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Tag: Oil

  • Buhari to NNPC: work with indigenous oil producers

    Buhari to NNPC: work with indigenous oil producers

    President Muhammadu Buhari yesterday assured indigenous companies operating in Nigeria’s oil and gas sector of the full support and protection of his administration.

    He promised during a meeting with members of the Independent Petroleum Producers Association at the Presidential Villa, Abuja to do everything within his powers to address the challenges they currently face.

    A statement by the Senior Special Assistant on Media and Publicity to the President Mallam Garba Shehu, said he commended their determination to increase the participation of Nigerians in the country’s oil industry.

    He directed the management of the Nigerian National Petroleum Corporation (NNPC) to work closely with the indigenous oil producers to resolve the problems which they enumerated to him.

    “We have the manpower for a more effective participation in our oil industry. We will  give you all possible encouragement.  You certainly won’t be ignored under my leadership,” President Buhari told members of the association which represents about  20 Nigerian companies operating mainly on onshore fields.

    President Buhari assured the Nigerian oil producers that the administration will take appropriate actions to maintain and enhance security in their areas of operation, noting that better security will help to lower production costs, which, he said, had become unnecessarily high in the country.

    Mr. Austin Avuru, who spoke on behalf of the Nigerian oil producers, told the President of challenges currently being faced by the group such as security and the funding of joint ventures with the NNPC.

    He said the indigenous oil producers were already making significant contributions to the development of the economy and could do more with the support of the administration.

    Avuru, the chief executive officer of Seplat Petroleum, told reporters after the meeting that given the necessary backing, the Independent Petroleum Producers Group (IPPG) could raise Nigeria’s domestic oil refining capacity to 1.2 million barrels daily by the year 2020.

    Stressing that IPPG is made up of indigenous companies responsible for over 200,000 barrels of oil production and over 900 million cubic feets of gas production per day, he said it is a very significant segment of the upstream sector of the oil and gas industry.

    He said: “It was one of the points we raised with the President, we think that by 2020 domestic refining capacity should not be less than one million barrel of oil per day in domestic refining.

    “We actually put 1.2 million barrels domestic refining capacity per day and that falls on our doorstep as indigenous operators.

    Asked how the target would be achieved, he said: “It will be achieved. Some construction is already ongoing by indigenous companies and between some others which are coming in with smaller sized refineries and in partnership with the NNPC. We are confident that by 2020 we will deliver 1.2 million domestic refining capacity.

    “We thought it was necessary to engage the President, then fortunately the Vice President, permanent secretary, GMD of NNPC were all there. So it was a very useful discussion.” he added

    Speaking further on the necessity of the visit to the President, he said: “Because if you watch the way the oil and gas sector is evolving, increasingly the key segments of the oil and gas industry, the onshore segment and the swamp, oil is now falling into the hands of Nigerian Independent, and which is why in the past five years, we have made so much investment over $9 billion in just acquiring these assets and over $1 billion each year in work programme investment and this is growing.

    According to him, the group is seeking ways to become a very critical partner to government in the delivery of natural gas and other products into the domestic economy.

    He said that the group called for the meeting with the President as it identified with all his policy direction.

    He said: “We realised we are very critical partners that he needed to know about and to engage with very early in the administration of the President. So, we called for the meeting and he obliged us.

    “Mr President was very receptive and promised that all the help and support we need to succeed as indigenous producers, we will get it. Specific requests will go to the GMD when we engage him.

    “What happened today was all parties, stakeholders and all our partners in government, that is partner to indigenous operators in government were present at this engagement. Of course, we would now follow it up with more specifics when we meet with the GMD of the NNPC.

    He said that the indigenous companies do not have to take over from the multinational but will compliment each other.

    He said: “The multinational are going into some areas which we are unlikely to go into. Deep offshore, LNG, and whereas the onshore terrain and delivery of gas to domestic market, these have become our frontiers.”

    On the about 200 barrel per day production, he said: “That is 10 per cent today. Just in the past five years, up from near zero, and we anticipate that in the next 5years (by 2020) we will account for 30 per cent production of about three million barrels per day, that is very significant especially when in addition to that, we account for half of the total gas delivery to the domestic market. We can get as high as seven PCF per day by 2020.”

  • Sanitising the oil sector

    Everyone now knows that the integrity train looks unstoppable. Sample: the President Muhammadu Buhari administration has stopped the lodgement of oil revenues into any bank accounts other than that of the federation.
    Also in its efforts to fight corruption in the oil sector, the government last week disclosed that some stolen oil monies have been traced to some foreign accounts.
    While it will only take days for the international oil thieves to be unmasked, President Buhari has also started to put in place measures to get refineries working again.
    For corrupt and selfish reasons, the refineries have been made to remain comatose for many years, even as Nigeria lost millions of barrels of oil daily in the process of refining it outside the country.
    At the centre of all these irregularities, oil theft and corruption in high places is the Nigerian National Petroleum Corporation (NNPC), which is seen as the chicken that have been laying the golden egg.
    No wonder the restructuring of the organization towards efficiency engaged the attention of President Buhari last week.
    Buhari on Tuesday sacked and replaced the former Group Managing Director (GMD) of NNPC, Dr. Joseph Dawha.
    He appointed Dr. Emmanuel Ibe Kachikwu to immediately take over from the former GMD with the mandate to restructure the corporation.
    What he was expected to do include ridding the NNPC of corrupt elements; recover all stolen crude oil funds;
    work with the Economic and Financial Crimes Commission (EFCC) and the Directorate of State Service (DSS) to trace and recover stolen oil money.
    He was also expected to review the structure of the NNPC to compete globally, give targets to subsidiaries complete with performance benchmarks, and fixing all refineries to work at optimal level.
    Within 24 hours of his appointment, Kachikwu has sacked eight Group Executive Directors at the helm of affairs of the Corporation.
    The GEDs relieved of their duties include Mr. Bernard Otti (Finance and Accounts); Dr. Timothy Okon (Acting GED, Exploration and Production who also doubles as Coordinator Corporate Planning & Strategy); Adebayo Ibirogba (Engineering and Technology).
    Others are Dr. David Ige (Gas and Power); Ms. Aisha Abdurrahman (Commercial and Investment); Dr. Dan Efebo (Corporate Services); Ian Udoh (Refining & Petrochemicals) and Dr. Attahiru Yusuf (Business Development).
    For efficiency, Kachikwu also trimmed the directorates from eight to four including Refining and Engineering, Exploration and Production, Commercial and Investment, and Finance.
    To also properly scrutinize NNPC books among other agencies and remove any political undertone in the final reports, two audit firms are expected to be named this week to take over the function from the four man panel set up by the National Economic Council (NEC).
    After allegation by former Central Bank of Nigeria Governor, Sanusi Lamido Sanusi of missing money and incomplete remittance to the Federation Account by NNPC, the immediate past administration of former President Goodluck Jonathan, after much pressure, appointed PriceWaterhouse Cooper Nigeria (PWC) to investigate the allegation.
    The summary of the investigation as disclosed to journalists was that the firm found nothing wrong in the NNPC books except for $1.48 billion transferred by NNPC to one of its subsidiary, NPDC.
    With the fresh audit of the NNPC accounts, it is hoped that the true picture about activities of the Corporation will soon be very glaring to Nigerians.
    The ongoing efforts are not only expected to properly reposition NNPC but make all existing and upcoming refineries operate optimally for the benefit of Nigerians.

    Efficient National Carrier

    President Muhammadu Buhari has not hidden his desire to have a functional and efficient national carrier in the country.
    Before he was inaugurated President in May, he had blamed the 16 years governments of the Peoples Democratic Party (PDP) for the death of many national institutions in the country including inability to have a functional national carrier.
    This, over the years, has resulted in the sufferings of Nigerians who loose productive time due to delayed and cancelled flight and who have no option but to be taken round unnecessary routes before arriving at their destinations.
    Buhari’s directives for quick action on the establishment of a new national carrier issued to the Federal Ministry of Aviation on Wednesday was a welcomed development.
    But efforts should be made now to ensure that pitfalls and problems encountered by the defunct Nigeria Airways, Virgin Nigeria and Air Nigeria are avoided for an efficient national carrier that will stand the test of time.

  • The oil subsidy scam

    Former Governor Rotimi Amaechi recently said one of the reasons that caused a friction between him and former President Ebele Jonathan was his opposition to subsidy to petrol importers that ballooned from N300 billion a year  to N1.9 trillion. Amaechi was acting on behalf of the governors of the country then  as leader of the informal association of governors  forum. Dr. Jonathan by this time had been pocketed by the cabal of corrupt petrol traders who were also funding generously the PDP and enriching those in the corridor of power . The then president apparently realized at a point that there was something odd in a country spending more money on petrol subsidy than on development and wanted to do something about it. This led him to increase the pump price of petrol but did not have the backbone to resist public outcry  and quickly reduced what he had been advised as the true price of gasoline. The hostility of the public arose from their perception of the rampant corruption in the country. People felt they were not prepared to make sacrifice while the number of private jets was increasing daily. The president himself celebrated this as an index of prosperity  in the land where Nigeria’s rebased GDP gave us the appearance of a rich country and rich people. His so-called coordinating minister of the economy was everywhere alluding to this manufactured achievement of economic prosperity to the discomfiture of the ordinary citizen. Stories were told of washermen, carpenters, garbage collectors being asked to fill forms that they were petrol importers and being subsequently paid billions of naira as subsidy. Young children of party bigwigs became billionaires overnight.

    This jamboree went  on for years until the country nearly went bankrupt following low price of crude oil in the world market forcing the corrupt government to shine some light on the oil imports sector. It found many  people culpable and made some noise and took some people to court including party top dogs or their children but it was all motion without movement for no one has been convicted  neither has money been recovered. To make matters worse, some of the people involved also ruined some of the country’s banks  while the huge foreign reserves Obasanjo left was drawn down on  subsiding this corrupt fuel importation. This  is how we got to this juncture of broken down four refineries and huge importation of refined fuel  which is an embarrassing situation for an oil producing country. The subsidy guzzlers were not interested in functioning refineries. They also never thought of selling the refineries  as part of their market driven economic reforms. Obasanjo had gotten private  operators interested in buying some of the run down refineries but they preferred the so-called annual  turn around contracts award  for the refineries. As usual these contracts went to party hacks who knew nothing about refineries. Instead of calling on those who built the refineries to rehabilitate them they gave the contracts to traders who simply pocketed the huge amounts given them while making some donations to the ruling party. They did this annually with impunity damning the people especially those with conscience to protest or go to hell.

    Now change has hopefully come and we hope and pray that things will change for the better. President Buhari has cautiously said he will not rush to take a decision on oil subsidy. He said he will study the situation first. But it is clear from the several studies done and advice by experts and friendly countries and development partners that that the oil subsidy and the oil sector generally constitute the bedrocks of corruption in Nigeria. We cannot be talking of fighting corruption while dilly-dallying on the oil subsidy issue. If the president does not strike while the iron is hot, subsidy beneficiaries with their enormous resources will mobilize to ensure the failure of its removal. Surprise is a well known military strategy and this president with his huge goodwill  should make up his mind quickly. Besides in the last two months, most Nigerians have been buying fuel at deregulated prices ranging from 100 to 130 naira a litre. If this is the price to pay to release money going into subsidy for development we should be prepared to pay it. Imagine what two or three trillion naira that was being spent for subsidy by the Jonathan government  can do for the development of this country. Delaying a decision on this issue may haunt us in the years to come especially if this government allows the oil oligarchs to mobilize against subsidy removal. The right policy is deregulation. Let the market determine the right and correct price of gasoline and let all who feel they can make profit engage in fuel importation and sell all the refineries at give away price to oil companies engaged in oil production in Nigeria or if they are not willing to buy  them, sell them to those who can run them but certainly not party people and preferably to foreign investors and I repeat at a give-away price of even a dollar provided the buyers promise to put them back into oil refining.

  • Upstream firms face uncertain future over oil glut

    Upstream firms face uncertain future over oil glut

    The downturn in the global oil market is adversely affecting operations of Nigerian upstream companies, the exploration and production (E&P) and service companies. Level of jobs has dropped abysmally, compelling these firms to drastically scale down on their investment and workforce. EMEKA UGWUANYI looks at the situation.

    The global oil glut has continued to send economic shocks around the world. The hardest hit have been countries whose economies depend heavily on oil for a significant percentage of their foreign exchange earnings, such as Venezuela, Angola, Azerbaijan and Nigeria among others.

    An energy expert, Mr. Kazeem Bello, said the fluctuation of price in the oil market is a normal occurrence, but the concern now is that the current slump in price might last longer than usual following the discovery of crude oil in many parts of the world and the new wave of alternative energy sources, particularly shale oil, which will have adverse effect on Nigeria.

    He said the country’s failure to take cushioning measures against volatility risks by implementing fiscal buffers and hedging mechanisms has left it at the mercy of the crisis. He noted that Nigeria didn’t save for the rainy day by investing in the oil and gas sector or putting substantial part of proceeds from oil sale in period of boom in its sovereign wealth fund like other producer countries. Money is drawn from such funds in times of downturn like the one currently being experienced for reinvestment into the oil industry for more output and for capital projects.

     

    Significant drop in revenues

    Bello said the likes of Saudi Arabia, Kuwait and the United Arab Emirates have over $2 trillion in their Sovereign Wealth Fund (SWF) accounts; one of their numerous fiscal buffers, hence the oil crisis has so far had very little impact on their respective economies. Also laudable is Mexico’s adoption of a hedging mechanism before the oil downturn at $76.40 per barrel, saving the country an inevitable exponential loss in the wake of the free fall in price.

    The Chair of the Nigeria Natural Resource Charter (NNRC) and former Minister of Petroleum Resources, Mr. Odein Ajumogobia noted that crude oil prices had fluctuated over the years, but the current decline highlighted the importance of planning. Speaking at a policy dialogue entitled ‘Implications of the Falling Oil Price for Policy in Nigeria,’ organised by the Centre for Public Policy Alternatives, a Lagos-based think-tank, he commented on the need for a hedging mechanism, saying, “because we don’t have a hedging mechanism, we are completely left at the mercy of the oil price.”

    Inevitably, oil and gas companies globally have been adversely affected by the falling oil prices with their revenues and profits on the decline.  Seplat Petroleum Development Company’s profit after tax amounted to N4.83 billion at the end of the first quarter of 2015, which represents a drop of 33.4 per cent year-on-year. Full year outlook indicates after tax profit in the region of N20.21 billion for the company in 2015. The company may therefore, lose as much as half of the profit figures of N40.48 billion it reported in the preceding year. In April 2015 the Wall Street Journal reported that BP’s UK version of net income fell 40 per cent from a year earlier and its cash flow plunged by more than 75 per cent, while Total SA of France net profit fell by 20 per cent. Both companies reported lower revenue from oil sales as crude traded for about $54 a barrel in the first quarter of 2015, half its price a year earlier.  The publication further stated that, to demonstrate how challenging the market has been for big oil companies, these numbers were considered better than expected by analysts. In January, Total reported a $5.7 billion loss for the fourth quarter of 2014, while BP’s losses totalled almost $1 billion.

    Companies have taken to proactive measures to cushion the effect of the downturn including cuts in capital expenditure (capex), downsizing of operations and cancellation or suspension of contracts.  At the end of 2014 Shell said it was deferring spending in many areas and this would result in a reduction in capital investment from 2015 to 2017 of over $15 billion.  Chevron Corporation announced a $35 billion capital and exploratory investment programme for 2015; 13 per cent lower than the total investments for 2014. ExxonMobil said it would slash its capital spending by 12 per cent to $34 billion from about $38.5 billion last year, while French oil major, Total cut capital spending by $2 billion to $3 billion from last year’s total of $26.4 billion.

    “Companies have taken to proactive measures to cushion the effect of the downturn including cuts in capital expenditure (capex), downsizing of operations and cancellation or suspension of contracts”

    In Nigeria, there have been cuts in Joint Venture budgets. In third quarter of 2013, the National Petroleum Investment Management Services (NAPIMS), a subsidiary of the national oil company, Nigerian National Petroleum Corporation (NNPC), which foresees government’s investments in the upstream sector of the industry, ordered a 30 – 40 per cent cut in the Joint Venture (JV) budget followed by a similar directive in first quarter of 2015.  This has led to the stalling and suspension of several ongoing projects.  New opportunities have been deferred or completely cancelled. This singular move led to a significant drop in the Nigerian rig count from 51 in September 2013 to 27 in June 2015 – a 47 per cent reduction.

    The drop in rig count has had a negative effect on other manufacturing and services businesses such as drilling fluids and chemicals, drill bits, casing services, and marine vessels, among others, leading to multimillion dollar losses to indigenous services companies who have made substantial investments towards acquiring assets, technologies and capacity to execute projects. The President, Petroleum Technology Association of Nigeria (PETAN), an umbrella body of Nigerian firms that play in the upstream, Mr. Emeka Ene told The Nation that over  6,000 jobs were lost  in the oil services segment of the industry as at first quarter of 2015. He said many oil firms have lost their expatriate workers to recession because they are unable to raise enough money to maintain them. He said with the lingering downturn in the industry, companies may be compelled to further reduce their capital expenditure and personnel. He said even highly technical workers such as geologists, engineers and others have lost their jobs.

    Ene advised that if Nigeria will not face this kind of situation in the future, the Federal Government should start investing in the industry now and encourage investors to come in now that oil price is low and help produce cheap barrels, which will be sold in period of high price.

     

    Negative impacts of the downturn

    However, the highest losses are indigenous rig owners who are stipulated by the Nigerian Content Act of 2010 to acquire by direct purchase at least 50 per cent of deep water assets, which can be valued at as much as $650 million and above.  These local companies are expected to demonstrate this ownership at the tendering stage with no guarantee of contract commitment.  Tendering is unusually lengthy because of bureaucracy and outdated manual processes with cases of tendering going on for over five years with no conclusion in sight. Acquisition of these assets usually requires these companies to borrow from local banks at interest rates averaging 20 per cent or more.  These rates make the indigenous companies uncompetitive especially when compared to foreign oilfield service companies that have access to finance at significantly reduced interest rates and grants from their governments.

    A combination of falling demand for rigs and cheaper foreign options has led to local rigs being left idle – according to a February 2015 BBC report. Industry analysts have said this is the worst oil rigs market they have seen globally since 1985.

    Idle rigs are in themselves cost centres as there is a daily maintenance cost of several thousands of dollars to ensure they don’t deteriorate and are ready to use as and when required.  Consequently, companies have to invest on manpower that supports every oil rig idling by- from staff on board the rigs to office support and supply related companies.

    The Group Lead of the NNRC Expert Panel Core Sector group, Mr. Gbite Adeniji, said oil companies were beginning to renegotiate contracts, adding that some clients were delaying payments. According to him, “there is a general waiting game in the industry. In the service sector, several companies will go out of business. Borrowing from the banks in this kind of environment is almost suicidal. Contractors are beginning to lay off staff. The implications remain that projects will be cut, while the optimism that heralded those indigenous companies in the industry is dampening.”

    Examples of indigenous companies that have caved in to the pressure are Seawolf Lonestar and NRG Drilling to mention a few. Seawolf has since gone out of business with the Asset Management Corporation of Nigeria (AMCON) seizing its three rigs. The company terminated the contracts of its 450 employees who are presently being owed 22 months outstanding salaries and the company has been unable to service its loan agreement with First Bank of Nigeria.

     

    Govt not helping matters

    Besides the lack of investment in the oil and gas industry, which has led to diminishing reserves and production, government’s failure to put in place measures that will fast-track implementation of projects as well as payment of its counterpart funding of Joint Venture (JV) projects operated by the international oil companies (IOCs), has significantly stalled growth of the oil industry.

    Nigeria is said to have the longest contracting process in the world. It takes between 18 months to three years to conclude a process of awarding contract for a project. As a result of the length of time, initial budgets of most projects are altered and reviewed upwards, making projects costs in Nigeria very high.

    The Federal Government runs joint venture projects with the multinational oil firms in Nigeria, where it holds 60 per cent interest. Unfortunately, it has been a challenge over the years to pay its part of financing operation of those JV projects.

    According to an industry operator, the plunge in crude oil prices has further aggravated the Federal Government’s inability to fund Joint Venture (JV) agreements with international and indigenous oil companies. Prior to the oil glut, payment of cash calls and requests for payment for anticipated future capital projects sent by Joint Venture operators to the Government as non-operating partners had always been a challenge, with payments either being partially made or not at all.

    In the Joint Venture operation, the ownership of assets is between Nigerian National Petroleum Corporation (NNPC) on behalf of the Federal Government and international oil companies (IOCs) such as Shell, ExxonMobil, Chevron, Total, Eni and some local oil firms, among others. In the arrangement, all parties contribute to funding oil exploration and production operations in the proportion of their JV equity holdings and receive crude oil produced earnings in the same ratio.

    As at January 2015, NNPC owed $5bn in cash calls to its Joint Venture partners. The Managing Director/Chief Executive Officer, Total E&P Nigeria, Elizabeth Proust, buttressed the need for prompt payment of cash calls (counterpart funding). She said: “Resolving JV funding could increase production by 2.8 billion cubic feet per day by 2020. Government and industry need to implement a sustainable solution to deliver vital funding.”

    This particular challenge, according to operators, has adversely affected production output by 200,000 barrels per day. Production from Joint Ventures, which in the past accounted for about 95 per cent of Nigeria’s crude oil output, has continued to decline yearly as international oil companies increasingly shift offshore due to onshore risks including funding, oil theft and sabotage.

    According to the Public Relations Officer of PENGASSAN, Emmanuel Ojugbana, “Oil companies are owed billions of dollars in cash call arrears putting the jobs of our members and other workers in the industry in jeopardy as companies easily rationalize disengagement of staff and reduction in welfare packages due to lack of funds.”

    Evidently, with the continued oil crisis, the NNPC will be unable to meet their JV funding obligation this year. Platts, a US-based publication that provides information on energy and metals data recently quoted sources at the NNPC as saying “The NNPC has informed its Joint Venture partners that this year’s capital expenditures will be cut by 40 per cent from the initial proposed budget of $13.5 billion. The $13.5 billion has been the level that has been maintained in the past three years, but because of the drastic decline in oil prices, that level cannot be sustained this year.”

    The government has also come to the realisation that the current JV funding model isn’t working; over the years a series of models have been adopted as a source for alternative funding proving futile. In 1993 the Production Sharing Contract (PSC) model was adopted as the preferred petroleum arrangement with IOCs. Under this arrangement, the concession is held by NNPC and it engages the IOC or the indigenous company as contractor to conduct exploration and production on behalf of itself and NNPC. The contractor takes on the financing risk and if exploration is successful, the Contractor is entitled to recover its costs on commencement of commercial production. If the operation is not successful, the Contractor bears the loss.

    The second model adopted was the service contract. Under this model, the contractor undertakes exploration, development and production activities for, and on behalf of NNPC, at its own risk. The concession ownership remains entirely with NNPC, and the contractor has no title to the oil produced. The contractor is reimbursed the cost incurred only from proceeds of oil sold and is paid periodical remuneration in accordance with the formulae stipulated in the contract. The contractor has the first option to buy back the crude oil produced from the concession.

     

    Proposed models

    Industry experts have suggested more appealing alternatives for all concerned parties such as a Modified Carry Arrangement (MCA). The MCA is a financing agreement whereby the IOC will advance a loan to NNPC for the purpose of investing in upstream projects with an understanding that the IOC will be reimbursed through a combination of tax relief and incremental oil production derived from the JV operations.

    Another option is reducing the percentage of government equity (usually 60 per cent) in the operations and letting the IOCs and indigenous companies cover exploration and development costs.

    Suggesting a way forward, the Head of Energy, Ecobank Capital, Mr. Dolapo Oni said: “The best option will be to incorporate these Joint Ventures and list them on the Nigerian Stock Exchange (NSE), so that they can raise their funds through equity or debt directly, and also pay dividends to investors.”

    To date, alternative funding models adopted by some IOCs has witnessed some success. ExxonMobil has successfully generated about $15 billion of alternative capacity through external financing and Modified Carry Agreement. This has accounted for about 70 per  cent of current JV production. ExxonMobil’s model of external financing entails that commercial banks provide funding for approved JV work programme at cost-effective, market driven borrowing rates; the lenders have no recourse to JV assets and the loan is secured by revenues from forward sale of incremental production volumes.

    “In the service sector, several companies will go out of business. Borrowing from the banks in this kind of environment is almost suicidal. Contractors are beginning to lay off staff”

     

  • Tyranny of oil marketers in Ogbomoso

    SIR:Independent oil marketers in Ogbomoso have become a clog on the wheel of progress in the town, and the earlier men of conscience make their voices heard the better for the town and its economy. As at the time of writing this report, these shylocks have stopped selling fuel and making life difficult for the people, adding to the agony which the economic recession in the country had imposed on the people. The cartel has formed a parallel government in the town and determining the spate of business.

    In actual fact, since multinational oil companies like Total, Oando, Texaco, Master Energy, and even NNPC have closed shops or working skeletally, independent oil marketers have been employing their majority and unity to cheat the customers. Instead of selling at the normal price of N87 per litre, they sold between N110 and N105. In spite of that, they still ration the selling of the products. At times, when the task force visits the town, the visit is used as an excuse not to sell at all as being witnessed at the moment. Meanwhile, they have fuel in their stations.

    In the past, people believed that a prominent traditional ruler in the town, who doubled as an oil dealer was behind the invincibility and power wielded by the marketers. However, having leased out his filling station to the NNPC, the situation has not changed. There is no doubt that people are fed up with the murderous activities of the marketers and no one can say precisely what the reaction of the people will be if the actions are not checked; this makes the appeal to the concerned authorities imperative.

     

    • Abdulsalam Olalekan,

    Ayedaade, Ogbomoso.

  • GE books $2.5b African orders from oil, locomotives

    General Electric Co. booked $2.5 billion of orders from sub-Saharan Africa in the past 11 months, including oil and gas equipment for Eni SpA in Ghana and locomotives for Angola.

    That figure is $500 million more than the company targeted by 2018 during a United States-African leader summit last August, Jay Ireland, chief executive officer for GE Africa, said in an interview in Kenya’s capital, Nairobi.They will be delivered “over the next two years,” he said.

    Orders from the 25 African nations where GE operates range from items for transportation to oil and gas, power generation, health care and aviation, according to Ireland.

    GE expects to seek financing for projects worth at least $1.5 billion in Africa each year as it expands its footprint in a region increasing investment in infrastructure development, and exploitation of its natural resources, he said.

    The announcement coincides with U.S. President Barack Obama’s visit to Kenya, where he addressed the Global Entrepreneurship Summit in Nairobi.

    Economic growth across Africa is set to accelerate to five percent in 2016 from an estimated 4.5 percent this year, when foreign direct investment will rise to $73.5 billion, according to the African Development Bank. The inflows may help narrow a funding gap for infrastructure development on the continent that the World Bank estimates at $93 billion a year.

    GE will “soon” announce new assembly facilities to be established on the continent in addition to those already in Nigeria, Angola, and South Africa, Ireland said.

    Eni, whose offshore Ghanaian project is scheduled to deliver first oil by 2017, placed an order worth $850 million for equipment including three gas turbines for power generation and four centrifugal compressors, he said. GE will start delivering the equipment later this year.

    Angola, which is planning a transportation hub, placed an order with GE to supply Angola National Railways with 100 locomotives. The southern African country plans to use the railroad to diversify its economy from oil into industries including mining, agriculture and energy, according to GE.

    The company plans to supply 60 wind turbine generator units to a power project in Kajiado county, central Kenya. The total cost of the project that includes a service agreement for 15 years is about $155 million, according to GE.

    The company is supplying 98 Kenyan hospitals with radiology infrastructure and has started an institute to train domestic health workers in use of the equipment.

    GE, which has its Africa office in Nairobi, may double its workforce by end of this year as it seeks to expand its footprint on the continent. The company plans to open a regional office in Abidjan, Ivory Coast, to cover Francophone Africa, according to Ireland.

    “The potential in Africa is huge,” Ireland said.

  • Buhari: ex-ministers, others will face trial for oil theft

    Buhari: ex-ministers, others will face trial for oil theft

    Accounts with looted funds to be frozen

    Oil thieves, including former ministers and some prominent individuals, have been put on notice – the law is coming after them.

    President Muhammadu Buhari did not name them, but he spoke of how they plundered Nigeria’s economy by stealing one million barrels of crude oil daily, selling the stuff overseas and lodging the proceeds in their personal accounts.

    Buhari spoke on Tuesday at the Nigerian Embassy in Washington D.C., United States (U.S.) at a parley with members of Nigerians In Diaspora Organisation (NIDO) as part of his four-day visit to the U.S.

    He told his audience – NIDO members in America and Canada – that his administration would recover “mind-boggling” sums of money stolen from the oil sector.

    “250,000 barrels per day of Nigerian crude were being stolen and people sell and put the money into individual accounts,” he told NIDO members, according to a statement issued yesterday by the President’s Senior Special Assistant on Media, Garba Shehu.

    The statement reported Buhari as vowing to trace the accounts of individuals, who stashed away ill-gotten oil money, freeze such accounts, recover the loot and prosecute the culprits.

    Buhari lamented that “corruption in Nigeria has virtually developed into a culture where honest people are abused”.

    On the contentious fuel subsidy on which Nigeria spends billions of dollars in months, the President disclosed that if fuel subsidy was removed; transport, housing and food prices would go out of control and the average worker would suffer untold hardship.

    He said the U.S. and other developed countries had agreed to assist in tracking the accounts where looted funds are deposited.

    “We will ask that such accounts be frozen and their owners be prosecuted,”, he said.

    Buhari told the NIDO members: “The amount involved is mind-boggling. Some former ministers were selling about one million barrels per day. I assure you that we will trace and repatriate such money and use the documents to prosecute them. A lot of damage has been done to the integrity of Nigeria, with individuals and institutions already compromised.”

    Citing the Nigerian National Petroleum Corporation (NNPC), President Buhari said unlike what obtained when he held the forte as Federal Commissioner for Petroleum in the military regime when the NNPC had only two traceable accounts before paying oil proceeds into the Central Bank of Nigeria (CBN), “now everybody is doing anyhow”.

    Agreeing that the “economy is in an extremely bad shape”, Buhari said the All Progressives Congress (APC)-led administration would fulfill its three-pronged campaign manifesto of providing security, turning around the economy with a major focus on youth employment and fighting corruption.

    When asked if the Federal Government will negotiate with Boko Haram to pave the way for the release of the abducted Chibok schoolgirls, the President said his administration would only negotiate if genuine and confirmed leaders of the militant sect came forward and convinced the government of the conditions of the girls, their location and the sect’s willingness to negotiate.

    “Our objective is that we want the girls back, alive and returned to their families and rehabilitated. We are working with neighbouring countries, if they will help,” he said.

    Buhari also said agriculture and mining would receive priority attention as faster job-creation avenues for the teeming unemployed youths, adding that some foreign investors had agreed to take advantage of the immense business opportunities in the country.

    Speaking on when he would form his cabinet, the President jokingly observed that the question on the cabinet had been chasing him around the world even to the point that he had been nicknamed “Baba Go Slow at home.”

    He, however, noted that not even the Peoples Democratic Party (PDP) during all the years it ruled the country ever formed a cabinet within the first four months.

    “I am going to go slow and steady,” he said, calling for patience to allow the new administration “put some sense into governance and deal with corruption”.

    The President promised that his administration would at the right time tap into the enormous talents available amongst members of NIDO, especially as consultants. Their requests for voting right in 2019, a Diaspora Commission and opening of new consulates in parts of the United States and Canada are to be considered.

    The President had earlier met at the same venue with a group of young professionals in the U.S. and assured them of his administration’s resolve to fight corruption, remain steadfast and invest heavily in education which he said was the answer to taking the youth out of poverty and ignorance.

  • Many feared killed as vandals’ clash causes explosion in Arepo

    Many suspected vandals were on Wednesday feared killed after a gun duel between two groups caused pipeline explosion in Arepo, Ogun State.
    The incident which occurred at the wee hours of Wednesday, led to the shutting down of supplies on the pipeline by the Nigerian National Petroleum Company (NNPC).
    The incident is coming few weeks after the federal government suspended the contract awarded the Oodua People’s Congress (OPC) by the past administration to secure the facility.
    The fire is was learnt, broke out in the canal where the vandals steal petroleum products and spread into the pipelines.
    At the time of filing this report, the actual casualty figure could not be confirmed, as rescue workers were yet to gain access into the scene for fear of being killed.
    It was learnt that neither the Police nor the Niger‎Ian Security and Civil Defence Corps (NSCDC) responsible for the protection of the facility were on ground.
    A source told The Nation that the security agencies have since absconded their duty there, adding that emergency workers said they cannot enter the canal where the fire was raging because of lack of protection.
    ‎Although rescue workers alleged that the scene is about two kilometres from residential area and doubted the possibility of innocent citizens being victims, unconfirmed reports claimed that over 100 persons might have died in the mishap.

  • Jonathan ministers sold one million barrels of oil per day- Buhari

    Jonathan ministers sold one million barrels of oil per day- Buhari

    President Muhammadu Buhari has given more insights on the extent of corruption in the country’s oil sector under the administration of former President Goodluck Jonathan.
    He spoke on Tuesday while reacting to questions from members of Nigerians In Diaspora Organisation (NIDO) in the United States and Canada at the Nigerian Embassy in Washington DC.
    According to him, “250,000 barrels per day of Nigerian crude were being stolen and people sell and put the money into individual accounts,” adding that the United States and other developed countries “are helping us to trace such accounts now.”
    ” We will ask that such accounts be frozen and prosecute the persons. The amount involved is mind-boggling. Some former ministers were selling about one million barrels per day.
    ” I assure you that we will trace and repatriate such money and use the documents to prosecute them. A lot of damage has been done to the integrity of Nigeria with individuals and institutions already compromised,” Buhari stated.
    Citing the example of the Nigerian National Petroleum Corporation (NNPC), President Buhari said unlike what obtained during his tenure as Federal Commissioner for Petroleum under military regime when the NNPC had only two traceable accounts before paying oil proceeds into the Central Bank of Nigeria (CBN), “now everybody is doing anyhow.”
    The President, who expressed skepticism on the existence of oil subsidy, said if subsidy was removed, transport, housing and food prices would go out of control and the average worker would suffer untold hardship.

  • Inside the oil deals that cost Nigeria billions

    Inside the oil deals that cost Nigeria billions

    Despite elaborate efforts to sweep it under the carpet, facts have shown that a strategic alliance agreement between the Nigerian Petroleum Development Company (NPDC) and Atlantic Energy Drilling Concepts Nigeria Limited Limited (AEDCNL) has helped parties in the agreement to swindle the country. After wide-ranging investigations, Assistant Editor ADEKUNLE YUSUF uncovers the details of the deal that set back the country by about $2b

    It is an adventure laced with shoddiness. That perhaps is the most fitting silhouette for the Strategic Alliance Agreement (SAA) between the Nigerian Petroleum Development Company (NPDC) and Atlantic Energy Drilling Concept Nigeria Limited. From all available documentary evidence, the SAA, which paved the way for Atlantic Energy to operate some oil blocks during the administration of former President Goodluck Jonathan, has left the country short-changed of about $2billion, excluding hundreds of millions of dollars as bank loans and money owed to workers and contractors. After four years of the alliance, everything suggests that NPDC and Atlantic Energy owe Nigerians a lot of explanations regarding how some oil blocks – OMLs 26, 30, 34, 42, 60, 61, 62 and 63 – were handled between 2011 and 2014, including outright theft of proceeds from all the millions of barrels of crude oil lifted during in the four years.

    A portfolio company

    Like a well-choreographed movie, it all started on a measured pace. On July 19, 2010, Atlantic Energy Drilling Concept Limited (AEDCNL) was incorporated as a portfolio company. That was barely three months after Mrs Diezani Alison-Madueke, former Minister of Petroleum Resources, assumed office after her redeployment from Mines and Steel Development Ministry. Curiously, the company changed its name to Atlantic Energy Drilling Concepts Nigeria Limited (AEDCNL) on October 27, 2011. However, Atlantic Energy, even without prior record of successful experience in the oil and gas sector, announced that it had entered into a Strategic Alliance Agreement (SAA) with the Nigerian Petroleum Development Company (NPDC) in April 2011. That was exactly six months before AEDCNL was legally born. In a capsule, the company that claimed to have signed the SAA with NPDC was not legally in existence when the deal was shoddily consummated in April 2011. As unknown portfolio company, Atlantic Energy was operating from a temporary office accommodation before it opened office in 2012 at 32a Adetokunbo Ademola Street, Victoria Island, Lagos, after the NPDC fortune had smiled on it. With the NPDC contract in its kitty, Atlantic Energy embarked on a massive recruitment exercise, poaching good hands in the oil industry, which it used to actualise its planned scheme to play big in Nigeria’s highly shady oil and gas sector.

    But all that never dissuaded partners in the deal from embarking on a hot business romance at the expense of the country. The SAA covered 4 Oil blocks: OML 26 – FHN; OML 30 Shoreline; OML 34 – Niger Delta Oil, and OML 42 Neconde, all sold by Shell /Agip and Total. It was obvious that the NPDC granted the SAA in absolute secrecy without following any due process as stipulated in the government procurement laws and policy. With the sale of the four oil blocks, in which the Federal Government owns 55 per cent, the National Petroleum Investment Management Services (NAPIMS), which oversees national investments in Joint Venture Companies (JVCs), Production Sharing Companies (PSCs), and Services and Services Contract Companies (SCs), transferred the ownership to NPDC as the upstream producing arm of the NNPC. Although the NPDC should have paid NAPIMS a signature bonus, no payment was made, leading to a loss of asset by the federation and loss of revenue that should have accrued to national coffers. This was confirmed by the recent PwC audit report, which audited remittances from NNPC to the Federation Account after the allegations by Sanusi Lamido Sanusi, former governor of the Central Bank of Nigeria (CBN) who is now the emir of Kano. The audit findings showed that remittances into the Federation Account were not up to date.

    An unholy alliance?

    The SAA is to enable Atlantic Energy provide fund and technical services and lift oil. Being a funding mechanism, the SAA is meant to enable the owner (NPDC) to accept its strategic partner (Atlantic Energy) to partake in the production sharing of the oil field at a fee called signature bonus, while the strategic partner is expected in return to fund the operations and provide technical support so that it can be reimbursed directly from the production in subsequent periods. Although a good idea that is said to be critical to the survival of the country’s oil and gas industry, the SAA was obviously not managed in the national interest, for it has helped parties in the deal to embark on a stealing spree of public fund after production liftings.

    Up till now, industry watchers are still in a shock over how NPDC, which is peopled with some of the best engineers and technical experts, granted the SAA to a company that paraded no track record of requisite experience in the sector – all without following any process as stipulated in the government procurement laws and policy. Besides documentary evidence, findings within the sector showed that the deal was an unholy arrangement between Alison-Madueke, top NPDC officials and the duo of Kola Aluko, who is a known business ally of the ex-Minister, and Jide Omokore, a controversial business mogul who is a Peoples Democratic Party (PDP) stalwart, financier and kingmaker to some governors as well as many senators and members in the House of Representatives. Aluko and Mrs Alison-Madueke have denied any business ties.

    NewTable New1Of the two promoters of Atlantic Energy, Omokore had no easily traceable previous experience in the oil and gas industry, while Aluko had.

    However, drawing on its connections in high places, Atlantic Energy swung into plum business, having won the hearts of those at the helms of affairs – from the ministry and the Presidency. As contained in the SAA document, Atlantic Energy was supposed to pay a signature bonus of $245 million to NPDC, but it ended up paying $135 million – no thanks to legal terminology and simple mathematics that only parties in the deal could explain. The balance was remitted to the account of unknown people.

    Inside the raw deals

    Atlantic Energy approached two Nigerian banks for loans. Going by the books of Atlantic Energy, the loans were meant for the payment of signature bonus and cash calls to NPDC. Therefore, in 2011, it took a loan of $490million, with First Bank contributing $370million and Skye Bank $120million. At the beginning of the deal, Atlantic Energy actually paid the signature bonus of $135 and cash calls of $68 to NPDC from the loan, totalling $203 million out of $490million lifeline provided by the two banks.

    But another weighty, if not damning evidence that was to expose the shoddiness of the SAA came in the early life of the deal. In 2011, shortly after securing the juicy contract, it was NPDC that lifted crude oil (947,096 barrels) on behalf of Atlantic Energy and remitted $102m into the coffers of its strategic partner; instead of Atlantic Energy to lift oil and remit proceeds. Why? It was because Atlantic Energy, a mere portfolio company at the time it was handed the sweetheart contract, was still too new and untested to even secure an export permit for such a venture as at the time, thus showing the level of involvement of the top echelons of the Petroleum Ministry and NPDC officials.

    A detailed scrutiny of the cash calls schedules and other papers also showed that the plundering galore continued till 2012 and 2013.  For example, in 2012 alone, Atlantic Energy paid cash calls worth $168m, but lifted crude oil of about 3million barrels valued, conservatively at over $350 million. Despite the differentials in remittances, NPDC continued to look the other way as Atlantic Energy lifted about 2million barrels of crude oil in 2013, valued at about $240million, but paid cash calls of $68million. In 2014, records also revealed that Atlantic Energy paid zero cash calls and lifted about 500,000 barrels of crude oil, valued at $54 million, with all the funs siphoned abroad as payments for vendors sources say are phony.

    Table2Again, the promoters incorporated the Atlantic Brass Development Company Limited on February 5, 2013. As usual, it was hurriedly granted another set of SAA. The SAA covered another set of 4 blocks: OML – 60; OML – 61; OML – 62; OML – 63. Unlike in the previous deals in 2011 and 2012, when it paid a fraction of obligatory funds, the company simply pocketed all the proceeds, paying pay no signature bonus or any cash calls at all despite lifting about 8 million barrels of crude oil, valued at $800 million at the time. Instead various amounts of money were transferred to the accounts and investment companies in UK, Dubai and Switzerland. They also opened mirror accounts of Atlantic Energy Brass in the UK and Switzerland (see the table on foreign accounts).

    However, with the fall of the administration of Jonathan, the chicken seemed to have come home to roost, as the NPDC, which seemed to have condoned all the infractions of its strategic partner, has suddenly woken from slumber. In a letter from NPDC, dated May 6, Atlantic Energy was asked to pay its outstanding indebtedness OMLs 26, 30, 34, and 42, totalling $573,668,090 (five hundred and seventy three million, six hundred and sixty eight thousand, ninety dollars).

    “This is to inform you that we have not yet received any payment on outstanding cash call obligations after our reconciliation sign-off, dated August 28, last year. Kindly remit the sum of $573,668,090 (five hundred and seventy three million, six hundred and sixty eight thousand, ninety dollars) only, being amount due to OMLs 26, 30, 34, and 42,” said the NPDC.

    An analysis of the reconciliation sheet revealed that the $573,668,090 was just a fraction of the cash calls, as some huge returns that were yet to be subjected to technical and financials by the two parties were not included.

    But the bad state of finances on OMLs 26, 30, 34, and 42 paled when compared with that on OMLs 60, 61, 62 and 63 where Atlantic Energy owes NPDC a staggering $1,250,644,474.54 (one billion, two hundred and fifty million, six hundred and forty four thousand, four hundred and seventy four dollars).

    In another letter from NPDC, dated May 6, Atlantic Energy was reminded of its outstanding indebtedness.

    Table3“This is to inform you that we have not yet received any payment outstanding cash call obligations after our reconciliation sign-off, dated August 28, 2014. Kindly remit the sum of $1,250,644,474.54 (one billion, two hundred and fifty million, six hundred and forty four thousand, four hundred and seventy four dollars) only, being amount due on OMLs 60, 61, 62 and 63,” the letter said.

    Atlantic Energy has also defaulted on the bank loans from First Bank Plc and Skye Bank. Instead of moving the proceeds of the liftings to the two banks to repay the loans and pay the obligatory cash calls, Atlantic Energy has transferred the funds through various related party companies. As at now, the loans have not been paid while the mounting interest element is also long overdue.

    In a letter from Skye Bank, dated April 10, Atlantic Energy was reminded of repayment its outstanding obligations ($39,232,428.16) on the $120 million loan facility it took from the bank.

    “Kindly refer to our various correspondence and discussions regarding your outstanding obligations on the above subject facility ($120 million). This is to remind you that the total sum of $39,232,428.16 plus accrued interest is past overdue for payment on your facility,” the letter said.

    The letter was signed by Tutu Alu, manager, corporate banking group, and Tosin Faniro-Dada, relationship officer, corporate banking group.

    Another letter from First Bank, dated February 20, tacitly refused a request from Atlantic Energy seeking to restructure the loan facilities it has received from the bank, hinging it on some stringent conditions.

    “We refer to the meeting held on 19th February 2015 and your request for a restructure of your facilities coupled with lenders’ consent to change the ownership structure of Atlantic Energy. We wish to state that, even as we are mindful of the set timeline, we are constrained to progress your request further until we receive the following documents: (1) copy of the executed NPDC/Atlantic Energy reconciliation, (2) copy of executed NPDC repayment plan, (3) addendum to the SAA, (4) NPDC consent to the restructure of the company.”

    The FBN letter also included the following conditions that must be met before considering Atlantic Energy’s request: “provision of standby Letter of LC to secure crude oil liftings, and payment of all overdue obligations, coupled with the injection of $100 million to reduce exposure to lenders.”

    The letter was signed by Deji Abisola, business manager, corporate banking group (energy and utilities), and Jide Ayeronwi, group head, corporate banking group, (energy and utilities).

    Also, in spite of the billions of dollars it has enjoyed over the years, Atlantic Energy has not filed its accounts with the Federal Inland Revenue Service (FIRS) as stipulated by law. Using an influential lawyer, who sources said is the company’s legal backbone, Atlantic Energy has continued to hold on to the legal advice that it is not liable to tax.

    In a letter from FIRS, dated February 17 , Atlantic Energy was warned of the consequences of its refusal to submit the accounts and returns within the next ten days. It was signed by the duo of Okeowo Taiwo, and Ocheja E.F., FIRS’ manager (tax) and deputy manger (tax) respectively.

    It reads: “It is worrisome to note that we are yet to receive the draft accounts/returns as promised. Let me remind you that the accounts/returns are long overdue for submission. You are advised to submit the accounts/returns within 10 days from the date of receiving this letter, failing which FIRS shall enforce compliance with the relevant tax laws.”

    Transfers, cash withdrawals

    Sadly, a company that could not meet its financial obligations was on a spending binge, with its directors living ostentatiously (owing private jets and armoured jeeps) and transferring huge sums – sometimes in billions and millions of naira and dollars – into accounts of both local and foreign organisations. And if the local transfers raised some red flags, so were the numerous transfers of millions to foreign accounts (see a table on foreign accounts) of Expedia Marine Company Limited, Energy Property Development Ltd, Petrochemicals Offshore, SPOG Petrochemicals Limited, Premium Aviation Services Ltd, Ibalex Nigeria Limited, and numerous others, where funds were paid at different times.

    Interestingly, Atlantic Energy is enmeshed in huge debts – albeit self-imposed. But it seems the embattled company is not ready to go down alone. Not only has it closed its office, it also did not pay its staff for more than one year.  It has equally defaulted in the payment of workers’ pension and PAYEs, leading to a mass resignation crisis that swept the company even before it closed its shop recently. Even business partners were not left out, as Atlantic Energy, which kept booking flight tickets and enjoying services from international and reputable companies, did not meet its obligations to its numerous clients, wrecking havoc on several businesses. Now, Atlantic Energy owes NPDC about $2billion, banks $550million, workers $5million, and other vendors $20million. This explains why the banks as well as NPDC appear helpless, as Atlantic Energy is frantically looking for investors to buy the company and the massive debts to boot.

    The Nation learnt that the promoters of Atlantic Energy are negotiating a soft-landing with some people that are very close to the corridors of power with a view to refunding a paltry amount. Their stratagem is to sway the new administration to avoid the “unnecessary controversies” that a probe may generate so that they can be asked to go and sin no more. As part of a grand strategy to achieve their objective, some foot soldiers have been enlisted, including some highly-placed Nigerians, to reach out to President Muhammadu Buhari to strike a deal on their behalf, fearing that any inquiry into the books of NPDC and other agencies in the highly opaque oil and gas sector will most likely unearth a can of worms. Will President Buhari, who is widely revered as an incorruptible man, allow them to walk away free after what seems like clear financial crimes against the country? Time will tell.