Category: News

Nigeria began preliminary talks with international oil companies to settle a dispute over revenue.

Citing a 2018 Supreme Court ruling, the government says it’s entitled to $62 billion from the companies after they failed to comply with a 1993 law that hands the state a greater share of income when oil exceeds $20 a barrel. The companies are challenging the claim.

“We have opened up a process of engagement between the parties,” Justice Minister Abubakar Malami said at his office in Abuja late on Saturday. “Whether those discussions will eventually translate to settlement, whether it will translate to opening up of a full-blown negotiation process, is what we wait to see.”

READ: Nigeria Wants $62 Billion From Oil Majors on Offshore Ruling

President Muhammadu Buhari is trying to bolster government funds after crude output and prices dropped. Nigeria relies on oil for at least two-thirds of state revenue and more than 90% of foreign-currency income. While oil is the country’s main export, it has also targeted other foreign companies in the past, fining mobile operator MTN Group Ltd. $5.2 billion in 2015, and eventually settling for less than $1 billion after months of negotiations.

Most of Nigeria’s crude is pumped by Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA, who operate joint ventures with state-owned Nigerian National Petroleum Corp. Under production-sharing legislation, the companies agreed to fund the development of deepwater oil fields on the basis that they would share profit with the government after recovering their costs. Crude was selling at $9.50 a barrel when the law became effective 26 years ago, and is now trading above $60 in London.

“Taking into consideration the government’s need to attract investments, no possibility can be out-ruled,” Malami said. “The possibility of settlement is not out of sight.”

Vice President, Prof. Yemi Osinbajo, on Friday revealed that the Federal Government had embarked on plans to crash Nigeria’s dependence on crude oil for survival.

He said, a vibrant commodities trading ecosystem put in place by government would help diversify the economy and enhance Nigeria’s foreign exchange earnings.

The vice president spoke at a roundtable on Nigerian Commodities Trading Ecosystem held on Friday by the Securities and Exchange Commission (SEC) in Lagos.

His words: “The Commodities Trading Ecosystem is of paramount interest because Nigeria has an abundance of natural resources and accordingly a comparative advantage in agriculture, solid minerals and oil and gas, hence emphasis in the immediate term is the agricultural sector.”

The Vice President who was represented by Dr. Yemi Dipeolu, Special Adviser to the President on Economic Matters, Osinbajo said the Federal Government attached great importance to an active and vibrant capital market which will contribute to national growth and development.

According to the Vice President, “Agriculture (accordingly) occupies a pride of place in Federal Government policy, as stated on numerous occasions by the President and as articulated in the Economic Recovery and Growth Plan. The importance of agriculture was underscored during the last recession as its growth then of about three to four per cent prevented a steeper decline. Agriculture is also important for food security and as a means of generating a quick production response.

“The agricultural sector is also important for job creation and employment and for producing the raw materials that go into agro-processing. Indeed, the subsisting Agriculture Promotion Policy specifically aims to ‘integrate agricultural commodity value chains into the broader supply chain of Nigerian and global industry’.

Meanwhile, the Acting Director-General of SEC, Ms Mary Uduk, in her address said the Commission was collaborating with all relevant stakeholders to implement the 10-year Capital Market Master Plan to ensure Nigeria’s capital market was one of the world’s deepest and most liquid as well as the largest in Africa by 2025

“Currently, our potential as a nation is grossly underutilised in the area of commodities. There is, therefore, the need for these commodities to be efficiently harnessed to the benefits of our consumers, industries and governments.

“We believe that if we can develop and institutionalise a vibrant commodities trading ecosystem in Nigeria, we can substantially address problems such as lack of storage, poor pricing, non-standardization as well as low foreign exchange contribution affecting our agriculture and other commodities sub-sectors,” she said.

Source: Ripples

The House of Representatives has approved $57 per barrel as crude oil benchmark price for the fiscal year 2020, while also increasing the revenue target of the Nigeria Customs Service (NCS) from N942.6 billion to N1.5 trillion.

The House said that the exchange rate of N305/$ should be maintained for economic stability, while adding that more work should be done by the Minister of Finance and all economic advisers and her team on improving the economic growth by increasing the GDP and reducing the inflation rate to single digit.

At the plenary presided over by the Speaker of the House, Hon. Femi Gbajabiamila, on Thursday, the House adopted the report of the Committee on Finance and Appropriation on the 2020 2022 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper and approved the recommendations therein.

The report was laid before the House during the plenary by the chairman of the committee and lawmaker representing Ikeja federal constituency, Hon. James Abiodun Faleke.

The House also approved 2.18mbpd as daily production output in 2020, stressing that in view of the concerted effort by the Nigerian National Petroleum Corporation (NNPC) and security agencies to combat the menace of oil theft and vandalism, that the 2.18 million bpd would be realisable.

The House explained that the increase in revenue target for NCS was as a result of its performance in the last nine months with three months still outstanding.More in Home

The House noted that the NCS revenue as at September stood at N1 trillion against the budget figure of N969.8 billion for the year 2019.

The House added that the joint committee commended the NCS for exceeding the targeted revenue despite the global economic challenges and closure of the Nigerian boarders.

The House also said that the sum of N557.4 billion from the revenue increment of NCS be used to reduce borrowing by N200 billion and increase capital expenditure thereby decreasing the size of the budget deficit from N1.7 trillion to N1.5 trillion, while also increasing the total capital available to MDAs by N857 billion, from N1.01 trillion to N1.367 trillion.

The House stressed that the saving on income accruing from the increase of the benchmark amounting to N172 billion, which represents the federal government’s portion of the $2 added to the benchmark be used to pay salaries and emolument of the proposed 30,000 new employees.

The House however ordered that “proper investigation be carried out on the e-collection stamp duties domiciled with the Central Bank of Nigeria (CBN) for the past years so as to show probity and accountability and of course increase the revenue base of the country”.

The green chamber also called for the immediate amendment of the Act of the National Assembly on Production sharing Contracts (PSC) with International Oil Companies.

The House said that proper investigation be carried out on NNPC so as to ascertain the actual cost associated with the Joint Venture agreements.

It also stressed that more government-owned enterprises budget be added to the nation‘s budget to ensure proper checks and balances among all federal government agencies.

The House also stated that the Debt Management Office (DMO) should put more efforts and strategies in managing the foreign and local debts.

The House said that the total estimated expenditure of the federal government should be increased from N 10.002 trillion to N10.729.4 trillion.

The House also said that the National Assembly should expedite action on the passage of the Finance Bill which it said would be brought along with the national budget into law for easy implementation of the 2020 budget, most especially in the area of VAT.

It also called for the urgent review/amendment of the FRA Act and the various laws of the revenue generating agencies to align with current realities.

The House also approved N1.5 trillion as the amount for new borrowing as a result of reduction of N200 billion which was sourced from the increase of revenue target of the Nigeria Custom Service, but insisted that borrowing must be project-tied.

According to the House, in borrowing more, government must remain focused and ensure that it is used to fund critical projects that would increase productivity and contribute to finance such debt.

Source: This Day

The Nigerian Senate on Wednesday mandated three of its committees to investigate seven international oil companies over their alleged refusal to remit about $21bn to the national treasury, according to a report by PUNCH.

The decision of the upper legislative chamber was sequel to a motion by the Vice Chairman, Senate Committee on Petroleum Resources, Ifeanyi Ubah.

Ubah had drawn the attention of his colleagues to the IOCs alleged refusal to honour the provisions of the Production Sharing Contracts Act.

The Act of the National Assembly according to the senator, regulates the sharing of additional revenue between the Nigerian National Petroleum Corporation and the various oil companies.

The Deep Offshore and Inland Basin Production Sharing Contract Act Cap D3 LFN 2004 (PSC Act) became effective on January 1, 1993.

He said the legislation was supposed to be reviewed after 15 years.

He said as a result of the non-review of the PSC Act, the Nigerian Government had lost about $21bn over a period of 20 years as confirmed by the Minister of State for Petroleum Resources after a meeting of the Federal Executive Council on December 14, 2017.

He, therefore, stressed the need to thoroughly investigate reasons for the failure to review the salient provisions of the PSC Act.

He said beyond the crude oil price of $20, the share of the Nigerian Government in the additional revenue was adjusted to the extent that the PSCs shall be economically beneficial to the government in accordance with the provisions of the Act.

The Senate after a debate on the issue mandated committees on Petroleum Resources (Upstream); Judiciary and Legal Matters, and that of Finance, to investigate reasons for the failure to review the salient provisions of the PSC Act.

Source: Sahara Reporters

The Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, at the weekend disclosed that Nigeria lost an equivalent of $1.7 billion within two years of temporary shutdown of oil and gas production from Oil Mining Lease (OML) 25 following a disagreement between the communities and Shell Petroleum Development Company (SPDC).

Kyari explained during a joint visit of stakeholders to OML 25 communities and its facilities in Kula Kingdom of Akuku-Toru Local Government Area of Rivers State, that this was possible because over 35,000 barrels of oil production were daily shut in from the shutdown.

His disclosure came just when the Minister of State for Petroleum Resources, Mr. Timipre Sylva, advised communities and leaders in the Niger Delta to consider adopting a fresh strategy which involved peaceful engagements with oil producers operating in the region to resolve extant issues affecting them and oil production.

Sylva noted that through peaceful engagements, oil-producing communities in the Niger Delta could earn more oil and gas investment opportunities and developments as against the constant cases of hostility, disruption of oil production and underdevelopment.

Until recently when the NNPC reportedly brokered peace between Shell and the community within the operational block, OML 25 had been in conflict for over two years with the host community, insisting that Shell relinquished its hold on the oil field located at Kula in Akuku-Toru.

They alleged that Shell had failed to honour a Memorandum of Understanding (MoU) signed with them, and which bordered on how oil production from the block could be beneficial to both parties.

“In monetary terms, that is worth about $1.7 billion which could have been put to use for the benefit of the community and the rest of the federation.”More in Home

Explaining how the NNPC got Shell and the community to agree to a truce, he said: “What we have done is to engage the community and its leadership to ensure that dispute between it and Shell is brought to a closure, as a result of which there will be more community engagements. They have agreed to vacate the facility and allow petroleum operation to continue in this facility.”

Asked how the development would impact oil and gas production from OML 25, Kyari said: “Our immediate priority is peace for the community and not oil production, but we know that ultimately when peace comes, oil production will come back and we can see the return of about 35,000 barrels of oil production per day.

“The re-entry process will commence, they will validate the state of damages done on this facility over time and within the shortest period of time, Shell will come up with a plan.”

He maintained that community engagement remained the best solution to resolving dispute with oil-producing communities in the Niger Delta, adding: “We are going to promote that ultimately. We have found a solution, and this would enable people to go back to their work, social service and all that is needed will come back. We have to deliver this.”

In his remarks at the meeting, Sylva said he wanted oil-producing communities in the region to consider new ways of engaging with oil companies operating there to resolve community-related challenges.

According to him, “The relationship with the community has come to stay. We need unity in Ijaw land today, and it is time for us to change strategy on our engagements to bring investment to our communities.

“If we cannot make our communities peaceful, investors will not come. It is our responsibility to bring peace to our communities for investment to come because investors are willing to come.”

Source: Punch

Petrocam Trading Nigeria Limited, an operator in the nation’s downstream oil sector, has said it aims to increase the number of its fuel stations across the country to 50 in the next five years.

The Managing Director, Petrocam Trading Nigeria Limited, Mr Patrick Ilo, disclosed this at the inauguration of the company’s 11th solar-powered station at Igando, Lagos.

He described the new station as a one-stop shop for Premium Motor Spirit (petrol), Automotive Gas Oil (diesel), Liquefied Petroleum Gas (cooking gas), lubricants and other services, with a capacity for about 270,000 litres.

Ilo, who expressed optimism about the downstream sector of the nation’s oil sector, said, “We are doing well and moving fast. We started this expenditure in 2014, and we have been growing exponentially. We are going to unveil another station next year, and another one in December. In the next five years, we are targeting about 50 stations.

“I think the downstream oil and gas sector is promising; there is sanity. If you look at the standards on a daily basis, people are raising the standards and with the trend of population growth, I think there is a lot of prospect for the sector.”

He noted that although margins were reducing, operators should avoid short-changing customers.

Ilo said, “Operators should know that margins generally will grow thin, and the most significant thing is that fuel business is a volume business; so we must make sure that we are able to expand our market to bring more people into the market. People should make sure a litre remains a litre despite the thinning margin.

“If you cheat the unsuspecting consumers, it would have a reverberating effect on your business. If you cheat people, you will not last.”

Source: The Punch

The federal government expended a total of N2.3 trillion on subsidising the consumption of petrol and electricity from 2015 to 2018, a report from global accounting and consulting firm, PricewaterhouseCoppers (PwC), has revealed.

The report, which was obtained by THISDAY yesterday, was presented to power sector stakeholders at a roundtable organised by Mainstream Energy Solutions- operators of the Kainji and Jebba hydro power generation companies (Gencos), by the Chief Economist of PwC Nigeria, Dr. Andrew Nevin.

The report highlighted the challenges of Nigeria’s electricity sector and potential solutions to them. It equally indicated that the country spent N1.12 trillion as electricity subsidy and another N1.2 trillion on petrol.

It noted that both subsidy expenditures within the review period represented 17 per cent of Nigeria’s current foreign reserves and 26 per cent of 2019 federal budget.

It said: “The federal government has expended about N1.2 trillion as petroleum subsidy over the past four years (2015-2018). The tariff shortfall in the electricity sector which technically is the electricity subsidy payable by the federal government stood at N1.12 trillion between 2015 and 2018.

“Both subsidies amount to N2.3 trillion, which represents about 17 per cent of current foreign reserves and 26 per cent of the 2019 budget.”

The PwC report stated that the total electricity subsidy for the four years could cover the current budget of the ministries of health and education.

It added that electricity distribution companies (Discos) have steadily reported losses since they took over the distribution assets from the government at the conclusion of the power sector privatisation in 2013.

“In addition, there has been a steady growth in the amount of loss reported. In 2017, the total loss reported by Discos stood at N417 billion.

“Liquidity crunch is the biggest challenge of the Nigerian electricity sector today. The 11 Discos have been struggling to meet their obligations to the Nigerian Bulk Electricity Trading Plc (NBET) and Market Operators (MO) as evidenced in their low remittances to NBET and MO,” the report stated.

According to it, in the first quarter (Q1) of 2019, only about 28 per cent of the N190 billion invoice comprising invoice of N161.4 billion for energy purchased from the NBET and an invoice of N28.8 billion for administrative services from MO, were remitted by the Discos.

“In one year (Q1’2018 – Q1’2019), Discos’ outstanding remittance to NBET and MO stood at about N523.8 billion and N80.3 billion respectively.

“Consequently, NBET have in turn been unable to meet their obligation to the generation companies (Gencos) thus creating a liquidity challenge that has plagued the electricity industry since the privatisation exercise in 2013,” it added.

The report noted that the proportion of remittances relative to market invoice were low across all the Discos, indicating that none of the Discos could attain 50 per cent of the total bill they owed for electricity supplied to them.

“This situation creates liquidity challenges to the generation and transmission segment of the industry,” it said, adding that it is believed that metering customers will reduce the liquidity challenges of the country.

“But meter delivery progress has been slow so far. Abuja, Benin and Port-Harcourt are the Discos that currently have more than half of their customers metered. Yola Disco recorded the slowest metering progress (21 per cent) of all Discos as at Q1’ 2019.
“Progress in metering customers will help to reduce ATC&C (Aggregate Technical Commercial and Collection) losses and billing collection inefficiencies in the sector,” it said.

Indicating that the tariff shortfall in 2018 by the 11 Discos amounted to N384 billion, the PwC report also stated that the average aggregate technical, commercial and collection loss in 2018 was 52.7 per cent.

This, the report pointed out, meant that more than half of the energy received by Discos was wasted.

Source: This Day

The law and the regulation governing the operation of the West African Gas Pipeline (WAPCO) is the subject of an amendment in Lomé, this Thursday, September 26, 2019. Experts, delegates and parliamentarians of the four countries that are part of this transnational mechanism (Nigeria, Ghana, Benin and Togo) are meeting in a workshop that was opened by Dèdèriwè Marc Ably-Bidamon, Togolese minister of mines and energy, and also president of the Committee of Ministers of the West African Gas Pipeline Project .

Indeed, the meeting “aims first of all to imbue you with the realities of the West African Gas Pipeline, after eight years of operation,” said the Togolese minister. It is also for these actors to harmonize their points of view, “on amendments that the test of time, or the experience of exploitation have made necessary”.

The experts will thus floor on the proposals of amendment of the law of WAPCO and its regulation with the institutions concerned. The idea being to submit the harmonized proposals for adoption by the parliaments of the four States Parties.

This solidarity tool between the four countries of West Africa, with an estimated cost of $ 974 million, aimed at its launch to provide gas with a maximum capacity of 13.45 million cubic meters per day to countries such as Benin, Togo, Ghana and Nigeria . Launched since the beginning of this decade, its functioning has, however, been undermined by cash and unpaid issues vis-à-vis some partner countries.

As a reminder, these negotiations take place in a context where Nigeria has closed its borders with its western neighbors, particularly Benin, and consequently Ghana and Togo. A closure that is not without consequences on the economies of these countries and continues without the authorities of Abuja announce end date.

Source: Agence Ecofin

NIPCO Plc, has declared N254 billion turnovers and a profit after tax of N1.58 billion for 2018 financial year just as it deepened its petroleum products outlets expansion and doubled its Liquefied Petroleum Gas (LPG) market share in Nigeria.

The Company Chairman, Chief Bestman Anekwe, who declared this at 15thAnnual General Meeting of the company in Abuja, maintained that these achievements were recorded in the face of the prevailing difficult environment, which had prevailed in the sector in the last few years.

The Board of Directors, he said, proposed a total dividend of N563 million translating into 300k per share from the profit after tax ,which was unanimously approved by the shareholders .

Stating that the result achieved even in the face of the challenging business environment, made the company to feel proud, Anekwe noted that NIPCO Plc has maintained its culture of outstanding performance and industry leadership by focusing on pursuing its major objectives.

“We are yet improving on our core competencies and remain committed to our vision of being the First choice company in the Oil & Gas Industry to all stakeholders

“We have maintained a constant expansion of our retail outlets and furthermore our company has maintained the lead in the LPG subsector by doubling the number of LPG skids and plants all over the country “the chairman pointed out

Said he :” Our strategy and approach in venturing into the upstream sector hopefully will give us a competitive advantage to explore even new frontiers in the business environment.”

Chief Anekwe noted that regardless of the prevailing difficult environment in the downstream sector in 2018, NIPCO was able to sustain its steady growth through strategic expansion of some of its core business activities and made a turnover of about N254B and a profit after tax of N1.5B.

According to him, the result is rather commendable considering the prevailing operating environment in the sector ,which NIPCO was not immured adding “we are hopeful that we will sail on calmer waters in the coming year.”

Meanwhile, NIPCO Plc has announced plans to go into production of Liquefied Petroleum Gas (LPG) in new investments surge.

Managing Director of the company, Mr. Sanjay Teotia, who disclosed this on the sidelines of NIPCO’s 15th Annual General Meeting (AGM) in Abuja, pointed out that conscious efforts are in place in preparation for the take off of the LPG production.

“Your company is thinking of venturing into LPG production against the background of the nation’s richness in natural gas. In the near future, we are going into its production,” he said.

The strategy to diversify and grow the streams of income through the expansion of the company’s oil and gas business, Teotia said, would gain more momentum.

Currently in LPG storage space, NIPCO, the company’s helmsman said, “we not only possess the largest but the most active as well as the supplier of choice.

“Our shareholders will continue to smile with good returns on their investment year in year out but with a caveat that challenges in the sector are addressed headlong by concerned stakeholders” ,he asserted.

Source: Oriental News

Within a one-year period covering August 2018 to July this year, the country earned a total of N5.37tn from oil, figures obtained from the Central Bank of Nigeria have revealed.

The amount is contained in the economic report of the CBN for the month of July, a copy of which was obtained by our correspondent in Abuja on Friday.

The amount was earned from four major sources of oil revenue. They are crude oil and gas exports; Petroleum Profit Tax and royalties, domestic crude oil and gas sales, and others.

A breakdown of the N5.37tn showed that the sum of N346.45bn was earned from crude oil and gas exports, while N3.59tn was collected from the PPT and royalties.

In the same vein, the sum of N1.31tn was realised from domestic crude oil and gas sales, while about N60.82bn was received from other oil revenue items.

A monthly breakdown of the N5.37tn showed that the sum of N403.6bn was earned from oil in August, while September, October, November and December had N471.1bn, N422.1bn, N601.0bn and N441.3bn, respectively.

In January, the country earned N417.3bn from oil; February, N479.5bn; March, N516.9bn; April, N472.4bn; May, N410.2bn; June, N336.6bn; and July, N387.7bn.

Findings further revealed that throughout the 12month period, the Federal Government could not achieve its budgeted monthly oil revenue of N640.2bn

It was learnt that the inability of the government to meet its oil revenue target of N640.2bn was due to production shut-down and closure of various terminals due to fire and flooding.

The Minister of Finance, Mrs Zainab Ahmed, last week expressed concern about the country’s medium-term fiscal challenges, particularly in the area of revenue generation.

She said that the 2020 budget would be predicated on a lower oil production of 2.18 million barrels per day and lower benchmark oil price of $55 per barrel.

In the 2019 budget, the budget benchmark was based on 2.3mbpd oil production and $60 per barrel benchmark.

She said, “Oil production volume is projected to average 2.18mbpd for 2020. Although this is lower than the projected oil production volume of 2.3mbps for 2019, we believe that this is a more realistic projection. For 2021 and 2022, the projections are 2.22mbpd and 2.36mbps respectively.”

Explaining the reason for the cut in oil price benchmark, Ahmed said that this was done considering the fact that there would be glut in the oil market.

She said there were strong indications of an oversupplied oil market by next year, adding that when this happened, it would result in a fall in oil prices.

The minister said all three major forecasters,  the Organisation of Petroleum Exporting Countries, the International Energy Association and the United States Energy Information Administration, had predicted that non-OPEC countries would grow oil production by about two million barrels this year and produce even more next year.

According to her, while the US shale oil accounts for most of the total supply increase, new projects in Norway, Brazil and Australia will also contribute to the increase in the non-OPEC supply.

She said, “A lower oil price benchmark of $55 per barrel is assumed, considering the expected oil glut in 2020 as well as the need to cushion the unexpected price shock.

“There are strong indications of an oversupplied market in 2020. Oil projection volume is projected to be average 2.18mbpd for 2020. Although this is lower than the projected oil production volume of 2.3mbpd for 2019, we believe that this is the realistic projection.”

Copyright PUNCH.