TheNewsGuru

Tag: Crude Oil

  • TNG Deal Breakers: Navigating Inland with Ships of Destiny: The Cabotage Transition

    TNG Deal Breakers: Navigating Inland with Ships of Destiny: The Cabotage Transition

    For decades now most Nigerian maritime experts have been worried over the absence or abysmally low capacity of indigenous players in the maritime sector given the fact that more than 80% of Nigeria’s economy is dependent on maritime activities. The crude oil and the import and export trades are sea-bound activities. Wet cargo revenue far outstrips dry cargo. The target has been to deepen Nigerians’ participation in the estimated US$ 10 billion coastal shipping. Investments are usually capital intensive and that is the reason the government’s intervention is vital towards creating impetus.

    Technology and communication earnings certainly do not belong to this equation. Nevertheless, technology may be key to unlocking the potential of the local shipping business. For instance, deploying technologies to vessel dashboards could help minimize thefts. Vessels, ships, crafts, barges and all other marine transportation systems are heavily reliant on foreign inputs. These gulp millions of dollars to acquire. It is along this perspective that one must understand the federal government and NIMASA’s intervention through Cabotage Fund to aid more local participation in sea transport. 

    Domestication of several maritime rules has been championed by several Nigerians who out of patriotism canvass for a reduction to the millions of dollars in exports that could otherwise develop the maritime space. However, the domestication of rules is just one problem. The capacity has to be built up organically such that every resource is available for fully grown services. For instance, Nigeria does not have the required number of admiralty lawyers both at the bench and bar to adjudicate on maritime cases. Of course, there are few Nigerian admiralty lawyers but all of them are practising in London’s Lloyds market. Cases emanating from Nigerian jurisdiction are shipped overseas to be settled there because most charterers and vessel owners are foreigners. Added to the FOB rules for cargoes, it would seem that dominance by overseas traders is affirmed.

    Therefore, the structure required for Nigeria to begin to have some form of domestication of maritime practices would yet have to be deliberately built up. Hand-in-hand with financing ships acquisition, some universities may have to be endowed to open studies in admiralty law as a specialization while academicians could be sponsored by government institutions to acquire the knowledge. The Nigerian Police as well as other prosecutorial ambulation structures will take cues to train personnel for that purpose. 

    Hence, Nigeria could still operate its cabotage businesses; build, register ships, and indigenize shipping for coastal trade and yet parties to any dispute will travel to another jurisdiction for settlement. Specifically, London will definitely host all the cases arising from maritime business disagreements if no trained and knowledgeable manpower is available.

    So-called cabotage is the transportation of passengers and goods between two places in the same country. Originally applying to shipping, port to port, the terms now extend to aviation, railways and road transport is some countries. It pertains to the right to operate a shipping business within a country and therefore, connotes a restriction. Lower insurance costs, lower risk of accidents and a lower rate of piracy attacks and a better guarantee for goods are some of the perceived advantages for charterers.

    The Cabotage Act also known as the Coastal and Inland Shipping Act 2003 seeks to indigenize inland transport business through the Cabotage Vessel Financing Fund (CVFF) established under the Coastal and Inland Shipping (Cabotage) Act, 2003.

    The US$350million plus US$350million funding

    The Nigerian Maritime Administration and Safety Agency (NIMASA) have taken a firm step in the direction of building the needed capacity. Only recently it announced the federal government’s approval to begin the disbursement of US$350 million in cabotage funds to qualified indigenous operators with a relevant pedigree in shipping. Eleven banks have been shortlisted as primary lending institutions under the scheme. The purpose is for ships, vessels, barges, crafts and so on to be owned and serviced here in the country for any meaningful development to commence.  

    There is another tranche of US$350million for the same purpose through the Nigerian Content Development and Monitoring Board’s Nigerian Content Intervention Fund (NCI Fund). It is hoped this is not the same fund approved for disbursement through NIMASA’s Cabotage Vessel Financing Fund (CVFF). 

    Altogether, the US$700million from both NIMASA and local NCDMB presents a huge opportunity for the maritime sector, especially locally-owned shipping companies, to develop local capacities in those areas in that Nigeria has complete jurisdiction for coastal shipping.

    Therefore, the objective of disbursing US$700 million is to ensure that “all vessels that engage in coastal shipping in Nigeria are built in Nigeria, owned by Nigerians, manned by Nigerians and registered in Nigeria.” The spillover of this empowerment will be the strengthening of the local insurance capacity for local shipping. In addition, more seafarers trained at such cost to the government will find jobs to deploy their skills. The Nigerian Dockyard will also be amply busy in building to specification the required vessels appropriate for Nigerian waters. 

    Where a vessel is needed in Nigeria but does not meet the requirement of being wholly built, registered and operated in Nigeria and by Nigeria, the law and guidelines provide for a waiver application from the charterer on the particular requirement they are seeking to be waived and ensure that no indigenous capacity is available in that area before recommending to the federal ministry of transportation for approval. Ambiguities as to the classification of some vessels classified as foreign vessels should also be cleared up. These include vessels with foreign registered companies but owned by Nigerians and registered under foreign flags due to the requirements for the financing of such vessels’ acquisition.

    Transitioning  

    But there is a caveat which shades the objective of indigenizing coastal businesses –– the Cabotage Department of NIMASA is to “ensure that the Oil and Gas Industry which is the mainstay of the Nigerian economy and provides over 80% of the cabotage trade business, is not destabilized.” This clause may eventually subvert the cause of building the shipping structures that would operationalize the cabotage business in the country. The reason for this is not far-fetched; currently, transactions are dollar-denominated and most vessels and charterers are foreigners and the movement of oil and petroleum must be constant. The most important of all is the fact that part of NIMASA’s revenues accrues from the 2% levy collection from the gross contract sum of all cabotage vessels in Nigeria. 

    The transition is not going to be very smooth because this 2% revenue will suffer disruption and the caveat to ensure the smooth running of Nigeria’s oil transactions and transportation would certainly pose a roadblock. In this respect, a body of oversight professionals should be constituted to oversee Nigeria’s cabotage transition. It is also doubtful if NIMASA has seen and identified the need for this course of action. If it has taken 19 years and 16 years to activate the Cabotage law and guidelines respectively, then a close scrutiny of the processes should be put in place to see through the operational phase of the vessels acquired by local players. The Ship Building and Ship Acquisition Fund should serve as a lesson on Nigerian soil.

    Cabotage Vessel Financing Fund (CVFF) is the Fund meant to be used to help indigenous operators acquire vessels for tonnage capacity building and gradually take over fully from foreign operators. What these flagships will achieve will determine the future of coastal maritime trade in Nigeria and the milestones will be destined to provide a blueprint for further development of the sector.

    Resources to bank on

    o   The Dangote Refinery is projected to start full operations by 2023. Though fossil fuel is gradually being phased out in developed countries, yet the refining capacity and consumption in the local market would provide ample development opportunities for the cabotage to thrive.  

    o   There are about 2,050 Nigerian seafarers trained by NIMASA with about 800 engaged by mostly foreign shipping lines. Indigenous shipping companies may absorb the rest that is unemployed if they are properly equipped. 

    o   The establishment of other deep seaports in other regions of Nigeria’s vast maritime enclave will support expansion and provide jobs and hubs of activity for many Nigerians. This policy ought to be pursued with vigour in view of the scope expected in the cabotage enactment.

    o   The Nigerian Content Development and Monitoring Board (NCDMB) assisted vessel acquisition funds in support of Nigerian local content in the oil and gas services providing another opportunity to transit from a foreign-dominated space to one populated by Nigerian shippers. The Bank of Industry manages the Nigerian Content Intervention Fund (NCI Fund) established by the Nigerian Content Development Fund. 

    o   It is also important to gazette any waiver on imports of ship-building components to counterbalance the single-digit loans for ship acquisition. 

    Dispute Resolutions

    Any legislation or judgement which cedes crew arbitrage exclusively to the National Industrial Court should be examined as shipping is international and requires accelerated discharge of cases in order to engender confidence. The High Courts should also have jurisdiction over such cases to also develop capacity in this field. Prior to proper constitutional amendment of fresh legislation in this aspect, experts advise that courts when faced with such challenges can constitute a special panel and invite friends of the Court to help in resolving crew claims disputes. Charterer issues have their own complications which may not immediately be ventured into by Nigerian courts.

    It is in this light that the efforts to entrench informed maritime decisions by the courts should also be viewed. The yearly training of judges through the collaboration of the Nigerian Maritime Law Association and the National Judicial Institute should be supported by the government. In like manner, the Cabotage Implementation Forum set up by the Nigerian Shipowners Association, lawyers, the Nigerian Chamber of Shipping and other stakeholders is geared towards building the required capacity to deal with outcomes of increased local shipping.  

    The purported stoppage of waiver and ban of foreign ships trading in Nigerian waters must be backed with a coherent plan that situates the actions on existing local capacity and structures so that there will be no disruption in the movement of oil and gas. It is against this background that the seized vessels that are not compliant with the Cabotage Act must be reviewed.

  • Productive people in a productive country – By Dakuku Peterside

    Productive people in a productive country – By Dakuku Peterside

    Recently, I was opportuned to listen to a presentation titled “Nigeria’s Economic Prospects” by one of Nigeria’s foremost Economists, Dr Ayo Teriba. He articulated Nigeria’s current economic woes and situated them in the global context of Post COVID era, European geopolitical tensions, and the resulting energy and commodity price crises. His overarching arguments and postulations are not only germane for a rethink of Nigeria’s economic trajectory but also a breath of fresh air in the current discussions on restructuring Nigeria’s economy for growth and prosperity.

    This essay and a series of others to follow result from the need to rethink our economic structure for productivity, in line with the global trend and current realities and not leave our economy to be decided by happenchance and outdated political economy theories, reminiscent of the industrial revolution era instead of the knowledge economy built more on innovation, than on production.

    Three of the leading presidential candidates for the 2023 general elections are talking of increasing productivity and export as the critical drivers of economic growth. A review of their economic thinking shows that they all believe Nigeria should engage in more agricultural and manufacturing production for internal consumption, import substitution and export.

    They emphasise production and the resultant increase in productivity and employment of human and natural resources as the blueprint for Nigeria’s economic growth. As simplistic and direct as this economic thinking is, the existing economic structure and the ones proposed by the presidential candidates are insufficient to put Nigeria on a growth trajectory.

    Nigeria must leapfrog industrialisation and connect with global innovation and financialization trends to succeed. Financialization is eclipsing industrialization. Financialization, according Thomas Polley of the Levy Economics Institue referring to a process whereby financial markets and institutions gain greater influence over economic policy and outcomes. Productivity in the post- industrial economy goes beyond income-centric optimization of production transactions for largest margins from local and foreign sales that was the hallmark of the earlier stages of industrialization. It is now much more about wealth- centric optimization of tangible and intangible asset portfolios for maximum balance sheet values that is the hallmark of financialization.

    The world has moved away from the past in which global commodity prices (crude oil inclusive) dictated the pace of growth of items on income statements into a new reality in which global equity prices plays the bigger role of dictating the pace of wealth growth on balance sheets. Global wealth has been growing much faster than global income since 2000, and this trend is largely expected to continue in the foreseeable future.

    The mixed outlook of the two global asset prices over the next half- decade underpins those expectations. The IMF projects that commodity prices, including crude oil, currently elevated by geopolitical tensions will fall steadily back to 2021 levels from 2023 to 2027, while we expect equity prices to continue the solid upward trajectory in the last decade through 2027.

    If the asset prices follow the projected paths, global exports could rise by about 50 per cent from US$22.4 trillion in 2020 to US$33.1 trillion by 2027, while FDI stocks could surge twofold from US$41 trillion in 2020 to US$79 trillion by 2027. Over the medium-term balance sheet gains look set to remain three to four times as large as income statement gains.

    It is in this context that it becomes more important for the presidential candidates to say more about what they plan to do about getting a fair share of the growing global pie of global FDI stock into idle public assets in Nigeria that spread across corporate, real estate, and infrastructure.

    We now must define productivity to include innovations that optimizes asset portfolios in addition to those that optimizes output transactions.The transaction model of productivity relies on the quantity and quality of goods and services produced and the revenue generated through internal consumption and export. Global trends now transcend this by embracing asset productivity. Optimizing assets involves unlocking liquidity from publicly owned place-based, space-based, and skill- based assets littered across corporate, real estate, and infrastructure sectors.

    So, instead of relying solely on products and income from agriculture, industry, and service, we should go after the place-based, space-based, and skill-based assets that are needed to generate output in these production-based sectors. Government should allow the inflow of FDI into the innovation sectors of the economy that productive sector rely on to thrive. We see this in Nigeria’s Fintech sector, where small and medium industries attract billions of dollars as FDI. The government should collaborate with the private sector to open other innovation sectors for FDI.

    Saudi Arabia’s exemplifies this trend. The country has historically focused on creating wealth through income-centric optimization production and exports, not caring much about creating wealth through optimization of asset portfolios. But the weakening of global commodity prices since 2014 in the face of strengthening global equity price prompted the country to take steps to financialize its public asset portfolio from 2016.

    It was in this process that it listed ARAMCO in the market through an initial public offering in 2019. The market value of ARAMCO is more than$2 trillion now,making it one of the biggest companies in the world. Considering that Saudi Arabia’s GDP is only about US$850 billion now, it is fair to say that Saudi Arabia’s balance sheet now contributes more to its national wealth and net worth than its income statement.

    We can also see this with American technological behemoth, APPLE. It takes direct control of the upstream/conception and downstream/distribution phases of its value chain where its growing stock of tangible and intangible skill-based, and space-based assets ( including patents, brands, creative designs, and it’s closed digital marketing platform ) differentiates its offerings but outsources the midstream assembling/production stages of its devices, where operating procedures are hard to differentiate, to third parties offshore. Apple is worth over $2 trillion.

    The next is the place-based optimisation. All stakeholders must unlock liquidity by optimising the market value of public spaces, real estate, cities, transit routes, tourist centres, farms, factories, and other physical capital. Government should review its real estate holdings to unlock the liquid value attached to them. It may make sense to commercialise real estate with substantial commercial value due to its location rather than keeping them as government buildings serving a need that count for less.

    For example, the British government moved prisons from inner cities across the UK to more economic locations and repurposed the old sites for redevelopment into luxury residential or commercial real estate as part of their efforts to get the best value from public real estate portfolio.
    Dubai is another example. It developed its real estate market, tourism, and business centres to attract people from around the world to visit, work and live in Dubai. Optimization of Dubai’s portfolio of place- based assets contributes more to its wealth and net worth than than producing and exporting oil. Unlocking the value in place by Amenitizing leisure and leisure activities is essential.

    Optimising spaces also fuels productivity. Companies obtain ownership rights, patents, licenses, connectivity, digital platforms that create significant values for other producers and consumers. Companies like Google, Facebook, Airbnb, Uber are owners of space-based assets that others who wish to produce, sell, or buy cannot do without. They are multi-trillion- dollar companies in equity value and generate huge revenues from the financialization of their spaced-based assets.

    Likewise, optimising skills and knowledge development is an excellent part of productivity. Global skill shortage is fueling an unprecedented wave of talent migration. The Philippines is a leading supplier of seafarers, caregivers, and domestic workers in the world. The culinary skills of the Chinese help to differentiate Chinese restaurants worldwide. We can debate whether diners are paying a premium for the skills or for the products.

    The need for healthcare workers in developed countries is an opportunity to train and export the skills of Nigerian youths to the rest of the world, so also ICT skills .Investors worldwide highly value skills, brands, trademarks, recipes, talents, innovations, and knowledge.

    There is a need for rethinking productivity in Nigeria. The presidential candidates should not only understand the problems of Nigeria and how to solve them, but they should have a sharp vision of the destination they are taking Nigeria to. According to Seneca the Younger, ‘If a man knows not to which port he sails no wind is favourable’. The February 1887 Magazine of American History teaches that ‘You cannot make much of a wind, but you can choose a wind, trim your sails to it, and attain the haven you select by its push and inspiration”.

    Presidential candidates need to tell us more about how they plan to incentivise innovation to unlock growth in both income and wealth. Innovation is a crucial enabler of productivity. Innovation and productivity drive living standards. The capacity to generate innovations is the defining factor of productivity, not necessarily the goods you produce.

  • Crude oil production: Angola, Libya maintain lead over Nigeria

    Crude oil production: Angola, Libya maintain lead over Nigeria

    Angola and Libya have for the second consecutive month maintained their lead over Nigeria as Africa’s highest crude oil producers, according to a report by the Organisation of the Petroleum Exporting Countries (OPEC).

    OPEC made this known in its Oil Market Report for October. According to the report, Nigeria’s crude oil production in September averaged 1.087 million barrels per day.

    The report said the figure showed an increase of about 30,000mb/d when compared to the 1.057mb/d produced averagely in August.

    However, like the preceding month, the report said Angola remained Africa’s highest crude oil producer for the month under review with an average production of 1.184mb/d.

    It said Libya’s crude oil production also averaged 1.152mb/d in September.

    “According to secondary sources, total OPEC-13 crude oil production averaged 29.77 mb/d in September, higher by 146,000 barrels per day month-on-month.

    “Crude oil output increased mainly in Saudi Arabia, Nigeria, Libya and the UAE, while production in Iraq, Venezuela and IR Iran declined,” the report said.

    The report said the latest data suggested that inflation accelerated to 20.5 per cent year-on-year (y-o-y) in August from 19.6 per cent y-oy in July.

    It said the recent rate had been fuelled by domestic and international constraints on supply chains, a weakening naira as well as higher energy and transportation prices.

    “Moreover, floods in the northern part of the country, which have weighed significantly on the grain harvest, could lead to even higher prices.

    “However, considering the broad money-supply growth of 21 per cent y-o-y in August, there is a significant monetary component behind the inflationary spiral.

    “In response, the Central Bank of Nigeria (CBN) recently hiked the policy rate for the third time this year by 150 basis points, to 15.5 per cent, adding up to a cumulative 400 bps.

    “The CBN also increased the minimum Cash Reserve Ratio (CRR) by 500 bps, to 32.5 per cent, from 27.5 per cent previously, but kept the liquidity ratio unchanged at 30 per cent.

    “For the time being, the Stanbic IBTC Bank Nigeria Purchasing Manger’s Index increased to 53.7 in September 2022 from 52.3 in the previous month,” the report said.

    It said this was a reflection of a stable improvement in overall business conditions as sentiment remained positive, supported by the outlook for the fossil fuel market.

  • Senate approves 2023-2025 MTEF/FSP

    Senate approves 2023-2025 MTEF/FSP

    The Senate on Wednesday approved the 2023-2025 Medium Term Expenditure Framework(MTEF) and Fiscal Strategy Paper (FSP) for the country.

    This followed the adoption of the report of the Senate Committee on Finance at plenary.

    As part the approval, the Senate requested that 10 out of the 63 Government Own Enterprises(GOEs) be exited from the budget and placed on cost of collections to serve as a test case for others in the future.

    The GOEs included Nigeria Communication Commission(NCC,) Cooperate Affairs Commission (CAC) Nigeria Ports Authority (NPA), Nigerian Maritime Administration and Safety Agency (NIMASA) and Nigeria Upstream Petroleum Regulatory Commission (NUPRC)

    Others were Federal Inland Revenue Services (FIRS), Nigeria Customs Service(NCS)Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Joint Admission and Matriculation Board (JAMB) and National Agency for Food and Drug Administration and Control(NAFDAC).

    The upper legislative chamber also approved daily crude oil production of 1.69 million barrel per day (mbpd) 1.83mbpd, and 1.83mbpd for the 2023, 2024 and 2025.

  • NNPC discovers illegal pipeline routed into the sea for crude oil theft

    NNPC discovers illegal pipeline routed into the sea for crude oil theft

    The Nigerian National Petroleum Company (NNPC) Limited has revealed the discovery of an illegal oil pipeline that is routed into the sea and used in stealing crude oil.

    TheNewsGuru.com (TNG) reports that the Group Chief Executive Officer of NNPC Limited, Mele Kyari made the disclosure at a meeting with Senate ad hoc committee on oil theft in Nigeria on Tuesday.

    Kyari said the discovery was made with the help of its private security partners, further disclosing that the illegal oil pipeline had probably operated for the last nine years.

    According to him, the illegal oil pipeline is about four kilometres long, stressing that the route did not get to its terminal.

    Speaking during the meeting, Kyari also disclosed that the company has deactivated 395 illegal refineries in its efforts to curb oil theft in the country.

    The NNPC GCEO, who raised an alarm over the scale of oil theft, and vandalism of assets in recent times described the crime as calamitous.

    “We have deactivated 395 illegal refineries, we have taken down 273 wooden boats, we have destroyed 374 illegal reservoirs, we destroyed 1,561 metal tanks.

    “We have sized over 49 trucks and burnt them down, we have discovered illegal oil pits of 898 so far, and 1,219 cooking sites have been taken down,” he said.

    He said crude theft by vandals has brought down Nigeria’s oil production to around 1.2 million barrels per day from 1.8 million.

    He said that It was not true that the difference between 1.2 million barrels and its potential budget level of 1.8 million barrels was been stolen.

    “To be very precise, we have never seen this level of escalations in our operations. The scale of oil theft, and vandals that we are seeing today is unprecedented, prices of crude oil is so high in the market today, for oil thieves to operate.

    ”But we have put a structure of security hovering around our partners, all the government security agencies, we have set up security private contractors.

    “Because the Brass, Forcados and the Bonny terminals,  all of them are practically doing zero production today, the combined effect is that you have lost 600,000 barrels per day, when you do a reality test.

    “But we hope to restore production to the Forcados terminal, this is as a result of the security intervention that is ongoing,” he said.

    The Chairman of the joint committee, Sen. Mohammed Nakudu (APC-Jigawa) urged the NNPC Group general manager to install trackers on trucks lifting crude from terminals, saying that there was technology to monitor ships laden with crude as done in other countries.

    He also urged him to be prepared for oversight in Port Harcourt and Warri Refineries, given the submission of NNPC that the refineries have been rehabilitated.

  • Petroleum upstream commission moves to enhance national crude oil production

    Petroleum upstream commission moves to enhance national crude oil production

    The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has expressed determination to take bold and revolutionary steps, using a non-kinetic approach, to address the challenges of crude oil theft, improve national crude oil production and save the country’s economy from further degeneration.

    This was contained in a statement released on Tuesday by Gbenga Komolafe, the Commission’s Chief Executive. He stated that although NUPRC is not an operator/producer, it has a statutory responsibility as a regulator to probe into the situation and seek drastic solutions to the challenges as the current situation has seriously affected the country’s economy and posed a huge challenge to the funding of the national budgets.

    The statement reads: “The Commission will do everything within its authority to challenge the narrative and halt further degeneration by ensuring transparency in hydrocarbon accounting.

    “One of the steps, in line with its technical and regulatory powers, is to probe into the operational and commercial activities of exploration and production companies operating within the country to ascertain the level of compliance with the terms and conditions in their operational contracts, as well as the challenges impeding expected deliveries.

    “The Commission will particularly be interested in the mode of operation of the companies in relation to the approvals as per their operational licences, the level of conformity with the technical provisions and production terms,  their level of investments to enhance capacity utilization, and the challenges they are facing, especially those contributing to the current unacceptable situation.

    “Beginning Wednesday September 28, the Commission will be engaging all the exploration and production companies individually to get to the root of the current situation as it believes strongly that there might be more fundamental issues in the industry affecting expected output and deliveries beyond the much touted issue of crude theft.

    “Already invitations have been extended to all the operators for the  engagement during which they would be expected to present their work programme performance, acreage status, divestment plans (if any), field development plan (FDP) implementation status, Upstream investment in the last five years, exploration activities including geophysical acquisition/processing/re.processing, leads and prospects maturation plans; and exploratory wells drilled in the last five years.

    “Also during the engagements, the companies would be required to present their reserve status; life index, current reserves replacement ratio (RRR) and reserves growth strategy (RGS); status of Joint Venture/Production Sharing Contract activities, including ongoing facility projects, number of drilled wells, re-entry applications and approvals grafted in the past five years; shut-in wells, their potentials and reactivation plan(s) and expected incremental volumes; technical allowable/production performance and production optimization strategy, including production profile for the last ten years; status of production facilities, as well as unit technical cost of production on field basis.

    “The Commission would also insist on knowing their gas development strategy, gas reserves commitment status and domestic gas delivery obligation performance; status of utilization activities (if any); crude oil evacuation route and exported volumes from January this year, status of statutory payments as well as the challenges they are facing in the course of their operations.

    “The move by the Commission is to ensure transparency and accountability in the industry to guarantee effective operation and output delivery in the interest of the country’s economy and the benefit of the investors and industry operators”.

  • We will soon reveal ‘big men’ behind crude oil theft – Garba Shehu

    We will soon reveal ‘big men’ behind crude oil theft – Garba Shehu

    Malam Garba Shehu, Senior Special Assistant to President Muhammadu Buhari on Media and Publicity has said the federal government would soon reveal the identities of important personalities behind crude oil theft in the country.

    Shehu said that as part of efforts to rid the country’s economy from sabotage of greedy few, security operatives had raided locations where illegal oil bunkering thrive.

    Speaking on Trust TV’s Politics Today, Shehu hinted that there might be cases of some law enforcement agents engaging in the illegal act, but said that new measures were being taken to put a stop to it.

    “Oil theft is being tackled. The big problem we have in this country is that we ought to see more commitment from communities in assisting law enforcement agents. In some cases, where some actors in the law enforcement are complicit, it becomes bad,” he said.

    He added that it was embarrassing for Nigeria not to meet up with the quota given to it by the Organisation of Petroleum Exporting Countries (OPEC).

    “We used to fight the OPEC for more quotas; now, they have given us and we are not able to meet up. This is embarrassing. Security agencies are fully involved in stopping this act.

    “I am hopeful that in the next few days, the office of the National Security Adviser will be presenting to the country, big men who are promoters of this kind of business as they are being caught and illegal refineries are being bombed out.

    “The Nigerian National Petroleum Company (NNPC) Limited is also installing a monitoring capacity to detect or advise immediately when sabotage of oil pipelines happen,” he said.

  • FG moves to tackle crude oil theft

    FG moves to tackle crude oil theft

    The Federal Government through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) says it has developed key initiatives aimed at reducing to the barest minimum activities of crude oil theft and illegal artisanal refining.

    Engr Gbenga Komolafe, Chief Executive Officer, NUPRC, made this known at the Lagos Chamber of Commerce and Industry (LCCI) Public Private – Dialogue on Crude Oil Theft and Artisanal Modular Refineries on Thursday in Lagos.

    Komolafe said that an unprecedented level of theft estimated at a daily average of 103,000 barrels which was recorded in 2021 had grown to 120,000 barrels in first quarter of 2022.

    He added that daily average production in 2021stood at 1.5 million barrels while the national production advised by the commission was 2.2 million barrels.

    “Consequently, only 58 per cent of the technical rate was achieved in 2021 and similar performance has continued in 2022 hence the need for more concerted efforts across all quarters to stem the tide.

    “Unfortunately, the amount of oil received at the terminals indicates that over nine million barrels of oil is lost to crude oil theft amounting to a loss of one billion dollars in first quarter of 2022,” he said.

    Komolafe said that the effect from this level of theft had resulted in the declaration of force majeure, shortage of wealth, a hostile, unsafe environment and was a disincentive to investors in the Nigerian upstream sector.

    He added that many operators had deliberately shut down facilities and pipelines which had further aggravated the low oil production also impacting gas production both for domestic utilisation and exports.

    He said that in view of the development and the ongoing government’s efforts to enable the industry deliver production target of three million barrels daily in three years, the commission has developed some key initiatives.

    Komofale said that the initiatives were aimed at mitigating oil theft and creating enabling regulatory environment for local refining in Nigeria.

    He said they include: a roadmap for tackling the insecurity challenges in the industry, identifying and implementing areas of collaboration between government and operators in ensuring that operators realise their full production potentials.

    Others, he said were massive collaboration with the top civil echelon of the Nigerian security forces for a robust security for both operators and host communities.

    “The commission is also promoting the implementation of modern security technology for real time loss detection that would enable swift and more proactive responses.

    “We also advocate a refinery regulation in terms of establishment of more modular refineries to curb activities of artesians from refining crude which is outside the ambit of the law and absolutely below acceptable minimum standards of technology in the 21st century,” he said.

    Dr Michael Olawale-Cole, President, LCCI, expressed concerns over Nigeria’s battle in recent years with dwindling revenue, security challenges, weak infrastructure, rising inflation, high cost of production, and a burdening and unsustainable fuel subsidy.

    Olawale-Cole said that crude oil theft had taken a worrisome dimension spiking production costs to $32 a barrel with losses from pipeline vandalisation and theft overwhelming the International Oil Companies (IOCs).

    He added that the development had led to several indigenous oil firms contending with rising operational expenses driven mostly by personnel, maintenance, and security costs.

    Olawale-Cole said that there were also concerns about the culpability of the nation’s security agencies, noting that barges of oil could not be stolen and moved on the coastal waters without the collaboration of some powerful stakeholders.

    “The menace of oil theft has become a national disaster and a critical threat to our revenue base as Nigeria is losing crude oil at the level of about 91 per cent of output.

    “Nigeria lost $3.2 billion to crude oil theft between January 2021 and February 2022, as revealed by the NUPRC, the LCCI Oil Producers Trade Section, and the Independent Petroleum Producers Group (IPPG).

    “This menace has prevented Nigeria from meeting its crude oil output capacity,” he said.

    The LCCI President reiterated the chamber’s position in favour of the removal of fuel subsidies and full deregulation of the petroleum downstream sector to attract required investments into the sector.

    He said that the twin factor of fuel subsidy payments and crude oil theft have combined to deny Nigeria the gains of the high crude oil price on the international market.

    “No investor wants to invest in an industry where they cannot even recover their cost of production.

    “While we expect some respite from the commencement of commercial private sector refining and modular refineries, we call on the regulators to ensure a conducive business environment that supports these investments coming on stream soon,” he said.

  • NNPC boss seeks support of stakeholders in oil and gas to tackle crude theft in Niger Delta

    NNPC boss seeks support of stakeholders in oil and gas to tackle crude theft in Niger Delta

    Group Managing Director of Nigerian National Petroleum Company Ltd, Mele Kyari, has solicited the support of the National Association of Petroleum and Engineering Gas Workers, National Association of Road Transport Owners and others to tackle crude oil theft in Niger Delta.

     

    In his words: “We are partners and workers in the industry and NNPC is here to protect and preserve every institution that is helping this industry to grow and survive.”

     

    Kyari spoke on Tuesday at a conference in Asaba, Delta State, organized by the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG).

     

    He said the theft of crude oil is denying the country funding to boost economic development.

     

    A report released last month during a meeting on crude oil theft between Nigerian Upstream Petroleum Regulatory Commission, Oil Producers Trade Section and Independent Petroleum Producers Group, showed that between January 2021 and ths February, Nigeria lost about $3.2 billion to crude oil theft.

     

    President Muhammadu Buhari subsequently ordered the Chief of Defence Staff, Gen. Lucky Irabor, and other security chiefs to combat crude oil theft.

     

    The report added that oil theft rose significantly between 2021 and 2022, with over 90 per cent of total crude produced at the Bonny Terminal stolen in January.

     

    Kyari said: “You can see the short trouble that we have and what it has caused all of us. But more than this, our locally industries are terribly challenged and you may be aware, we have seen vandal activities around our areas of operations not just in Niger Delta but across other corridors of product supply.

     

    “Activities of oil thieves have got to a limit we haven’t seen before, almost bringing down this industry to its knees. As we speak, our production total is less than 1.5 million barrels per day. This no doubt will affect the investing companies, they will not have the resources to continue to invest and therefore make more and more sustainable employment to become a challenge, no doubt about it.

     

    “That is why all of us must practically come together to see how we can contain it. There is so much going on now. We are leading a process to ensure that we intervene in the security matter.

     

    “We want to ensure that verybody is involved so that ultimately we are able to get back this industry or otherwise this industry will collapse on our hands and if it does, we will not be talking about employment and this is the reality we are facing today.

     

    “You are very critical in stopping some of the situation today because when people steal products and they convert them to diesel, they will use your trucks to bring them into the country.

     

    “And you can play a very prominent role to stop some of these transactions going on and I really implore all of us to come on the desk so that this industry can survive.

     

    On the issue of energy transition, Kyari said that this concept does not mean that oil will disappear by 2050.

     

    He said what the concept of energy transition means is that countries should start embracing more cleaner sources of energy that are more friendly to the environment.

     

    He added that NNPC “is also championing this initiative by shifting more attention to gas production which is a more cleaner source of energy than fossil fuel.”

  • Crude oil probe: Reps demand proper report of volume of produced oil by NUPRC

    Crude oil probe: Reps demand proper report of volume of produced oil by NUPRC

    The House of Representatives on Tuesday directed the Nigerian Upstream Petroleum Regulatory Commission to submit proper reports on the volume of crude oil produced and details on the projected revenue.

    The panel also requested for details of crude oil production from October 2021 to March, 2022, with a view to determine the revenue accrued to the Federation through the commission.

    The investigative hearing on the ‘Revenue Monitoring Exercise’ was held at the instance of the House Committee on Finance, chaired by Hon. Abiodun James Faleke.

    As stipulated in the documents submitted to the Committee, out of total sum of N695.617 billion revenue realized by the Commission for the period under review, the sums of N616.182 billion; N19.556 billion; N39.085 billion; N3.502 billion; N6.693 billion and N10.599 billion were generated from Oil Royalty, Gas Royalty, Gas Flared Penalty, Concession rentals, MISC Oil Revenue and Signature Bonus, respectively.

    According to the Commission’s document submitted to the Committee, from the 24 contracts awarded from last quarter 2021, the sum of N55.438 million for renewal of contract for the provision of 20 Mbps internet bandwidth in DPR offices nationwide to VDT Communications Ltd on October 18, 2021; N20.464 million for procurement and installation of network & communication devices for DPR Calabar Field and N10.899 million for Akure Field Offices awarded to Zionchrome Int’l Nigeria Ltd on October 5, 2021.

    Contract worth N49,921,250 was also awarded for engaging the service of consultant to facilitate Capacity Building on Upstream Petroleum Operations for relevant National Assembly Staff and Legislatives Aides for the NUPRC on the 24th December, 2021 awarded to Priceless Craft; N48.268 million contract to facilitate strategic engagement on budget and revenue for NUPRC awarded on the 24th December 2021 as well as N39.295 million contract for separation and reconfiguration of smart inspector (Formelo) mobility workforce application for NUPRC; N78.045 million for renewal of automated upstream system (AUS) for NUPRC; among others.

    While responding to questions on the Fiscal Responsibility Commission’s activities, Mr. Bello Aliyu explained that from the N4 billion liabilities inherited from the defunct Department of Petroleum Resources (DPR), it was scaled down to N1.7 billion was taken over by the Commission.

    “The Nigeria Upstream Regulatory Commission is a new agency. It is the name that is new. The name was added to our purview December last year. So, we now wrote to them a letter sometimes in March to inform them of their responsibilities to Fiscal Responsibilities Act 2007 and then to inform them that, the obligations of DPR which was their former name is now transferred to them and that liability for DPR that they are responsible for is N1,739,837,045.

    “This we informed them sometimes in March. I think 29th of March,” he said.

    While presenting NUPRC’s position, Mr. Babajide Fashina said: “Details of revenue sources is based on oil royalty, gas royalty, gas sales royalty, gas flaring penalty, concession rental, miscellaneous oil revenue and signature bonus and all these are paid into the generation account, the Commission does not maintain any account of it’s own.

    “On the second one, which is the schedule of revenue collected, from October 2021 till February date, we have a total collection of N695,617,119.49. That was from October 2021 to February 2022.

    “And the breakdown as shown, the oil royalty which was the large one, we have N616 billion, the gas royalty, N19 billion, had flare N39 billion, Concession rental, N3.5 billion then Miscellaneous oil revenue, N6.69 and all these have been paid int the Federation Account.

    “From January to December 2021, we were able to generate about 2.7 trillion for the Federation,” he noted.

    He argued that the differential observed by the Committee would be resolved during the reconciliation with Fiscal Responsibility Commission.

    In his ruling, Hon. Faleke said: “Royalty, N88.7 billion, I am reading from your figure. From what volume of crude? We need to know. You need to create a column to tell us the volume of crude for that particular period you are referring to. Because we have to monitor this in line with our production.

    “So, all the revenue items you need to create that column for us to know what you are talking about. This is just bandying figures before us without foundation.

    “The Deputy has also advised that, in every budget, there are revenue expected of you and you are aware of that from the Budget Office. So, you need to also create that column, okay.

    “What is the expectation? What have you done to see have you surpassed or you have not surpassed? We would be able to ask you reason for that. So that gives us proper reporting, then we can interact properly rather than just guessing.

    “So, we will give you another day to do two things. Give us this proper report that we are asking. Two, do a final reconciliation with Fiscal Responsibility and get back to us next week.”

    To this end, Hon. Faleke directed the Commission to submit proper reports on the volume of crude oil produced and details on the projected revenue.