion, access to credit by those in the rural areas, semi/urban and even the poor areas in the cities across the country at affordable interest rates would boost real sector activities at the Micro Small and Medium Enterprises (MSMEs) level.

  • CBN’s stress test shows oil assets big risks to banks

    The Central Bank of Nigeria (CBN) bi-annual banking industry stress test carried out to evaluate the resilience of banks to credit risk, liquidity, interest rate, has shown the deteriorating state of oil sector assets in banks’ balance sheets.

    Signed by CBN Governor Godwin Emefiele, the test report showed that despite the deteriorating state of oil assets and slow growth in the economy, the economy is on the path to full recovery and as forecasted, will return to normal growth this year.

    The CBN’s Financial Stability Report for the first half of last year premised the recovery on the expected stability in oil prices, responsive monetary policy and expansionary fiscal policy.

    The bank assured that it will continue to monitor developments in the sector to keep lenders safe   and   sound.

    The report linked oil asset deterioration in lenders’ books to lingering impact of macroeconomic instability which trailed the oil price shock in 2014.

    According to the apex bank, industry asset quality deteriorated in the first half of last year as Non-Performing Loans (NPL) ratio rose 2.2 percentage points to 15 per cent from 12.8 per cent in the 2016 fiscal year.

    The report said that regulatory attention was being focused on ensuring an improvement in the quality of banks’ assets  as  well  as  ensuring  that  the  banks  contribute  effectively  to  the  real  sector.

    It said the disruptions experienced  in  the  economy  with declining  oil prices  and  government  revenue resulted  in  an  increase  in  the  NPLs  in  the  banking  industry.

    The  CBN said it  will continue  to  monitor  developments  and  initiate  measures  to  limit  contagion  and  ensure  that financial   institutions   remain   safe   and   sound. The regulator promised to ensure the provision of appropriate structures and policies in financial institutions to curb money laundering and financing of terrorism.

     

     

     

  • Banks stake $10b in oil assets’ acquisition

    Banks have invested about $10 billion in acquisition of  oil and gas assets by local players in the industry, it was learnt.

    The Managing Director/Chief Executive Officer of First Exploration & Petroleum Development Company Limited, Mr. Ademola Adeyemi-Bero stated this on the sideline of the Nigeria Oil and Gas conference held in Abuja. He was corroborating the assertion that Nigerian banks are well capitalised to finance oil and gas projects across downstream, midstream and upstream. He said that local banks have invested about $10 billion to help Nigerian oil firms to acquire these assets in the last 10 years.

    He also called the attention of the government to the importance of putting in place policy or to directly intervene in production of gas to power as well as the need to develop capacity.

    The Executive Director, Corporate & Investment Banking, Access Bank Plc Mr. Elias Igbinakenzua also told The Nation that the progress made by indigenous upstream companies was made possible by some factors but noted that the independent companies have done well in the last few years.

    Igbinakenzua said: “The independents have done well. Some things have made that possible. Let me start by thanking the government for creating the enabling environment for that to happen. I also must thank the IOCs who didn’t insist on holding on to the assets but let go to maximise our resources. I must also thank the lawmakers for the passage of the Nigerian Content Act. Today we can say clearly say that we have some number of Nigerian vessels out there in the waters because of the Cabotage law, which has made marine business booming.

    “The Local Content Act has given the local production and contribution in the oil and gas sector a great deal. Today 20 percent or more of the oil reserves is held by the independents, which is between 9 and 10 billion barrels. That is a lot. It is a huge success story to tell. There is no success journey that is so easy. It takes some roughness to get there.

    “That has happened because the local banks have also come of age. Today you can find a Nigerian bank that can comfortably put half a billion dollars in a project. The banks have gotten well capitalised to support the oil and gas sector and that support has been immensely behind the local players. The issue of maximum lending to the sector came up but after the CBN saw the need to lend to the sector, it put the directive behind for now.

    “As of today what we have as the operating law for the banks to lend to the oil and gas sector is not just 20 per cent. It is actually more than that. In fact, the old policy said we can do 20 per cent downstream, 20 per cent midstream, and 20 per cent upstream, which is a huge number. But you must not forget the rules in lending. If you allow that huge amount to go into a sector without the risk being well managed, then you risk the financial sector and that has its impact on the entire economy.

  • Forte Oil outlines growth plan, eyes oil assets

    Forte Oil outlines growth plan, eyes oil assets

    Forte Oil Plc would combine investments in its downstream and energy businesses with prospecting for productive upstream oil assets to ensure it achieves its main goal of becoming the foremost integrated energy solution provider in Nigeria.

    Chief executive officer, Forte Oil, Mr. Akin Akinfemiwa, outlined the company’s growth plan yesterday at the presentation of the company’s underlying fundamentals at the Nigerian Stock Exchange (NSE) in Lagos.

    Akinfemiwa said the group would diligently implement the strategic initiatives under its growth plan to enhance profitability and increase shareholders value.

    He said the group was considering two options of acquiring moribund fields and bring back them to production or buy existing international oil companies (IOCs)’s assets in its plan to diversify into the upstream market adding that the group would exercise great caution by identifying the risk and getting parties to share and manage the risks.

    He pointed out that the group’s immediate strategic initiatives included strengthening its corporate governance structure, achieving market dominance through the expansion of retail infrastructure, commercial business and diversification into the upstream space through profitable acquisition of upstream assets.

    “Upstream diversification is to be managed properly, considering the level of investment required. We are into petroleum retailing and marketing but if we are going into the upstream, we would form strategic alliances so that we can share the risk together because there is no technical expertise for it now. We have identified potential partners that will go into it with us and we are going into it as producing assets not as a prospecting one,” Akinfemiwa said.

    He said the company is committed to becoming the investment of choice through positive actions that would boost investor confidence at all times.

    He outlined that the company has embarked on aggressive and strategic acquisition programme noting that it has concluded plan to site its branch network in such a way that the distance between two branches would be at the region of three kilometers with a view to expanding its retail network.

    According to him, the group’s business transformation programme was aimed at repositioning the business on the bedrock of strong corporate governance and business ethics, enhanced safety health and environment practices, effective business control across the company as well as superior customer delivery.

    “We would acquire market where we can drive up volume across Nigeria but it has to be strategic. It has to be three kilometers along densely populated areas where the market is booming. The exercise would be continuous without any time frame and we would continue to consolidate on it,” Akinfemiwa said.

    He said the company has also invested in the acquisition of 100 trucks and tankers in order to give transporters the confidence to invest in the business.

    He hinted on the prospects of further capital raising by the group noting that the company’s balance sheet for the expansion exercise would be funded through the combination of equity and debt issues.

    “Through our focused commitment to remain open, responsive, continually engaging our customers and maximizing our resources, we are confident that Forte Oil Plc will attain its vision of being the foremost integrated solutions provider in Nigeria,” Akinfemiwa assured.