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Nigerian Oil and Gas Mining Report
How Oil Sector Reforms will work.
The Special Adviser on Petroleum to President Umaru Yar’Adua, Dr. Emmanuel Egbogah, has explained some of the intricacies in the workings of the new oil and gas sector reforms. He was speaking at the 2009 edition of the offshore technology conference in Houston, Texas, United States.
While alleging of plans by the multinational oil companies to oppose or truncate the planned reforms, Dr Egbogah vowed that the Federal Government would put its feet down to achieve the plans.
The Special Adviser appealed for patience from Nigerians saying that the deregulation plans would take some time, at least, about three years to come to fruition.
He explained that the reforms would require that all companies involved in oil exploration and production in Nigeria must form Incorporated Joint Ventures (IJVs) with the Nigerian National Petroleum Company Limited.
The IJVs will run their operations and seek funding from banks, capital market and other sources.
According to him, government hopes to use IJVs to curtail the challenges posed by the cash calls regime, where government is required to provide part of the funding for exploration and production of oil. Delays in releasing such funds in the past had often been alleged to hold up operations of the oil companies.
Moreover, he said that a National Petroleum Assets Management Agency will be created after the reforms and will be empowered to compare the cost of oil production claimed by the incorporated joint ventures. The agency will also move against any company seen to be inflating or running its production costs at exorbitant rates.
Dr Egbogah, who said he had established a similar situation in Malaysia, clarified that the production sharing agreements between the government and oil companies would be renegotiated in some parts of it.
N’Delta: Nigeria Lost $24bn Oil Revenue in 9 Months in 2008.
"If we were to buy peace, we would be spending less than what we are losing in the crisis”. With this assertion, Mr Ledum Mittee, head of the Niger Delta Technical Committee unveiled a report by the committee which stated that the rising violence in the oil-rich Niger Delta has continued to take its toll on Nigeria’s revenue. The report said that the country lost at least $23.7 billion to oil theft and sabotage in the first nine months of 2008.
According to the committee, "this amount (of $20.7 billion) is exclusive of another estimated $3 billion lost to oil bunkering (theft) over the first seven months of this year alone." The report, which was based on an average of 700,000 barrels a day lost during the months from January to September multiplied by each month's average Nigerian crude prices, also added that "there are unaccounted costs in human misery, with about 1,000 persons killed within the same period and another 300 taken as hostages."
Mr Mitee is a political leader in Ogoniland and the committee was set up on December 1, by President Umaru Musa Yar'Adua to resolve the crisis in the Niger Delta. The report is yet to be made public as at press time.
Militants' attacks and crude theft since 2006 have resulted in the shut in of more than 500,000 barrels a day of production. Prior to the escalation of the crisis, Nigeria produced between 2.5 million and 2.6 million barrels of oil per day. The current production fluctuates between 1.6 and 2.2 million barrels a day.
The report had proposed an amnesty for militants if they are willing to disarm, an offer the militants have however rejected.But "judging by the level of angst we perceive, we share the views of those who believe that there is a looming danger that the present Niger Delta crisis could easily escalate. Based on the numbers disclosed, "the cost of failure is too enormous to contemplate," the report added.
The Group Managing Director of NNPC, Dr. Mohammed Bakindo, NNPC had at a recent meeting between the Senate committee on petroleum ( upstream) and stakeholders in the oil and gas industry announced a shortfall in oil revenue from average N330 billion (US $2.2 billion) monthly recorded in 2008 to about N150 billion (US $1 billion) in January 2009. This he said represents a 50 percent fall in the oil revenue flow compared to that of 2008. According to him the drop is occasioned by the slide in the price of crude which dropped from as high as N22,500 (US $150) per barrel in 2008 to as low as N6,450 (US $43) per barrel this year. "In terms of pricing, whereas in 2008, our crude strength averaged $97 per barrel, in the year 2009, as at January, the average basket is hovering around $43 a barrel," said Bakindo.
The GMD added that the decline in daily crude production from two-million barrels per day in 2008 to the current level of 1.6 million barrels per day, is taking a heavy toll on the economy. The NNPC group managing director observed that the slowdown in investment in oil and gas production, insecurity in the oil- producing Niger Delta and OPEC quotas are some of the key challenges facing the industry. Nigeria is Africa's most populous nation and the world's eighth-largest crude oil exporter.
Crude oil production figures among NDDC States.
Documents obtained from the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) and the Department of Petroleum Resources (DPR) show that Akwa Ibom State topped crude oil production quantum for the first half of 2008 (January to July 2008) with 92,864,465 barrels (representing 28.05 per cent) as against the total of 331,017,271 barrels. The February 2009 RMAFC document titled “Revised 13 per cent Derivation Indices (January-July 2008) for the Sharing of Derivation Fund from the Federation Account” listed other states in the order of crude oil production during the period under review as follows: Rivers (84,119,047), Delta (80,848,289), Bayelsa (38,341,667), Ondo (18,591,642), Edo (5,966,489), Abia (5,196,707) and Imo (5,088,965).
For 2007, crude oil production figures show that Akwa-Ibom also led the pack with 202,784,331 barrels or 32.05 per cent of the total production of 632,554,146 barrels. Figures for the other states in the order of ranking are Rivers (200,733,004), Delta (97,755,551), Bayelsa (77,177,299), Ondo (36,047,188), Imo (9,607,666), Abia (8,145,117) and Edo (303,990). These figures, however, contrasts with 2006 crude oil production data in use before the revised figures of February 2009. That data shows Rivers topping the production quantum and accounting for 36.86 per cent of the total. Other states accounted for the following production: Akwa-Ibom (23.06 per cent), Bayelsa (15.45 per cent), Delta (13.87 per cent), Ondo (5.79 per cent), Cross River (2.02 per cent), Imo (1.58 per cent), Abia (1.11 per cent) and Edo (0.23 per cent).
The upsurge in violence and activities of militants especially in the Niger Delta states of Bayelsa, Rivers and Delta has led to decline in crude oil production in these three states.
Moreover, the ceding of oil wells under the administration of former President Olusegun Obasanjo, which has been reversed by the Yar’Adua administration, has also changed the status quo. These have largely accounted for the loss of the top spot in crude oil production to Akwa-Ibom State.
Total’s Akpo Field to Export 77,000 bpd in May
Total’s Akpo deepwater oil field will commence loading for the first time in May 2009 with 77,000 barrels per day, a Reuters report has said. According to the report traders were quoted as saying that the stock will be three cargoes of Akpo oil grade condensate.
The traders said the first two loading on May 1 to 2 and May 8 to 9 would be taken to home refineries in France by Total and Brazil by Petrobras, while a third cargo for May 23 to 24 delivery is available to be traded with Arcadia.
China ’s biggest offshore energy company, Chinese National Offshore Oil Company (CNOOC) Limited, one of the equity holders, will market a 1.0 million-barrel cargo of Akpo crude for June loading. Akpo, a world-class deepwater oilfield, is located in Oil Mining License (OML) 130 and operated by the French oil giant Total.
Total holds a 24 per cent stake, with Brazil's Petrobras, Nigerian National Petroleum Corporation (NNPC), CNOOC and South Atlantic Petroleum (SAPETRO) as equity holders.
On March 9, 2009, Total announced that its subsidiary, Total Upstream Nigeria Limited (TUPNI), operator of the OML 130 block, had started crude oil production from its Akpo deep water development ahead of the planned start-up date. Akpo will add as much as 185,000 barrels of oil and 320 million standard cubic feet of gas per day to Nigeria 's production when it reaches a plateau production rate close to its designed capacity.
The Akpo field development requires 44 wells (22 producers, 20 water injectors and two gas injectors), out of which 22 have already been drilled. The 100,000 tonnes dry weight Floating Production, Storage and Offshore (FPSO), maintained on location by 12 anchor lines, houses the surface treatment facilities. The FPSO is designed to process 185,000 barrels per day and store up to 2 million barrels of stabilised liquid hydrocarbons. The design of Akpo complies with the Federal Government`s gas “flare out” regulation, and is in line with Total’s strategy of reducing flaring.
Clean-up of Ogoniland to Gulp N1.5bn
The Federal Government and Shell Petroleum Development Company (SPDC), operators of the Nigerian National Petroleum Corporation (NNPC) joint venture have approved N1.5 billion ($10 million) for the technical study on the clean-up of Ogoniland allegedly polluted by the oil giant.
The Federal Government has also approved the immediate commencement of the technical study of all the locations affected by oil spillage in Ogoniland as a prelude to the clean-up.
President Umaru Musa Yar’Adua made this known yesterday in Abuja at a meeting with the Presidential Facilitator of the Ogoni-Shell Initiative, Monsignor Matthew Hassan Kukah, leading a delegation of the Presidential Implementation Committee and the United Nations Environment Programme (UNEP).
According to him, the possibility of a shorter implementation time frame for the environmental remediation should be considered. He, therefore, directed the Presidential Implementation Committee, Shell, UNEP and Ogoni to hold consultations with all stakeholders involved in the exercise and ensure that all stakeholders were carried along.
Yar’Adua said Rivers State Government, the Ministry of Niger Delta and the Niger Delta Development Commission (NDDC) should be at the forefront of providing social amenities for the people of Ogoniland, adding that the social cushions in the UNEP proposals should be used.
Fielding questions from State House correspondents after the meeting, the President of the Movement for the Survival of Ogoni People (MOSOP), Ledum Mitee, said the presidential directives followed concerns raised by the Ogoni at the meeting that they were not being carried along in the scheme of things on the proposed clean-up processes.
Asked if Ogoni stakeholders were satisfied with government’s intervention so far and Shell’s pledged commitment, Mitee said: “Some of the concerns we raised was the issue of consultation and I think the President has also agreed. That is the outcome of the meeting that they need to do more about consultation.
“Shell will speak for themselves. But what I want you to know is that the relationship between Shell and Ogoni is obviously strained and that has affected even the question of trust and it requires a lot to build that trust. So it is going to be difficult for me to say that we have gotten anything. We do not believe their words and I am sure perhaps they might not also believe us”, he said.
Cross River Loses Status as Oil State
The Cross River State government has dragged the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) before a Federal High Court in Abuja for ceding 76 of its oil wells to Akwa Ibom State and thereby depriving it of 13 per cent derivation from the Federation Account.
In the suit, which has the National Boundary Commi-ssion (NBC), Accountant-General of the Federation, Attorney-General of the Federation and Attorney-General of Akwa Ibom State as other defendants, the plaintiff is saying that unless the defendants were restrained by the court, the defendants would continue to deprive it of federal allocations to its prejudice.
It stated that by a letter dated March 22, 2009, the RMAFC had directed the 3rd defendant (Accountant-General of the Federation), not to include the state in the disbursement of the $1.5 billion 13 per cent derivation fund accruing to the oil-producing states, of which the state belongs.
In the suit, the plaintiff argued that its 2009 budget was based partly on expected revenue from the 76 oil wells, adding that Federal Government's decision to hand over Bakassi Peninsula to Cameroon had resulted in refugees flooding into the state which it has to provide for at a huge cost.
It also stated that apart from the fact that if the RMAFC’s directives are implemented, the damages accruing to it could not be compensated, it also stated that the loss of revenue from Derivation Fund will mean that the state would find it hard to pay salaries to its workers and virtually stop all developmental programmes.
Part of the suit filed by Paul Erokoro (SAN), read: “By the said letter, the 76 oil wells lying within the 200 metre water depth Isobath contiguous to Cross River State were arbitrarily allotted to Akwa State, without recourse to due process. The 3rd Defendant is about to implement the directive of the 1st Defendant as contained in the letter of 12th March, 2008, which will deprive the Plaintiff of its entitlement.
“If this Honourable Court does not stop the implementation of the directives of the 1st Defendant, it would bring untold and irreparable hardship on the Plaintiff. If the Defendants are not immediately prevented by an order of this Honourable Court from disbursing the $1.5 billion, the disbursed money cannot be recovered as it would have been dissipated by Akwa Ibom State to whom it would have been disbursed.”
The plaintiff revealed that to its knowledge, there was no boundary dispute between it and Akwa Ibom State other than the one that had been settled to the satisfaction of both states, since October 2006.
It further buttressed its argument with a Certified True Copy of a letter marked Exhibit "A" written by the Akwa Ibom State Governor to the President and dated January 31, 2005, stating that the boundary between the two states had been satisfactorily settled by the 2nd Defendant (NBC).
The suit stated that the NBC, by a letter dated 4th January 4, 2005, with reference No. NBC/SEC.32/1/485, had delineated the Cross River/Akwa Ibom maritime boundary in paragraph 4 thereof thus: "(a) The terminal point of Akwa Ibom State/Cross River interstate boundary in Cross River estuary has co-ordinates 43733N and 82439E. (b) The maritime boundary between Akwa Ibom and Cross River should be a line drawn trunk point referred to in (i) above southwards until it intersects with Nigeria-Equatorial Guinea international maritime boundary. (c)Items 4(a) and 4(b) have further implications as follows: (i) Cross River has 3509N and 81253E as co-ordinates of the terminal point on the Nigerian-Equatorial Guinea maritime boundary. (ii) Cross River state will gain 76 number oil wells. This implies Akwa Ibom will lose the same number of oil wells."
The plaintiff disclosed that on October 27, 2006, at a meeting presided over by the President of Nigeria, the two states accepted the above determination and agreed that it defined their estuarine and maritime boundary. It supported its argument with a letter which it marked as Exhibit "B", written by the President affirming the position.
It further averred that in spite of all these, the RMAFC “strangely” wrote to the President suggesting that the 76 oil wells attributed to it be given to Akwa Ibom State as it had ceased to be a littoral state since the country had ceded the Bakassi Peninsula to the Republic of Cameroon.
NNPC to supply 2.5bscf of gas to local market
The Nigerian National Petroleum Corporation (NNPC) plans to supply 2.5 billion standard cubic feet of gas per day to the Nigerian market by 2012, the Group Managing Director, Dr. Mohamed Barkindo has said in Abuja.
An NNPC statement in mid April quoted the GMD at the briefing of the 15 short listed investors in Nigerian Gas Master Plan as saying that the 2.5bcf/d will be the corporation‘s domestic supply obligation. According to Barkindo, NNPC‘s strategy was to consolidate its position across the domestic, regional and export LNG markets and extend its reach across the value chain.
He added that rapid and cost effective market entry in high value markets was a priority and the corporation was also looking at a portfolio of possible export projects and inroads into the key European markets as a key player, and reiterated that NNPC was being repositioned under the Oil and Gas Reforms and was redefining its gas business, which will manifest in the establishment of a full scale gas directorate headed by an executive director.
”This directorate will champion an aggressive expansion of NNPC‘s gas business both domestically and in the rapidly growing LNG export business,” he said.
The GMD further stated that NNPC was the singular largest equity investor and gas reserves owner in the Nigerian gas sector.
“It owns about 60 per cent of the proven gas reserves within the Joint ventures and is the sole concessionaire in the Production Sharing Contracts. NNPC is the largest equity gas supplier to the domestic, regional and LNG project in the country today. In addition to the JV and PSC arrangement, NNPC‘s fully owned exploration and production subsidiary, the Nigeria Petroleum Development Company has a proven gas reserve of about two trillion cubic feet”, he said.
He, however, stated that NNPC‘s ability to consolidate these market opportunities was critically dependent on the availability, scalability and connectivity of the gas infrastructure.
Barkindo said that NNPC had the most diverse and widespread source of gas in Nigeria and its ability to effectively leverage the various supply sources would determine its competitive position and that the infrastructure was key in realising this aspiration.
On the Gas Master Plan, Barkindo said it provided the platform for the realisation of all the corporation‘s aspiration for gas.
He maintained that through the GMP initiative, the corporation‘s gas gathering, processing and utilisation initiatives can be developed and harnessed into the Clean Development Mechanism projects, and the development of gas infrastructure by leveraging competent third party investors.
Oil Majors Criticize OGIC reforms.
The federal governments efforts to reorganize the petroleum industry has come under attack from the oil majors in Abuja.
They spoke under the auspices of Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, saying that some of the provisions of the Petroluem Industry Bill currently before the National Assembly would threaten about 80 per cent of their investments in the sector, while some of the provisions may be illegal outright.
The Secretary of the Oil and Gas Reforms Implementation Committee, Dr. Bello Gusau, reported these views during a meeting between the Vice Minister of Petroleum Resources of Venezuela, Mr. Bernard Mommer, and officials of the Nigerian petroleum industry in Abuja in late April.
Gusau was seeking the views of Mommer on how Venezuela structured the fiscal regime of its oil industry to get the best value.
According to Gusau, “The OPTS is claiming that the enabling law is going to jeopardise nearly 80 per cent of the investments in the sector. There are also arguments questioning the legality of some of the provisions of the PIB. OPTS also said that Nigeria presently has about the highest take in the world to the tune of 94 per cent and that the PIB will compound the situation by making it 99.1 per cent.”
In his contribution via a speech, the Group Managing Director of NNPC, Dr. Sanusi Barkindo, said that over 15 separate laws guiding operations in the Nigerian oil and gas industry forms the Petroleum Industry Bill, saying that Nigeria’s fiscal regime for its oil and gas industry must be reviewed to get maximum benefits from her oil resources.
“We have been in the process of taking a closer look at our fiscal systems in order to reposition ourselves to face the current global challenges as well as the challenges ahead in the context of OGIC reforms that we are about to commence implementing… In doing so, we should be mindful of the fact that we have been in several joint ventures over the years and we intend to continue our partnerships with international oil companies and other stakeholders since this is a global industry”, he said.
FG Considers Dec 2011 as New Flare-out Date
The Chairman of House of Representatives Committee on Gas, Hon. Igo Aguma, has told journalists in Houston Texas that the Federal Government was considering December 31, 2011 as the new gas flare-out deadline in the country, saying the new date was fixed the NNPC.
Multinational oil companies operating in the country had expressed difficulty of previous targets set by the federal government.
According to Aguma, the various infrastructure needed to transmit associated gas from the oil fields to the market centres – instead of flaring it – was a major challenge, which will require a minimum period of two years to complete successfully.
He said, “We are all aware that there is currently a gas utilisation programme ongoing to support the power industry. We also know the capacity of the industry to receive the gas that is being flared. So, projects need to go on before we can have a zero flare-out date.”.
He also predicated attainment of the new date on availability of funds for investment in the industry, pointing out that the NNPC is a major stakeholder in each of the gas utilisation projects needed to achieve the flare-out deadline.
“If NNPC that is trusted with the management of JV operations on behalf of the Federal Government has agreed that adequate time is needed to raise fund required to complete major infrastructure and gas utilisation projects, without pre-empting the final decision of the House of Representatives on the gas re-injection bill which we have just concluded at the public hearing, as the chairman of the Gas Committee, there is already a consensus about 2011 as the possible date feasible for ending gas flaring in Nigeria,” he said.
Some of the reasons adduced by the oil majors as constraints to the flare-out programme include the insecurity in the Niger Delta region, inadequate funds for gas gathering and utilisation projects, and failure by the NNPC to fund its own part of the Joint venture projects.
Amaechi signs kidnap prohibition law
The Rivers State Governor, Mr. Rotimi Amaechi, on Friday, signed into law a bill which prescribes among other things, life imprisonment for kidnappers and their accomplices.
Mr. Rotimi Amaechi
Known as the Rivers State Kidnap Prohibition Law No. 3, of 2009, the bill was recently passed by the State House of Assembly as part of measures to curb the growing cases of kidnappings in the state.
Under the new law, anybody caught kidnapping in any part of the state, will upon conviction be sentenced to life imprisonment without an option of fine.
The law also prescribed various degrees of punishment for persons found to have collaborated with kidnappers in carrying out the criminal act, ranging from 20 to 10-year jail terms without option of fines.
While signing the bill into law at the Government House, Port Harcourt, Amaechi described the law, which was initiated by the legislature, as a high impact bill.
With the law against kidnapping now in existence, he noted that the government would immediately put the necessary machinery in motion for its implementation.
Amaechi said that henceforth, anybody caught kidnapping another person would be made to face the full wrath of the law.
The governor insisted that the anti-kidnapping law was meant to protect the lives of the people, stressing that the names of those who initiated it would be written in letters of gold.
Niger Delta Crisis – Death Penalty Gains Ground.
The South-South Regional Economic Summit held in Calabar in April produced mind-blowing recommendations: death penalty seems to be gaining ground amongst the governors of the Niger Delta states as a panacea to the problems of militancy, kidnapping and allied lawlessness.
Speaking at the summit, Akwa Ibom State governor, Godswill Ak-pabio said he would push for a bill for the introduction of the death penalty for militants at the State House of Assembly.
He vowed to kill all suspected militants in his state, saying they were mere criminals parading as militants in the state. “We have no militants in Akwa Ibom. What we have in Akwa Ibom is total criminality and my approach to it is total engagement. Those who have genuine agitation, whom you can call militants, we would draw out and talk to them. But criminals who have decided to copy the ways of the militants to see if they can make money for themselves, we must stop them. I have submitted a bill for the death sentence for anyone that carries a gun to terrorize another citizen. I am going to kill them. We have to put everything in place to safeguard the future of our children. So anyone that tries to stray with a criminal mind, I will kill them”, according to Governor Akpabio.
He supported the widespread opinion that the federal government was not treating the South-south region fairly, accused it of double standards. Citing history, he noted that when the major ethnic groups were producing agricultural produce in the country, the federal government used 50 percent derivation, with the regions also sharing from the 35 percent reserved for the Distributive Public Account whereas when it came to the minorities and oil became important, the federal government took everything.
“It became troublesome to even accept that the region that produces and suffers degradation should keep a certain percentage. The South-south is a region that has been raped by the federal government. It is a region that has been cheated,” he said.
On his part, the Rivers State governor, Rotimi Amaechi also supported death penalty. It will be recalled that the bill for the law has since been at the Rivers State House of Assembly. According to him, “My view as a Niger Delta man is that these boys who call themselves militants are not ideological; they do not represent the views of the South-south. They are pursuing their own selfish goals. That we are suffering under the big nation called Nigeria is not in doubt. If our people are suffering in the big nation called Nigeria, the big people in Nigeria are marginalising us and at the same time misappropriating our resources, should we also kill ourselves?” he asked.
“They are kidnapping our people. They are driving away investors and economic goods from the Niger Delta. They are growing poverty instead of growing the economy of the country. Therefore, like the speaker (Bertie Ahern) said, there are those you don’t negotiate with and these people fall into this category. You don’t negotiate with criminals. If you negotiate with those who kidnap, you might as well negotiate with armed robbers because they commit the same crime.”
He called for enforcement of laws that punish people who break the law.
The speaker at the occasion, the former Prime Minister of Ireland from 1997 to 2008, Hon. Bertie Ahern, recommended for the Niger Delta the strategy used in resolving the three-decade long Northern Ireland conflict between the nationalist and unionist communities.
Ahern said the Northern Ireland peace deal that ended 30 years of sectarian strife and bloodshed could serve as a model for resolving the Niger Delta conflict, though he noted that the strategy was limited to parties which had shown some commitment to peace.
Thereafter he said the Irish economy prospered into consistent investment in infrastructure though he stressed that it was important to allow the private sector take the lead in driving the economy.
Weighing in from a comical posture, Bayelsa State governor, Timipre Sylva likened the Niger Delta situation to an airplane filled with bickering passengers who were annoyed over the fact that the plane has yet to take off while blaming each other for the delayed take off. “All the while nobody cared to look into the cockpit to see if there was a pilot in there”, he said.
He described the airplane analogy used for the situation in the Niger Delta as simply a case of “absent leadership”.
The Minister for Niger Delta Ministry, Mr Ufot Ukaette, called for massive transformation of the region using a dedicated master plan which should be funded with crude oil revenue.In a speech titled, "Imperatives for Sustainable Development in the Niger Delta", he decried the wanton waste of the natural resources and the attendant loss of much revenue via gas flaring by the oil majors whom he accused of exploiting crude oil in Nigeria but not operating in accordance with global best practices.
In a 10-point communique read by the Chairman of the Summit, Prof. Pat Utomi, at the end of the event, "the region resolved to build in the short term regional and common infrastructure in the areas of aviation, tourism, roads, security, education, power and in the medium term oil and gas."
The Summit also submitted as follows:
- "the region has agreed to jointly develop the economically viable ventures in Public Private Partnership arrangement and to create genuine strategy to rationalise and increase efficiency as a region and not to compete in the two key areas of agriculture and education.
- the Niger Delta states resolved to establish an institutionalised permanent coordinating body that would be charged with the responsibility of implementing the regional integration mandate.
- the region also agreed to promote knowledge economy in the Niger Delta embedded in youth-oriented initiatives geared towards job creation and entrepreneurial development.
