FG woos Spanish investors for seven oil blocs

The Federal Government on Thursday wooed Spanish investors to invest in Nigeria’s 2022 deep offshore mini-bid round, as it also announced that Spain would support Nigeria with security in the oil and gas sector.

It wooed the investors during a meeting between the Minister of State for Petroleum Resources, Chief Timipre Sylva, and the Minister of Foreign Affairs of Spain, Jose Albares, who led a large delegation of key investors from his country to Abuja.

The meeting also had senior officials of the Federal Ministry of Petroleum Resources, as well as chief executives of the Nigerian National Petroleum Company Limited, Nigerian Upstream Petroleum Regulatory Commission, and Nigerian Midstream and Downstream Petroleum Regulatory Authority, in attendance.

The NUPRC had on Wednesday announced the commencement of the 2022 deep offshore mini-bid round, as it promised that the bid process would be competitive and transparent.

In his address at the meeting on Thursday, Sylva said, “As a country, we need all the investments we require. The oil and gas sector is at the core of our economy, and coming to the country with all these array of investors, it is a major investment opportunity for Nigeria.

“For the (Spanish) minister to come with these array of potential investors, then I’m sure that we have potential of having a lot of investments coming into Nigeria from now. The NUPRC has already pitched, they are already in the process of having a bid round.

“And with these number of potential investors on the table, who are people that they (NUPRC) ordinarily would have to meet in their country. Usually, before any bid round, you will have a road show.”

Sylva added, “What is the road show about? You are supposed to go and meet your investors. But in this case, the potential investors are here by themselves. So you can see why this meeting, for us, is very important.

“As a country, we need a lot of investments, we need FDIs (foreign direct investments) and Spain is one country that we believe can give us a lot of that investment to help in the development of this country. This is more of an economic diplomacy.”

The minister said the Federal Government was also looking up to Spain for the development of the abundant gas resources in Nigeria.

He said, “We are focused on the development of gas. We have a lot of gas resources and we need these resources to be developed. I told the Spanish minister that today we have proven gas reserves of over 200 trillion cubic feet of gas.

“We also believe that with focused exploration for gas, we can increase this reserves to about 600TCF. How do we develop this gas? We need investors and Spain is one country that we are looking towards to bring the investments into this sector.

“It is going to be a win-win for both countries, because Europe also requires the gas. We’ve always been shouting that energy transition programme should be more mindful of the development of gas as well.”

Sylva noted that there was a clamour from some sources to move so quickly to renewables, but stated that as a country, Nigeria felt that it was going to move on the transition train with the instrumentality of gas.

“The rest of the world have also come to see that there is a need for us to tarry a while with gas. So it is mutual on the part of both countries for us to develop the gas resources that we have,” he stated.

On Security, he said the foreign nation would be supporting Nigeria with technology to protect to oil and gas sector.

Sylva said, “We have also had discussions on strong support that we would require from them in the area of security. The biggest problem today in the oil and gas sector is security and, of course, Spain is in position to also support us in this area.

“So, in the areas of investment and technology we are going to be looking up to Spain. And Spain looks up to us for further supply of gas. We are also developing a pipeline to Morocco and I believe that it is going to settle this issue of gas supply from Nigeria to Europe.”

On his part, the Spanish foreign affairs minister said Nigeria was his country’s first supplier in petroleum and gas combined, adding that Spain was the second trade partner of Nigeria.

Albares said, “I want to commend the reliability and stability of Nigeria as our supplier. You are a trustful partner. I want to thank the minister who has informed me of the evolution and opportunities of this sector here in Nigeria.

“Nigeria has proven once again that it is a friend and trustworthy partner in this very complex setting – the energy market in the world. Now we have worked out some aspects to develop this bilateral relationship on energy and also in all the aspects that I have been dealing with today here in Abuja.”



Nigeria, Spain deepen partnership on gas development

Nigeria and Spain have expressed commitment to deepening bilateral relationships and partnerships in investments and development of Nigerian gas resources for the global energy market.

Chief Timipre Sylva, Minister of State for Petroleum Resources made this known on Thursday in Abuja when he received Spanish Foreign Minister, Jose Albarese, in the company of other top officials and investors from Spain.

The bilateral meeting between Nigeria and Spain dwelt on Spain’s investment in Security, technology, and development of Nigerian gas resources.

According to the minister, Spain has been a partner and customer of the Nigerian Liquified Natural Gas (NLNG) company from its inception.

Sylva, who describes Spain as one of the first countries to visit in 2023, said the visit could tell the importance of the relationship between the countries, adding that Nigeria required investments in the oil and gas sector, being the core of the economy.

He said the identified major investment companies and potential investors on the table, occasioned huge opportunities for Nigeria in view of the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) already pitched process of mini bid round.

“These are people that they would have ordinarily gone to meet in their country before any bid round, but in this case, the potential investors are here by themselves, so you can see why this meeting is very important.

“As a country, we need a lot of investments, we need Foreign Direct Investment (FDI) and Spain is one of the countries that we believe can give us a lot of that investment to help in development,” he said.

According to Sylva, Nigeria currently has proven gas reserves of up to over 200 trillion cubic feet of gas, and with a focus on the exploration for additional gas, Nigeria can increase these reserves to up to 600 TCF.

He further said that Europe also required gas currently, hence Nigerian energy transition programme should be more mindful of the development of gas as well because there was the clamour from some sources to move so quickly to renewables.

“And as a country, we felt that we are going to move on the transition train through the instrumentality of gas.

“Spain is in the position to also support us in this area of security because insecurity is one of the major problems facing the industry today. So we are going to be looking up to Spain.

“And then, of course, Spain will also look up to us for further supply of gas. They are also interested in the pipeline that we are developing to Morocco. I believe that is going to settle the issue of vessel flight from Nigeria to Europe.

Albarese, earlier had commended Nigeria’s ability and expressed Spain’s interest to facilitate investment opportunities in the oil and gas sector of the economy, adding that Nigeria was its first supplier of oil and gas.

The Spanish minister who was pleased with the revolution and opportunities in the sector as informed by Sylva, said the cooperation from the countries, especially from Spanish investors, would yield gains.

“Nigeria has been a strategic partner to Spain and has proven once again as a trusted partner in the complex setting of the global energy market,” he said.

The meeting had in attendance, the Group Chief Executive Officer, NNPC Limited, Mallam Mele Kyari; Authority Chief Executive, Nigerian Midstream and Downstream Regulatory Authority, Mr. Ahmed Farouk; Commission Chief Executive, NUPRC, Mr. Gbenga Komolafe; Managing Director, NLNG, Mr. Philip Mshelbila, among others.



Nigeria Underproduced 2022 Crude Oil Projection by 263 Million Barrels in 11 Months

Data show country barely drilled 60% of 1.88 million bpd budget benchmark $30bn Brass, Olokola LNG projects suffer 19 years delay despite lucrative gas market  •IOCs spent over $1bn on projects without FID, says NCDMB

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

With a projected 1.88 million barrels per day crude oil production in the 2022 federal budget, Nigeria under-produced to the tune of 263 million barrels of the commodity between January and November, a THISDAY analysis of industry data has shown.

Also, Nigeria’s inability to deliver two major Liquefied Natural Gas (LNG) projects -the $20 billion and $9.8 billion Brass and Olokola LNG projects, respectively, after about 19 years of their initiation has resulted to the country now counting its losses from the failed projects despite gas becoming increasingly lucrative at the moment.

In the last quarter of 2021, the Senate and House of Representatives agreed to fix the country’s expected daily output for 2022 at 1.88 million barrels per day, pegging it at a price of $57 per barrel.

However, while the total expected production in the first eleven months of the year was about 641 million barrels, a computation derived from the figures released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that only 378 million barrels were realised during the period under review.

In essence, this meant that the country was unable to produce as much as a whopping 263 million barrels of crude oil during the period spanning between January and November this year.

It further indicated that Nigeria was barely able to produce 60 per cent of the total production forecast, losing roughly 40 per cent to oil theft and sabotage, leading to incessant shut-in of planned output for the period.

While the planned production for each of the months in 2022 was 58.2 million barrels, going by the budgeted data, Nigeria only managed to drill 43.3 million barrels in January, turning out to be the highest output for the year so far; 35.2 million barrels in February; 38.3 million barrels in March and 36.5 million barrels in April.

It deteriorated to 31.7 million barrels in May; rose marginally to 34.7 million barrels in June, before falling to 33.6 million barrels in July this year.

August saw the production of 30.1 million barrels, against the 58.2 million projection; followed by September in which Nigeria’s output fell to a multi-decade low of 28.1 million barrels while in October and November, the country drilled 31.4 million barrels and 35.5 million barrels respectively.

The figures exclude condensates which are not included in the Organisation of Petroleum Exporting Countries (OPEC) calculation.

A further analysis of the NUPRC data, revealed that while the Bonny terminal produced 3.8 million barrels in January, that figure declined to 1.5 million barrels in November.

Similarly, Brass’ output of 1.36 million barrels in January fell to 404,726 barrels last month, even as Qua Iboe which yielded 5.3 million barrels in January, produced 4.4 million barrels last month.

Whereas the newly repaired Forcados’ output was 7.5 million in January, as of November it produced 6.2 million barrels while Escravos blazed the trail, increasing production from 3.7 million barrels in the first month of this year, to 4.6 million barrels in the eleventh month.

In the meantime, with a modest improvement in its November OPEC production performance, the country has returned to the top as Africa’s highest oil producer.

This is a relief from previous months when Angola, Algeria and Libya pushed Nigeria to the fourth position as the country struggled with sundry issues which have hobbled its capacity to meet the OPEC oil quota.

While in October, Algeria drilled 1.060 million barrels per day, Angola produced 1.051 million bpd, Libya’s output was 1.163 million barrels per day while Nigeria’s oil production stood at 1.024 million bpd.

Although Nigeria added 77,000 in that month, it wasn’t enough to return the country to the top of the table as Africa’s biggest producer, even though Algeria gained a paltry 2,000 bpd, Angola lost 40,000 bpd and Libya gained 6,000bpd, according to OPEC’s secondary sources.

Production in Angola saw the second-steepest drop in OPEC producers in October, but it wasn’t the result of a conscious reduction since the African producer has been lagging behind its quota for many months.

The OPEC figures released in its latest Monthly Oil Market Report (MOMR), indicated that Nigeria’s roughly 1 million bpd was also a far cry from its average of 1.493 million bpd in 2020, a covid year, and 1.323 million bpd in 2021.

But with the recent concerted effort to end oil theft in the country, this month, OPEC which released its data for November activities in the sector, stating that Nigeria came tops with 1.158 million barrels per day in November, followed by Libya with 1.133 million bpd and Angola with 1.102 million bpd.

Earlier this month, the Minister of State, Petroleum Resources, Chief Timipre Sylva, said Nigeria was working towards meeting its OPEC crude oil production quota of 1.8 million bpd by the end of May 2023.

Consequently, the minister explained that the federal government would continue to improve security along the tracks of the major crude oil pipelines and block every leakage through which crude oil is stolen by oil thieves and pipeline vandals.

Sylva added that the inability of Nigeria to meet the current OPEC quota was not due to lack of production capacity on the part of crude oil producers, but because a lot of producers decided not to inject into the pipelines because they were losing a lot of their production when they inject crude.

Although Nigeria was likely to surpass its November production of 1.158 million bpd since a number of terminals are now back on stream, it’s still unclear by how much since there are currently conflicting figures from the Nigerian National Petroleum Company Limited (NNPC) and the NUPRC.

While the NNPC put December production data at 1.59 million barrels per day so far, the NUPRC pegged it at 1.4 million bpd. Traditionally, OPEC and NUPRC release the production information every month.

Nigeria Counts Losses as $30bn Brass, Olokola LNG Projects Suffer 19 Years Delay Despite Current Lucrative Gas Market.

Meanwhile, Nigeria’s inability to deliver two major Liquefied Natural Gas (LNG) projects -the $20 billion and $9.8 billion Brass and Olokola LNG projects, respectively, after about 19 years of their initiation has resulted to the country now counting its losses from the failed projects despite gas becoming increasingly lucrative at the moment.

Some of the economic losses arising from the stalled projects, according to industry sources and data ranged from massive revenue and job losses, flight of Foreign Direct Investment (FDIs) to other neighbouring countries, delayed industrialisation as well as persistent energy poverty in the country.

However, the Nigerian Content Development and Monitoring Board (NCDMB) said the international oil companies (IOCs) involved in the projects have lost over $1 billion without getting to Final Investment Decision (FID).

Globally, gas is now a much-sought-after energy source, driven by the double whammy of the Russia-Ukraine War and the world’s acceptance of gas as the transition fuel owing to the current pressure to ditch fossil fuel and enthrone cleaner and sustainable energy. Consequently, countries that have sizeable number of LNG plants that push huge volumes of gas to both the domestic and export markets are currently smiling to the banks with huge revenues being raked in.

With only the Nigeria LNG Limited operating in the country with its 22 million metric tonnes per annum (mtpa) Bonny Island plant, which is even operating under capacity at the moment, the failure to execute the Brass and Olokola LNG projects has kept Nigeria out of the nations now cashing out from their LNG revenues.

According to the General Manager, Corporate Communications and Zonal Coordination, NCDMB, Dr. Ginah O Ginah, the opportunities lost in the failed two LNG projects were enormous.

The Brass LNG sited in Brass, Bayelsa State and the Olokola LNG located in Ondo State were initiated in 2003 and 2005, respectively, by the administration of the former President Olusegun Obasanjo to help the country monetise part of its vast natural gas reserves and meet the growing global demand for clean energy.

  The Brass LNG estimated to cost about $20 billion was incorporated in 2003 with shareholders that included, the then Nigerian National Petroleum Corporation (NNPC) (49 per cent), Eni International (17 per), ConocoPhillips) (17 per cent) and then Total (17 per cent).

The company was formed to construct and operate a LNG plant to be sited on Brass Island, in Bayelsa State. The Front End Engineering Design (FEED) was for two LNG trains of five million metric tons per year each and the facility was targeted to be in operation by 2011.

But the withdrawal of the IOCs from the project, beginning with Conoco Phillips and later, others, led to the abandoning of the Brass LNG project.

On the other hand, the $9.8 billion Olokola LNG was expected to have a total capacity of 12.6 mtpa, with start-up originally scheduled for 2011.

Its shareholders included NNPC, 49.5 per cent, Shell and Chevron each had 18.5 per cent and the UK’s BG Group, which Shell later bought in 2016 had 13.5 per cent.

However, in 2009, BG Group also pulled out of the project, and in August 2013, Shell and Chevron followed suit, leaving the NNPC as the sole shareholder

The IOCs had attributed their withdrawal from the two projects to perceived Nigeria’s unfavourable business climate and sundry conditions.

Ginah, who spoke in Lagos during a recent capability building workshop for media stakeholders organised by the NCDMB, said lack of political will by successive administrations contributed to the failure to take projects further.

He lamented that at a time gas nations were benefitting from the current global demand for gas and the attendant opportunities for revenue growth, Nigeria was missing out because it could not deliver those two important LNG projects that would enable it pump more gas to the expert market.

With a gas reserves of 208 trillion cubic feet (tcf), Nigeria ranks as the ninth most gas rich country in the world and the number one in Africa.

“Nigeria has missed a lot of opportunities in the gas sector when we should be reaping the benefits of our huge gas resources. We had two major LNG projects: the Brass and Olokola LNG projects that we would use to grow our economy but we couldn’t progress with them and now we’re losing in those projects.

“IOCs have spent over $1 billion in the Brass, Olokola LNG projects without getting to FID and they pulled out due to some issues they were not comfortable with. So the opportunities we lost in Brass LNG and Olokola LNG are enormous”, Ginah said.

He noted that the government was now trying to see how it could ramp up gas production as quickly as possible, adding, “I think, in that light, I’m aware that the Minister of State for Petroleum is taking initiatives to see how investors can come together to revive this Brass LNG and Olokola LNG.

“So what I cannot tell you is exactly where that initiative has reached as at this point. But I know that efforts are being made because gas is going to be there for a very long time and this projects will help a lot.”

According to him, NLNG’s production was not enough as the market was much bigger than the company’s production capacity because the whole world has accepted gas as transition fuel.

“So that means the shortage is much bigger than what NLNG is producing. So there is going to be a huge market that can take from Brass LNG and Olokola LNG. In realisation of that, the Minister of State for Petroleum Resources, Timipre Sylva is making moves to bring together investors for the realisation of those LNG facilities”, he stated.

The NCDMB official, who decried the waning investments in the Nigerian oil and gas industry over the past decade, pointed out that about $20 billion worth of investments in oil and gas industry used to come to Nigeria annually but that that has dropped.

He attributed this to the unfavourable and rough business environment in the country, adding that a lot of the investments have gone to other African countries.

Ginah further said, “So why is it that smaller countries like Ghana will be having more foreign investments in the oil and gas industry?

“The population of Lagos alone is about 15 million. If you add the next two most populous cities in Africa -Egypt and one other city, it’s not up to the population of Lagos. That’s how huge the internal market is. So this is where the foreign investments should be coming to because of the internal market alone.

“Why is foreign investment running away from Nigeria and what can we do about it? If you (the media) can sensitise the public for us, and of course, including the critical stakeholders, I think we will begin to see some changes that will happen that will enable us to change the narrative about this foreign investment leaving the country”.


oil and gas sector-2

Events that shaped Nigeria’s oil, gas sector in 2022

Nigeria’s energy sector was expected to gather momentum coming into 2022 following the passage of the Petroleum Industry Act (PIA) and mild recovery from a COVID-19-induced recession, rather it saw one of its most volatile years on record.

In 2022, the Nigerian government began commercial crude oil production in the North, completed bid rounds for marginal oil fields and began the implementation of the PIA, rebranding the national oil company and creating regulatory bodies for the petroleum upstream and midstream sectors.

It was also the year crude oil theft rose to the level of heists, forcing oil majors to step up divestment plans, and Russia’s war against Ukraine roiled global oil markets.

Messy downstream sector and fuel scarcity

The year began with the revelation that the Nigerian National Petroleum Company (NNPC) and its partners imported adulterated petrol, which destroyed private cars and caused some scarcity of the products, especially in Lagos and Abuja. The situation went downhill from there.

Scarce foreign exchange reduced NNPC’s ability to import even as it burns millions of dollars daily paying for subsidies. The scarcity worsened towards the end of the year again, and Nigerians spent the holidays worrying about fuel in their tanks.

Oil exploration in the North

President Muhammadu Buhari, in November, flagged off the Kolmani Integrated Development Project in the North-East. It is designed as a fully integrated in-situ development project comprising upstream production, oil refining, power generation and fertiliser. According to the NNPC, there are over one billion barrels of oil reserves and 500 billion cubic feet of gas in the Kolmani area and a huge potential for more deposits as it intensifies exploration efforts.

Oil theft and pipeline vandalism

Oil prices rose to as high as $130 per barrel in the global market on the back of Russia’s invasion of Ukraine in February, but rampant crude theft forced many producers in Nigeria to shut their fields, ensuring that the country fails to benefit.

In October, the NNPC uncovered an illegal four-kilometre pipeline from Forcados in Delta State to the sea and a loading port that was part of an elaborate crude theft operation for the last nine years.

The country lost its status as the largest oil producer for six months and has been unable to meet its OPEC quota since November 2021.

This forced the government to contract private security companies to secure the pipelines including one associated with a formerly wanted militant, Government Ekpemupolo, popularly known as Tompolo. The NNPC also said it was building a surveillance architecture similar to Saudi Aramco’s to monitor the pipelines.

Oil majors’ divestments

Multinational oil companies stepped up their plans to divest from the Niger Delta due to rising crude theft and pressure from their shareholders to seek cleaner energy sources. ExxonMobil, Chevron and Shell moved their divestment plans ahead, even as they encountered resistance from the NNPC and the Nigerian government.

NNPC blocked the sale of ExxonMobil Nigerian unit shares to Seplat Petroleum Development Company. A court case in Port Harcourt stymied Shell’s divestment plans.

In July, Panoro Energy, a London-based and Oslo-listed oil and gas company, announced the sale of its wholly owned subsidiaries, Pan Petroleum Services Holding BV and Pan-Petroleum Nigeria Holding BV, to PetroNor E&P ASA.

Ikike oil field production

TotalEnergies, which operates Oil Mining Licence 99 in partnership with the NNPC, started production from the Ikike field in Nigeria in July.

The company, which owns 40 percent of the oilfield located 20 kilometres off the coast at a depth of about 20 meters, said the Ikike platform is tied back to the existing Amenam offshore facilities through a 14km multiphase pipeline. According to TotalEnergies, it will deliver peak production of 50,000 barrels of oil equivalent per day by the end of 2022.

Oil bids

The Nigerian government completed oil marginal fields and in December announced it would offer seven deep offshore oil blocks for investors in its 2022 mini-bid round with the aim of spurring new exploration and drilling activities in the country’s prospective deep waters.

The regulator said the oil blocks under the bid exercise will cover an area of approximately 6,700 kilometre square in water depths of 1,150 metres to 3100 metres.

Agreement signed for Nigeria’s first Floating Liquefied Natural Gas project

UTM Offshore signed an agreement with United Kingdom’s Kellogg Brown and Root, Japan Gas Corporation and Technip Energies for the front-end engineering design for Nigeria’s first floating liquefied natural gas (FLNG) project.

The 1.52 million tonnes per annum FLNG facility, with a capacity to process 176 million standard cubic feet of natural gas per day and condensate, will have a storage capacity of 200,000 cubic metres, and would be located 60km from the shore of Akwa Ibom State, Nigeria, was conceived to serve the global energy market.



Economist: Declining oil may end elites’ squabble over public resources

Country’s crude production slides back to 1970 level, says Morgan Stanley
Economic pundits look forward to slight growth next year

With less than two months to Nigeria’s crucial presidential election, The Economist says the declining importance of oil could mark the beginning of a new leadership model and ultimately ends “elites squabble over oil money while ignoring their citizen”.

In an article titled, ‘A Sluggish, suffering giant’ in its print edition, the publication says Nigerian leaders would be compelled to “expand the rest of the economy” when easy oil money stops flowing.
It notes that the forthcoming elections would end President Muhammadu Buhari’s “failed presidency”.

The report does not, however, raise much optimism that there would be a remarkable improvement on the status quo, insisting: “Barring a shock win for Peter Obi, a third-party candidate, the victor will come from the same clique of kleptocratic elites”.
While the respected magazine hints at the possibility of a national leadership reset with the declining role of crude. Morgan Stanley, in its 2023 Global Strategy Outlook, says Nigeria’s oil production has recently slid back to the level of 1970 amidst falling investment in the sector globally.

“The supply side of the oil market is not in good shape: inventories are at multi-year lows, spare capacity is thin, and investment levels have now been so low for so long that concerns about ‘underinvestment’ are arguably justified. On top of this, production growth from US shale has been roughly half,” the investment bank states.

With global headwinds, Nigeria faces peculiar obstacles ranging from imperious insecurity to ruinous oil theft. A Senate Ad-hoc Committee on Oil Lifting suggested that “Nigeria lost over $2bn to oil theft between January and August 2022, with consequent loss of revenue that would support the country’s fiscal deficits and budget implementation.”

In the face of dwindling output, Morgan Stanley projects Brent to rally to $110 per barrel as demand recovery continues, noting that spare capacity is eroding rapidly while capital expenditure response is broadly absent.

“European gas and LNG markets are likely to remain tight and support the price recovery from current levels,” says its forecast document themed, ‘the year of yield’.

“Less growth, inflation, and tightening should support DM (developed market) and EM (emerging market) bonds and lower cross-asset volatility. Continued economic uncertainty should create investor demand for high single-digit returns,” it notes in its projection on the likely performance of the financial market.

Goldman Sachs bets on 1.8 percent average global output growth next year, over one percentage point decline from this year’s 2.9 per cent. Against the fear of a possible slump in the coming year, its forecast says the United States could narrowly escape recession.

The investment bank makes some forecast that seemingly contradicts trends and historical path but insists that the current cycle, coming from the disruption of COVID-19 and the uncommon responses of key variables like employment, stressing that “this cycle is different”.

“To be sure, the tightening in financial conditions is weighing heavily on growth, to the tune of nearly two percentage points at present. But real disposable personal income is rebounding from the plunge seen in H1 – when fiscal tightening and sharply higher inflation took their toll – to a pace of three per cent plus over the next year.

“And while there are risks on both sides, we think the real income upturn is likely to be the stronger force as we move through 2023, especially because the financial conditions drag will likely diminish assuming Fed officials do not deliver dramatically more tightening than the rates market is currently pricing,” it states.

Global investors expect the Federal Reserve System to start interest rate cuts as early as the middle of next year after a marathon hike that has seen the upper limit increase from 0.25 per cent to over four per cent. But the Fed Chair, Jerome Powell, had earlier warned that rate cut expectations may be premature. The divergence suggests a gap between investors’ optimism and Fed direction – a potential cause of another uncertain year ahead.


Oil and Gas Sector

Stakeholders raise alarm over safety in oil, gas operations

As BPP decries the impact of declining crude oil revenue on projects devt

Stakeholders in the oil and gas sector in Abuja, yesterday, raised concerns over safety issues in the country’s petroleum sector, especially midstream and downstream.

From August, last year, about 30 incidents have occurred in the sub-sector, killing about 60 people and leaving 62 others with injuries.

Although the Nigerian Midstream Downstream Petroleum Regulatory Authority (NMDPRA) said it was eyeing zero accidents and fatalities, the downstream sector has been in the eye of the storm with repeated gas and tanker explosions.

Speaking at the opening ceremony of the Midstream and Downstream Petroleum Industry HSE (Health, Safety and Environment) Managers’ Forum, the Chief Executive of NMDPRA, Ahmed Farouk, admitted that safety issues remained a serious challenge in the sector, stressing that unless it is dealt with, life and property would remain in danger.

He noted that a healthy and environmentally conscious workforce and a safe workplace are a must for oil and gas businesses to thrive in Nigeria.

Farouk, who was represented by the Executive Director, Hydrocarbon Processing Plants, Installations and Transportation Infrastructure at the agency, said concerns about global warming, exponential improvements in the efficiency of renewable energy alternatives, and the policies of oil pricing have combined to post an existential threat to the global petroleum industry.

He said the development should compel the oil and gas industry to become careful in terms of the environment, health and safety issues.

He also called for innovative and practical solutions to the challenges of HSE, noting that oil and gas operations must become sustainable.

“As sweet as Nigeria’s crudes are known to be, globally, we have recently lost our most valued customers, and our gas buyers are themselves now competing with us in the same market space as suppliers.

“All of these point to one fact: if Nigeria is to continue to benefit from its vast petroleum resources, now, more than ever, is the time to build sustainability into our oil and gas value chain as well as management of its wastes,” he said.

ALSO, the Director-General, the Bureau of Public Procurement (BPP), Mamman Ahmadu, decried declining revenue from crude oil, saying it is affecting development of approved projects.

He regretted that the drop has put pressure on existing insufficient allocation for national development, saying agencies must imbibe cost effectiveness to avoid abandoned projects.

Ahmadu, who spoke in Enugu at a capacity-building workshop organised for the Tertiary Education Trust Fund (TETFund), beneficiary institutions and Bureau for Public Procurement, stated that the exercise was part of efforts to promote accountability, transparency and efficiency for effective and timely delivery of TETFUND projects.

Represented by the Director of, Special Procurement Department, Eze Obasi, he said the essence of the session was to equip participants with vital skills necessary to ensure good procurement practices are entrenched, even as he regretted that some institutions engaged contractors who do not possess proper manufacturer’s authorization to procure equipment.


Secure of oil and gas installations

Edo govt tasks communities on secure of oil, gas installations

The Edo State Government has urged local communities to protect oil and gas installations in the state.

The state’s Commissioner for Mining, Oil and Gas, Ethan Uzamere, who stated this during the official commissioning of the Efe Field OML152 in Orhionmwon Local Council, said the asset would boost Edo State’s contribution to the nation’s ability to meet its oil production allocation by the Organisation of Petroleum Exporting Countries (OPEC).

He said: “On behalf of Edo State Government, I want to specially congratulate Newcross Petroleum Limited for this feat as you have secured the start-up and stabilisation of production from the Efe field – OML152.

“I know it gives your management a sense of fulfilment as today serves as a landmark for your success story ever since you showed interest in this asset. I know that ever since you fulfilled all regulatory requirements for the conversion of the asset here from an Oil Prospecting Licence (OPL) phase to an Oil Mining License (OML) phase, you have not relented in your pursuit that has led to this commissioning. I am impressed with the level of work and commitment you have put into achieving this milestone.”

“We have a security architecture that is community-based. Some of the infrastructure we have very close here in Orhionmwon built by Governor Godwin Obaseki include the Abudu Township Road with three adjoining streets and a bridge. Others are Ugo Skills Acquisition Centre in Niyekorhionmwon and the Town Hall in Obazogbe-Nugu. We have also completed the new Police Area Command Office in Urhomehe. There are more to come in our efforts as a government to improve and protect the well-being of our residents.

“We urge you to explore collaboration with us along this line in the downstream sector, especially in areas of oil and gas parks and refineries. We want to make Edo State the energy hub of Nigeria.”

He said the state oil and gas ministry had a robust and active collaboration with security agencies to protect investments in oil and gas across the state, adding: “We will deepen our collaboration with you to help secure this facility. This is critical as attacks on this installation or others will affect revenue targets from the oil sector.

According to research, oil bunkering, theft and other maladies are due to absence of critical community partnerships.

I will implore you to take your role as citizens in Edo State seriously and be active in many projects that promote health, education and socio-economic development.”



‘What engineers must do to fix oil and gas sector’

The Group Managing Director, Niger Delta Exploration and Production PLC, Mr. Adegbite Falade has highlighted what the Nigerian Academy of Engineering must do to fix the problems in the Nigeria oil and gas sector.

Falade who was the guest speaker at the 2022 Nigerian Academy of Engineering Dinner Lecture in Lagos spoke on “Ownership Changes in Nigeria’s Oil and Gas Assets: Trends, Implications and Outlook.”
Dignitaries at the event included the President of the Nigerian Academy of Engineering, Prof. Azikwe Peter Onwualu, Group Chairman/ CEO of International Energy Services Limited, Dr Diran Fawibe and the immediate past president of the academy, Engr. Alex Ogedegbe.  
According to Falade, Nigeria has to fix the issues that are limiting current production in the industry, especially from the onshore base axis. “And very core to that is fixing the transport infrastructure that evacuates our production to the point of sale…” 

He said that the Nigerian Academy of Engineering needs to be at the forefront of advocacy for this.

“While ensuring that there is demonstrable technical and operational capacity in the would-be operator, the technology charge for the domestication of the consumption of our hydrocarbon resources must be a key agenda to the academy,” he said.
According to him, the academy should champion the deployment of technical solutions for the purpose of surveillance and security in the industry. “Current security efforts that are heavily reliant on human presence and intervention are outdated and grossly insufficient. Our industry is powered by technical professionals at the moment. We are facing a serious brain drain and there is a massive dearth of talents needed for the industry.”

He said that the academy must put the regulators on their toes, especially as it relates to safety, professionalism and prudent operation. “Basically we need to be at our creative best to fashion out and catalyse the right solutions,” he noted. 

He disclosed that the Niger Delta remained one of the most prolific in terms of resource endowment. He said that the fact that the region has witnessed stagnated reserve and declining production is due to very poorly maintained critical infrastructure, especially those related to evacuating oil products to the point of sales.

“Further to the poor maintenance culture by the current operators of this infrastructure is the rising level of vandalisation that has given rise to unprecedented losses via theft, and growing insecurity among others.

“We have very little and insufficient government presence in host community areas. There is weak penetration of socio-economic development in these communities. This has created an incentive for individuals to target the product in the pipeline and many instances to mount stiff resistance to the uninterrupted operation of the international oil companies who are the major and dominant operators accounting for the bulk of our national production. Four, we have a high cost of operations in our operation in Nigeria.”

He disclosed that Niger Delta Exploration and Production Plc over the last 17 years have extracted in excess of 20 million barrels from the field that was deemed to own up to 5 to 10 million barrels. 

“It is a company that is 100 per cent Nigerians, with no single expatriate and has run a very sustainable operation adhering to best practices globally. Today, from the same location where we have extracted 20 million barrels, we are still capable of doing more than double what we have done.”
He added that the company further went into investment downstream or upstream and built a gas processing plant that today processes gas and sells it on the back of long-term off-taker agreements both to the export market and the domestic market.

“ And we have done that sustainably now for 10 years. Not only have we done that, we then went to invest in the refinery that started off about 10 to 12 years ago,” he said. 



Stakeholders seek transparency in administration of 13% derivation scheme

Policy Alert urges oil states to explain N171.2billion refund

As the debate on benefits from oil and gas resources continue in Nigeria, some stakeholders have insisted that it was high time transparency and disclosure are enforced in the administration of the 13 per cent derivation by state governments.

The 13 per cent derivation is paid to oil-producing areas as part of a benefits transfer scheme for the resources extracted from the state.

Reportedly, eight states are currently benefiting from the scheme. The eight oil-producing states had received N6.589 trillion from the federation account under the 13 per cent derivation principle, between 2009 and 2019. Sadly, there has been little or nothing to show for such allocation in beneficiary states as agitations for benefits continue among the people directly impacted by oil production.

A civil society organisation, Policy Alert, told The Guardian that it was high time for the narrative around the scheme to change.

Experts at the organisation insisted that most sub-national governments in the country have been struggling with funding, with many in a debt crisis despite benefit transfers.

The Executive Director of Policy Alert, Tijah Bolton-Akpan insisted that transparency is important for the states since it would open up revenue sources and spending priorities to interrogation by the citizens on whose behalf the states are doing the spending.

“For states receiving derivation payments, transparency is even more key, given the history of state governors’ management of these funds. That way, the temptation to yield to corruption risks are reduced, wasteful spending is curtailed and oil-producing communities have a greater chance of getting these funds to work in their interest,” Bolton-Akpan said.

The CSO had accused the Akwa Ibom Governor, Udom Emmanuel of failing to disclose the N171.2 billion derivation refund his administration received from the Federal Government after a Federal High Court, in June, ordered the government to pay over $3.3 billion to Rivers and Akwa Ibom States as a share of recalculated oil derivation revenue.

Bolton-Akpan said the non-disclosure of the fund to the public leaves a huge gap in transparency.

“We are delighted that the Federal Government has obliged to the refund ruling. This development explains why the State government recently reviewed its expected revenue on exceptional income; 13 per cent derivation revenue arrears from N61.1 billion to N193 billion which is a 315.9 percent increase.

“However, Akwa Ibom people were not informed about this development during the presentation of the supplementary budget even after the state had received the fund.

“This leaves a huge gap in transparency. We were disappointed that the Governor’s 2022 budget speech was silent on this development when he reviewed the performance of the 2021 budget, especially given that N137.9 billion refunds from the Federation Account were proposed as capital receipts,” Bolton-Akpan said.

Former President of Nigerian Association for Energy Economics (NAEE), Prof. Wunmi Iledare, also said transparency remained elusive in Niger Delta Development Commission as well as the 13 per cent benefit transfer scheme to oil-producing states.

Iledare, although noted that the 13 per cent derivation remained noble and laudable as a form of royalty, in a sense for mineral owners conceptually, the fund, unfortunately, became susceptible to being hijacked for political expediency rather than meeting the needs of the mineral owners.

“Fast forward and in comparison to the new instrument for the host community, the development fund, the disbursement mechanism for the new fund is very well laid out with guard rails to ensure transparency and accountability.”

“Transparency and accountability remain elusive with respect to NDDC and 13 per cent derivation. The state assembly members in the oil-producing states are not engaged and they tend to have, majorly, Esau’s syndromic mindsets when it comes to the benefits of the derivation fund,” Iledare said.

He noted that there must be a paradigm shift away from political expediency in the use of the Petroleum Derivation fund to using the fund to maximise the social welfare of the producing community in particular and the state in general.

Managing Partner, The Chancery Associates, Emeka Okwuosa, insisted that there was an urgent need to compel the state government to be transparent and accountable in the use of 13 per cent derivation.

“The oil-producing communities in these states must be seen to be enjoying the dividends as oil-producing communities. The 13 per cent must be enjoyed across the board in these states and communities,” Okwuosa said.

According to him, accountability remained key if benefit transfer must get to the citizen, adding that the need to imbibe and incorporate corporate best practices in the oil and gas industry in Nigeria must include holding the state Governments accountable for the derivation.

An energy expert and former adviser at Nigeria Extractive Industries Transparency Initiative (NEITI), Garuba Dauda said extractive revenues face a huge utilisation challenge at both national and subnational levels in Nigeria, stressing that there are far-reaching accountability gaps in the management of oil revenues at both national and subnational levels of government, especially the 13 per cent derivation.


LCCI - Oil and Gas SECTOR

LCCI urges FG to amend Petroleum Profit Tax Act

The Lagos Chamber of Commerce  and  Industry (LCCI) has asked the Federal Government to consider amending the Petroleum Profit Tax Act with the same provisions in the Petroleum Industry Act (PIA) section 104.

The chamber made the remark following the 2022 Finance Bill as approved by the National Assembly and as it awaits the assent of the president. 

Director General of the chamber, Dr. Chinyere Almona, noted that in recognition of the potential impact of the 2022 Finance Bill on the operations of  its members in various sectors of the economy, LCCI has reviewed the Bill and made its recommendations.

Almona recommended  that with the divestments by some IOCs from the oil and gas sector, the government needs to reposition the  industry through a steeply implemented PIA to pave way for new investments and also encourage indigenous companies to reflate the sector with required investments. 

She said gas flares-out projects should be incentivized to ensure monetization of the resource for the benefit of Nigeria. The DG also suggested that the 30 percent CIT for all oil and gas companies be retained. She empahssied the need for Finance Bills to be  presented for extensive stakeholders’ consultations before they are passed by the National Assembly. On the 2023 budget, the DG promised that the Chamber will continue to work towards mobilising the private sector to support the implementation of the 2023 Federal Budget. 

“On achieving revenue targets for the budget, the MDAs and Government Owned Enterprises (GOEs) can intensify their revenue mobilization efforts in an enabling environment where the private sector thrives.”

To achieve the laudable objectives of the 2023 Budget, she  urged the government to sustain current efforts toward the realization of crude oil production and export targets by creating an investment-friendly oil and gas industry, saying Public-Private Partnerships (PPPs) are the best models to fast-track the pace of the nation’s infrastructural development.

According to her, recent statistics reveal that Nigeria has struggled to attract investments into the oil & gas industry and that investments in the sector have declined significantly in the last 7 years. “The operations overheads of oil and gas companies remain above 40% above the global benchmark.

“ In line with FGN priorities and ongoing initiatives to incentivize gas production, several sections of the PIA clearly show the determined efforts by the government to limit gas-flaring and contain very steep penalties. Also, gas flare fees/costs are treated as a penalty and as such a non-tax-deductible item. And oil and gas companies in Nigeria have reduced flaring by 70% since 2000 while nearly doubling overall gas production and commercialized volumes in four-folds.

“The oil sector’s contribution to Gross Domestic Product (GDP) through 2022 was just around 5% but this sector accounts for over 85% of foreign exchange earnings and about 50% of total government revenue. This suggests that this sector requires a sensitive regulatory environment to avoid disruptions to investments in the sector.

“With the plan to exit some large enterprises from the Pioneer Status incentives, the Government can save about N6 trillion tax expenditure (waivers, exemptions, incentives granted by the government), according to the  Minister of Finance, Budget and National Planning in her 2023 Budget presentation. On the path of caution, we urge the government to tread conservatively in raising tax rates, since there are new ways of rescuing some tax expenditures to add up to government revenue in 2023. Leaving rates at their levels will not lead to a loss of revenue.

“The chamber suggests a retention of the Tertiary Education Tax (TET) rate at 2.5%, since it was just recently increased from 2% to 2.5%. At the proposed rate of 3%, Nigeria’s corporate income tax rate would rise to about 36% which is one of the highest rates in the world, according to available research.”