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Nigerian authorities have launched an investigation to determine whether the government has been short-changed by a state oil company scheme to swap crude for refined products, the company, three oil traders and a security source said.

The Nigerian government may be losing money through opaque contracts in which crude oil worth billions of dollars is given to traders in exchange for refined imports, mainly gasoline, international and domestic watchdogs have said.

Nigeria's anti-corruption agency EFCC and domestic intelligence service DSS began the investigation last month. A spokesman for the EFCC said he was unable to comment for the moment and the DSS did not respond to requests for comment.

A security source with knowledge of the matter said the DSS wanted to find out how the value of the crude and products was computed.

"It appears that the value of the crude was more than the value of the refined imported," the security source said.

The contracts, known as offshore processing agreements (OPAs) are between Pipelines and Product Marketing Co (PPMC), a subsidiary of state-run Nigerian National Petroleum Corp (NNPC) and three oil trading companies: Sahara Group, Aiteo and Duke Oil, the trading subsidiary of NNPC.

Expired contracts with Swiss trader Trafigura, Taleveras, Ontario Oil and Gas are also being examined, the sources said.

The PPMC head was among the NNPC and company officials called in the investigating agencies in the past two weeks to answer questions about the agreements, the NNPC sources said.

"It started about two weeks ago...he was called in to the DSS everyday since Thursday and before that by the EFCC," one senior official at the company said.

A statement from the NNPC said some of its officials were invited by the agencies "to shed light" on the contracts and that none had been detained or arrested as part of this investigation.

The Nigerian Extractive Industries Transparency Initiative has said there was a revenue loss of at least $600 million due to a discrepancy between the value of the crude and the products delivered. The figure was taken from its 2009-2011 and 2012 audits of the oil and gas industry, the latest was released this year.

Some contract-holders have said that the discrepancies in value were reconciled.


Sahara, which receives 90,000 barrels per day for processing through an agreement with the Societe Ivorienne de Raffinage (SIR), said it was invited to the EFCC and submitted information to show that its contract was justified.

Aiteo, which also has a 90,000 bpd contract, could not be reached for comment. There was no response to a Reuters email and no telephone details were given on its website.

Duke Oil, an NNPC subsidiary, which has a 30,000 bpd contract, could also not be reached for comment. The listed phone number led to NNPC and it did not respond to an email.

A spokesman for Taleveras, that held a crude swaps contract between 2011 and December 2014 via Duke Oil, said that the company did not owe any money and it would deliver gasoline until June this year to balance out what it received in crude.

A spokesman for Trafigura said that the EFCC had requested information about their swap contract and it was provided by the company in the past month. Trafigura held a Refined Products Exchange Agreement, or swap contract, between Oct. 2010 and Dec. 2014.

"Despite Trafigura facing extensive logistical challenges in delivering refined product into Nigeria...delivery would typically precede the corresponding swap of crude oil by an order of weeks - sometimes months," the spokesman said.

"This reality led to ongoing supply imbalances...and ultimately reconciled, every two months over the duration of the term."

Nigeria relies on imports for the bulk of its domestic gasoline demand, which is met by gasoline coming via the crude exchanges and through a subsidy scheme that was at the root of acute fuel shortages at the end of May.

The new administration of Muhammadu Buhari came into power on an anti-corruption platform and the EFCC is keen show it has teeth. Right after Buhari's inauguration on May 29, six central bankers and 16 commercial bank staff were accused of currency fraud by the EFCC, the agency said.

The EFCC has investigated various oil scandals in the recent past, namely a fuel subsidy fraud costing the government $6.8 billion between 2009-2011. But due to a lack of political will from the top, only a handful were prosecuted with little result. (Additional reporting by Chijioke Ohuocha in Lagos and Camillus Eboh in Abuja; editing by Anna Willard)


Oil & Gas Industry / OML 42: NUPENG, PENGASSAN backing wrong horse
« on: June 12, 2015, 08:59:16 AM »

Although, the indus­trial action em­barked upon by the Petroleum and Natural Gas Senior Staff Associa­tion of Nigeria (PENGAS­SAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) to protest the transfer of the operatorship of the Oil Mining Lease (OML) 42 to Neconde En­ergy Limited has been sus­pended, the oil unions are unrelenting in frustrating the strategic alliance of the OML 42 to Neconde.

The unions maintained that the transfer of OML 42 operatorship to Neconde did not follow due process and also questioned the capacity of Neconde to run the fields better than the Nigeria Petro­leum Development Company (NPDC), the exploration and production arm of the Nige­rian National Petroleum Cor­poration (NNPC). This is the same NPDC that has clearly shown it lacks the technical and financial ability to oper­ate the asset.

Until recently when the full operatorship of the OML 42 asset was ceded to Neconde; the NPDC was in charge of operating the asset, albeit unproductively. Its inability to deliver on the asset, saw a disturbing decline in produc­tion level from 30,000 barrels per day, bpd, achieved as at the period of acquisition from the Shell Petroleum Devel­opment Company (SPDC), the previous operator of the onshore block to 13,000 bpd in 2014.

It would be recalled that in 2011, the Federal Govern­ment assigned 55 per cent equity in eight assets divest­ed by the SPDC to NPDC. NPDC has since retained the operatorship of most of the assets which included: OMLs 4, 26, 30, 34, 38, 40, 41 and 42.

But given its inability to sustain any long lasting pro­duction increment, the Fed­eral Government decided to grant operatorship of the assets to indigenous oil com­panies that have the technical capacity to operate and de­liver on the assets.

While the NPDC branch of PENGASSAN was busy pushing back on the granting of operatorship of the OML 42 to Neconde, the immedi­ate past Minister of Petro­leum, Mrs. Diezani Allison- Madueke also went ahead to grant the wishes of Elcrest for operatorship of OML 40.

That NPDC was indicted by Pricewaterhouse Coopers’ (PWC’s) in the forensic audit of NNPC’s accounts for mis­appropriating $1.48 billion which it has since failed to refund to the Federation Ac­count, equally shows how the company is being run over the years. Some of the NPDC management practices is said to also be a major reason it falls short in delivering its mandate on oil mining assets under its charge.

Perhaps, to further its un­derperformance, the NPDC has resorted to playing up unnecessary sentiments so that it can continue to milk the country as well as fail in its financial obligations to the NNPC and, by exten­sion, the Federation Account. Sadly, this is the parastat­al, NUPENG and PENGAS­SAN are now backing against legitimate and well-meaning indigenous oil companies that have continued to dem­onstrate first rate capacity to get the job done, as in the case of Seplat which has been able to ramp up production on OML 4, 38 and 41 to 70,000 barrels per day, Afren and Atlantic Energy, and Elcrest which have doubled produc­tion of OML 26 and OML 40 respectively.

Speaking on the activities of the indigenous oil compa­nies, James Olaito, an oil sec­tor expert said that they have been very supportive of the Federal Government’s policy on local content in the oil and gas industry and the liber­alisation of the upstream oil sector to optimise value and make the industry work for the good of all. Unfortunate­ly, there are those who rather than feel a sense of pride in the accomplishment of these companies, are instead look­ing for avenues to pull them down. This is what the NPDC did by trying to cast asper­sions on the transfer process of OML 42 transfer that was by every way transparent.

Regrettably, NU­PENG and PENGAS­SAN either by ignorance or sheer conspiracy are backing the wrong horse. That the unions are worried over how the process will pan out in terms of retaining members’ job is understandable, how­ever trying to arm-twist the government of President Mu­hammadu Buhari, so that he will not be sympathetic to Neconde, Seplat and other indigenous oil companies’ show that they may have been compromised. How does one explain that the unions, despite knowing the role Neconde played in absorbing some of the Shell staff mem­bers working in OML 42 who NPDC could not retain, would be backing NPDC on this combative mission to re­tain control of the oil well as­sets so it can continue to feed off Nigeria’s prime treasure?

It is on record 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 it clearly showed proof of capacity to deliver, so the question is, what do NUPENG and PEN­GASSAN seek to achieve by jumping ship with NPDC when it is obvious that they are better at an advantage having a capable and compe­tent hand steer the ship?


Oil & Gas Industry / Nigeria’s crude oil losing market appeal
« on: June 12, 2015, 08:57:52 AM »

NIGERIA may have to prepare for tougher times this year as the once a highly desired, easy-to-refine Nigeria’s sweet crude is now hard to sell, making the country to embark on discounted sales just to get the cargoes off the high seas.
International crude oil traders are said to have shunned the country’s export of sweet crude for the months of May and June 2015, making it difficult for the country to find buyers for the product, of which the country’s 2015 budget was planked on.

For example, Nigerian crude cargoes for January loading struggled to sell due to very weak demand with an oversupply of sweet crudes at the international market.

The Guardian gathered that the country’s crude oil suffered the same fate in March, April, May and June 2015 cargoes,
Asian and European demand for Nigeria and other West African cargoes has been slow so far, due to the availability of cheaper crude oil at the international market.

China, which became a large buyer of Nigerian crude oil, has reduced importation due to heavy build up of its products. The country now prefers Angola’s grade.

Specifically, latest information from Organisation of Petroleum Exporting Countries (OPEC) showed that China’s total commercial crude stocks fell by 5.6 million barrels, while product inventories rose 13.5 mb.

At 249.9 million barrels, commercial crude stocks represented a surplus of around 9.1 mb compared with the same period one year earlier. The fall in commercial crude stocks came mainly from the drop in crude oil imports, which declined by around 350,000 bpd to an average 6.3 mb/d. The increase of 5.5 per cent in crude throughput also contributed to the decline.

However, the increase of 2.1 per cent in crude oil production limited further drops in Chinese crude oil commercial stocks.
In contrast, total product stocks in China rose by 13.5 million barrels to end March at 161 million barrels, which is 2.5 million barrels below a year ago at the same time. All products went up. Gasoline rose by 5.2 mb, ending March at 52.3 mb driven by a decline in gasoline demand.

Early this year, the Organisation of Petroleum Exporting Countries (OPEC) disclosed in its monthly report that Nigeria’s 35 million barrels of crude oil was stranded at the high sea.

According to the cartel, Asian countries, which Nigeria turned to when the United States stopped buying Nigeria’s crude oil due to the shale boom, now prefer Angolan grades.

OPEC said that low European refinery demand amid weak gasoline and naphtha margins has put pressure on West African crudes, most especially, Nigerian light sweet crude.

“Asian refining margins dropped slightly during December on the back of losses seen in the gasoline and middle distillates cracks as the strong seasonal demand within the region was partially outweighed by increasing supplies from several countries in the region”, it added.

A fair share of Nigerian export crude cargoes every month are grappling to attract end-user and refinery demand, and are instead being stored on ships and on storage terminals, idling away.

The bulk of the oversupply in the Atlantic Basin crude market is composed of Nigerian crudes. A lot of Nigerian crude is floating on the seas and in storage tanks with no home and no destination.



The former Minister of Petroleum Resources, Diezani Alison-Madueke, has dispelled all the allegations of embezzlement levied against her, stating she at no point in the course of duty as a Minister stole from Nigeria.

In a recent interview with ThisDay, Allison-Madueke, acknowledged that mistakes were made, but was quick to add that she had nothing to do with the missing $20 billion or $18.5 billion in the Nigerian National Petroleum Corporation (NNPC) coffers.

She said, "did we make mistakes? There would always be mistakes. People would always make mistakes. Everybody make mistakes and there is no question about that. Have we learnt from our mistakes? Of course we have.

“But please do not say I stole $20 billion or $18.5 billion because I did not at any point in time. And if NNPC misappropriated funds or so, they have the entire explanation and more forensic audit should be done to determine how and why. But people should not make damaging accusations which have nothing to do with an individual.

“At no point did I steal from the Nigerian state. And if NNPC misappropriated funds or so, they have the entire explanation and more forensic audit should be done to determine how and why. But people should not make damaging accusations which have nothing to do with an individual. At no point did I steal from the Nigerian state.

“In fact, the first mantra I had from the time I came in was that I will never touch anything that has to do with the Federation Account and I never did and I will take that to my grave. So I will suggest that this issue of $20 billion or $18 billion be dropped because that is the major problem I had with my job. I was accused of unsavoury things, but which were actually accusations against NNPC and the audit was deployed to clarify all these things.

“So let us deal with the issues. I have never gone around accusing people of doing this or that, I have always stuck with the issues even when I was the most abused minister, I was professional, I stuck to the issues and responded only to the issues.”

The former minister, who is reportedly  to be undergoing treatment for breast cancer in London, also addressed the allegation that she rented N10 million jet for personal purposes during her tenure as a minister.

She said that she never used the jet for personal use, but rather official activities.

"No it was not for my personal use, it was for executive movement, which is has always been the case. I am saying just like the $20 billion, you find something, you throw it on the person to feel smart or to make it look as if the person is junketing all over the place or as if nobody had done that before in the annals of the NNPC.

"Of course we were not junketing all over the place. To be very honest, if they had never done that contract to lease the jet, we would have been hiring at a higher cost and which probably would have caused less of an issue. But to be frank, the lease that was put in place, to the best of my knowledge, was done with a company which even Shell and others have been using. So there was a known company with a very good track record and was being used in the industry by other multinationals,” Madueke added.


The Independent Petroleum Marketers Association of Nigeria (IPMAN) at the weekend said it has started discussing with foreign partners to refine crude oil abroad and import Premium Motor Sprit (petrol) and Kerosene into the country.

It added that it has no intention to claim any subsidy payment from the Federal Government through the method.

IPMAN National Secretary Danladi Pasali, who spoke to reporters in Abuja, explained that should the Federal Government approve the intervention, it would be a temporal relief arrangement pending the improvement of the capacity of the Nigerian National Petroleum Corporation’s (NNPC’s) refineries and the construction of greenfield refining entities.

According to him, the initiative was developed by the association’s new executives to assist the present administration to reduce cost in subsidy payment at the same time meet products’ demand.

His words: “We urged  the Buhari  administration  to support  IPMAN  in mobilising  our foreign  partners  in importing  petroleum  products at no cost or  without  subsidies  payment to government.

”We have done all our mathematics that through our new model of Crude Oil SWAP arrangement; we can wet the country with petrol and kerosene and still gain from the transactions,” Pasali said.

Nigeria is currently consuming about 35 million litres of PMS. But only 30 per cent of the amount can be refined by the four local refineries at full capacities.

The IPMAN secretary said the association in the long run will construct two brand new refineries in the country with 400,000 barrel refining capacity with Blue Oil International.

He added that the association’s National President Mr. Chinedu Okoronkwo is in Lagos to monitor the distribution of the PMS to its members to stop its scarcity.

Pasali said with government’s cooperation, IPMAN members will stop fuel scarcity with their over 20,000 filling stations.

Read more: http://news2.onlinenigeria.com/news/418202-ipman-plans-to-import-fuel-without-subsidy-payment.html#ixzz3cSbsDCWf

Nigeria can boost its oil and gas production by changing the way capital investments are funded in its joint ventures with energy companies, according to Seplat Petroleum Development Co.
State-owned Nigerian National Petroleum Corp., or NNPC, holds an average 55 percent stake in five joint ventures with Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA that pump more than 80 percent of the country’s crude. It pays the same share of capital contributions for the operation of the oil ventures.

Seplat, a Nigerian producer now running a joint venture with NNPC after buying assets sold by Shell, wants the current funding arrangement in Africa’s biggest oil producer scrapped in favor of a method less dependent on the government. The “cash call” requirements are a “constraint” affecting production, Ambroise Orjiako, the company’s chairman, said in a June 5 interview at the World Economic Forum Africa in Cape Town.

“We need to find a situation where the joint-venture partners sit down and agree on what percentage of production should be dedicated on operation and capital expenditures,” Orjiako said. “That way you ensure that growth in the industry is guaranteed, that the production will increase, that the reserves will be increased and that there will be room for exploration activities as well,” he said.

The Nigerian government struggles to meet its share of funding to the operation of the joint ventures with energy companies, thereby limiting the scope for increasing production. It is currently indebted to companies including Shell, Exxon Mobil, Total and Eni, which had provided loans in the past to fill the funding gap.

‘Engage Communities’

“We would like to see government also thinking about divesting some of its joint-venture assets such that the private sector will drive the industry,” Orjiako said.

As energy companies including Shell, Chevron, Total and Eni continue to divest assets in onshore areas plagued by communal unrest and disruptions in favor of offshore investments, Seplat will be looking for opportunities to expand.

“We believe we can engage the communities where we operate differently, being Nigerian companies,” Orjiakor said. “We are looking to see more of that happen and that will create more opportunities.”

When Seplat took over its current oilfields from Shell, they were producing 14,000 barrels of crude per day, according to Orjiakor. Currently, the company pumps an average of 70,000 barrels a day and sees daily output reaching 85,000 barrels by 2017, he said.

With Nigeria seeking to tap its gas reserves to meet pent up power demand, Seplat has expanded its gas investments, improving output from 90 million cubic feet per day in 2010 to the current 200 million cubic feet, the chairman said. It plans to reach a capacity of 300 million cubic feet next year.

“We have increased the ability to deliver gas to different parts of the country, to the north and to the west and indeed into the West African gas pipeline,” he said.


Nigeria became a top drawer when she joined the league of crude oil exporters in 1958. With that achievement, Shell d’Arcy, the company that first struck oil, took significant move to construct the first Port Harcourt refinery in 1965.

After that quantum leap why has none of the International Oil Companies (IOCs) otherwise known as super majors including Shell got involved in constructing any other refinery in Nigeria?

To unravel what went wrong on issues of petroleum refining, importation, subsidy and the attendant inefficiencies, we should not pass over the IOCs long absence in this aspect of the Nigerian downstream petroleum sector.


In finding explanation on how to refine locally, we should be guided by this axiom; that the best answers are found in asking the best questions. Why are the super majors not investing in the Nigerian downstream sector even when they do so in non-oil producing consumer nations?

The petroleum industry is divided into two main categories videlicet the National Oil Companies (NOCs) and the International Oil Companies. It is also segmented into upstream, downstream, pipeline, marine, as well as service and supply.

The Upstream is the searching for potential underground and underwater oil and gas fields, drilling of wells and recovering crude oil and, or natural gas to the surface. The downstream sector is made up of the processing plants called refineries and sometimes petrochemical plants, distribution and marketing of byproducts. Our discourse here is the absence of super majors in the downstream especially as it relates to refining.

National Oil Companies and Super Majors

National Oil Companies: They are petroleum companies nationally owned and operated by governments. More than half of the world’s reserves are controlled by NOCs. Most global oil supplies are from the National Oil Companies.

The development of NOCs in countries with large oil reserves was a struggle to control petroleum resources.

The top 10 NOCs in the world are: Saudi Aramco (Saudi Arabia), National Iranian Oil Company (Iran), Qatar Petroleum (Qatar), Iraq National Oil Company (Iraq), Petroleos de Venezuela (Venezuela), Abu Dhabi National Oil Company (UAE), Kuwait Petroleum Corporation (Kuwait), Nigerian National Petroleum Corporation (Nigeria), Libya National Oil Corporation (Libya), and Sonatrach (Algeria). (Courtesy: Petroleum UK). These NOCs belong to OPEC. There are also NOCs that are non – OPEC.

International Oil Companies: They are publicly owned petroleum companies not operated by governments. The six largest publicly traded IOCs in the world a.k.a. super majors are ExxonMobil (Texas, USA), Royal Dutch Shell (The Hague, Netherlands), BP/Amoco (London, UK) Total SA (Paris, France), Chevron (California, USA) and ConocoPhillips (Texas, USA).

Market and Price Control

We should underscore the point that a cold war between the NOCs and the IOCs existed over time. While NOCs control the reserve size of the industry, IOCs tend to control both reserve size and the market using technology and expertise to manipulate and dominate.

NOCs control about 88 percent of the oil reserves while the IOCs control only 6 percent of the reserves. It should however be noted that NOCs perceived control of the reserve size does not translate to large revenues.

International Oil companies control the price of oil paid to petroleum producing nations. It was in response to imbalances in the bargaining power of IOCs that OPEC was founded in 1960. OPEC encouraged its members to put more pressure on Oil Companies to offer more concessions and also for NOCs to devise better means of extracting and refining with a view to reduce reliance on IOCs.

Super Majors Subsidy

Many governments do not operate nationally owned oil companies. These governments grant publicly owned petroleum companies subsidies. The reason is that oil is of strategic importance to a nation’s security. These subsidies are also granted by governments not to drive companies overseas.

The fear is that home countries will become even more dependent than they already are on foreign nations for oil. So for those governments their oil companies are protected via subsidies at home. The United States government for instance provides large subsidies to publicly owned oil companies a tax rate of nine percent, well below the standard 25 percent corporate rate.


Shell struck oil at Oloibiri in present day Bayelsa State on Sunday 15th January 1956 after about half a century of petroleum prospecting in the Niger Delta. The company extracted and exported crude and refined abroad. In 1965, Shell constructed the 38,000 barrels per day capacity refinery in Port Harcourt. It was expanded to 60,000 barrels per day after the Nigerian civil war.
Nationalisation of Downstream Assets and Consequences

In 1971, Nigeria was to join the Organisation of Petroleum Exporting Countries (OPEC). A requirement was that a country must have a 51 percent stake in the industry. The then military government of General Yakubu Gowon promulgated the indigenization decree to increase the participation of Nigerians in businesses dominated by foreigners.

With that law by fiat, the Nigerian National Oil Corporation (NNOC) was formed as the National Oil Company. The Shell Refinery was then nationalized. One is not sure whether there was a buy out of the nationalised Shell refinery. That was an albatross around Nigeria’s neck and dimmed the spirit of international oil companies to further invest in refineries.

Before indigenization the Federal Government had limited involvement in the oil industry; just taxes and royalties were paid by the oil companies. Nationalisation may have generated large amounts of income and technology for Nigeria but the country paid dearly for it. The Nigerian state built three more refineries in Warri (1978), Kaduna (1980) and the 2nd Port Harcourt (1989). The Eleme Petrochemical Complex (1990) now privatised completes the list.

By 1979, the government of then General Olusegun Obasanjo merged the NNOC and the Ministry of Petroleum Resources to form what is now the NNPC to gain more power over the allocation and concessions through the NNOC. The NNPC then acquired about 60 percent participation in the oil industry; a regime that is still operational today.

Again, the Obasanjo administration in 1978 nationalized Shell and BP downstream facilities because their home government support for the defunct apartheid regime in South Africa. Shell was changed to National and BP became AP. That again may have put the death knell on IOCs downstream investments in Nigeria.

Expertise to explore and develop crude makes IOCs almost indispensable in Nigeria. If not how do we explain their heavy investment in the downstream sector in countries that are net oil importers, and worse still in non-oil producing consumer nations.

Exxon Mobil Corporation of the United States, the largest refiner in the world has no refinery in Nigeria. It owns the ExxonMobil Refining & Supply Company in Singapore with a refining capacity of 605,000 barrels per day capacity. That refinery is the 5th largest in the world. Its refining capacity is higher than our four refineries combined capacity of 445,000 barrels per day. Also, Shell the biggest player in Nigeria, owns the Shell Eastern Petroleum (Pte) Ltd Singapore with a refining capacity of 462,000 barrels per day. It is the 13th largest in global ranking (Courtesy: OGJ).


With the legal and regulatory frameworks of decrees, corporate entities could not enforce their rights. It became expedient for international oil companies to
operate only in the upstream sector as it is today.

Petroleum Industry Bill: The bill to provide for the establishment of legal, fiscal and regulatory framework for the Petroleum industry in Nigeria and other related matters otherwise known as the Petroleum Industry Bill (PIB) is a way to go.

That bill proposed the establishment of a progressive fiscal framework that encourages further investment in the industry while optimizing revenues accruing to government.

The bill also proposed a Downstream Petroleum Regulatory Agency. It makes the Agency a body corporate with perpetual succession. It means the Agency can sue and be sued.


One believes that Nigeria’s nationalisation even when it increased the revenue base to the nation caused a problem in that the International oil companies were forced out of the downstream sector. As a solution, we may renegotiate with these oil companies as they have the technology and expertise to dominate the upstream and downstream sectors for now. We may also tinker and reform our fiscal, legal and regulatory frameworks to accommodate the partnerships we longingly desire with IOCs in the construction of refineries.

- See more at: http://www.vanguardngr.com/2015/06/petroleum-refining-why-super-majors-shun-nigeria/?#sthash.7KA1uvvv.dpuf


Just last week, President Muhammadu Buhari was inaugurated at the Eagle Square, Abuja, as part of a historically peaceful and democratic transition of power in sub-Saharan Africa’s most populous nation. And this new president has his work cut out for him: slowing growth, low oil prices, and subsequent declining government revenues are threatening its economy, which is the biggest in the region. In addition, the Boko Haram insurgency still rages on in the north, though Nigeria and its neighbours have made recent strides in fighting the group.

To address these challenges, President Buhari has already offered a blueprint for his administration: Shortly before his inauguration, he released his 100-day plan, what he calls “My Covenant with Nigerians,” in which he states commitments to supporting agriculture, stamping out corruption, tackling insecurity, and boosting health, among many other objectives.

But to what extent is his plan achievable? What are the realistic expectations for the Buhari administration? What are the biggest obstacles in his way? And, as Brookings Africa Growth Initiative Non-resident Senior Fellow Richard Joseph put it, with this peaceful transition, has Nigeria’s hope for democratic development been renewed?

Next Monday, the Africa Growth Initiative (AGI) is convening a panel of Nigeria experts to discuss these (and other) opportunities and challenges President Buhari is facing at a public Brookings event entitled: “Nigeria in transition: Prospects and challenges for the new government.”

In the build up to this event, AGI scholars and colleagues have produced a number of briefs on the economic, political, and security developments in the country over the past few years. Here is a recap of some of this work:

Oil and Nigeria’s economy

Nigeria’s economy depends heavily on oil. In fact, crude oil accounts for over 70 per cent of its government revenue — so, the past year’s major decline in oil prices has hit the country hard. In a piece on the consequences of falling oil prices on the continent, Amadou Sy discusses how these dropping commodity prices caused the naira to depreciate, making it even harder for the country to service its debt. In times of low prices, many experts, like AGI’s Non-resident Senior Fellow Vera Songwe, recommend that policymakers take advantage of the opportunity and remove fuel subsidies.

The subsidy system, along with strikes by fuel marketers and unions, has also been blamed for the oil scarcities and widespread power outages just last week. These are not the only problems related to oil: Inquiries over accusations of embezzlement of $20 billion from crude oil sales have been taking place for months.

Nigeria’s political transitions

The first quarter of the year saw Nigeria’s most closely fought election in its history. Nigerian politics are particularly complex, as AGI’s Foresight Africa 2015 explored: Religious, geographic, ethnic, and security issues, among others, create a multi-faceted political landscape. The recent emergence of President Buhari’s new political party — the All Progressives Congress (APC) — through a merger of disparate parties created a true competitor for the former ruling People’s Democratic Party (PDP). According to AGI Senior Fellow Mwangi Kimenyi, the results of this election were a “surprise” to many — and not necessarily in that Buhari was the winner. For example, unlike many Nigerian watchers’ predictions, there were relatively few incidences of violence, even though the six-week postponement of the elections made many nervous. Also, and, perhaps most importantly, Buhari’s rival, former President Goodluck Jonathan, defied recent trends in the region and quickly respected the election results and agreed to step down.

For more information not only on historical political transitions since the end of colonialism, but those of other sub-Saharan countries too, check out AGI’s new interactive the “African Leadership Transitions Tracker.”

Security and Boko Haram

President Buhari, a former military leader, still faces an uphill battle in the fight against Boko Haram, whose frequent attacks remain a consistent threat to peace and security, especially in the north of the country. While Nigeria and its neighbours Cameroon, Niger, Benin and Chad have made in-roads into Boko Haram territory, the group continues to perpetuate kidnappings, bombings, and other violence.

In the wake of the 2014 kidnapping of some schoolgirls in Chibok, Bornu State, and as Western forces and actors contemplated heightened involvement in the region, Richard Joseph, highlighted key issues for policymakers as they consider their choices and strategies. At the same time, and as part of a wider AGI study on the impact of conflict on agriculture in West Africa, AGI posted a series of blogs examining the origins, goals, and potential trajectory of the continuing conflict with Boko Haram.


Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has adviced President Muhammadu Buhari to focus the deregulation policy of the nation’s oil and gas industry on local production rather than importation.

In a statement by its National Public Relations Officer, Mr Emmanuel Ojugbana, the association noted that if local refining was not increased to meet local demand for petroleum products, especially the premium motor spirit (petrol), removing subsidy on petroleum products will bring inflict serious hardship on Nigerians.

The association said removing subsidy while the country depends on importation of refined products would make prices of refined petroleum products to be out of the reach of the masses and causes inflation.

Ojugbana stated that importation of refined petroleum products was a drain on the nation’s revenue, adding that it creates jobs for the refining nations in spite of the high unemployment rate confronting Nigeria.

He stated: “Importation of refined petroleum products is also putting the Naira under undue pressure and creating social problems for the economy. This is unacceptable to PENGASSAN. Abrupt removal of fuel subsidy will create chaos that may ground the economy.

PENGASSAN calls for well-coordinated measures with timeline to achieve selfsufficiency in local refining as a means of proffering acceptable steps to end fuel subsidy. “This should be combined with such other measures for effective optimization of gas especially for domestic, industrial, electricity and automotive energy. Such will create other affordable and friendly sources for energy needs.”

He called on the government to declare a state of emergency in the downstream oil and gas sector and convene an all-stakeholders forum to come up with concrete and sustainable steps with reliable timeline for achieving demand-supply equilibrium through local refining.

The strategy must be to guarantee a total stoppage of both petroleum products importation and fuel subsidy. According to him, Nigerians expect relying on the resources that the nation is endowed with should be able to guarantee refined products at affordable prices to the populace, adding that this could have been possible if local refining capacities are enhanced.

Ojugbana explained that both the government and industry operators had always yearned to promote competition and efficiency but failed to assure on how to enhance local refining capacity to contain local demand.


Oil workers acting under the umbrella of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) have urged the Federal Government to make gas its major source of earnings.

In a statement signed by Comrades Francis Johnson and Bayo Olowoshile, (President and General Secretary respectively), the group said it is high time the country diversified its economy by giving more attention to gas exploration and exportation for growth.

It said Nigeria’s proven gas reserves estimated at 5.2 trillion cubit meters (tcm)/183 trillion cubic feet(tcf) is huge and capable of bringing huge revenue to the Federal Government if well harnessed.

It said the annual gas flared estimated at 31.5 billion cubit metres bcm / 1.1 trillion cubic feet (tcf) valued at $2.5billion is also a huge economic waste, adding that the waste can be prevented if the right policies are in place.

“With 172million estimated population and our vast growing, but grossly under exploited gas markets, the global campaign for the promotion of more environment friendly energy, emphasis on the activities of gas will preserve our forest, curtail diversification, and generate more revenues for the country.

Based on this, the government of President Muhammad Buhari will be recording a far more success in the area of improving fiscal resources for the growth of the economy,’’ it said.

It explained that the depleted fortune of Nigeria’s foreign reserves and failure of the Federal Government to meet budgetary expectations in recent time, was as a result of the fact that the country depends majorly on oil.

According to the body, there is the need for a paradigm shift from oil to gas to grow the economy well, stressing that billions of dollars being  by Nigeria is not good enough.


A national conference of contracts and procurement general managers in private sector and directors of procurement in public sector is being convened by Nigeria LNG Limited (NLNG) to hold on June, 8, 2015 in Lagos.

The company stated with the prevailing oil and gas prices, which are 40 per cent lower than previous levels and its resultant significant reduction in revenues of oil and gas producing countries and companies, there is an urgent need for cost efficiency and value for money.

According to Babs Omotowa, NLNG’s Managing Director/Chief Executive Officer and Global President of Chartered Institute of Procurement & Supply (CIPS) headquartered in the UK, “The conference is NLNG’s contribution to the ongoing drive to find strategies to survive the significant loss of revenue which is affecting GDP growth with potential for negative social impact. This is against the backdrop that costs, especially capital costs, have increased by over 500 per cent in the past two decades. Therefore, driving cost efficiency and value-for-money out of government and organization spend and lowering costs through efficiency, discipline, creativity and innovation, is critical.|

Omotowa added: “Good procurement strategies and practices can bring about significant benefits as seen in developed countries, and it also provides a significant tool for addressing corruption and capacity building in developing countries. This conference is to enable major players in contracting and procurement activities discuss how to deliver higher benefits to their organisations and to the Nigerian economy at large. This is our hope for Nigeria, in line with our vision to help build a better Nigeria, and as the number 1 ranked home-grown Nigerian Company,” he added.

The conference is expected to attract industry leaders, Contracting and Procurement General Managers and Directors of Procurement in Public Sectors.

NLNG is owned by four shareholders, namely, the Federal Government of Nigeria, represented by the Nigerian National Petroleum Corporation, NNPC (49%),  Shell Gas BV, SGBV, (25.6%), Total LNG Nigeria Limited (15%), and Eni International (N.A,) N. V. S. a. r. l (10.4%).


May 29, 2015 has come and gone. Goodluck Ebele Jonathan is now a former president, and Nigeria’s prevalent electricity crisis is no longer his headache. The problem is now wholly owned by Muhammadu Buhari, the new President of the Federal Republic of Nigeria and Commander-In-Chief of the Armed Forces. Thus far, Buhari has started on a good note, declaring in his inaugural speech that “Careful studies are under way during this transition to identify the quickest, safest and most cost-effective way to bring light and relief to Nigerians.”

Clearly, President Buhari is inheriting dizzying catalogues of crisis on all fronts. However, considering the importance of electricity in national development as well as human life, the new government cannot afford the luxury of an extended study or any level of presidential honeymoon in the area of the current energy crisis. There is an urgent need for immediate solution.

Truth be told, while it can be very apt to equate the past Jonathan government with every failure to proffer practical solutions in many areas, the team can hardly be faulted for the failure to identify and echo the problems. Thus, the last official press conference granted by the former Minister of Power, Prof. Chinedu Nebo, on the electricity crisis is very instructive. In his words, “Energy security must be addressed in a holistic manner…The first phase of the war has to do with the issue of gas pipeline vandalism and it may interest you to know that millions of dollars are spent fixing these gas pipelines on a monthly basis.”

Unlike in the past, the issue of pipeline vandalism requires every sense of urgency and decisiveness. It is time to view the matter with similar lens as in an act of war.

The point is that, even as the existing energy policy is fraught with various challenges, the situation no longer requires a rocket scientist to discern that the most immediate challenge is that gas pipelines to Nigeria’s main feed to the National Power Grid are constantly being vandalised, particularly along the Trans Forcardos and Escravos-Lagos axis.

A corpus of research has pegged the main cause of pipeline vandalism to restless youths who are agitated because of a long history of neglect of host communities. The area is replete with high unemployment, abject poverty, inadequate social amenities, and environmental hazards. Various governments responded by establishing agencies, such as the Niger Delta Basin Development Authority (NDBDA), the Niger Delta Development Commission (NDDC), and the Niger Delta Ministry. However, despite billions of dollars in annual budget, the programmes are mired in all manners of controversy, including massive corruption, phantom projects, and the gross neglect of the intended beneficiaries.

Unlike in the past, the issue of pipeline vandalism requires every sense of urgency and decisiveness. It is time to view the matter with similar lens as in an act of war. Not only has the current electricity crisis cost thousands of lives, directly or indirectly, it has also resulted in billions of dollars more of incalculable loss to the national economy. Further, depending on the index of measurement, several studies have cited the linear cost of the sabotage as anywhere from $7 to $24 billion per annum. Moreover, the pattern of vandalism and attendant epileptic power supply has historically discouraged both local and foreign investment in Nigeria. The objective fact is that the incessant vandalism of energy assets is a serious threat to national security and potentially as grave as the Boko Haram menace terrorising the country.

…the “quickest, safest and most cost-effective way” to curb the problem, in the interim, is to deploy with immediate effect Nigeria’s armed forces to fully safeguard every pole in the breadth and depth of the problematic areas along the Trans Forcardos and Escravos-Lagos axis of the pipelines. The phalanx can be augmented with ever-ready labour from the National Youth Service Corps or the other teeming unemployed graduates who are eager to work.

Accordingly, President Buhari should, without any delay, isolate the problem and inaugurate a presidential task force on Pipeline Vandalism. Such task force should include but not be limited to some influential representatives from Niger Delta and other host communities. With new faces expected soon at the helm of the Niger Delta Ministry, the host communities can be reassured by also effecting necessary changes to the leaderships of both NDBDA and NDDC, commonly associated with corruption and ineptitude.

In the process, the president should demonstrate the common sense leadership that has eluded Nigeria for ages. Buhari’s unique pedigree, the manner of his second coming, and charming political goodwill have combined to position him better than anyone in the national history to effectively influence followers towards the desired change. Influence! Now is the time to lead by influencing the people of the host communities with a clear message that crystallises the impact of pipeline vandalism, the sincerity of purpose of government, and the implications for the greater good.

The measures above should go in tandem with practical solutions. Of course, a permanent solution to pipeline vandalism ought to include 100 percent digital surveillance systems, but such approach requires longer time to install. Thus, the “quickest, safest and most cost-effective way” to curb the problem, in the interim, is to deploy with immediate effect Nigeria’s armed forces to fully safeguard every pole in the breadth and depth of the problematic areas along the Trans Forcardos and Escravos-Lagos axis of the pipelines. The phalanx can be augmented with ever-ready labour from the National Youth Service Corps or the other teeming unemployed graduates who are eager to work. The recurring costs of fixing the pipelines, current security, and other contingencies are well adequate to fund this proposal. The ancient idea of entrusting recreant militants with the nation’s oil and gas pipelines was never a solution in the first place.

Yet, I pity Muhammadu Buhari here. True. Given his background, any mention of war or mere emphasis on punishment in relation to his presidency is sure to awaken critics who are anxious to castigate such notion as a perpetual vestige of the man’s military regime…

Next, unlike the case of oil pipelines, there are no visible benefits to the perpetrators of gas pipeline vandalism themselves. The most likely justification is a possible conspiracy within the electric generator industry whose businesses thrive upon any drop in power supply. The other scheme resides within the maintenance structure that gulps about N1.5 billion per year for fixing vandalised pipelines. But these conspiracy theories have lingered for far too long. The cabals are well known. Their activities are traceable. It is time to unmask and mete them with commensurate punishment once and for all.

Also important, similar to other countries of the world, Nigeria has in place specific anti-sabotage laws that address punishment for vandalism and conspiracy in the oil and gas sector. But a major Nigerian problem had been the absence of a leader with the will power to enforce the laws. This was exactly where and why Nigerian masses beckoned Muhammadu Buhari back to power. The president must seize the moment and work with relevant agencies to ensure that culprits face the full wrath of the law.

Buhari does not need to be reminded that his impeccable track record against indiscipline remains the prime seal of his contract with the Nigerian masses.

Yet, I pity Muhammadu Buhari here. True. Given his background, any mention of war or mere emphasis on punishment in relation to his presidency is sure to awaken critics who are anxious to castigate such notion as a perpetual vestige of the man’s military regime, serially discredited during the past election.

But Mr. President should not waver. Buhari does not need to be reminded that his impeccable track record against indiscipline remains the prime seal of his contract with the Nigerian masses. Moreover, not only is leadership contingent upon the prevailing environment, effective democracies are consistent with accountability, checks and balances and, of course, consequences. A mere tampering of an electric metre in the State of Texas, USA, for instance, is treated as a felony let alone any threat to national security like the endemic sabotage of oil and gas pipelines in Nigeria. Where there are no serious consequences for bad behaviours, the bad behaviours usually worsen. And that has been Nigeria’s Achilles’ heel for the longest time.


Petralon Energy, a Nigerian indigenous exploration and production company targets to record first oil milestone by early July 2015, and stressed that it has already committed in excess of $10 million over the last six months to complete the re-entry of the existing Dawes Island-1 well in the Dawes Island marginal oilfield.

The company said in a statement at the weekend that the drilling campaign in the Dawes Island well was at an advanced stage, having drilled over 4,100 feet with the side-track to a target depth of 7,010 feet well underway.

Petralon Energy farmed into the Dawes Island Field in Oil Prospecting Leases (OPLs) 2005 and 2006 in July 2014, in partnership with Tako Exploration and Production (E&P) Solutions Limited and has made considerable headway in operations in this field.

The Dawes Island Marginal Field is located in OPLs 2005 and 2006 (formerly Oil Mining Lease (OML) 54, in Swamp Terrain, about 15 kilometres South West of Port Harcourt and has a Field Coverage Area of 40 kilometres squared.
The field, previously owned by Chevron (formerly OML 54), is currently owned by Eurafric Energy Limited.

Petralon acquired a joint stake in Dawes Island with Tako E&P – 35 per cent and 14 per cent, respectively.

The Chief Executive Officer (CEO) of Petralon Energy Limited, Mr. Ahonsi Unuigbe said his company was extremely delighted to be developing the Dawes Island Marginal Field.

“At Petralon, local content meets global best practice and I am confident that our dynamic approach coupled with our experience and expertise will make this project a success.  We anticipate a base case initial production from the field of 1,500 bopd, ramping this up to 3,000 barrels of oil equivalent per day (bopd) by year-end. We are proud to be part of the rapidly growing group of indigenous companies who have the technical competence and financial resources to own and operate assets in Nigeria, fueling the growth and development the indigenous upstream sector Nigeria,” he explained.

Petralon Energy is based in Nigeria but with regional expansion plans into other African countries.

The company, which has already raised over $50million to fund it’s immediate growth plans, is set up to acquire, develop, and operate assets in the oil and gas sector, including, but not limited to farm-in opportunities with indigenous and international oil companies, marginal fields, and bid rounds and concessions.


Oil & Gas Industry / Bayelsa Community Shuts Down Agip's Oil Wells
« on: June 02, 2015, 08:57:50 AM »
The people of Egbebiri Community in Biseni, Yenagoa Local Government Area of Bayelsa State have shut down six oil wells operated by Nigerian Agip Oil Company (NAOC), alleging neglect of its Cooperate Social Responsibilities.

The News Agency of Nigeria (NAN) reports that the aggrieved residents, comprising youths and women, blocked all access roads leading to the affected oil wells with logs.

The paramount ruler of Egbebiri, Chief Aniedima Nicholas, told NAN that they disrupted the oil production because of NAOC refusal to renew the Memorandum of Understanding (MoU) with the community.

Nicholas said the maiden MoU signed in 2001 lapsed in 2005, but efforts to get the oil firm to renew the MoU proved abortive.

"Our grievances are due to the insensitive posture of Agip to our developmental aspirations.

"Our needs and expectations are captured in that agreement and if you look at the few amenities we have here, they are products of the first MoU.

"From 2005 till date, Agip abdicated its role and that stagnated development here; the road you see was from that MoU, we have waited for so long a time and decided to take this final step.

"We are prepared to go to every length to bring them to the negotiation table to renew the MoU as well as pay outstanding liabilities for jobs done by the community for more than one year.

"Our surveillance jobs on their pipelines have continued despite heavy debts owed to us as well as pending compensation for oil spills since 2010," Nicholas said.

The Chairman, Ijaw Youths Council in Egbebiri, Mr John Aniedima, said the youths have sacked security operatives deployed to safeguard the facilities after shutting down the flow of oil.

"We have taken over the wells to compel Agip to come to a negotiating table with community leaders.



To  ease cooking gas scarcity, the Nigeria Liquefied Natural Gas(NLNG) has supplied 6,000 metric tonnes of Liquefied Petroleum Gas(LPG) to oil marketers.

The product arrived in Lagos at the weekend, by MT Gas Provident, which  left Bonny, Rivers State, a few days ago.

Few hours after the vessel  berthed in Lagos, the product  was  distributed to oil marketing firms  such as Conoil, Mobil, MRS, Nipco and others, by the Federal Government.

The aim was to ease     scarcity caused by  the strike embarked upon by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigerian Association of Petroleum and Natural Gas Workers (NUPENG).

The strike, which was called off last week, has seen prices of cooking gas normalising because tanker’ drivers who are members of PENGASSAN and NUPENG have resumed  supply  of the product to marketers.

The Nation  findings  revealed     that   prices of cooking gas have reduced  because  marketers are no longer rationalising the product.

It was found that prices which went up by  between 70 to 100 per cent has reduced to 30 per cent, depending on the areas  consumers buy from.

In some places, consumers  now refill a 12.5kilogramme gas cylinder with between 3, 000 and N3,200,  as against N4,000 they paid during the scarcity.

At Iyana- Ipaja, Egbeda, Ikeja, Oshodi,  Yaba, Maryland, among other  has visited by The Nation, the price of the cooking gas has reduced slightly.

Marketers said the scarcity of the product and the attendant increase in prices caused by the strike has reduced.

A marketer, who identified himself as Joshua Roland, said the scarcity of cooking gas  has disappeared, adding that marketers are  getting  the product to sell.

He said: “Anytime there is shortfall in the supply of gas in the country, either due to strike or technical problems from the Nigeria Liquefied Natural Gas Limited (NLNG), what I do for my loyal customers, is reserve and sell to them. “A good businessman must know the needs and mindset of his customers to stay in business,” he said.

A  gas dealer in Ikeja,  Moses Adeoye, said the scarcity has had untold effect on their operation. He said the problem was compounded by power supply and fuel scarcity.

He said the campaign for increased use of cooking gas by the Nigerian National Petroleum Corporation (NNPC) and operators such as Oando and Forte Oil, have not been effective because of the problems in the sector. “How can people use cooking gas for domestic and industrial purposes when they cannot get the product to buy when needed? How can the government achieve the goal of making people use cooking gas when it cannot remove the bottlenecks hindering supply of the product?

The President, Liquefied Petroleum Gas Association of Nigeria (LPGAN), Dapo Adesina, said the scarcity of cooking gas and rise in price was expected, given the strike. He said the strike affected the distribution of the product across the country, stressing the situation is normalising  now that the strike has been called off.


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