Register for free      |     Facebook    |    twitter    |    Google+     |    Advertize for free

Show Posts

This section allows you to view all posts made by this member. Note that you can only see posts made in areas you currently have access to.

Messages - Admin

Pages: 1 ... 23 24 [25] 26 27 ... 79
News & Happenings / Nigeria Needs to Check Into Oil Rehab Now
« on: November 05, 2014, 04:13:23 PM »
In 2009, the great recession of the previous year was continuing to have a serious effect on global demand capacity with oil prices crashing from $140 to $38 per barrel. Nigeria however, was not flustered - unlike its fellow African oil producer, Angola. It simply withdrew funds from its Excess Crude Account (ECA) to finance its budget. Angola on the other hand took an IMF $1.4 billion loan to stabilise its economy.

But now the oil market is crashing again. Since June, prices have gone from $115 to around $80 per barrel. How Nigeria will mitigate this remains to be seen is to be seen. Whilst Angola has established a sovereign wealth fund to invest the profits it makes on oil sales, Nigeria has carried on spending.

The weakening of the Nigerian economy's protection from the oil market began shortly before Umar Musa Yar'Adua succeeded Olusegun Obasanjo in 2007. He was politically weaker than his successor and realising this the State Governors, through the State Governors Forum, soon became politically powerful enough to set their sights on the ECA.

They argued in court that the 1999 constitution recognises only the Federation Account, that the ECA is illegal, that all proceeds from oil sales should be put into the Federation Account from where they would be shared out among the three tiers of government: Federal, state and local. The ECA, which increased to $20 billion between 2004 and 2007, should be closed down.

The account contained $3.6 billion in the middle of 2012, $11 billion at the end of 2012 and $2.1 billion at the beginning of this year. It contains $4.1 billion at the time of writing, an amount the World Bank at the end of its current meeting advised should be urgently increased as it is not sufficient to protect the economy from an oil shock.

The issue is not the legality of the ECA. Politicians are just not interested in saving the oil wealth. If they were, it would have been going into the Sovereign Wealth Fund (SWF) - the National Assembly passed a bill that makes every Nigerian its collective owner (in comparison with the ECA, which only the Federal Government owns).

The SWF was established in 2012 to replace the ECA. The latter's funds were to be transferred into it for investment. The Federal Government however, went through the eye of a needle before governors agreed to the transfer of the first $1 billion. Hopes for the fund have remained unrealised and at the time of writing it contains $1.5 billion. The main opposition party, the All Progressive Congress, has promised to scrap it alongside the ECA when it gains power in 2015.

Nigeria has general elections to finance early next year. It has to pay subsidy bills, salaries and to finance the reconstruction of areas that the terrorist group Boko Haram has, and continues to decimate. It also has to service the almost $60 billion in domestic debts politicians have collected. The country's political economy must change.

Nigeria must check into oil rehab. It should start by reducing the amount of oil proceeds that finance the budget or reducing the overall size of the budget. The budget benchmark, which is set based on a price the government projects oil would sell in a given year, must stop increasing annually. It is the addictive annual increase that has made the government unwisely put the benchmark for the 2015 budget at $78 per barrel - at a time of oil market uncertainties, when prices which have fallen to $80 per barrel may still fall further. The time for oil rehab check-in is now.

Yemi Soneye is a poet and graduate student of Agricultural Economics at Obafemi Awolowo University, Ile-Ife. He has written on the Nigerian economy for London's Think Africa Press. His poetry appear most recently in Maple Tree Literary Supplement.

Nigerian stocks dropped, replacing Zimbabwe's as Africa’s worst performer this year, as sliding oil prices weakened the nation’s ability to shore up the currency.

The Nigerian Stock Exchange All Share Index (NGSEINDX) fell for a 10th day, bringing losses in 2014 to 12.5 percent. Zimbabwe’s benchmark gauge is down 11.7 percent as President Robert Mugabe’s ruling party battles factional infighting and a slowing economy with factories shutting down and slumping consumer spending.

The currency of Africa’s largest producer of oil, which accounts for about 80 percent of government revenue, declined a fourth day as Brent crude slipped to its lowest level in four years. The Central Bank of Nigeria reduced foreign-currency reserves to a three-month low to try stem the naira’s 3.7 percent depreciation this year, while pledging to keep supporting the currency.

Nigeria’s central bank “remains intent on managing the exchange-rate situation without needing to hike rates or devalue the currency” before the February general election, Gareth Brickman and Catherine Bennett, analysts at Johannesburg-based ETM Analytics, said in an e-mailed note. “Current trends still show the outlook to be pressuring away its room for maneuver.”

A weaker currency would boost the cost of importing everything from fuel to food, threatening support for the party of President Goodluck Jonathan, who’s already under pressure for failing to stem deadly attacks by Islamist militants. Africa’s biggest economy imports about 70 percent of its fuel needs because of inadequate refining capacity.

The NSE All Share Index slid 1.6 percent to 36154.73 as of 12:23 p.m. in Lagos, the commercial hub as 47 stocks retreated, four rose and 144 were unchanged. The gauge is the world’s fifth-worst performer this year after benchmarks in Russia, Portugal, Greece and Austria. The naira weakened 0.4 percent to 166.58 per dollar.


The Chairman , House of Representative Committee on Petroleum Resources (downstream) , Honourable Dakuku Peterside is optimistic that the Petroleum Industry bill (PIB)  which has suffered delays  for over 8 years  due to lack of harmonization of contending interests,  would be passed into law before the end of the 7th  legislative  regime .  He  spoke with our Acting Energy Editor, Anayo Korie  on  wide range of issues concerning the downstream sector of Nigeria’s oil industry. Excepts:

What is the House of Representative doing to ensure that Federal Ministry  of Finance settle subsidy claims of oil marketers  to avert fuel scarcity now that Christmas and 2015 General Elections are  fast approaching?

The commitment of National Assembly is  to serve  the interest of all Nigerians by making good laws  for the governance of the country  and for the welfare of the citizens, as  most of the oil marketers are Nigerians. For the fact they are Nigerians they  are serving  the interest of Nigerians .Therefore, our  interests    in  payment of importers claims   is  for them to continue  to import fuel  which is an interim measure   to sustain the running of Nigerian economy.

On the long  term , we  will not support the importation of fuel into the country  when regulatory frame work is okay to guarantee the refining of petroleum products  in-country .For now that is one of the measures   that keep the nation moving .The marketers will  continue to import fuel for the nation  to have uninterrupted supply of Petroleum products ,because if they stop   importation of fuel today there will be crisis ,none of us can imagine  the  dimension of the crisis. .If the downstream sector of the oil industry is  shut down today it will affect all sectors of the economy.For instance it will affect homes, industries,transportation  .The reason for  our  interest in the downstream sector  is to protect Nigeria businesses.We don’t  have to throw people out of employment.

Therefore, the question is what are we doing?,  we are doing three things to keep Nigeria  moving on the right track.  One is to accelerate the passage of petroleum industry bill. Secondly, we are engaging the Ministry of Finance to pay for the imported products into the country   .We have told the Ministry of Finance  ,there is no justification for owing the importers .The truth is that the bench mark for crude is  $77.05 ,crude oil price has not fallen below $90 per a barrel ,absolutely there is no justification for the delay in  the payment for now.

The target   at the time we passed  that  budget was 2.3 million barrels per a day ,again the fluctuation of 2.4 million barrels  is not the justification for owing the marketers. When we approached the Ministry  of Finance to pay, they complained of not having money. Therefore, in this issue of corruption, they are  delaying things ,we have to investigate the matter properly again. We know of the incidence of oil theft, but not to the extent of saying ,there is no money to pay for service rendered.

On the preparation for the payment for importation, I want to commend Petroleum  Products Price Regulation Agency  PPPRA for their role in the area of processing  and  documentation for the marketers who imported  fuel . The   House of Representative  is pleased  with  their conduct.

We are still talking to Ministry of Finance  on the best way  to pay marketers  for fuel imported  into the country. The House of Representative is searching  for the best approach to handle the subsidy regime. We  have observed that subsidy in itself is not sustainable. No matter how we look at it, the initiative cannot last for long  ,Addressing it  with legislation now  is not the appropriate time. For now,  we have to block some loopholes. We are not resting on our oars, because whatever  happens now will impact on the economy. We don’t want Nigerians to suffer or the economy to be grinded to a halt.

You will understand  that we are approaching 2015 General  Election , which is critical to  Nigerians.  If we get it wrong,   the nation will begin to witness demonstrations  and riots all over,  thereby   affecting Christmas celebration and  most importantly, 2015 transition .We don,t  want such negative vice    to happen to the nation.  We are committed  to ensuring that  peace  thrives.

What  is the National Assembly’s role in mitigating the risk undertaken  by oil marketers  in fuel importation?

Every business  venture comes with  its  associated risks.  An entrepreneur is  the one   who takes risks. One of the   risks associated with business is  that of anticipation.  If it goes well, will the businessman bring  the profit to national purse ? The answer is no, or any one of us the answer is also no. They   should have the ability to absorb the shock. In the interim ,the National Assembly will not do anything  to combat the risk associate with  anticipation.

Very soon  when the House of Representative resumes  from recess, the  PIB would be laid on the floor for deliberation  and approval.   The Senate will follow suit ,before it will presented to the President for ascent  . There is transitional legislation for PIB that will  take care of Pre and post PIB  regime .For instance,  downstream regulation is done  by multiple agencies such as Department of Petroleum Resources, (DPR ) and the Petroleum Products  Price Regulation Agency  (PPPRA) to an extent. If you talk of the quality of petroleum product that is regulated by  DPR, the importation of Fuel is regulated by PPPRA,there  are some aspects of regulation done  by Petroleum Product Marketing Company (PPMC), and Nigeria National Petroleum Company.

Now in the new post   PIB regime, it will be one –stop  shop down stream  to regulate the demand and consumption of fuel in Nigeria. Between that  time,  the PPPRA will transit to DPRK  After that transition, regulation will take  care of what  is happening now.

The importation of  fuel will still continue even when PIB is passed into law,that is when regulation will be paramount. The fact that the   PIB   becomes law  does mean that refineries would be built immediately.   Certainly not. The fact is that we will continue to import fuel while regulation will cheek quality to avert oil traders going to bring substandard fuel to the country .In post PIB, the players will still remain the players because they have the facilities  already.They  have tank farms, trucks, marine vessels   and other logistics that will enable distribution of fuel nationwide .What will happen is the change of operation.

However, for any importer to bring petroleum  product  into the country  there is the need  for him to have import license in order to bring the right quality.  We have  to know the source of the fuel, and to know if the products  meet our specification.

When will Nigeria stop importing fuel, considering the  fact that she is one of the largest producer of hydrocarbon  in Africa?

We are not happy that Nigeria is still  importing fuel to meet our domestic  needs, We are not pleased that the nation is also importing , almost all the components used in the formulation of lubricants. That is not where  we desired to be ,or wanted to be.  That is not our vision.  It never makes us happy, We are concerned like every other Nigerian .The reality is that , though  it may not be palatable that today ,we don’t have refineries to  produce these  derivatives locally. Our refineries are not working  to our desired level .

However, in the short term, we have to import fuel  because we  cannot  build refineries over night . The most important thing we want  to do is to provide the regulatory business environment  for investment to flow in to the  country . We are making efforts to provide that environment .In terms of power, you know that we are not getting it  right,in terms of regulation. We are still grappling with PIB.

In the area of funding, most Nigerian banks are not interested in long term funding .It’s not blaming government alone,  both government and the private sector should partner to develop  the nation.

Licenses were awarded to private sector to  build 18 refineries , but not one was  built today. A lot of   factors   was responsible for that.  One is regulatory  environment: marketers were mandated to sell at a particular  price. The importing environment is tight.

In terms of security, you are  aware  of the prevalent challenges.  Every day, the oil pipeline is vandalised or destroyed. Even when  you are bringing vessels ,piracy is there to contend with. We have not got the issue of security right .There is  a lot of things we need  to put in place to get our bearings  right. You must be aware of government plans to build green refineries in Bayelsa,Lagos  and Kogi  states. Have you asked why those refineries have not started producing fuel?  The model  is that government wants  to own maximum of 40 percent ,while private investors 60 per cent. You understand that government is not a good business man.We need private sector inputs not   only to drive efficiency and effectiveness but also  ensure that business is run efficiently  to guarantee returns   on  investment .The investment  should  be run  efficiently to avoid people coming to claim the business are their political patronage or dividend of democracy.  We don’t have private investors.  To that extent, private investors are insisting that certain regulatory policies must be addresse.  Nobody puts his funds down for investment for mere  fun of it. Investors invest to earn profits.  The issue of corruption in downstream sector has to be addressed. The question is,  are we okay with the situation we find our self now ,and are we addressing it?  We  are using PIB legislation  and other  legislations  to address  the challenges.

Why  are private investors shunning investment in the downstream sector?

Why private investors are shunning  investment in the downstream sector  is due to heavy regulation.  It is a fact that deregulation  will  not solve our problems, but that is critical  to moving the sector forward. If we go to international lenders to borrow funds for investment, we have go there with  a balance sheet on how the borrowed funds will be re-paid .We have  to show how their money will be re-paid over time including profit.  I don,t   see any investor  committing his funds if the  challenges of regulatory environment  are not addressed.

We have to  find  a way to stop importation of fuel which is creating jobs for the citizens of the exporting nations .Nigeria is affected due to this  practice with  its  negative  impact  of job loss  that affects  citizens  of Ngeria. Of course, our role  in Africa will be undermined. Like the saying that one of every four  black man in Africa is a Nigerian, they are looking unto Nigeria for assistance and we will not fail them.

When  are we  expecting the passage of PIB?

When the bill is laid on the floor of the house of Representatives ,it will be circulated  to members , observation and correction will  made.   After studies, it goes to  third reading and committee stages,  subject to the Senate adding their inputs . Thereafter, the bill would be forwarded  to the President for his ascent .Hopefully, by the grace of God  before the end of May 2015 which is end of the 7th  legislative period,  it  will  become one of the laws of the land.

The passage of the bill would definitely drive the efficiency of the operation of the downstream of the petroleum industry , develop individual and corporate businesses,  and create wealth for Nigerians  via employment opportunities etc.

Seplat Petroleum Development Co. (SEPL), a Nigerian oil producer that raised about $500 million in a share sale this year, is looking to buy natural-gas assets to take advantage of higher prices in Africa’s biggest economy.

“Two things are driving the gas-commercialization business: the gas price and increasing demand,” Chairman Bryant Orjiako said in an interview yesterday in Cape Town. “Another thing that we’re doing is to find any available source of gas.”

Nigeria, the holder of Africa’s largest gas reserves, raised the price of gas to power plants to $2.50 per million standard cubic feet plus 80 cents for transport in August, from $1.50.

The country increased gas tariffs to help spur supplies to power plants in Nigeria, which generates less electricity than is needed by Africa’s biggest population of about 170 million. This causes regular blackouts that the government says are a bottleneck for growth, with a shortage of the fuel for stations being one reason why generation is below capacity.

The nation wants to almost triple natural-gas production capacity to 11 billion cubic feet a day by 2020 to help meet its electricity and industrial development needs, Oil Minister Diezani Alison-Madueke said in September. Nigeria loses at least $3 billion in revenue a year by burning off associated gas, which is pumped together with crude oil, according to the Petroleum Ministry. Flaring was taking place because the domestic fuel prices were so low.

Shell Assets

Seplat has contracts to supply power generators and is in discussions to add others, Orjiako said. The company sells its gas for about $3 per 1,000 cubic feet to electricity plants, Chief Executive Officer Austin Avuru said in April. The price for the fuel has risen from about 20 cents only a couple of years ago, he said.

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, is selling fields in Nigeria, where it lost almost $1 billion to sabotage in 2013, as part of its $15 billion asset-disposal plan. Seplat will consider some of these fields, Orjiako said.

“We are interested in every divestment in the onshore and shallow water,” he said. “Shell, having the largest footprint, obviously has the ability to put up all these assets so we’re looking at all of these.”

Pipeline security has long been an issue in the Niger Delta and is now improving. Throughout the 700-kilometer (435-mile) network in the areas of Seplat assets, there were seven incidents of vandalism in 2011, its first full year of operations, four in 2012 and none since 2013, Orjiako said.

Brent crude has dropped 28 percent from its 2014 high of $115.71 a barrel on June 19. It declined 1.4 percent to $83.57 a barrel at 9:24 a.m. in London. Seplat fell 1.9 percent to 196 pence in the city, extending the decrease this year to 6.7 percent.

In the “oil and gas business, like any commodity business, you expect volatility,” Orjiako said.

While the oil price has declined, Seplat isn’t limiting itself to gas acquisitions.

“Depending on what you find in your environment, you’re bound to adjust,” Orjiako said.

News & Happenings / 'How to grow non-oil economy'
« on: November 03, 2014, 10:28:42 AM »
The sudden decline in the price of crude oil at the international marketer from over $100 to about $78 per barrel is unsettling for Nigeria’s economy, which depends largely on revenue from crude oil to run the economy.
economy. This is happening at the same time Ghana is planning to cut the volume of gas import from Nigeria.

Currently, Nigeria’s economy is about 90 per cent dependent on income from crude oil, even as the nation’s fiscal budget is often planned based on revenue from oil.

While some economic experts expressed fears that the nation’s economy may suffer cash crunch as a result of the dwindling price of crude oil, others advised the Federal Government to invest more in non-oil export sectors and entrepreneurial development to boost productivity.

In a chat with Sunday Vanguard in Lagos, an experienced entrepreneur and the Chancellor, Akpabio Centre for Leadership Development, a Non-Governmental Organisation (NGO), established over seven years ago for entrepreneurial development and capacity building, Mr. Bassey James, advised President Goodluck

Jonathan, to invest heavily in manufacturing and human-capital development in order to build a strong economy that is not dependent on oil.

He said, “We must build an economy that is technology driven like what obtains in advanced countries.

The only way we can achieve this is to develop the industrial sector, which is capable of generating revenue and creating jobs at the same time.

It is imperative for government to invest massively in infrastructure, agriculture, Small and Medium Enterprises (SMEs) and man-power development in order to encourage entrepreneurship across Nigeria.

Training is important because we need the skills, modern technology and the technical-know-how to refine crude oil in the country, rather than spending so much money to import refined petroleum products from other countries”.

On Ghana’s plan to cut gas importation from Nigeria, he explained, “Ghana’s move to significantly reduce the quantity of gas importation from Nigeria will not affect our economy in any way.

Every country is looking inward to build capacity locally, which is exactly what we need in Nigeria. This is the time for the citizens to support the efforts of government in growing the economy.

For example, the governors in other States should look at what is happening in Akwa Ibom, in terms of infrastructure and human capital development and replicate the same across the country.

If you visit the State, you will see that the current government has turn around the whole place by building good roads and other infrastructure needed to open up the State for Foreign Director Investments (FDIs).

This is what we need for national development. The three tiers of government should key into economic concept of Akpabioism on capacity building. We need to train the mechanics, vulcanizers, hair dressers, barbers and other artisans to create wealth and employment in the economy”.

On the way out of the declining crude price, he stressed. “The way out is for government to take from what we have in the Excess Crude Account (ECA), which is estimated at about $4billion now. Also, we need functional plants to refine crude oil locally because we have a lot to benefit from it.

At the moment, we spend about $60billion to import refined petroleum products, which can be channelled into other projects if we have local refineries. For instance, there are over 200 by-products in crude oil but we are only maximising fuel, diesel and kerosene.”

- See more at:

News & Happenings / Inequity in government’s revenue drive
« on: November 03, 2014, 10:26:30 AM »

Inspite of the assurances of Okonjo-Iweala, the Finance and Co-ordinating Minister of the Economy that Nigeria is not broke, there are concerns that falling crude oil prices may in fact belie the Minister’s apparent confidence. Indeed, crude oil which accounts for over 50% of Federal revenue has dipped below $90/barrel after remaining stable between $100-110/barrel for over two years.

Although, the current market price still exceeds the 2014 budget benchmark of $77.5/barrel, observers have noted that reduced international demand and regular production shortfalls below budget benchmark of 2.45m barrels/day, as well as alarming massive oil theft and rampant pipeline vandalisation may make revenue projections unattainable.

Certainly, published statistics on oil output and revenue will continue to be controversial as audited authentic figures on production and related sale prices are not readily available public information; indeed, some observers wonder why revenue projections should be a concern, when crude prices exceeded budget projections by up to 30% for over two years; furthermore, Diezani Madueke, the Petroleum Minister had also suggested according to media reports that production exceeded budget benchmark and OPEC quotas for some time.

Nonetheless, we will have to accept Okonjo Iweala’s assessment, that if the Excess Crude revenue Account which dropped to $4.0bn can be increased to $5bn, Nigeria’s economy would retain its current stability (Guardian Newspaper, 28/10/2014, Pg. 3). This assertion, of course assumes that the current state of Nigeria’s economy is satisfactory; however, even a blinkered apologist of government performance will admit that our economy cannot be described as successful, when government gleefully borrows back its own free funds with double digit interest rates and over 70% of our population live on less than $2 a day, with unemployment at almost 30%, and over 50% of our youths aimlessly idle, while, inflation annually eats up over 8% of the purchasing power of all income earners, particularly the wages of the majority who earn less than the minimum wage of N18,000/month introduced four years ago.

However, if according to Madam Minister, $1bn is all the additional revenue needed to keep the economy afloat, then we really should lose no sleep because of dwindling revenue from crude oil, since our own well endowed chattel, the Central Bank of Nigeria still sits comfortably on close to $40bn, which is inexplicably designated as CBN’s own dollar reserves. Surely, a two percent reduction in CBN reserves should not jeopardise the stability or the strength of the Apex Bank.

Nevertheless, Okonjo-Iweala has suggested that inspite of current revenue contraction, public finance can still be astutely managed to ensure that the balance in the Federal government’s unilaterally designated Excess Crude Account, which incidentally State Governors have rejected as unconstitutional, can still be augmented. Obviously, any such augmentation will inevitably come from deferred or reduced expenditures from some other sectoral budgets. However, since this administration has apparently found it inconvenient to reduce the clearly bloated expenditure budget, the usually relatively paltry votes for capital and infrastructural enhancement may regrettably suffer further decline, with adverse consequences for improved social welfare for the masses.

Nevertheless, in an attempt to shore up its non oil revenue, the Federal government, according to a report in the Punch edition of 30/10/2014, Pg. 38, indicated that it “had raised the revenue targets of the Nigerian Customs Services and the Federal Inland Revenue Service.”

In its reaction to this development, the Lagos Chamber of Commerce and Industry however warned that “there is a risk that best practice principles will be compromised by government’s revenue generating Agencies in their desperation to meet set targets.” The LCCI President, Alhaji Remi Bello, noted that “there were already negative manifestations in the mode of Import Valuation by the Customs Service.” Importers, according to Bello “have been made to pay import duty and other charges that are far beyond what they ordinarily should have paid; many investors have consequently suffered untold hardship as a result of this practice.”

Similarly, officials of the FIRS seem to have also been given a carte blanche opportunity to intimidate and extort payments from companies in the name of revenue drive ordered by ‘Oga at the top’. Regrettably, those companies, which have been victims, unfortunately have no sincere, transparent, effective or timely dispute resolution system in place. Consequently, the LCCI Chairman called on government’s revenue collection Agencies “to concentrate more on the efficiency of collection and the expansion of tax coverage rather than inflicting hardship on businesses that were already in compliance.”

Ironically, in contrast to its directive on aggressive revenue drive, the Federal government, according to Oscar Onyeama, CEO of the Nigerian Stock Exchange, has waived the payment of Value Added Tax on all capital market transactions, since the last two years; Onyeama confirmed that VAT exemption is now effective on all Commissions applicable to capital market transactions. According to the NSE CEO, “the elimination of VAT on stock market transaction fees will ultimately reduce the cost of transactions for investors and will encourage investments in the Nigerian capital market.”

Onyeama further urged government to also implement the stamp duty waiver which was earlier announced along with VAT exemption in 2012. Curiously, VAT exemption on commissions and stamp duty waivers are in addition to a debt forgiveness of about N22.6bn by AMCON to stock brokers who contravened the provision of the Investment and Securities Act by their flagrant involvement in margin trading; a case of waivers for the rich and hard labour for the poor, one might say.

In the light of the above, we should be concerned that any responsible administration will subject its wealth creating real sector to a harrowing experience of harassment by government’s revenue generating agencies, while actively excluding commission income from a “casino market” such as the stock market from any form of taxation. The question is, what percentage of Nigerians directly profit from commissions on Stock Exchange transactions compared with the majority whose livelihood would be directly positively impacted by the activities of productive and social welfare supportive subsectors which are under the aegis of the LCCI and Manufacturers Association of Nigeria respectively? Why must government penalize those who lay the golden eggs while featherbedding the interest of plain rent seekers and criminals in the economy?

Besides, we should similarly be concerned that despite alleged dwindling crude oil revenue, government obviously has no answer that would redeem the wasteful expenditure of over N1500bn (about $7.5bn) for subsidising fuel annually. Worse still, there is no hope that government appears capable of plugging the gaping holes of massive theft of crude oil in order to shore up our dwindling revenue base.

- See more at:

News & Happenings / FG Urged to Prevent Leakages in Oil Production
« on: November 03, 2014, 10:23:56 AM »
In view of the effects of dwindling crude oil price on the Nigerian economy, the federal government has been advised to intensify efforts at preventing leakages and pipeline vandalism, which disrupt oil production.

This, according to analysts at the Financial Derivatives Company Limited (FDC), would help increase the Nigeria‘s oil production and in turn, minimise the impact of falling oil prices on revenues and external reserves.

Analysts at the FDC, in their latest report obtained at the weekend also urged the federal government to strengthen the non-oil sector in order to boost revenues.

The report also pointed out that the Central Bank of Nigeria’s (CBN’s) monetary policy would be a very useful tool in managing the risks to the exchange rate and inflation in the country. It argued that the current restrictive policy stance of the central bank has been effective so far in achieving the central bank’s objectives.

“Although there is a strong desire for an expansionary interest rate policy to boost growth, it may not be prudent to adopt such a policy at this critical time,” it added.

However, the report noted that fiscal policy would have limited impact in curbing economic risks.

“Pending developments in the agriculture and power sectors should be carefully analysed to determine the way for-ward. Furthermore, there should be better collaboration of nation-al and regional governments in tackling the Boko Haram menace, since crimes are perpetrated through interstate and country borders,” it added.

According to the report, Nigeria‘s economic indicators have remained positive and relatively stable this year. However, it pointed out that the threats of increased risks from excess market liquidity, decreasing oil prices, changes in global monetary policies and security unrest may affect the stability of some economic variables.

“We expect the CBN to continue to pursue a contractionary monetary policy, which will help in mitigating the risks to inflation and the exchange rate.

“The security crisis can also be better managed through greater collaboration of national and regional governments,” it stated.

The inflation rate declined to 8.3 per cent in September 2014 after six consecutive months of increase. The moderation in inflation was attributed partly to an increase in food supply from the harvest season.

Another petroleum products scarcity may be looming nationwide, as the National Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) have jointly threatened to disrupt production and distribution of petroleum products.

Part of their grievances, Sunday Independent learnt, is connected with Federal Government's failure to address issues of constant victimisation of their members by various employers in the oil and gas sector.

The two oil industry unions, at their joint National Executive Council (NEC) meeting held in Abuja, late on Friday night, said they would shut down the oil and gas industry if after 14 days, their sacked members were not reinstated by their respective organisations, while also demanding for the reversing of transfer of some union leaders.

The unions also noted that within the 14 days the Federal Government must address lingering issues of pipeline vandalism, terrorism, bad state of major roads and 2015 elections amongst others or face an indefinite strike.

PENGASSAN President, Francis Johnson, told journalists during the NEC that failure of the members of the House of Representatives to speedily pass the Petroleum Industry Bill (PIB) after its recess would be greeted with a nationwide protest.

His words: "Transfer and termination of appointment of members of PENGASSAN, Petroleum Industry Bill passage, casualisation and outsourcing of staff in oil and gas industry sustenance of national minimum wage bill in the Exclusive List, workers right to unionisation, divestment of portfolio and attendant effect on the oil and gas industry, pipeline vandalism/oil spillage and its attendant effect on revenue drop and economy, anti labour activities of indigenous oil companies, insecurity, bad roads to operational areas, refineries, 2015 election and lastly, policies and inconsistency in appointment in NNPC."

ConocoPhillips reported rising profits in the face of falling oil prices as an asset sale in Nigeria and higher output in Texas and North Dakota boosted returns.

Third-quarter net income rose to $2.7 billion, or $2.17 a share, from $2.48 billion, or $2, a year earlier, Houston-based ConocoPhillips said Oct. 30 in a statement. Excluding one-time items, per-share profit of $1.29 was 8 cents more than the $1.21 average of 20 analysts’ estimates compiled by Bloomberg.

ConocoPhillips Chairman and Chief Executive Officer Ryan Lance has helped transform the one-time energy conglomerate, which spun off its refining business and has sold $10 billion assets in the past two years to fund dividends and expansion in North America.

That strategy coincided with an oil market slump that has seen U.S. prices fall four consecutive months to $82.20/bbl Oct. 29, prompting some to question the longevity of North American drilling prospects. ConocoPhillips is among producers poised to weather the oil slump due to its low drilling costs in emerging fields.

"They have plenty of places to put capital, and they can take the time to make sure that when they drill an unconventional well, they are successful and realize a high margin," James Sullivan, a New York-based analyst at Alembic Global Advisors, said today in a telephone interview.

Shell Profits

Earlier today, Royal Dutch Shell Plc also reported higher third-quarter profits as earnings from refining and natural gas offset the impact of lower crude prices.

ConocoPhillips boosted production 33 percent to the equivalent of 212,000 boed day in North Dakota’s Bakken and Texas’s Eagle Ford formations, two of the fastest-growing U.S. oil fields. That follows a 41% output increase in the second quarter.

ConocoPhillips also completed a sale of its interest in Nigeria for proceeds of $1.4 billion.

The third-largest U.S. oil company has gone from a small player in fast-growing U.S. shale regions to a dominant force able to turn a profit at an oil price of $40/bbl.

Profits rose as oil futures traded in New York averaged $97.25/bbl in the third quarter, 8.1 percent lower than a year earlier.

Benchmark U.S. natural gas futures jumped 11% to an average of $3.949 per million British thermal units during the third quarter.

ConocoPhillips, which has 17 buy, 9 hold and one sell recommendations from analysts, closed at $70.75 in New York trading yesterday.

The Nigerian National Petroleum Corporation (NNPC) and its partners, Total and Eni, have agreed to take over the shares that were left behind by American energy corporation, ConocoPhillips (COP), which recently left the multibillion dollar Brass Liquefied Natural Gas (LNG) project.

Chairman of Brass LNG, Dr. Jackson Gaius-Obaseki said on Wednesday in Abuja that NNPC, Total and Eni have now agreed to take up the 17 per cent shares that COP left behind at its exit from the project.

He however said that the shareholding restructuring process was being worked out and that it will take quite a while to conclude especially with considerations of standards in transfer and acquisition of shares.

It will be recalled that the shareholding structure of the Brass LNG shows that NNPC holds 49 per cent, Eni, 17 per cent and Total, 17 per cent. The remaining 17 per cent which is now being taken up by the trio was held by COP.

The development may have also put  paid to expectations that a new partner to take over from COP will be shopped for by the promoters.

Obaseki said at a courtesy visit to the Group Managing Director (GMD) of NNPC, Dr. Joseph Dahwa that the decision of the shareholders to acquire COP’s 17 per cent equity in the project has saved the board from having to shop for a replacement.

He explained that with such commitment, the project was still on track to achieve its Final Investment Decision (FID), not minding COP’s exit.

Obaseki also noted that but for the resourcefulness of the remaining shareholders; the exit of COP from the project would have perhaps led to its wind-up.

“We went through a very tough time with the exit of ConocoPhillips because the provision of the shareholders' agreement would have been that we would deadlock and have to wind up the company and I knew that it would have been a nightmare if we went that way.

“I had meetings with the honourable minister and she was just wonderful in this respect and just only took decisions that guaranteed the continued existence of BrassLNG. So rather than you (Dahwa) being an undertaker, we congratulate you for presiding over Brass that is alive,” Obaseki said.

He further stated: “One cannot help but also acknowledge the commitment of the remaining shareholders; NNPC, ENI and Total. It would have been impossible for us to hit the ground running if they didn’t do what they did because they were not ready for it but they just had to do it to keep us going and also for their tolerance while a few of us were doing the negotiations but the good story is that it all ended well.”

“The easiest way to talk about the commitment of the board to carry on with this is that winners don’t quit and quitters don’t win, that is just it, those who were left behind said that we wanted this because the reasons haven’t changed, the market is still there and our offtakers are only asking when we will come on.

The board demonstrated this commitment otherwise when COP left, you would have had to shop for a replacement but NNPC, Total and ENI said they will take up the shares, although they were not ready because shares acquisition is a long process in any organisation and that also encouraged a lot of us in the board,” he added.

On the impact of the Shale phenomenon on the project, Obaseki said that Shale which is majorly driving the United States’ drop of its appetite for foreign fuel was not a threat to the Brass LNG project. He posited that with or without Shale, BrassLNG was still a viable project with a proven market.

“Brass remains a viable and wonderful project. The reasons for conceiving that project are still very relevant today; the market is still there, that is one of the things, shale gas or no shale gas, the market is still there with a large appetite.

“I don’t speculate and I work with data which are fundamental. For you to build a plant, you must have an offtaker. COP has left but as we speak today there is no single buyer that has withdrawn, we have MoUs with all of them, and we have not signed a purchase agreement because we say that we will do that at FID,” he said.

“There are other reasons, Shale gas is different from Shale oil but even before this came out, we had diverted all our products from the US anyway and so that is where the confidence comes from.

“We have hit the ground running and as we go on, once we can see the end, we will inform all of you but the important thing is that you have to acknowledge the fact that the shareholders and board are committed,” Obaseki added.

The one-time GMD of NNPC said in congratulating Dahwa on his appointment that: “What all organisations do, international and national organisations is that they try to preserve their culture and that is really where your appointment becomes the gratifying one for us because you have been here and knows the culture, probably grew with us while we were growing here and so you cannot pretend not to know what our culture is and that is why we thank the minister and Mr. President for your appointment.

“I make bold to say that your group management is strong because I have interacted with them; you just have to make sure that the environment is conducive for every other person to aspire to grow.”

Dahwa in his remarks said that NNPC as the largest shareholder in BrassLNG will continue to work with stakeholders to see that it comes to fruition.

He said: “We at NNPC will continue to collaborate with all stakeholders to make sure that the project that is so important to the government is seen through. We will not stop at that but go ahead to make sure that all the challenges that is pertaining to the development of the project are addressed just like the chairman said and as a major shareholder, we played a very big role in that regard and intend to do more.”

News & Happenings / Nigeria Unprepared for Falling Oil Prices - Experts
« on: October 30, 2014, 08:48:23 AM »
A cross section of financial and economic experts have said that Nigeria is unprepared to contain the impact of falling oil prices.

"The price of crude oil has been on the rise for a long time during which we would have prepared for the price shock but the truth is we are totally unprepared," said chief executive officer (CEO) of Global Analytics Consulting Ltd, Tope Fasua.

On his part, the CEO of BIC Consulting, Dr. Boniface Chizea, averred that the discovery of shale gas in both the USA and China at face value is bad news for the Nigerian economy. He, however, noted that shale gas challenge might be a shock therapy which the country requires to wake up from its long slumber.

"For a long time, the fact of this country's unwholesome dependence on oil sector had been decried and efforts have been made at diversification of the economic base of the country - to no avail," said Chizea.

Fasua observed that the falling oil prices had resulted in cash squeeze in the country because it is the mainstay of the economy.

"For now, the Central Bank of Nigeria (CBN) is defending the naira but nobody knows how long they can continue. Also, nobody knows how long the oil price will continue to dip before it will rise. It is really bad this time and I believe the price will still dip more," he said.

According to him, the falling oil prices has serious implications for government revenue and would adversely affect the people and every facet of the economy.

"A gross revenue of N 502.09 billion was received in the month of September which is lower than the N 601.05 billion received the previous month. This decline of N 99.55 billion in one month was largely due to the falling price of oil as well as the inability of the country to meet its production quota due to production losses arising from shut down of trunk lines and pipeline vandalism at the various export terminals," Chizea said.

"It was, therefore, reported that because of this development the Excess Crude allocation for the month standing at N 2.7 billion was shared by the three tiers of government."

Conversely, the president of Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, has expressed concern over the current scenario of sliding oil price from $114 per barrel in June to $85 per barrel at present.

Bello, who stated this yesterday at the third quarter press briefing of the chamber in Lagos, noted that this is the lowest dip in three years, adding that it has implications for the capacity of government at all levels to meet their statutory obligations.

"For an economy that is 95 percent dependent on oil for its foreign exchange earnings and 85 percent dependent on it for revenue, this development should be a cause for concern," he said.

Bello also revealed that there is a relationship between stock market performance and the fortunes of the oil market, and that the declining oil price often results in further tightening of monetary policy to preserve macroeconomic stability, lead to high interest rates and superior returns on investments in the money market which could have negative impact on the stock market.

Chizea agrees with Bello that that the Nigerian Stock Exchange (NSE) is not spared the impact of the falling price of oil as Nigeria is now dependent on foreign investors and institutions that purchase treasury bills issued by government to finance its deficits in recent times.

"Yields on local debts rose across board in volatile trading as the growing concern about the global economy continued to mount," said Chizea. "The 10-year benchmark bond yield rose to 13.10 per cent - up by 3.3 per cent basis points. Meanwhile tight liquidity is driving demand for treasury bills, pushing yields for short-term government securities to below 10 percent."

The Independent Petroleum Marketers Association of Nigeria on Tuesday said local refining of the nation’s crude remained the only way to stem the effects of declining crude oil prices on the Nigerian economy.

National President, IPMAN, Mr Chinedu Okorokwo, made the assertion during the association’s zonal meeting and inauguration of the new western zonal vice-chairman in Lagos.

Okoronkwo said the decline of price of crude oil at the international marketer should not disturb Nigerians adding that local refining would cushion other expenses and boost Gross Domestic Products.

According to him, more than 243 by-products are associated with crude oil but only three are maximised in Nigeria.

He said, “When we refine our crude locally we harness more products to boost the country’s economy.

“We should not entertain any fear on the current decline in crude oil prices globally.

“IPMAN is working seriously to ensure that the proposed three billion dollars refineries in Kogi and Bayelsa come on stream by 2016 to reduce cost of refining outside the country.”

He said that when the refineries come on stream, the nation would continue to build and maintain a healthy external reserves position.

He added that: “We are proposing to build two refineries in Nigeria, one in Bayelsa and another one in Kogi, to ease scarcity which is part of the present administration’s agenda.

“We are in discussion with our foreign investors.

“We will ensure that the product will get to all nooks and crannies of the country; it will also grow the GDP of the country because capital flight will be reduced drastically.

“Where Nigerians are spending $60bn in importing refined products, the proposed refineries will reduce the cost and stress of exporting crude to bring in refined products.

“It will also create jobs; there will be massive job creation where Nigerian youths will be gainfully employed. It will also stop incessant kidnapping in the country.”

Okoronkwo also said the proposed refineries would go a long way in supporting the socio-economic growth of the country as part of the transformation agenda of President Goodluck Jonathan.

He said Nigeria, Africa’s largest crude oil producer, is the biggest importer of refined petroleum products in the continent, creating a lucrative market for refineries particularly in Europe and the U.S.

He expressed confidence that domestic refineries hold enormous economic benefits for Nigerians and Nigeria.

According to him, IPMAN cannot commit more than $3bn without making sure that the refineries will work.

Newly-elected vice chairman, western zone, IPMAN, Alhaji Debo Ahmed, lauded government effort in combating pipeline vandalism and reassured Nigerians of the commitment in ensuring effective monitoring of petroleum distribution.

News & Happenings / Pirates hijack gunboat, kidnap workers in Niger Delta
« on: October 28, 2014, 01:16:47 PM »

Nigeria's military says pirates in the country's oil-rich Niger Delta hijacked a police gunboat, killed three officers and kidnapped six local oil workers.

Joint Task force spokesman Col. Mustapha Anka says the gunboat and police were escorting a barge-load of oil for the Nigerian Agip Oil Company, which was not attacked. The attack happened on Friday on the Barbara River in southern Bayelsa state, Anka told The Associated Press on Tuesday.

The day before, the Bayelsa police command reported that six Nigerians working for Agip were kidnapped by pirates. Oil workers usually are held for ransom and released unharmed.

Piracy in Nigeria is aimed at oil theft and kidnapping for ransom and cost the nation some $131 million in the past three years, according to the Contemporary Maritime Piracy Database..

The Umugini pipeline, a crude oil evacuation route for four Nigerian marginal field producers in the western Niger Delta, has been completed. The project that lasted for two years cost   Midwestern, Energia, Pillar and Platform  oil firms over $70 million to complete the 12” wide, 51-kilometre long pipeline, that  runs from the Umusadege field  in Oil Prospecting Lease (OPL) 283 , south to the Ogini flow station in the Oil Mining Lease (OML) 26 and then east to Shell’s Eriemu flow station.

Daily Independent gathered that the  line will connect Midwestern Oil and Gas’ Umusadege and Energia operated Ebendo fields to the Trans Forcados export pipeline. These two companies will switch from the Kwale hub to this route, whereas Platform Petroleum and Pillar Oil consider the new route as an alternative for their Egbeoma and Umuseti fields.

Mart Resources, a partner in the Umugini Asset Company Limited(UACL), the project’s operating firm, in a statement issued recently  noted that  the Eriemu flow station and other start-up activities including the pumping of line fill and the inspection of the Umugini pipeline facilities has been completed.” The line fill process is required to commence shipment of oil to the Trans Forcados crude oil export pipeline and onward to the Forcados oil export terminal

The  pipeline is ready for injection of crude into the Trans Forcados crude pipeline and Shell Petroleum Development Co. of Nigeria’s (“SPDC”) pipeline system connected to the Forcados oil export terminal. The commencement of oil flow will occur following the receipt of the formal authorization of oil injection by the operator of the Trans Forcados export pipeline..

Completion deadline for the line, with capacity to pump 45,000barrels of oil daily , had been postponed several times since early 2013. Project cost has shot up by over 33 per cent, to $70 million. The key challenge has been community demands along the pipeline right of way.

The pipeline was constructed as an alternate route to a 48km line to Agip’s export hub in Kwale where the Italian major applies strict restraints to intake.  The four operating companies (Midwestern, Energia, Pillar and Platform) evacuating crude through Kwale claim they have capacity to collectively deliver over 32,000 barrel of oil  through the facility but Agip would only allow 22,000 barrels of oil .

“We have over 6,000barrels of oil  locked behind pipe”, Midwestern  lamented. The Trans Forcados export pipeline will deliver crude oil from Umusadege and Ebendo fields to the Forcados export terminal operated by Shell, management of Midwestern firm noted.

Nigeria Liquefied Natural Gas (NLNG) Limited, one of Nigeria’s gas marketing company has contributed over five percent to the  revenue projection for 2104 fiscal year through its income tax payment to the federation account, the Managing Director of the company , Babs Omotowa has said.

Omotowa,who spoke  at the 46th annual conference of the Chartered Institute of Personnel Management (CIPM) of Nigeria held recently in Abuja, said the company   having exhausted its tax holiday period, now generates revenue and pays  taxes to  government and people of Nigeria.

He said, Nigeria has reaped significant benefits from NLNG in terms of its 49 per cent dividend, 30 per cent Corporate Income Tax (CIT) and feed-gas purchases, amongst other benefits.

Omotowa noted  that with increasing competition from new gas discoveries and shale gas phenomenon, NLNG was analysing global trends in the natural gas market as well as developing strategies to make the most of market before extant windows of opportunities closes.

“To give you a perspective, the company’s income tax payment this year represented about five per cent of the total revenue projections of the government for 2014,” The reality is that having come to the end of our tax holiday period, about 70 per cent of value generated in NLNG today goes to the government and people of Nigeria’’. he said.

Laying emphasis  on the current challenges of the company as it concerns the global LNG market, Omotowa said that NLNG  will continue to push for a sizeable share of the market.

“We cannot rest on our oars and so we continue to look at the future which we currently see as burdened with challenges. We are therefore already looking at our strategies to achieve even beyond these boundaries. As the window of opportunities closes, we are analysing the global trends including shale gas competition, new mega LNG plants in Australia and East Africa threats to our business,” he noted.

He explained  that the technological improvements to shale gas extraction have doubled the world reserves in LNG and this has led the United States to changing from an importer to a likely exporter.

‘These global challenges are not made easy by the local challenges from the uncertainties of policy changes, delayed passage of the Petroleum Industry Bill (PIB), gas developments for domestic use, sustaining feed gas supply, ageing plants and ships, and continued tension between a Nigerian culture and a World-Class culture,” he further said.

He  said that NLNG was already looking at what it needs to do differently from growing volumes by the addition of a Seventh Train to enable it compete with volume in the global market as well as use that to offset any reduced prices.

“Train 7 will allow us add 8 million metric tons or 40 per cent to our current production capacity. It will enable us attract over $12 billion investments, create over 18,000 construction jobs and yield additional $2.5 billion revenues. So, a Train 7 is a big value to Nigeria and together with shareholders we are continuing to work on this.”

Pages: 1 ... 23 24 [25] 26 27 ... 79

Sponsored Ads

Quick Links

About Us
Contact us
Privacy Policy

Contact Info

Nigeria Oil & Gas Forum

Email Address
Contact Form
Business Hours
9.00am - 5.00pm (Mon - Sat)

Would you like to partner with us on this forum?

Then you can contact us here

Nairaland     Oil Prices     UK Gas Forum     Ghana Gas Forum     Russian Oil & Gas Forum     Israel Oil Forum     Agric Forum

Powered by EzPortal