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106

In the escalating duel over oil production between the United States of America and Organisation of Petroleum Exporting Countries (OPEC), few countries’ oil industries have been hit as hard as Nigeria, highlighting a challenge for the petroleum cartel ahead of its meeting on Friday, a report by the Wall Street Journal (WSJ) has shown.

Nigeria has lost business in its main market in the US and struggled to gain footholds elsewhere, raising a question for OPEC over whether its decision to fight for market share may have left behind more vulnerable members.

Once a highly desired, easy-to-refine product, Nigeria’s oil is now hard to sell. In 2014, it fetched over $2 a barrel more than the global benchmark, Brent crude, according to OPEC data. This year, that premium has plunged to 74 cents, on average—the lowest in a decade.

Nigerian cargoes that normally sell a month ahead of delivery have languished without buyers. In early May, at least 80 million barrels of Nigerian and Angolan crude were still seeking buyers, according to Barclays.

“Nigeria is in immense pain,” said Amrita Sen, chief oil analyst at Energy Aspects.
OPEC last year abandoned its traditional role of propping up prices through production cuts, figuring that surging American production would depress prices no matter what it did and opting to fight for market share instead. Within OPEC, Ms. Sen said, Nigeria has been the worst affected by these changes.

The state-run Nigeria National Petroleum Corporation (NNPC) and the country's oil ministry declined to comment.
Its plight highlights divisions within OPEC, as the group’s ministers begin arriving in Vienna this week. Venezuela, Algeria and Angola have also struggled while wealthier OPEC members such as Saudi Arabia and Kuwait ramp up production and lock down buyers in Asia.
Nigeria’s situation also raises a red flag about the strength of a recent oil-price recovery. After crashing from $114 a barrel to $45 from July to January, Brent price has gone up more than 30 per cent since, closing at about $65 last Friday.

A disconnect between the price of oil-futures’ contracts and the price paid in daily physical transactions was a precursor to the collapse last year, though analysts disagree about whether Nigeria is symbolic of the larger market.

“The Nigerian barrel is really now the swing barrel,” said Eugene Lindell, an oil market analyst at JBC Energy. “That’s on our radar and when we see West African barrels underperforming, then we’re worried about the global crude market.”

Nigeria is Africa’s largest oil producer and ranks 13th in the world, pumping about 1.9 million barrels of oil a day. That is less than the Middle East’s biggest producers that include Saudi Arabia, Iran and Iraq, and about the same as Norway.

Its flagship crude oil, known as Bonny Light, is similar to American shale oil. It is generally called “light and sweet” because of its low sulfur levels and low density, which means it will flow easily at room temperature and is more easily refined into high-value products such as petrol and diesel.

US refineries have generally moved to buy the cheaper, easier-to-access local version rather than importing Nigerian product in recent years. Imports of Nigerian crude oil into the US have plummeted from nearly 1 million barrels a day in 2010 to less than 60,000 barrels a day in 2014, according to the US Energy Information Administration (EIA).

Around the world, Nigeria’s barrels have had trouble competing with cheaper products from the Middle East. It has found buyers in India and Europe, but some new and high-tech refineries in Asia prefer to run different oil grades, leaving Nigeria in need of a new core customer base.

That has made it difficult for Nigeria’s government to balance its budget. Oil accounts for close to 80 per cent of Nigeria’s export earnings and roughly 70 per cent of its consolidated budgetary revenue, according to the World Bank.

The International Monetary Fund (IMF) predicts Nigeria’s oil exports will be worth $52 billion this year, down from $88 billion in 2014.
According to Deutsche Bank, Nigeria needs oil prices at $87.90 to balance its budget, a level most oil analysts don't see happening soon.

Stubbornly low prices prompted Nigeria to raise the issue of an emergency OPEC meeting earlier this year, though it didn’t materialise.
It all comes at a sensitive moment for Nigeria. Last Friday, Mohammadu Buhari was sworn in as president in a rare peaceful transition of power. The country had also recently been rocked by fuel shortages, though some have blamed politics and not revenue problems for the issue.

For OPEC, Nigeria’s struggles could signal a potential problem for the group’s unity as it decides this week whether to continue its strategy of fighting for market share—a strategy kingpin Saudi Arabia argues is working.

According to its latest public projections, the producer group expects non-OPEC production to grow by just 680,000 barrels a day this year, a precipitous drop from 2.17 million barrels a day in 2014. That is expected to increase demand for OPEC’s oil.

But that strategy doesn’t take into account the seismic shift the oil market has undergone in the last few years that underpins the challenge facing Nigeria's oil sector. The producer group needs to go further, said Dolapo Oni, energy analyst at Lagos-based Ecobank Capital.

“OPEC should focus on how OPEC members can gain market share as a group,” Mr. Oni said.

http://www.thisdaylive.com/articles/nigeria-hit-hardest-in-opec-us-tussle-over-oil-output/210923/?

107
Oil & Gas Industry / Scrap SURE-P, PENGASSAN urges BUHARI
« on: June 01, 2015, 12:49:42 PM »
THE Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has urged President Muhammadu Buhari to scrap the Subsidy Reinvestment Programme (SURE-P), arguing that the N21billion is provided for its operations in the year’s budget should be spent on infrastructure.

Its President, Mr. Francis Johnson, alleged the SURE-P was set up by former President Goodluck Jonathan to settle some people, adding that it was the major reason for the problem of integrity that dogged the implementation of the programme.

He said: “Subsidy Reinvestment Programme (SURE-P) for which N21 billion is provided in the 2015 Budget should be scrapped. SURE-P largesse is at the whims of the party in power to settle those it wishes to favour with a lot of integrity issues around the program regarding fostering balance and accountability.”

He said the Nigerian National Petroleum Corporation (NNPC), made up of the holding companies and 10 subsidiaries, had been subjected to undue political interference, which he claimed, hindered its autonomy for effective running and competitiveness.

Johnson said: “Operations and administration of NNPC come under several masters and conflicting instructions, some of which defy the national objectives and aspirations for setting up the national oil corporation and its subsidiaries.

“Appointment, removal and/or transfer of the heads and the staff of the corporation and its subsidiaries are often executed in the manner that undermine by fiat, the extant national laws, NNPC Act and its Corporate Policy and Procedure Guide.”


 
He called for the reorganisation of the NNPC and its subsidiaries to function effectively with clearer mandate and empowerment. This, he noted, would make the NNPC to operate and compete professionally in line with corporate governance principles and without undue political interference.

On the Nigeria Petroleum Development Company (NPDC), he said there was the need for full autonomy and responsibility, good corporate governance principles and practices.

He said pipeline vandalism is a major dent to nation and business integrity in the oil and gas industry, adding that the menace is the major cause of incessant shut-in of production, force majeure and high cost of maintenance and repairs

“The nation has continued to groan in unimaginable economic /revenue losses particularly with the depletion in revenue to the Federation Account and the attendant impact on governance. The menace continues to build up weaning confidence in the Industry’s operators and players,” Johnson said.

http://thenationonlineng.net/new/scrap-sure-p-pengassan-urges/?

108

For the first time in Nigeria, power supply from the national grid hit ground zero, throwing Africa’s largest economy into unprecedented darkness and chaos. The three-day blackout, which began on May 24, was triggered by a system collapse and the strike action embarked upon by oil and gas workers. Although, normalcy is gradually returning, the crisis left business operators in all sectors of the economy, especially manufacturers, severely bruised, prompting renewed calls for the deregulation of the downstream sector of the oil industry. Assistant Editor CHIKODI OKEREOCHA reports.

Nigerians are known for their resilience and never-say-die disposition. They have the uncanny ability to endure unsavory situations, smiling through them or shrugging them off. But in the last two weeks, it has been extremely difficult to extract a smile from Nigerians. The precarious state of the economy, especially in the days and weeks leading to the inauguration of President Muhammadu Buhari as Nigeria’s fifth democratically elected President on Friday, May 29, hardly gave anybody cause to smile. For the first time in history, there was zero electricity supply from the national grid. For three days, Sunday, May 24 to Tuesday, May 26, most residential, commercial and industrial consumers watched helplessly as their businesses crumbled under the weight of a major system collapse that plunged the nation into unprecedented darkness.

The system collapse was said to have been caused by Nigeria’s weak transmission infrastructure. And as if that was not enough embarrassment, the situation was worsened by the industrial action embarked upon by Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and Nigeria Union of Petroleum and Natural Gas Workers (NUPENG). The strike by the two major unions in the oil and gas industry disrupted gas supply to the electricity plants. Eighteen out of the 23 power plants in the country were unable to generate electricity due to shortage in gas supply to the thermal plants, according to Chairman of National Electricity Regulatory Commission (NERC), Dr. Sam Amadi.

Going by the record, Nigeria, that prides itself Africa’s largest economy, generates 1, 327 megawatts (MW) of electricity for its 170 million people, even as the former Minister of Power, Prof Chinedu Nebo put the electricity need of the people at more than 150,000 megawatts.

Amadi stated that one of the hydro stations had water management issue, which led to the loss of over 2, 000 mw. The Nation learnt that 70 per cent of power generation in the country is from gas-fired turbines, leaving 30 per cent to hydro. The Federal Government under the ousted Peoples Democratic Party (PDP) declined experts’ calls for the diversification of energy sources. It failed to explore alternative power sources such as renewable energy, including coal, solar, wind and biomass. In the heat of the crisis, power generation dropped to an all-time low of 1, 327 mw down from about 4, 500 mw in April.
 
Manufacturers, business operators groan

Although, normalcy is gradually returning after the aggrieved unions called off the strike on May 25, but business operators in all sectors of the economy, especially manufacturers and industrialists, have been counting their loses. Before the blackout, the electricity demand by members of Manufacturers Association of Nigeria (MAN) stood at about 3, 000 mw for optimal performance, but they have been getting less than 1, 000 mw gets to the Association.

Records have shown that over 75 per cent of the electricity needs of manufacturers are generated in-house, leaving only 25 per cent coming from the utility firms. A source close to the Electronics and Electrical Sectorial Group of MAN confirmed this. The source said members of MAN invest about N2 billion per week to power their plants.

The source, who pleaded anonymity because he was not authorised to speak for the group, described as unfortunate that MAN members pay electricity consumption bills above N120 million monthly.

Noting that it is difficult to quantify how much manufacturers lost to the three-day outage, manufacturers may have lost about N5 billion.

The amount, he said, does not include man-hour losses damages to machines, tools, raw materials and disruption to production processes as well as staff redundancy as workers earned their salaries for the period they were unproductive. “When power goes off, waste materials, manpower, time and so many things are wasted. At the end of the day, you discover that you are not making profit,” the source said.

It is easy to see why manufacturers rue the economic lockdown. For one, it added to their long list of woes, as most of them have long been bogged down by rising production cost due to inclement operating environment.

The business environment had taken a turn for the worse following the devaluation of the naira in the wake of the crashing crude oil prices at the international market.

The implication of the latest crisis is that the hope of an early reversal of Nigeria’s record as the most expensive country to do manufacturing business in the world may not be realised soon. At the moment, cost of manufacturing in the country is about nine times that of China, four times that of South Africa and about twice that of Ghana. Manufacturers have had to contend with falling profit margin, which remains a major threat to business sustainability and global competitiveness.

MAN’ President Dr. Frank Jacobs said last week that manufacturers are faced with payment for electricity not consumed.

“Despite the poor energy situation in the country, NERC has maintained increased electricity charges not considering its implication on the economy, especially on the productive sector,” he said at a media luncheon at MAN’s House, in Lagos.

Dr. Jacobs said despite the current high tariff from NERC, the manufacturing sector spends so much on alternative energy sources for production and the implication was increase in the average cost of production in the sector, which lowers the competitiveness of locally produced goods against imported close substitutes.

He urged the new government to streamline electricity tariff to reflect the actual consumption by the industries instead of the current use of estimated bills.

Yet, manufacturers are not the only ones counting their losses. Smaller business operators are equally feeling the pains. For instance, dealers in frozen foods in Ijora-Olopa,  Lagos, last week, cried out over heavy loses inflicted on them by the blackout. The frozen food dealers under their umbrella association, Ajeromi Frozen Food Market Association, raised the alarm that between May 23 and May 25 alone, they lost food items estimated at N10 million.

President of the association, Alhaja Afusat Popoola, who listed the lost items to include chicken, turkey, fish, shrimps, gizzard and prawns, said members of the association were caught unawares because they never envisaged a prolonged energy crisis.

Her words: “The traders were crying when we ordered them to surrender all the decayed food items for destruction on Tuesday. The market has a reputation for selling fresh frozen food and we cannot allow any trader to sell bad frozen food under our leadership.

“What we destroyed on Tuesday because of power outages and our inability to buy petrol and diesel was worth more than N10 million. We are appealing to the Eko Electricity Distribution Company (EKEDC) to always consider the impact of outages on our business and the health of the general public. Our business depends on regular supply of electricity.”

She lamented that irregular electricity supply had forced many traders out of business and also made many to be indebted to the banks.

Mrs. Popoola said: “We used to have many frozen food traders in this market before, but this power outage has forced them out business. Previously, when power supply was regular, we used to sell more than seven trucks of fish, turkey and chicken, daily.

“There is no kind of fish that one will not find in this market before because it is the number one frozen food market. But, the poor power supply has liquidated many traders. Some of them who use generating sets spend close to N80, 000 to buy diesel or petrol monthly. By the time one removes this amount from monthly sales, you discover that you’ve spent above your profit and part of your capital to buy diesel.”

The crisis also left sour taste in the mouths of operators in the aviation sector. The blackout forced many domestic airlines to cancel flights due to scarcity of Jet A- One. Most passengers were stranded at the general aviation terminal of the Murital Mohammed International Airport (MMIA), Ikeja, Lagos, as fuel shortage disrupted flights’ schedules. The collateral losses were mind-boggling. An aviation source told The Nation that for each of the three days, Arik, the biggest domestic airline, lost about $1 million.

This translates to about $3 million for the three days the crisis lasted. With about seven domestic airlines operating in the country, the source, who declined to be mentioned, said the local aviation industry lost close to $10 million in ticket sales alone to the economic shut down.
 
Banks, telecom firms also affected

Bank customers were jolted when, in the hit of the crisis, banks started scaling down operational time from the official closing time of 4pm to 1pm, citing the crippling fuel shortage as reason. The Guarantee Trust Bank (GTB), First City Monument Bank (FCMB), Sterling Bank and First Bank Pls, among others, sent SMS to their customers to bear with them.

For instance, in a message sent to its customers, FCMB stated clearly, “Dear customer, our branches will close at 1pm from Monday May 25th, 2015 due to the shortage of petroleum products. All our alternative channels will remain available.” However, there are banks that shut down banking operations, but could not communicate same to their customers, a situation that infuriated their customers.

Unlike in the other sectors, the loss suffered by the banking sector to the crisis could not be ascertained. Some banking and finance experts who told The Nation that banks only wanted to minimise or cut their losses; that much as the banks were losing money, they were also saving cost by scaling down operations. Besides, all their electronic (e-channels) were active, allowing transactions to go on.

However, customers did not find the situation funny, as some of the Automated Teller Machines (ATMs) in major cities across the country had network problems as the inverters that power the network had little or no power to run the machines. It is inverter that powers ATMs after daily banking operations. Anytime the inverter runs down, the ATM will seize to work. The result: long queues of angry and frustrated customers.

Many customers of telecoms services providers also got their share of the frustration following serious service degradation caused by difficulties in getting diesel to power the base stations.
All the major service providers such as MTN, Airtel and Etisalat warned that the scarcity of petroleum products particularly diesel was hitting hard on their operations.

For instance, MTN, in SMS sent to its subscribers, informed that they might experience “degraded service” due to the scarcity. The message read: “Dear customer, due to the diesel scarcity nationwide, you may experience degraded services.” The message, however, said the company was working hard to tackle the problem and solicited for the understanding of its subscribers.

Although, MTN and indeed, all other operators assured that they were working to continue to deliver quality services despite the fuel scarcity challenge. The Nation however learnt that such assurances were only intended to pre-empt a possible backlash from angry subscribers, who were actually experiencing poor quality of services, and it could not have been otherwise, as base stations and switches across the country are powered with generators.

The situation was not different at the nation’s ports where operations suffered serious hitches due to the scarcity. “The ports and terminals are driven by heavy-duty equipment and cranes, which are powered by diesel. It is sad to note that it is becoming increasingly difficult for our members to replenish their diesel stock due to the lingering scarcity of the product,” members of Seaport Terminal Operators Association of Nigeria (STOAN), said in a statement last week.
 
Small scale businesses shut down

Most small scale businesses simply went on vacation and locked up their ware points. Soft drink, bottled water and sachet water hawkers, (aka pure water), recorded huge losses, as patronage tumbled because of lack of electricity to chill the drinks. Barbing and hair salon operators shut down for lack of fuel to power their generators. Those who managed to maintain skeletal services after scouting for fuel at between N600 and N650 per litre, jerked up the cost of their services.

Recounting her ordeal, a supervisor with an upscale hotel in Lagos, Miss Chidi Igwe, said she trekked the entire Shagari Estate on Ipaja Road in search of a salon to fix her hair. She said the one that opened for business in the sprawling estate charged her N1, 800 against the usual N800.

She also lamented power outage in the last one month despite the fact that her subscription to DSTV, the PayTV service provider, never stopped running. Besides, Miss Igwe said she cannot even remember the last time she went to work with her dress ironed.

Eateries, beer parlour owners recorded low sales, as customers stayed indoors. Those who managed to leave their homes contended with skyrocketed fare, as transporters increased fares fivefold. For instance, passengers commuting from Iyana-Ipaja to Obalande/CMS coughed out between N600 and N700, up from the original N200. Those who could not cope with the high transportation cost trekked long distances. Nigerians cursed and hissed. It was bedlam.

It is extremely difficult to put a figure to what the nation lost to the economic lockdown, considering the nation’s penchant for poor record keeping. However, experts and operators say that the financial hemorrhage and social dislocation could be huge running into hundreds of billions of naira.
 
Calls for deregulation heighten

With the inauguration of a new government on May 29, the Director-General, Enugu Chamber of Commerce, Industry, Mines and Agriculture (ECCIMA), Mr. Emeka Okereke, said a fresh impetus has come the way of President Buhari to deregulate the downstream sector of the oil and gas industry. He said the new government only needs to muster the necessary political will and courage to call the bluff of certain cabals in the oil and gas industry and deregulate.

“The government has no business in doing business. Deregulation is an idea whose time has come. Put the right policies in place so that private investors can come in,” he told The Nation.
Mr. Okereke noted that because of political exigency, the administration of former President Goodluck Jonathan failed to take the bull by the horns and deregulate the sector.

While pointing out that this was why the administration buckled under the pressure of labour unions and civil society groups in 2012 when there was nationwide protest against the removal of fuel subsidy, he said subsidy has become unsustainable.

“Subsidy doesn’t make economic sense anymore. It has become unsustainable. We will never come out of the wood as long as we continue to subsidise the price of petroleum products. We cannot continue to postpone the evil day,” Okereke said.

He also urged the new administration to sustain the normalcy that is gradually returning to stabilise the oil sector by plugging all the leakages.

The ECCIMA chief has an ally in the Nigeria Employers’ Consultative Association (NECA) which has also called for proper deregulation of the sector. NECA’s Director General Segun Oshinowo argued that the recent reduction in the price of petroleum products by the government begs the more fundamental issues of appropriate policy framework that will promote investment in the downstream sector of the oil and gas industry and put a stop to the embarrassing and shameful importation of petrol.

He said: “Our expectation therefore, is that the government will seize the opportunity of the current decline in the price of crude oil to commence implementation of the policy on deregulation of the downstream sector of the oil and gas industry.

“This is a unique timing the government cannot afford to miss as full implementation of deregulation, which in time past had led to price increase and reaction by the labour movement in form of industrial action, does not have any negative effect on the masses.”

The NECA director-general added that rather than reducing the price of petrol from N97 to N87, there ought to have been a more holistic announcement of a new policy thrust of deregulation of the downstream sector and privatisation of the four refineries, which have now become sink-holes.

According to him, the economy stands to gain from deregulation.

Oil marketers under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) could not agree less, noting that deregulation would stimulate investment in the sector and encourage the establishment of private refineries.

Its Executive Secretary, Mr. Obafemi Olawore, said the government should muster the courage to fully deregulate and remove subsidy or embark on continuous subsidy regime payment as at when due.

“If the government likes, it can introduce gradual removal of subsidy, but it should not go beyond six to 18 months,” Olawore said, adding that if fully deregulated with rules, Nigeria will have serious investors coming in to invest adequately.

He insisted that deregulation remains the answer and that the government must talk to the people and let them understand the advantages.

Henry Boyo, an economist, noted that the 23 firms franchised to established refineries have not invested their funds for fear of being asked by the government to sell products at regulated prices

According to Boyo, crude oil produced in Nigeria, Saudi Arabia, or America has a uniform international commodity price.

“In the same vein, the process of producing crude oil or refined petroleum products is the same everywhere in the world; it is the same equipment. So, if you put in the same feed stock what you will get at the end will be the same price,” he told The Nation.

Noting that monies spent by the Federal Government through the Nigerian National Petroleum Corporation (NNPC) on Turn Around Maintenance (TAM) of the state-owned refineries were enough to build new refineries, Boyo said the point remains at what price will the government sell the products.

He said notwithstanding the federal ownership of the refineries, products cannot be sold to marketers at below production cost.

His words: “In no time they will pack their loads and go. So, the question of whether we sell off the refineries is not the issue, it is pricing, “ adding that once the pricing is right, those who got licenses for refineries will swing to action.

He, however, said the process of influencing the pricing has to do with the  naira-dollar mechanism.

Will the payment of about N1 trillion annually as subsidy continue under the President Buhari administration, when the nation’s revenue base is bleeding amidst rising debt burden of about $60 billion?  Will the new administration remove subsidy and risk confrontation with organised labour and the civil society? How he dances around this minefield will be a litmus test of his resolve to fix the economy.

http://thenationonlineng.net/new/manufacturers-count-losses-of-economic-lockdown/?

109
Oil & Gas Industry / NUPENG makes u-turn, supports subsidy removal
« on: May 28, 2015, 08:50:37 AM »
The Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) has reversed its position on petroleum products subsidy and has declared its support for its total removal, The Punch reports.

The union said that the subsidy funds should be channelled to the rehabilitation of refineries and infrastructural development in the country.

Speaking at a press conference on Monday, the President, NUPENG, Igwe Achese, stressed that if the government continued to fund the businesses of fuel marketers through subsidy and interest payments, fuel crisis in the country would continue unabated.

He therefore advised the government to deregulate the sector and reduce the dependence of the country on imported petroleum products.

Achese also questioned the failure of the Nigerian National Petroleum Corporation (NNPC) to provide fuel for Nigerians despite being the major oil importer in the country. In the same vein, he urged Lagos State Government to create access lanes especially for fuel tankers on the highways and trailer parks close to the depots to avoid further occurrence of gridlock on the roads.

http://energymixreport.com/nupeng-makes-u-turn-supports-subsidy-removal/?

110

As part of efforts to promote the local content policy of the federal government in the oil and gas sector, Samsung Heavy Industries Nigeria (SHI) and the Nigerian Liquefied Natural Gas (NLNG), have completed the training of 57 Nigerian youths at the SHI Shipyard in Geoje, South Korea.

The youths, who arrived Nigeria on Sunday, were taught naval architecture, ship design, fabrication and fittings, electrical installation, mechanical and maintenance, erections and scaffolding among other areas.

Speaking on the training programme, the General Manager, Samsung Heavy Industries in Nigeria, Mr. Frank Ejizu said the company was determined to grow local capacity through an intensive training programme expected to build the capacity of local engineers.

Ejizu further stated that efforts are being made to select another set of 60 Nigerians for the next round of training in South Korea by July this year.

“Samsung in December last year in collaboration with Nigerian Liquefied Natural Gas (NLNG) decided to train some Nigerians in ship building and all aspect of ship development. Since then, they have been in South Korea for the training and we came here today to welcome them after a successful training,” he said.

Ejizu stated that the training has contributed immensely to improving their knowledge, “because it is purely a capacity building exercise, now that they are back home, we will assist to absorb them into various aspects of the job”.

Ejizu said Samsung and NLNG decided to fill the gap through the training programme, adding that they also expected to do more of such trainings to encourage more Nigerians in the oil and gas sector.

He, however, described it as a pre- training, adding that many more people will be trained in Nigeria when the planned training centre in Nigeria is completed.

On the part of NLNG, the training was one aspect of Nigeria LNG’s inclusion of a local content clause in its contract with shipbuilders Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI) for the building of six new vessels costing $1.6 billion for Bonny Gas Transport (BGT), NLNG’s shipping subsidiary.

NLNG Limited had said the need to build local capacity in the field of shipbuilding informed its decision to send 57 Ni gerians to South Korea for the training.

NLNG’s General Man ager, External Relations, Mr. Kudo Eresia-Eke, said the company’s goal in helping to attain the objective of the Ni gerian Oil and Gas Industry Content Development Act (NOGICD) 2010, equally informed its decision to take the giant stride.

In his remarks, the Team Leader, Jamiu Suleiman, said they achieved the training objectives and even surpassed expectations.

“We have been certified by the American Bureau of Shipping (ABS). Our trainers did not hide anything from us on structural engineering in ship building, so we can deliver services to international standards now,” he said.

Samsung Heavy is an industry giant in the building of Floating Production Storage and Offloading vessels (FPSOs), LNG FPSOs, production platforms, Drillship Rigs and other special offshore vessels.

http://www.thisdaylive.com/articles/nlng-samsung-train-57-nigerian-engineers-in-south-korea/210428/?

111

Nigeria’s main oil union has shut down the local operations of the United States oilfield services provider, Halliburton Co. in protest against job cuts, the trade body told Reuters on Tuesday.

The Chairman of the Lagos State chapter of the National Union of Petroleum and Natural Gas Workers (NUPENG), said the group halted operations on Monday, saying it was opposed to Halliburton’s decision to sack 46 local staff members. The union accused Halliburton of not following due process.

Halliburton’s staff cuts in Nigeria are part of a company-wide jobs cut announced earlier this year to counter a sharp downturn in global oil prices since last summer that has shrunk profits.

In April, the company, which provides drilling services to Royal Dutch Shell PLC and Chevron Corp in Africa’s top oil producer, said it had cut 9,000 jobs, or about 10 per cent of the global workforce, and that more were planned. “Halliburton is in conversations with the union to resolve the pending issues,” a company spokeswoman said via email. “We will continue to monitor the business environment and will make additional adjustments as needed,” she said.

She declined to comment on how many jobs had been cut or what operations were impacted.

The shutdown was confirmed by another oil industry trade union - Petroleum and Natural Gas Association of Nigeria (PENGASSAN) - which said the US company sacked trade union executives in an attempt to weaken the bodies representing workers’ rights, Emmanuel Ojugbana, spokesman for PENGASSAN said.

http://www.thisdaylive.com/articles/nupeng-shuts-down-halliburton-operation-over-job-cuts/210470/?

112
Oil & Gas Industry / Electricity Supply Down By 2,000MW, Says FG
« on: May 26, 2015, 01:57:02 PM »
The Federal Government said yesterday that the nation has recorded a loss of over 2,000 mega watts in the national grid due to shortage of gas supply to the thermal plants.

The government in a statement signed by the Chairman of the National electricity Regulatory Commission, NERC, Dr. Sam Amadi explained that only five out of 23 power plants are currently generating electricity.

Dr. Amadi said that the Commission noticed with concern the acute shortage of power supply and the attendant hardship Nigerians are passing through.

He said "In the last couple of months, electricity supply has been generally poor on account of increase in vandalism in the run up to the April 2015 elections. But this bad supply condition has worsened in the last few days."

According to him: "At present, 18 out of the 23 power plants in the country are unable to generate electricity due shortage of gas supply to the thermal plants with one of the hydro stations faced with water management issue. This has led to loss of over 2,000mega watts in the national grid.

"This situation is further compounded by the recent industrial actions embarked upon by workers in the oil and gas industry, a development which is taking toll on other sectors of the economy. Gas supplies to the thermal plants have been further constrained by the industrial actions of workers in the oil and gas industry.

"The Commission had proactively engaged the gas supply companies and its licensees when two weeks ago discussion was held on how to firm up gas supply in order to increase power supply.

"Unfortunately, not much progress was made through this meeting as NNPC and its subsidiary Nigeria Gas Company, disclosed high incidence of vandalism in some areas that were relatively peaceful along its pipeline networks.

"That meeting was told of the damage done to Trans-Forcados pipeline in the western axis and elps gas pipeline in the eastern axis. Nigerian National Petroleum Corporation had explained at the meeting that repair works are being intensified even as it expressed worry on the integrity of the pipelines on account of incessant damage it has sustained.

"In essence, what has brought about this development is the increased incidence of vandalism which is beyond the control of the regulator and the industry operators. This situation is further compounded by the industry actions declared by the oil and gas workres.

"However, we have continued to engage with relevant authorities on how fast we can address shortage of gas supply to the thermal plants. We are also engaging with the industry operators on how to improve electricity supply.

"The Commission regrets the hardships which Nigerians are being subjected to on account of this development as we intensify efforts to bring the situation under control in the shortest possible time."

http://allafrica.com/stories/201505260270.html?viewall=1

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The Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, has said the incoming administration of President-elect, Muhammadu Buhari, must ensure that technocrats, not politicians, head the board of Nigerian National Petroleum Corporation, NNPC.

The union said it was the only way government can move towards “achieving effectiveness and curbing wastages of our resources and potentials to improve accountability and optimisation across the polity and economy.”

PENGASSAN’s President, Mr. Francis Johnson, told newsmen in Lagos that the holding company and its 10 subsidiaries can only be effective and adhere to global best practices if not subjected to undue political interference.

Speaking on PENGASSAN’s View on the Road Map to Revamp the Oil and Gas Industry, Mr. Johnson said: “There is need to instil in NNPC the culture of corporate governance and career management, which requires a legislative review to ensure that the board of NNPC is headed by technocrats and not politicians.

“The position of Group Managing Director and Managing Directors of the subsidiaries must be tenure based to check frequent termination of employment by the President that leads to policy somersault and unstable system, which breeds compromise of corporate values and principles.”

He also said Buhari’s government should establish a Petroleum Inspectorate for effective regulation of the sector, and that the Subsidy Reinvestment Programme, SURE-P, for which N21 billion is provided for in the N2015 budget, be scrapped.

On the Petroleum Industry Bill, PENGASSAN said: “There is need for an all-inclusive stakeholders’ summit to harmonise the grey areas and ensure speedy passage of the bill in a fair and equitable manner.”

- See more at: http://www.vanguardngr.com/2015/05/pengassan-to-buhari-technocrats-not-politicians-should-run-nnpc/?#sthash.3qs6VAVU.dpuf

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The Chief Whip of the Petroleum Tanker Drivers (PTD) wing of the National Union of Petroleum and Natural Gas Workers (NUPENG), Comrade Gambo Ibrahim Tuge, tells the Sunday Trust some sorry developments at the Kaduna Refining and Petroleum Company, (KRPC)

Since when have you been doing business with the KRPC?

That should be more than 20 years ago when the going at the KRPC was still good and the refining outfit was selling all refined products. The entire North was getting its entire supplies from there. Then, more than 500 trucks would load there different commodities that included petroleum, kerosene, cooking gas and diesel. When it was operating at full capacity, it was servicing depots in as far places as Maiduguri, Yola, Jos, Gusau, Kano, Suleja and Minna, which were getting refined products from the KRPC.

But things at the KPRC have since changed and the situation has further deteriorated during the Goodluck Jonathan administration and under the Minister of Petroleum Resources, Diezani Alison-Madueke. For two years, the KRPC has not been receiving crude oil regularly, and there has been no steady refining and loading of petroleum products for sale.

A certain cabal in the petroleum industry seems to have deliberately sabotaged local refining so they can keep importing refined petroleum products and earn cheap money. Some new oil companies were established to buy and sell imported refined petrol in Nigeria and not to establish their own refineries within.

This is sabotage. This is one area the President-elect General Muhammadu Buhari must look into. If you go to the KRPC you will pity the situation as there is no business activity and when they do bring in fuel based on 'bridging' from the south to the North, they inflate the government-approved pump price.

A marketer with an NNPC licence does not get fuel. But black marketers are dancing to the banks with the authorities not doing anything to arrest the situation. There is too much corruption in NNPC.

Chiyoda of Japan built KRPC but Total of France was once given the turn-around maintenance, is this right?

It is not right at all. How can an educationist be given a patient to operate? We want change.

Why are some filling stations selling petrol above N87 per litre?

If KPRC is working and you put your price a kobo above the government-approved pump price, who will buy it? But in this current situation, if a dealer bought a fuel from the black market at N100 a litre, how can he sell it at N87? It is not possible. But if the NNPC is functioning, every dealer will beautify his station to attract customers. That is why the price in many stations is abnormal. Instead of N87, some are selling at more than N130.

Why is tar used by road construction companies being imported when the KRPC can produce it?

It is because the KRPC is not working well. When it was functioning at its normal capacity, buyers were always available and the refinery management even reduced the price for them. But members of a cabal now imports the tar from abroad after they have sabotaged Nigeria and the North.

For how many months has the KRPC not been refining crude oil?

It has been down for about nine months now. It used to work for like one month and then would be shut down for nine months to one year without any production whatsoever. That has been going on for about five years running.

Is kerosene still being loaded here?

They don't load it here anymore. It is now being sold to cabal members who resell to dealers. Before now, a single truck used to load and discharge to dealers twice daily. But now, you have to go to Lagos, Warri or Port Harcourt to buy from private depots at black market prices and resell as you like. In reselling, dealers factor into their prices the risks they usually undertake, like extortion and accident possibility.

So would you say the NNPC staffers at the KRPC have just been collecting salaries for doing nothing for many months?

That is it. The main cause for concern is the enrolment of many casual staffers who are the main workforce, while the real NNPC staff just collect salaries for doing nothing. These casual staffers, when there is work to do, work hard because they want to be fully employed.

http://allafrica.com/stories/201505240161.html?viewall=1

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Oil & Gas Industry / Should Buhari Maintain Subsidy Regime?
« on: May 26, 2015, 08:47:34 AM »
Despite the billions of naira paid by the federal government to oil marketers, the president of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Comrade Igwe Achese, and other stakeholders said scarcity of fuel would persist if the refineries are not put in proper shape. In this special report, our reporters, Sylvester Enoghase, Phillip Oladunjoye, Emma Okwuke, Abel Orupke, Saheed Bakare, and Judith Eshemitan examine the subsidy regime of the Federal Government.

Subsidy Payment Would Not End Fuel Scarcity

Despite the billions of naira paid by the federal government to oil marketers, the president of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG), Comrade Igwe Achese, has disclosed that scarcity of fuel would persist if the refineries are not put in proper shape.

This comes as the coordinating minister of the economy and minister of finance, Dr Ngozi Okonjo-Iweala, recently said the federal government had released N156 billion for payment to oil marketers, leaving a balance of N98 billion certified by PPPRA as the amount owed them.

He told Daily Independent that the N156 billion is the latest in a series of significant payments made to the oil marketers within the last five months. These include over N300 billion in two installments in December last year and N31 billion in interest differentials recently. In all, oil marketers have received over N500 billion within the past five months.

However, Achese who stated that the payment would not end fuel scarcity, while speaking to our correspondent, said scarcity would continue as long as the country keeps importing fuel.

He emphasised that the acute fuel scarcity plaguing most parts of the country has taken a serious toll on residents of36 States, including the Federal Capital Territory, such that motorists have resorted to the black market where a litre of fuel goes for as high as N300.

The development, he said, has left commuters stranded at various bus stops, waiting endlessly for commercial vehicles, most of whom are stuck in fuel queues for several hours.

The Former President of Chartered Institute of Bankers of Nigeria, Mr. Wale Adeyemi however urged the Buhari- led administration to give a thorough look at the subsidy fuel regime with a view to finding lasting solution to unending fuel queues and scarcity occasioned by the disagreement between the marketers and the government.

According to him, it was important government work hard to ensuring that the refineries are in put into proper shape such that importation of fuel comes to an end.

Lamenting the situation faced by Nigerians, Adeyemi said it was regrettable that Nigeria was going through what it was experiencing now despite the abundance of crude oil.

He said:" They should review everything about subsidy arrangement. If they have to stop it, let them stop it. What they have succeeded in doing at the expense of Nigerian masses is to create huge wealth for very few people.

"This is the only country where we have refineries and still import refined crude oil. For me, this is demeaning and appalling. For a country called Nigeria where you have a number of intelligent people and knowledgeable people that is so endowed, I think there is something wrong somewhere which need to be addressed before it is too late. Nigeria's crude oil is the second best. Even in terms of the market, it is better than Saudi Arabia crude oil in the whole world market. They should take the issue seriously".

He pointed out that creating human problems, psychological issues by having to queue for time on ending at filling stations is not the way to go.

"A situation whereby there will be scarcity during the day and availability at night should stop. This comes often as dirty expectation between Nigeria and the republic of Benin. All these are against the economy of the people. The incoming government should address the fuel subsidy regime by bringing an end to the scam in addition to other cardinal programmes it promised to execute", he said.

"They need to address the issue of corruption which from part of what the fuel subsidy issue is all about. Just as they have promised, they must live up to that expectation if at the end of four years, they want to be adjudged to have been fair", he added

For the Chief Executive officer of Wealth Advisor, Mr.Adebiyi Adesuyi , the issue of fuel subsidy could only be best described as fraud which were being done between those in governments and the marketers.

He advised the Buhari administration to demonstrate the political will in solving the myriads of problems confronting the oil and gas sector some of which include taming the activities of the so called few cabal who are bent on holding the nation to ransom through their fraudulent activities.

He said:" What they are spending on fuel subsidy or paying as subsidy to marketers is more than enough to build new refineries for Nigeria, to refine what we need domestically and assist in refining products from other nations".

"Nigeria is the only country that produces the quantity of crude oil we produce and yet still import crude oil. If we don't import crude oil, there won't be issue of subsidy. I can tell you from my background as a banker, having managed about three branches for Oceanic Bank that the whole exercise is a fraud", he added.

Commenting further, he said: "I remembered back then that each time we financed these so called oil importers or marketers, whenever we asked them to make prepayment, the excuse they normally give is that PPRA has not made any payment. By so doing, they have nothing to pay. So, instead of using the primary source to make a payment for the loan, they will be asking for more time. Often time, they divert the money meant for that purpose to other things. They will now be telling you that they are expecting subsidy payment. And that shows you that the subsidy is a scam".

"It is so unfortunate that Jonathan came in together with the outgoing finance minister who had worked with the World Bank, who should know better, and still allow the scam to continue. If it would mean for them to borrows to build refinery and stop the nonsense, they would have done it", he said.

He said in a situation where we are using a quarter of our national budget to pay subsidy, does it make sense?. For me, it does not make sense. So, if Nigerians should pay more for petroleum, the idea of subsidy should be stopped.

Advising the incoming administration, Adesuyi warned the government to be careful of detractors that may want to put the government effort in stopping corrupt practices into abeyance.

He said: "If I have to advise the new government, I think within the next two years, they should give us commitment that they are building refineries. More so, the products are now being refined locally such that it can meet local demand. Apart from meeting local demand, they should also export refined products not the situation where we depend on imported products.

"As we are importing refined products from other countries, we should begin to export refined products once the refineries are in place. Once this is done, we will be able to curtail the decline in the value of the naira. Aside the benefit of curtailing devaluation of naira, we will be able to anchor foreign exchange through value addition.

"Once again, I need to reiterate that the fuel subsidy is used to siphon the wellbeing of average Nigerians. Take for example, if Jonathan administration had said no to fuel subsidy and concentrate on building refinery from the foreign reserve Obasanjo left, I don't think the situation we are witnessing now will occur. This was messed up due to the interest of just some few people. As you can see, most of them have started penetrating Buhari. That is the way they do. And that is why they are creating the scarcity we are facing now. All these set of rogues are doing is to arm-twist him. So, he needs to put his foot on the ground. Even if you look through the figures, you will realize that the subsidy is inflated", he however said.

The Chief Executive Officer of a public relation firm, Kishi Lagos, Mr Adeola Adejokun said issue surrounding fuel subsidy in Nigeria has created more than enough problems some of which he identified to include traffic gridlock, wastage of productive hours and long queues in filling stations.

He said there is the need for government to put an end to the problem considering the untoward hardship Nigerians have been made to suffer particularly in the last few weeks.

He recalled that a former CBN governor had raised the issue of $20 billion naira which was left unaccounted for on the basis of fuel subsidy noting that it has become imperative to end the subsidy crisis with a view to bringing smiles to Nigerians. To him, the continued implementation of subsidy boils down to the growing level of corruption in the system which he urged the new government to address to bring an end to the issue of fuel scarcity.

A Lagos based lawyer, Barrister Kabir Akingbolu, has suggested ways that will not only make the policy achieve its goals but also make it acceptable to the Nigerian citizens. He said nothing was wrong allowing subsidy but the way it was being managed.

Akingbolu, who spoke to Daily Independent in Lagos, said if corruption in the country and stealing in high places could be checked, the country will have enough resources that will make life worth living for its citizens.

He noted that the high level of corruption in the society has made the average man in the street to become suspicious anytime the government makes a proposal that affects the welfare, stressing that government in the past have deceived the populace by making unfulfilled promises.

He said:" There are so many corruption in the system. Government must ensure that sanction await those who connived to defraud the system. Even though the fuel subsidy regime as being described as somewhat fraudulent, there is need for the new government to exercise restraint and be more circumspect in taking decisions on subsidy. If you look at the state of things at the moment, I think it will better to allow subsidy to remain but not at an inflated figure as we have now. Pending when refineries will be built, government should allow fuel subsidy in the interest of Nigerians who may not be willing to endure the pay".

Another commentator, Samuel Ajayi, a brand analyst who groaned at the level of sufferings being encountered by Nigerians on account of current fuel scarcity, urged the incoming administration to be prepare to confront and step on toes as he embarks on a cleaning exercise in the oil and gas sector.

He said: " Over the years, the oil and gas sector has always been a major problem for leadership. One reason adduced to this problem comes from the background of enormous challenges confronting it".

"The new government, as they have promised during the electioneering campaign, should be ready to battle the unseen forces because so many underhand dealings happen in the oil sector. It is also important to state that government should ensure that there is transparency to engender competition and trust. That is not so say that professionalism should be dispensed with. I am of the view that fuel subsidy or not, the oil and gas sector need total reform. There is so much corruption in that system. Until that is removed, I don't think there can be any progress. All those who engage in corrupt practices in the system should be given the boot or flushed out. There is too much rot", he added.

Another public affair analyst who is a banker, Mr Ahmed Kareem stated that the government actions in the past had made people to lose faith in any of its programme.

He however said, it was important that the new government create enough room for Nigerians to believe it by living true to its promises .According to him, government must do all within its capability to make its word its bond.

http://allafrica.com/stories/201505220899.html?viewall=1

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Following reports of the suspension of the industrial action embarked upon by the Nigerian National Petroleum Corporation (NNPC) in-house members of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and National Union of Petroleum and Natural Gas Worker Association of Nigeria (NUPENG), the Managing Director of Capital Oil and Gas, Mr. Ifeanyi Ubah, has said it is not too late for President Goodluck Jonathan to fully deregulate the country’s downstream petroleum industry.

The unions were protesting government’s recent transfer of operating rights of Oil Mining Leases (OMLs) of the Nigerian Petroleum Development Company (NPDC) to private companies.

Ubah, on the heels of the suspension, called on Jonathan not to bequeath to the incoming government of Muhammadu Buhari, a regulated fuel price regime.

He made this call monday while reacting to his decision to breach an order on the nationwide oil workers’ strike and subsequently decided to go ahead to open up the company’s petroleum loading facility at Ibafo in Lagos. THISDAY got his reaction via an e-mail in Abuja.

His reaction and request on Jonathan however came when members of the NNPC in-house PENGASSAN and NUPENG called off their strike and allegedly pledged to work 24 hours to restore normalcy in the country’s energy sector.

However, the strike according to the Nigerian Electricity Regulatory Commission (NERC) and Minister of Power, Prof. Chinedu Nebo, has left 18 of Nigeria’s 23 power generating plants down, meaning that just about five power plants are generating a meager 1,327 megawatts (MW) as at Friday last week.

Ubah claimed that his action on Sunday had motivated the unions to suspend their strike, saying it was a bold intervention to save Nigerians from further crises.

“I felt I would be acting irresponsibly to watch Nigerians dying in hospitals, languishing in filling stations without buying the product and keep quiet. So I had an obligation as a Nigerian not to allow that continue, and I bet you that if I did not make that move, the strike would have been on today,” he said.

He also lamented that a situation where hospitals were shut down, telecoms threatened to stop operations and power supply crippled should not be tolerated by anyone who means well for the nation.

According to him: “You can understand the extent and enormity of the crises when even banks threaten to close shop because they don’t have fuel to power their generators since the public power system has also crumbled. So, I felt it a duty as one who operates the largest fuel supply base in Nigeria to turn around the situation.

“By today, I am sure we have already achieved the 13 million litres or 400 truck-loads target and we have product in the jetty and will not stop pumping.

According to him, “I am assuring Nigerians that what we did on Sunday was not a flash in the pan but real action and resolve to make sure the scarcity is defeated.”

In a few days, it would be over. That is why we call on the president to declare total deregulation even a day to his exit,” he added.
“In his advocacy for deregulation and removal of fuel subsidy, he stated that it would be a great act of patriotism for Jonathan to declare total deregulation of petroleum pricing.

“I envisage a situation where oil would sell at about N85 for a litre when deregulated because that will encourage competition among operators and also create the incentive for local refining. When that is achieved, more jobs will come and the entire economy would be more robust and gain from the development,” he stated.

Meanwhile, NERC explained in a statement that at present, 18 out of the 23 power plants in the country are unable to generate electricity due to shortage of gas supply to the thermal plants while one of the hydro stations is faced with water management issue.

It said the development has led to loss of over 2,000MW in the national grid, thus confirming the Nebo’s assertion that major gas plants including Utorogu, Chevron Orodo, and Oben in the western axis, as well as Ughelli and CNL Escravos are shut down.

Nebo also stated that on the eastern axis, Shell Gas, Alakiri has been down. He thus asked the unions to quickly take remedial steps to restore gas supply to the nation’s power stations.

http://www.thisdaylive.com/articles/it-is-not-too-late-to-deregulate-ubah-tells-jonathan/210280/?

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Oil & Gas Industry / How to make Nigeria’s energy cost less
« on: May 21, 2015, 04:15:36 PM »
Higher electricity prices would stimulate gas production in Nigeria and reduce blackouts and the need for expensive generators according to comments Dada Thomas, managing director of Nigerian exploration and production company Frontier Oil, made to TOGY. The growth and improvement of the domestic gas value chain is at the forefront of political and industry discussion in Nigeria, a country that combats daily blackouts due to power generation deficits and a lack of available feedstock.

Gas shortages in Nigeria are preventing electricity generation companies from operating at full capacity in a country that is woefully undersupplied with electricity. The shortage of gas as a feedstock for power stations is causing a snowball effect moving down the value chain because undersupplied distribution companies are not getting enough electricity. The transmission company is held by the government, which also fixes the price of electricity and gas. “The transmission company should be decentralised, with each one of Nigeria’s six zones having its own autonomous branch,” Dada Thomas, managing director of Frontier Oil, told TOGY.

RATED RATES: Nigeria has a power shortage of 160 GW. For every 1 million people, the country must generate 1 GW of power to meet global standards of living.

For even half of this capacity, the country would require 736 mcm (26 bcf) of gas production and feedstock per day. As of now, the electricity rate at consumer level is set at $0.06 (NGN10) per kilowatt hour, but due to power shortages and a reliance on generators during blackouts, consumers can pay up to $0.35 (NGN60) per kilowatt hour.

“For consumers and business alike, it would be better to set the price of electricity at NGN30 ($0.18) per kilowatt hour, as it would improve the incentives and economics throughout the value chain,” said Thomas.
With a higher base-level price, the government could raise the price of gas at the production level from the current $2.50 per thousand cubic feet (per million British thermal units), further incentivising gas production for domestic usage. Generation companies would then curtail their feedstock problems and generate more electricity for distribution companies to provide to the transmission entity.

Production, generation and distribution companies would be able to amortise fixed and sunk costs over a higher throughput, increasing per-unit profit margins and allowing for greater investment at all levels. “This simple change would remove the hassle of having to deal with generator mechanics and looking for diesel or petrol along with the safety hazard of storing petrol in one’s own house,” Thomas told TOGY.

RAISING THE BENCHMARK: While improvements have been made to the pricing of gas production, an increase from $1.50 to $2.50 per thousand cubic feet (per million Btu), there is still room for greater parity with international prices.

“The new $2.50 per thousand cubic feet (per million Btu) benchmark has been celebrated, but this is not high enough to be an attractive option to produce gas. If it were raised to around $5 per thousand cubic feet ($5 per million Btu), then it would create a very attractive and comfortable environment. Even international oil companies would want to jump into the domestic gas market,” said Thomas.

Nevertheless, domestic producers can continue to be at the forefront of the gas revolution. “When you look at the landscape of companies investing in gas, most are indigenous firms. As the domestic exploration and production segment continues to grow, gas production can serve as a steady, long-term base of revenue that can help shelter companies from dips in oil prices,” he added.

TAX INCENTIVES: Pioneer status relief could also help to stimulate and encourage investment in gas production. Pioneer status relief is a three to five year tax exemption given to new investing companies.

As of 2014, this pioneer status exemption was limited to downstream projects. The fiscal regime is proving to be a bottleneck to further investment. Pre-tax, 1,000 cubic feet of gas was one-seventh the value of a barrel of oil, as of December 2014. Yet, a gas production project’s capital expenditure is three times greater than that of an oil project.

“With these costs, the production of gas becomes a nice, reliable baseline, but you cannot use it to pay your bills up front, especially if you have just newly invested and are paying off your loans,” Thomas told TOGY.

http://www.theoilandgasyear.com/articles/how-to-make-nigerias-energy-cost-less/?

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The crisis in the oil sector seems to be deepening as workers of the Nigeria Petroleum Development Company (NPDC), under the aegis of the Petroleum and National Gas Senior Staff Association of Nigeria, PENGASSAN, and the National Union of Petroleum and Natural Gas Workers, NUPENG, early this week, shut down their operations.

The unions directed NPDC employees, a subsidiary of the Nigerian National Petroleum Corporation (NNPC) to shutdown indefinitely their locations and all oil production facilities nationwide in a bid to force the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke and the Federal Government to reverse the transfer of operatorship of OMLs 42, 40 and 30.

The assets were previously operated by Shell.

The unions are aggrieved that the sale of the assets did not follow due process and would affect the fortunes of the NPDC and its workers.

Mr. Emeka Offor’s Elcrest Exploration and Production Nigeria Limited, a joint venture company of Eland Oil & Gas Plc, was awarded the operatorship of OML 40, while Mr. Ernest Ezedialu Obiejesi’s NECONDE is the operator of OML 42.

A source from the union, who pleaded anonymity, said the strike is not national, adding that it is only an arm of the NNPC in Benin.

He said the workers are agitated   that they were kept in the dark by the management in the entire process, and are of the opinion that management’s decision would not only threaten their jobs, but will jeopardise the future of the industry.

He said the strike had resulted from a breakdown in communication between the management of the company and the unions.

Speaking on the development, the President, Trade Union Congress, TUC, Comrade Bobboi Kaigama, calls on  the Federal Government to immediately halt and reverse the last minutes transfers of the operatorship of OML 42, OML 40 and OML 30,  which are being arbitrarily handed over to Neconde Energy Limited, Eland/Elcrest and Shore Line respectively.

”We demand immediate reinstatement of the operatorship rights of the Nigeria Petroleum Development Company (NPDC), the NNPC subsidiary that has been successfully operating the assets to avert the brewing industrial crisis in NNPC in view of the impact it will have on the ongoing transition process,” Kaigama said.

http://thenationonlineng.net/new/fuel-crisis-deepens-as-nupeng-pengassan-strike-continues/?

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The direction and programmes of the incoming administration of Major General Muhammadu Buhari (rtd) appears to be emerging with the guide being offered in the form of start-up reform marshal plan by a former British Prime Minister, Mr Tony Blair, who urged him to carry out a complete overhaul of the Nigerian National Petroleum Corporation (NNPC) and solve the problematic petroleum subsidy regime within the first 100 days of assuming office. The recommendation is in synch with the call by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) for the incoming Buhari administration to declare a state of emergency in the oil sector given its myriad of problems. Blair’s policy pep-talk came just as the Vice-President-elect, Prof. Yemi Osinbajo, gave a frightening picture of the country’s economic situation, saying that Nigeria’s local and international debt burden has hit $60 billion, while the debt servicing bill for 2015 is N953.6 billion (about 21%) of our budget.

The ex-British prime minister, who was represented by Peter Benjamin Mandelson, a former Secretary of State for Trade and Industry, at a two-day All Progressives Congress (APC) Policy Dialogue holding in Abuja, yesterday advised that the government should as a matter of priority undertake the shake-up in the management of NNPC within the first 100 days of assumption of office. Blair said the new government should try to utilise the enormous goodwill it presently enjoys to take far-reaching economic decisions, including taking an intelligible stand on the controversial fuel subsidy policy. “You have more goodwill to do very difficult things at the beginning of your administration than later. You can crack the NNPC with the first 100 days,” he said. According to Blair, Nigeria has huge natural endowment of energy resources but could not effectively utilise such rich resources to economic advantage because of misplaced priorities.

“These issues are like this, for a country that has extraordinary resources of oil and have this amazing privilege of source of energy, yet power generation was not as good as it should. People having to wait for hours queuing to get fuel and end up buying it elsewhere. I think the resources voted for this subsidy can be better used for other things. “Where is it running away to? I think we need to recapture this oil resource and the revenues put to good use so that it can be invested for the long term good of the country, in infrastructure, human capital development, education system and skill acquisition that people need to work with in the future. “This is where the money should be going to. That is why before reorganisation and also the long reach of the law, there is the need to begin here pretty soon in order to make sure the system as whole works better for Nigeria. That is my view,” he said.

Exhibiting deep knowledge of Nigerian internal political dynamics, the Briton further advised Buhari not to turn his back on the people of the South-east and South-south based on the perception that he did not get the support of the voters from the zones. “You need to show the people who did not vote for you that you care for them and will work to solve their problems as much you will do for those that supported you. This is what is called ‘Big stake politics’,” he said. He also advised the government to tackle frontally the problem of unemployment immediately after taking over the administration of the country if it must successfully reduce youth restiveness and sectarian crisis.

He said that everything must be done to avoid allowing a return to the usual bad ways of doing things. While declaring the policy retreat open, Prof. Osinbajo, who also stood in for Buhari, said the country’s economy is currently in its worst moment in history. Apart from the figures of extreme poverty in the country, which he said had now affected 110 million Nigerians, Osinbajo said the country’s local and international debt stands at $60 billion, while the nation’s debt servicing bill for 2015 is put at N953.6 billion, 21 per cent of Nigeria’s budget. “The figures of extreme poverty in our society — 110 million by current estimates — makes it clear that our biggest national problem is the extreme poverty of the majority. Thus, no analysis is required to conclude that dealing with poverty and its implications is a priority. “We are concerned that our economy is currently in perhaps its worst moment in history.

Local and international debt stands at US$60 billion. Our debt servicing bill for 2015 is N953.6 billion, 21% of our budget. On account of severely dwindled resources, over two-thirds of the states in Nigeria owe salaries. Federal institutions are not in much better shape. Today, the nation borrows to fund recurrent expenditure,” he said. Osinbajo drew the attention of the gathering to some of the key issues raised by the party during the campaign which included addressing the challenges of economy, insecurity, corruption and job creation. Osinbajo lamented the highly unequal society in which the country had found itself, adding that “the largest chunk of the benefits of our national wealth accrues to a small percentage of our population”.

He said the APC manifesto has offered a vision of shared prosperity and socio-economic inclusion for all Nigerians, that leaves no one behind in the pursuit of a prosperous and fulfilling life. According to the vice-presidentelect, the goal of the policy dialogue is to “interrogate the various positions and propositions before a wider audience and to launch a robust public conversation on policy directions and priorities that will help inform our administration’s approach in the next four years”. “This forum exemplifies the sort of consultative and consensual approach to policymaking that our party and the new administration intend to model in office,” he said.

In his remarks, the Director of Policy, Research and Strategy in the Directorate of the APC presidential campaign, Dr. Kayode Fayemi, said the phase of policy conception is over and that the party should now be thinking of “execution, governance and of providing tangible developmental deliverables”. The policy dialogue continues today with presentations by panelists drawn from various sectors of the economy and social backgrounds.

In the same vein, citing a plethora of challenges bedevilling the Nigerian oil and gas industry, PENGASSAN has urged the incoming administration of Buhari to declare a state of emergency in the sector to address its many problems. The oil workers argued that all sub-sectors of the oil and gas industry are going through one problem or the other which are not only dwindling the fortune of the sector, but the entire Nigerian economy as the sector currently accounts for more than 80 per cent of Nigeria’s foreign exchange earnings In a statement by PENGASSAN’s President, Mr. Francis Johnson, the senior oil workers said there are many issues in the oil industry requiring urgent attention from the in-coming government.

They urged Buhari to reposition the industry for efficient and effective delivery of its benefits to Nigerians. Johnson also noted in the statement that there is need for the in-coming government to call an all-inclusive stakeholders’ forum of those involved in operations in the sector to critically examine and proffer workable and enduring solutions to all the problems in the larger interest of the Nigerian nation.

Johnson said: “All the subsectors of the oil and gas industry have one challenge or the other and all these challenges are affecting the deliveries of the benefits of our God-given hydrocarbon resources to the country and the entire people of Nigeria. “These challenges are as a result of past neglects, wrong policies and policy summersault in some areas of the subsectors.

All these are inflicting pains on Nigerians who ought to be enjoying the benefits of the natural resources that God bequeathed to the country.”

http://www.thisdaylive.com/articles/re-organisation-of-nnpc-removal-of-oil-subsidy-job-creation-top-agenda-at-apc-policy-meeting/209901/?

120
Fresh facts have emerged on the shutting down of oil production by oil workers employed by the Nigerian Petroleum Development Company (NPDC) over the transfer of operatorship of Oil Mining Lease (OML) 42 to Neconde Energy Limited.

Stakeholders in the oil industry say the actions of the workers under the aegis of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) are not in the interest of the country.

According to a source, “it is a pity that NPDC workers will go to this length in order to protect their selfish interests. We all work here and we know that they cannot afford to do what Neconde and Seplat are doing. Rather, they want to arm-twist the government, especially the incoming administration of President elect, Muhammadu Buhari, so that he will not be sympathetic to Neconde, Seplat and others.

“Let me also reiterate that OML 55 under the operatorship of Seplat where Seplat has only 22.5 per cent stake but it is raising the value and volume of production as operator as opposed to the poor performance of NPDC under other mandates,’’ the source who advised the government to ignore the two associations, noted that both of them were feathering their nests and that it would be better for the private operators to bring their expertise to bear in the industry.

While debunking newspaper reports by NPDC branch of NUPENG and PENGASSAN, accusing Neconde of propagating reports of incompetence to operate OML 42, Neconde’s Managing Director, Malije Okoye said in a statement “that on no occasion has Neconde made defamatory statements about NPDC in the media or anywhere else and Neconde is in no way in breach of any applicable rules.

“Records clearly show that the ceding of the management of OML 42 to Neconde Energy had nothing to do with the firm’s stake in the oil block. The transfer of management of OML 42 to Neconde was evidently about leveraging a national asset and obtaining optimal value, for which Neconde clearly showed proof of capacity to deliver.’’

He added that “despite the transfer of operatorship of OML 42 to Neconde, NPDC and Neconde still exist as partners at the level of ownership rights on OML 42, the Federal Government having ceded management to Neconde. Accordingly, Neconde will not be drawn into a disagreement with its partners on the pages of newspapers.

“The issues raised into consideration, Neconde will avail itself of the dispute resolution mechanism available under the joint venture platform to address all concerns relating to the transfer of the management of OML 42 to Neconde, as we are resolutely committed to fulfilling the government’s mandate of raising the production ceiling of OML 42.

“Neconde will continue to work in conjunction with our partners in the NPDC, who clearly require our professional expertise in this regard and have been working assiduously on the transfer of the management of OML 42 to Neconde. Neconde remains supportive of the Federal Government’s policy on local content in the oil and gas industry and the liberalisation of the upstream oil sector in order to optimise value and make the industry work for the good of all, not for a few vested interests, either in government or in the private sector,” he added.

It would be recalled that as the NPDC branch of PENGASSAN was pushing back on the Nigerian government’s granting of operatorship of the OML 42 to Neconde, the Minister of Petroleum went ahead to grant the wishes of Elcrest for operatorship of OML 40.

At the moment, Neconde and Elcrest purchased 45 percent stakes in OMLs 42 and 40 respectively from Shell, TOTAL and ENI in 2012, but the operatorship of the assets were not granted with the purchases. The two companies, along with First Hydrocarbon Limited, Shoreline Resources and NDWestern, who bought stakes in OMLs 26, 30 and 34 between 2011 and 2012, have lamented NPDC’s lack of capacity to continue as the operator of the acreages they purchased from the Shell-led consortium.

Their argument was that they could have gotten more production out of the fields than NPDC was doing as operator.  The government agreed with them and the perception in the industry was that the remaining three companies would soon be granted operatorship. However, the employees union is asking for a reversal of the two operatorships that have been granted.

http://dailyindependentnig.com/2015/05/neconde-npdc-battle-shells-interest-oml-42/?

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