The Nation Newspaper

Tag: oil industry

  • Need for multiple regulators for oil industry

    SIR: The petroleum industry operates under two, even three distinct sub sectors – the downstream, midstream and upstream. But the most critical sub sectors (downstream and upstream) are mostly engaging and have more industry operational activities.

    The downstream sector commonly refers to the refining of petroleum crude oil and the processing and purifying of raw natural crude as well as the marketing and distribution of products derived from crude oil and natural gas. The downstream sector reaches consumers through products such as gasoline or petrol, kerosene, jet fuel, diesel oil, heating oil, fuel oil, lubricants, waxes, asphalt, natural gas and liquefied natural gas and liquefied petroleum gas (LPG) as well as hundreds of petrochemical.

    On the other hand, the upstream petroleum sector includes all petroleum exploration and extraction activities such as exploration, development and processing which take place prior to the shipment of stabilised crude oil, condensate or sales gas (including liquefied natural gas.

    Upstream petroleum activities occur both onshore and offshore.

    The idea of a single regulator for the sector runs at variance as well as against the policy direction of government as approved in the National Oil and Gas Policy in 2009 which provided for a downstream and upstream regulator.

    As the industry awaits the passage of the Petroleum Industry Governance Bill by the National Assembly, concerns have been raised by industry operators on the plan to streamline all regulatory functions in the sector into a single regulatory framework.

    However, given the diversity nature of objectives ranging from guarding against systematic risk to protecting the individual consumer from fraud, it is possible that a single regulator might not have a clear focus in objectives and rationale of regulation and not be able to adequately differentiate between types of institutions.

    The content of the Bill seeks the establishment of the Legal and Regulatory Framework, Institutions and Regulatory Authorities as well as guidelines for the operations of the Upstream and Downstream sectors of the National Petroleum Industry.

    The Bill number 64, Volume 13 published in December, 2016 as index to legislative instruments specifies this.

    But a single unified regulator may suffer from some diseconomies of scale. Inefficiency could arise because a unified agency is effectively a regulatory monopoly, which may give rise to the type of inefficiencies usually associated with monopolies.

    There will be job losses for sure in an economy that is not generating or creating jobs where decision for a single regulator is final. In the event that such decision is final, staff of the Petroleum Products Pricing Regulatory Agency (PPPRA) should become the nucleus of the downstream department of the single regulator as PPPRA is already strategically placed to carry out such function.

    Also, it is not appropriate to concentrate too much power in one body where there are different players. A single regulator may not view things from the different dimensions they deserve and from the different viewpoints of the stakeholders.

    A particular concern about a monopoly regulator is that its functions could be more rigid and bureaucratic than these separate specialised agencies. It is argued that another source of diseconomies of scale is the tendency for unified agencies to be assigned an ever increasing range of functions, sometimes called Christmas tree effect.

    From these perspectives, history is on the side of two regulators for the sector thus the single regulator model has been tried and found to be unsuccessful in the past.

     

    • Dennis Mernyi,

    Abuja

  • Seven senators in U.S. for study tour of oil industry

    Seven senators are now on tour of the United States (U.S.) to study operations of the oil industry.

    The joint committee members on Petroleum Resources (Upstream, Downstream and Gas) was led on the trip by the Chairman, Senate Committee on Petroleum Resources (Upstream) Chief Tayo Alasoadura.

    Other senators are the Chief Whip, Prof. Shola Adeyeye, Minority Whip Phillip Taminu Adudu, Chairman, Petroleum Resources (Downstream) Kabir Marafa, Chairman (Gas) Albert Bassey Akpan, Ahmed Abubakar and Gershom Otu Bassey.

    A statement sent to The Nation in Akure by Alasoadura representing Ondo Central said the essence of the tour was to enrich the Petroleum Industry Bill (PIB) being put together by the joint committees of the Senate.

    It was organised in collaboration with the U.S. Embassy in Nigeria.

    The statement expressed optimism that the knowledge acquired after the study tour would enrich the activities of the Senate on petroleum resources matter.

  • Dogara worried about $40.266b revenue loss in oil industry

    Dogara worried about $40.266b revenue loss in oil industry

    •House panel: govt agencies scuttling $17b stolen crude, gas exports probe

    House of Representatives Speaker Yakubu Dogara said yesterday the $40.266 billion and N196.3 billion revenue loss in the Nigeria’s oil and gas industry in the past few years was worrisome.
    Dogara spoke at the opening of a four-day investigative hearing by the Abdulrasak Namdas-led ad hoc committee on $17 billion stolen from undeclared crude oil and liquefied natural gas exports to global destinations.
    He said the House would leave no stone unturned in its effort to tackle corruption in the oil and gas sector.
    The Speaker catalogued the revenue losses as including an audit that over $4.4 billion involving the national oil conglomerate “was trapped somewhere” and Nigeria Extractive Industries Transparency Initiative (NEITI) audit report, “which revealed that the Nigeria National Petroleum Corporation failed to remit $12.9 billion revenue accrued from Nigeria Liquefied Natural Gas (NLNG) Company since 2009 into the Federation Account”.
    He said others were $5.966 billion and N20.4 billion revenue allegedly lost to offshore processing agreement, crude theft and the notorious crude oil swaps, N175.9 billion disparity lost during the subsidy claims in the NEITI report as well as the $17 billion stolen from undeclared crude oil and Liquefied Natural Gas exports to global destinations.
    His words: “As you are well aware, today’s public hearing is one in the series of investigative hearings by the House of Representatives on the looting of the nation’s wealth in the oil and gas industry, which runs into billions of dollars. The emphasis and the interest, which the parliament has shown in investigating the sector is not a coincident but a deliberate effort to cleanse the industry of rot that has epitomised its existence over the years.
    “The incidence of money missing in the industry has become a recurring decimal to the point that news items in the national dailies are incomplete without reports on one fraudulent activity or the other in the subsector, which incidentally is the mainstay of the economy.
    “Hence, the reporting of the media on the ills of the industry clearly attests to the concern of Nigerians on the need to tackle the problem headlong.”
    Namdas was not happy that most of the agencies invited yesterday failed to attend the hearing.
    Those invited that did not appear include: the NNPC, Nigerian Maritime Administration and Safety Agency (NIMASA), Nigeria Customs Service (NCS), Nigerian Navy (NN), Nigerian Ports Authority (NPA).
    Others are the National Petroleum Investment Management Services (NAPIMS), Accountant General of the Federation, NEITI, the Attorney General of the Federation and Minister of Justice and the Economic and Financial Crimes Commission (EFCC).
    He said: “The government is fighting corruption. It’s very serious business. We have put it as part of our legislative agenda to actually support this government to fight corruption and we expect government agencies to also compliment by doing the needful.
    “The government is in Abuja. It’s not in Lagos. The heads of agencies are in Abuja and this is a serious matter… We’re talking about $17 billion, stolen and diverted. And the people who are responsible for this, just to come and give clarification and they’re sending people. We’re not going to take it.”
    Namdas said even the few representatives of agencies that attended such as the Central Bank of Nigeria (CBN), National Petroleum Development Corporation, Shell Petroleum Development Company (SPDC) and the Department of Petroleum Resources (DPR), had no letters of authority showing they were truly representing their managing directors/ chief executive officers and hence may not be able to answer the question of the committee authoritatively and satisfactorily.
    The lawmaker said over 57 million barrels of Nigeria’s crude oil were illegally exported and sold in the USA between January 2011 and December 2014.
    “The estimated revenue loss by the government of Nigeria is around $12,722,600,327. At an exchange rate of N196/$1, this translates to over N2trillion; you can imagine what the value is now.
    He insisted that all the heads of Ministries, Department and Agencies (MDAs) invited must be present at the continuation of the investigation today.

  • ‘How to solve Nigeria’s oil industry woes’

    ‘How to solve Nigeria’s oil industry woes’

    Emeka Okwuosa is the chairman of Oilserve Group, which is into power, oil exploration and production and farming. He chairs five other companies in the group, that is involved in building the largest pipeline system. In this interview with JOSEPH JIBUEZE and NNEKA NWANERI, he speaks on pipeline vandalism, how Nigeria can survive fall in oil price and the recession, and how to improve refining capacity, among others. 

    How can Nigeria survive the oil price plunge?

    I’ll give you a background to oil price drop. It is a normal thing. Oil is a natural resource that we mine or drill through a process. When you talk about oil production and utilisation, you talk about a global phenomenon. We apply the basic knowledge of economics here. When you have production and consumption, you try to match them. When production becomes higher than consumption, you have a glut of the product. So, what you have is a drop in price. When consumption at anytime is higher than production, you have a squeeze, which leads to oil price increase. I can tell you that the current drop in oil price is the fourth cycle I’ve seen in the industry. The first one was in 1986. Oil went down to $5 per barrel. The second one was in 1997/1998. Oil price went down to $9 to $10. The next was in 2008 when we had the global economic crisis. There was a major problem in the structure of the world economy. Oil price went down, before we had the one of two years ago. It’s a normal thing. Therefore, being a normal thing, it’s left for any producer to plan ahead. Our problem in Nigeria is not low oil price, but lack of planning of the economy. At $20 or $30, it’s tough because production cost in Nigeria has gone up to about $28/$29 per barrel, which should not be so. If Nigeria had gotten its oil industry under control, and managed it properly, we should not be having production cost of more than $12 or $13 per barrel. So for it to be over $20 is our fault.

    The inability of successive governments to plan ahead and know that when you have a resource based economy, you will be open to all the vagaries of price changes of this commodity is the problem. We should not at this stage, after more than 60 years of oil and gas production, be a single commodity economy. Today we should have an oil industry that should have gone through second or third cycle of evolution where we’re using the oil and gas industry to develop various industries to have added economic benefits. Why is Nigeria still exporting crude oil? All you do is produce it and sell. Who you sell it to will be the one to refine, produce bitumen, and other things that you go back to buy. It’s a no-brainer that it’s not sustainable. Today we should not be importing refined products. We should be producing our products. We should produce enough fertiliser from our gas. We should have added economic benefits from our oil. We have not done that and that’s why we’re suffering.

    The second part is the way we have structured our economy. It is not robust enough to adapt to world economic changes. So, oil price drop is not the primary thing that is affecting our economy. It is primarily because we have not planned and executed very well, and we do not have enough savings to drive the process. So, I hope we have learnt from this.

    What should be done?

    There is an added incentive to develop alternative sources of energy. Nigeria has many. Nigeria can develop biogas systems, solar systems, even our coal, but in a cleaner manner. How come Nigeria has not been able to develop cheaper forms of energy in the past 40 years like other countries? The last time coal was properly mined was when the colonial powers were here. Since the late 60s, we have just been living in denial; we have not developed our systems. So, there is a lot we can do. Agriculture is another one. Our economy should be robust because we have all it takes and we have the human resource to drive it.

    What projects have your companies executed?

    Oilserv is made up of six companies in the group. But Oilserv EPC Limited is primarily an engineering, procurement and construction firm, that’s why it’s called EPC. We are the first Nigerian company to provide full EPC services. We do the front-end engineering, we do detailed engineering, we do the procurement of the required facilities, and we construct the lines. We also maintain and rehabilitate the lines when necessary. We have full value chain coverage. Oilserv has that capacity. We have built over 30 pipelines in Nigeria. We built the longest gas pipeline in the Southern part of Nigeria of 137 kilometres. We crossed eight major rivers through what we call horizontal directional drilling (HDD), where we do not disturb the water, but we drill under the water, just like you have the channel tunnel between UK and France. We have the capacity to do that. We built the gas supply to five of the gas fired power plants in the country. We built the systems including the pipelines and the metering stations. They include the Ihovbor power plant in Edo, Gbaran Power Plant in Bayelsa, Egbema Power Plant in Rivers, Alaoji Power Plant in Abia, Calabar Power Plant in Cross River. We also built the supply system for geometric power plant in Aba, the one owned and operated by Prof Barth Nnaji’s company. So you can see that we have contributed more than any other company in Nigeria in developing gas systems.

    What is East-West pipeline project?

    It is the largest pipeline system in Africa. It is a 48-inch diameter of 67 kilometres pipeline. It is referred to as East-West pipeline. It’s actually called OB3 Pipeline, which means Obiafu, Obrikom, Oben pipeline. It starts from the eastern flank of Rivers State and goes all the way to Edo State through Delta State. It is about 85 per cent concluded. The pipeline is 100 per cent built. What we’re now building is the metering stations, and the gas commissioning systems. That should be completed this year. When it is completed, we’ll have a total of two billion standard cubic feet of gas being transported from the eastern flank where you have gas source into the West and North. Part of the pipeline will supply the Escravos to Lagos pipeline and feed more gas into Lagos and then into the West African gas pipeline. The other part will move from Oben to Ajaokuta and from there we’ll construct another line that will go to Abuja, Kaduna and Kano. So this is the major artery of Nigerian gas transportation system.

    How have you been dealing with vandalism and militancy?

    Don’t forget the basic, underlying issues and the causes. The fact that successive governments did not address the needs of host communities led to agitation, which led to militancy. But I believe that the current administration has done quite a lot in trying to address it. The engagement is better today than it was before. We have managed to work despite all these problems because we have a method of engaging the communities; we have a corporate social responsibility system that works very well. It can be quite expensive but the only meaningful solution is the government addressing the issues holistically by looking at environment degradation and the huge gap in development between what these communities should have and what they have. Of course government has put in funds previously, but their management was questionable. But from what is coming out of the current government, it seems they fully understand the issues and are working towards addressing them.

    How can Nigeria boost its refining capacity?

    We have over time made a simple issue complex. Our refining capacity is there but not efficient. Some of our refineries are not functioning, while some are not up to capacity. For over 20 years, we have managed our refineries in a way that made them not to work. Successive governments did carry out turnaround maintenance, awarding these contracts to individuals and companies that had no capacity to maintain them but ended up destroying them. Another factor is that the government has not invested in developing further capacity by training people. Most of the people that built these refineries were very good workers, but have retired.

    Younger ones have not received the same training that the older ones got in the 70s and 80s. So, there was a problem of sustainability of the refineries. However, I’ve been an architect of their privatisation. Refineries cannot be run by government or NNPC. They should be sold. And then entities like the operating companies should be encouraged to set up their own refineries. And the environment should be made conducive for them to do so. We should have enough refining capacity in Nigeria. On tackling illegal refining, I’ve heard government in the past few weeks talk about modular refineries. If we can articulate it very well and work closely with host communities, some of these illegal refineries will be taken out and replaced by modular refineries. And jobs will be provided for the same people that engage in illegal refining that is damaging the economy and the environment and killing people.

  • Local refining key to oil industry growth, says Kachikwu

    Local refining key to oil industry growth, says Kachikwu

    Minister of State for Petroleum Resources Dr. Ibe Kachikwu has said local refining of crude oil is key to the viability of the oil industry and economic growth of Nigeria.
    Speaking yesterday as guest lecturer at the inaugural Convocation/Founders’ Day Lecture of the Federal University of Petroleum Resources, Effurun (FUPRE), Dr Kachikwu explained that the Federal Government intended to reduce importation of refined petroleum products by the end of next year, preparing the country for net exportation of refined products by 2019.
    He said the development of gas and its subsequent distribution to generate electricity was one focus of his ministry.
    Urging the graduating students to “embrace what is embedded” in them, as reliance on government to provide everything must cease, Kachikwu encouraged the students to create designs to build modular refineries.
    “The objective is to improve our domestic capacity for local petroleum products production. This will entail the injection of private sector investments and expertise in revamping the existing refineries and implementation of modular refineries in the oil producing region.
    “The abundant gas resources in Nigeria will be harnessed to generate wealth and save the environment by converting flares to power. The focus of this initiative will include investor-led gas infrastructure development will be promoted to ease government burden of funding.
    “Domestic gas utilisation for power and households will also be promoted to support threefold increase in the nation’s power generation capacity by 2019″, he said.
    Speaking earlier, Chancellor of the FUPRE, Alhaji Attahiru Mohammed Ahmad, the Emir of Zamfara, while noting the peculiarity of the institution in Africa, expressed concerns over the poor state of its infrastructure.
    Commending President Muhammadu Buhari for his appointment as Chancellor, he called for “special and urgent interventions” to fast track the progress and advancement of the school.

  • Oil industry redundancies

    Oil industry redundancies

    •The sub-sector must be made more efficient to avoid job losses

    THE recent announcement that ExxonMobil, an International Oil Company (IOC) operating within Nigeria’s oil exploration sector, has fired 89 more of its workers brings home the sober truth that all is not well with the golden goose that is the source of much of the nation’s wealth.

    The sackings are only the latest in a gale of retrenchments in the oil industry that have hit the country ever since the global downturn in oil prices in mid-2014 and the concomitant economic recession.

    In December 2016, Exxonmobil had fired 150 of its Nigerian employees. A total of 3,000 oil workers were relieved of their jobs in October 2016, prompting a threat by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigerian Union of Petroleum and Natural Gas Workers (NUPENG) to embark on industrial action.

    In spite of the dispute over whether the sackings are warranted or not, it is heart-warming to see that the retrenched ExxonMobil staff were reportedly paid their entitlements in full. In contrast to what happens elsewhere in the country, these workers at least have the wherewithal to contemplate their futures with some hope.

    Periodic retrenchments are an unavoidable fact of life in any economy, and the beleaguered oil sub-sector in Nigeria cannot be any different. Apart from the precipitous fall in world prices of crude oil, the country has witnessed crippling attacks by militants on oil installations in the Niger Delta, the accumulation of persistent inefficiencies in the management of the industry, and rampant corruption.

    While it is obvious that many significant factors affecting the oil industry lie outside the control of the Federal Government, it is also true that some issues are well within its ability to rectify.

    Perhaps the most important of these is the corruption that has so badly disfigured oil industry operations, especially as seen in the outrageous stories of sleaze which have continued to pour out of the Nigerian National Petroleum Corporation (NNPC) on a regular basis.

    The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, must press on with his structural reforms of an organisation that is a byword for impunity, ultimately working towards the laudable goal of creating an oil corporation which is as profitable as any in the world.

    Deep-rooted corruption has given rise to entrenched inefficiency. One of the most obvious manifestations has been in the nation’s persisting inability to meet its cash call payments, which in December 2015, totalled US $6.8 billion. Although the Federal Government cancelled this method of financing its 60 per cent equity in oil and gas exploration in November 2016, there is still the question of how it will attract the much-needed investment into the oil industry. Unless transparency and efficiency are restored to the sector, such financial inflows are unlikely.

    Greater efficiency would also mean finding new buyers for the country’s oil and gas. It is particularly important that these products are utilised in greater quantities by local businesses. Apart from the country’s thermal power stations, there is no reason why more industrial concerns should not avail themselves of gas as a cheaper alternative to diesel as a source of power.

    The continuous militant attacks on oil installations is being addressed with the seriousness that it deserves; Acting President Yemi Osinbajo’s visits to the Niger Delta and his meetings with the region’s leaders offer a vital glimmer of hope for renewed peace and harmony. However, these initial contacts must be followed through with comprehensive strategies to ensure that grievances are fully addressed.

    As Nigeria works its way out of economic recession, the efficient utilisation of its oil and gas resources will be crucial to a sustained recovery. The nation must make sure that the reduction of redundancies in the oil industry is an important part of such plans.

  • Oil industry needs $9.06b funding

    Oil industry needs $9.06b funding

    THE oil and gas industry requires a minimum of $9.06billion funding to meet the nation’s energy requirement, the Head, Energy Research, Ecobank Group, Dolapo Oni has said.
    Oni said Nigeria needs to attract massive investment to the industry to boost reserves and output. He noted that the Federal Government should encourage operators to optmise production to generate enough revenue for investments in other sectors of the economy.
    He said: “We need to explore and get more reserves, but the major thing we need at the moment is to invest to produce more. A country like Nigeria needs to produce a minimum of four million barrels per day (bpd) because if you look at the amount of infrastructure investment we need to make, the amount of investments that have to go to other sectors, which have to be funded by oil, it will be clear we are not producing enough to achieve that. What we need to do at the moment is to encourage investors to come and invest in oil fields’ development.‘’
    Oni said the Exploration and Appraisals segment require at least $910 million, new projects $3.073billion, boosting brownfields $3.067billion, rehabilitation of NNPC refineries, $500million, other integrated refineries, $10million and Nigeria LNG Train 7, $2.5 billion.
    He said Nigeria needs to ramp up production as much as possible so we can make all the money we need to make, before the world moves from oil. To underscore the importance of making the best out of Nigeria’s oil, he said over 60 per cent of crude grades out of the West African region are light and sweet, therefore, it is no more fashionable to be carried away by the quality of oil grades the nation produces.
    According to him, Nigeria has reserves of 36.2 billion barrels of oil, 190 trillion cubic feet of gas, 68 oil prospecting licences (OPLs), 102 oil mining leases (OMLs), awarded 170 oil blocks, 216 open oil blocks, 218 producing fields, 97 fields not producing, 85 operating companies, six Joint Venture (JV) companies, 35 foreign companies, 31 marginal field operators, 2800 producing wells, 12 floating production, storage and offloading (FPSO) vessels, 33 rigs, and one liquefied natural gas (LNG plant) with six trains.
    He also said some good steps were being taken by the government, including the establishment of the Petroleum Industry Governance Bill (PIGB), the Petroleum Sector Roadmap (7 Big Wins) and unfolding of policies in gas, petroleum and fiscal, as well as some critical investment agreements signed with China and India.
    Others include planned licensing rounds/roadshows to attract investors to bid for acreages and invest in the refineries.

  • Corruption: Beyond the Nigerian oil industry

    Based on statistical and empirical evidences, Petroleum, the naturally occurring, yellow-to-black liquid found in geological formations beneath the earth’s surface, has been a source joy to some countries and harbinger of pain to others. Indeed, while some countries have in place structures for the judicious management of the monumental profit derived from the sale of petroleum for economic, infrastructural and technological transformation, others have used the resource to institutionalise corruption that ensures a seeming perpetual underdevelopment and pauperisation of the populace.

    According to the International Energy Agency (IEA), in 2016, Saudi Arabia and Russia regained the number one and two respectively, after briefly conceding it to the United States in 2015. Prior to that, in 2014 over 66% of world oil production came from the top 10 countries: Saudi Arabia 542 Mt (13%), Russia 529 Mt (13%), United States 509 Mt (12%), China 212 Mt (5%), Canada 208 Mt (5%), Iran 166 Mt (4%), Iraq 160 Mt (4%), Kuwait 158 Mt (4%), United Arab Emirates 157 Mt (4%) and Venezuela 151 Mt (4%). Total oil production was 4,200 Mt.

    Interestingly, most of the aforementioned oil producing countries rank among the most prosperous nations in the world, perhaps with the exception of Iraq and Venezuela, whose oil industries had been blighted by insurgency and questionable leadership. Also, when it comes to oil and gas reserves per capita, countries like Venezuela, Nigeria, Mexico, Angola, Algeria and Oman are among the richest. The problem is that the vast majority of people in these countries don’t see that wealth transferred in terms of economic growth and job opportunities due to entrenched corruption.

    The regime of heist is, however, not restricted to the oil industry of individual nations; reports continue to hug the headlines about oil majors – corporations with exploration and drilling expertise – who operate in developing countries employing all manner of underhand strategies to cheat their host nations and indigenous partnering companies.

    In Nigeria, it would amount to an understatement to say the oil industry is plagued with endemic corruption. In one of the scandals involving the Nigerian National Petroleum Corporation (NNPC), the country’s official audit revealed that around $19 billion of oil revenues went missing through corruption and oil theft in 2014 alone. An independent investigative analysis by the Natural Resource Governance Institute (NRGI) had revealed that over $32 billion oil revenue was lost to NNPC’s mismanagement of Domestic Crude Allocation (DCA), opaque revenue retention practices and corruption-ridden oil-for-product swap agreements.

    While the impeachment of Brazil’s former President, Dilma Rousseff officially cites allegations that she manipulated the federal budget to disguise a growing deficit, it was a sprawling scandal at Petrobras, the state-owned oil company, which had taken a greater toll on her government that helped generate support for her removal. Though Rousseff was not accused of any crime, but before assuming the Brazilian presidency in 2011, she was chairman of Petrobras between 2003 and in 2010 when much of the corruption allegedly took place. The opposition alleges her presidential election campaigns of 2010 and 2014 were funded by corruption, charges her political party denies.

    Remarkably, Statoil, the Norwegian multinational oil and gas company, appears to be the most corruption-riddled International Oil Company (IOC), going by the avalanche of allegations of corrupt practices against it and some of which the company had been convicted. For instance, between 2002 and 2003, Statoil reportedly resorted to extensive corruption in Iran in an attempt to secure lucrative oil contracts for the company in that country. This, according to documented evidence, was mainly achieved by hiring the services of Horton Investments, an Iranian consultancy firm owned by Mehdi Hashemi Rafsanjani, son of former Iranian President Hashemi Rafsanjani. Statoil was said to have paid $15.2 million to Horton Investment to influence important political figures in Iran to grant oil contracts to Statoil. A Norwegian court had on June 29, 2004, found Statoil guilty of corruption and ordered to pay NOK 20 million. And also on October 13, 2006, Statoil reached a settlement with the United States authorities for its involvement in the case and was ordered to pay $21 million in fines.

    In February 2016, investigators at Norway’s anti-crime agency, Okokrim, started looking into what happened to hundreds of millions of Kroner (the Norwegian currency) that Statoil paid to Angola’s state oil company, Sonangol, over the past several years. The money was supposed to be used for a research centre that’s never been built, and for “social contributions” to Angola that remain unclear, and Statoil’s management knew they posed a “considerable” risk to Statoil’s reputation. The payments, which date back to 2011, were reportedly tied to Statoil’s bid to win licenses and operating responsibility on Angola’s Kwanza oil field.

    The catalogue of corruption cases involving Statoil is seemingly endless. A company inherited by StatoilHydro was enmeshed in a messy deal in Libya. StatoilHydro, according to the October 7, 2008 edition of the New York Times, may have made payments to win business in Libya that breached the United States and Norwegian anti-corruption rules. The executive vice-president for Exploration and Production Norway, Tore Torvund; and executive vice-president for Projects, Morten Ruud, had resigned with immediate effect in the wake of the allegation. Also in 2014, a Norwegian Business School Professor, Petter Gotts chalk, had queried why Statoil employed the Judge who administered a case in which the company was a party. He said it was much greater cause to examine Statoil’s role.

    Yet again, Statoil was at the heart of it all when in 2014, when a scandal broke out in Tanzania raising questions about good governance agenda in managing the oil and gas industries. Public concern over the fairness of Production Sharing Agreements (PSA) between Statoil and the Tanzanian government was leaked to the public. Its revelations included the fact that the split of “profit gas” between the Tanzanian government and Statoil was between 20% and 30% lower than what was described in model contracts. Put in another way, the higher revenue to the Norwegian partner from the deal could be more than twice the total of Norwegian aid given to Tanzania since independence.

    Oddly enough, while all the highlighted corruption cases involving Statoil had emanated from its dealings with governments, the story is different in Nigeria, where the Norwegian company had been taken to court by a private enterprise, Inducon Nigeria Limited, over alleged breach of a partnership agreement. According to court documents, Inducon had in 1991 brought the British Petroleum-Statoil Alliance to the Nigeria and three blocks – OPL 213, 217 and 218 – were initially awarded to BP-Statoil Alliance with Inducon as the main promoter. Inducon, according to court documents, decided to sue Statoil when upon the start of oil production in 2008 in the Agbami-Ekoli block, with Statoil’s portion being 20.28%, Statoil refused to honour agreements in place between BP, Statoil and Inducon.

    In both the Federal High Court and Federal Court of Appeal, Inducon had judgments in her favour and the case has been at the Supreme Court since 2012. In the middle of 2016, Inducon chose to file a “Motion on Notice” at the Supreme Court accusing Statoil of transferring all income from the sale of crude oil (40-45, 000 bpd) through a Nigerian bank to an account in JP Morgan Chase Bank in London. Statoil’s action, says Inducon, was in total disregard of the Order of Court given on April 26, 2010 by a Federal High Court and on December 10, 2010 by the same court, that all monies, revenue, income, funds, proceeds, earnings or however called derived from all offshore oil fields shall remain within the jurisdiction of the court in Nigeria and not to be expatriated to Statoil of Norway or any other foreign entity.

    In the affidavit and application to the Supreme Court, Inducon is asking the order that is still subsisting to be enforced and that Statoil be made to return to Nigeria, the $4.3 billion it had expatriated. Indeed, legal experts have expressed shock at this new twist in development and wondered why an international oil company like Statoil will disregard a subsisting court order in Nigeria while it complied in other climes.

    This writer has taken the pains to research and make public some of the untoward activities of international oil companies, whether in their home nations or outside, to highlight the incalculable damage they have done to the economy and general wellbeing of billions of people. It is the responsibility of governments to protect the interests of the citizenry by ensuring that there is justice, fairness, probity and accountability in oil or any business transaction it regulates.

  • ‘African countries need reforms in oil industry to attract investors’

    PricewaterhouseCoopers (PwC) has urged African governments to reform their oil and gas industries to attract investors.

    In the PwC’s 2016 Africa oil & Gas Review, the international advisory firm stated that in the face of declining global oil prices, the continent still offers significant opportunities in the oil and gas industry.

    It noted that regardless of the  bleak landscape of the industry, there is still hope for the sector to attract investors’confidence.

    According to ESI Africa, PwC Africa Oil & Gas advisory leader, Chris Bredenhann, said: “It is an opportune time for local governments that want to attract oil and gas investors to reform their regulatory, fiscal and licensing systems.”

    The report highlighted that uncertain regulatory frameworks are one of the main issues that organisations in the oil and gas industry are struggling with. For instance, in South Africa, the study noted that there have been commitments to address concerns since last year, and the intention of government to separate regulations for oil and gas from the mining industry was communicated.

    However, South Africa’s Minerals and Petroleum Resources Development Act (MPRDA) has not yet been changed and approved to reflect such modifications.

    The report stated that in Tanzania the regulatory environment remains uncertain despite the promulgation of the Petroleum Act in 2015 while on the other hand, in Nigeria, the government has failed to pass the Petroleum Industry Bill (PIB) into law.

    The research found that by the end of last year, Africa had a proven natural gas base of 496.7 trillion cubic feet (Tcf), down marginally from 2014, with 90 per cent of the continent’s natural gas production still coming from Nigeria, Libya, Algeria and Egypt.

    PwC’s analysis suggests that is the ideal time for the industry to consider introducing training programmes to upskill levels and company standards in order to give local players a chance to enter the sector when activity picks up again.

    “The oil and gas industry is faced with a higher entry barrier because technology and jobs tend to be more complex, highly specialised and costly,” Bredenhann noted.

    Another point made by the research was that basic as well as technological infrastructure is essential for the oil and gas sector to thrive.

    “Furthermore, players must look at the state of the industry as an opportunity to reinvent themselves. Given the state of the industry, we think that stakeholders must also consider making changes to their business models.

    “Change is the way to survive in the ‘new energy future.’ We need to see new business models, new products, new energy sources and new strategies to meet the new reality,” Bredenhann added.

  • Oil industry loses $600b to price slump

    Oil industry loses $600b to price slump

    • Operators urged on cost-saving processes

    With the global oil price slump leading to cancellations of significant projects and delays put at $600 billion, oil and gas industry players have been urged to adopt cost-saving processes to remain in business.

    The Managing Director/Chief Executive Officer, First Exploration and Petroleum Development Company Limited, Ademola Adeyemi-Bero, who gave the advice, said the over-supply and oil in storage are still at record levels, which is about three billion barrels.

    He said global demand growth for oil would continue steady at 1.2 million barrels per day (bpd) per year.

    He noted that the global over supply has been driven by the United States shale play and Canadian oil sands mines, despite the fact that United States oil and gas drilling experiencing a historic drop, well below 1990’s levels.

    Adeyemi-Bero said US oil shale reservoir declined by 6.8 per cent monthly, but that these factors don’t have visible impact because of market over-supply. He said most private players were driven by major budget cuts and shortages and that Brent oil price has reached bottom level while Henry hub gas price touched below $2 per million standard cubic feet (mscf) with the US exporting its first liquefied natural gas (LNG) cargo in over four decades.

    According to him, the global supplier with untapped fields (wild cats), are Iran and Iraq, while the primary energy demand drivers are China, Organisation for Economic Co-operation and Development (OECD) countries and India, and all are yet to pick up.

    Besides, he noted that all producers (Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC) that are able to grow production are increasing supply despite the oversupply, adding that highest cost tar producers – Venezuela and Canada – are still showing production growth.

    To counter oil price volatility and instability, Adeyemi-Bero said smart solutions must be deployed to derive maximum value during project development and execution and throughout asset lifecycle operations.

    He canvassed the use of low unit technical cost (UTC), such as maximising hydrocarbon recovery and reservoir development and reservoir and facility management.

    He said industry players had to minimise project delivery timeline and lifecycle development costs, that is, project delivery (wells and facilities) and operating costs, ensure enabling environment while eliminating third party interference.

    To address the problem, Adeyemi-Bero said approval and contracting cycle should improved, adding that the Joint Venture (JV) contracting and procurement and approval processes significantly erodes project value.

    He also noted that JV cash call processes in the last 10 years has killed growth. He said hydrocarbon recovery has to be maximised, wells and facilities development costs minimised, and also minimise deferments through efficiency in operations and maintenance of equipment.

    He said production losses and decline can be minimised through efficiency in export operations, production metering and reconciliation, eficiency in wells, reservoir and facilities management.