NewsOil & Gas

 FG secures pipelines with N12.43bn, pays IOCs $4bn

 The Federal Government has so far paid $4.04bn to five international oil companies as cash call arrears repayment and has spent N12.43bn this year on pipeline protection and maintenance, it was learnt on Sunday.

Latest update on pipeline security/maintenance cost obtained from the Nigerian National Petroleum Company Limited showed that the N12.43bn was spent by the government through NNPC between January and June this year.

Figures from the oil company indicated that pipeline security/maintenance gulped N1.1bn, N368m and N2.61bn in January, February and March 2022 respectively.

The NNPC spent N498m in May and N8.35bn in June to secure and maintain its pipelines, while the firm subtracted N464m in April from the total amount during the review period.

Nigeria’s crude oil production has continued to slump due to the repeated vandalism of pipelines and attendant theft of humongous volumes of crude.

 The N12.43bn spent in the first six months of this year to protect pipelines came as the oil company recently contracted the surveillance of its pipelines to a contractor, a development that elicited diverse reactions.

On August 30, 2022, NNPC said its award of multi-billion naira pipeline surveillance contract to a former leader of the Movement for the Emancipation of Niger Delta, Government Ekpemupolo, popularly known as Tompolo, was the “right decision.”

The Group Chief Executive Officer, NNPC, Mele Kyari, had told journalists in Abuja recently that the decision was due to the need for Nigeria to hire private contractors to man its oil pipeline network due to a massive oil theft.

He said, “The security agencies are doing their part. End-to-end pipeline surveillance would require the involvement of private entities and community stakeholders.

“We need private contractors to man the right of way to these pipelines. So, we put up a framework for contractors to come and bid and they were selected through a tender process. And we believe we made the right decision.”

 The pipeline surveillance contract is reportedly worth N48bn per year (N4bn per month), and several groups in the Niger Delta have raised concerns about the deal.

Last week, a renowned Niger Delta activist and Igba of Warri Kingdom, Chief Rita Lori-Ogbebor, said the pipeline surveillance contract should be revoked to avert impending war in the region, as various oppositions to the contract increased.

Lori-Ogbebor, who spoke to journalists in Abuja, argued that it was the responsibility of the Federal Government to manage the Niger Delta and not an individual or company.

She said, “We should be worried about what is happening in the Niger Delta currently, because that contract is causing tension in the region. I am calling on the entire world to what is happening in the Niger Delta. There is a drum of war in that region.

  “There is a show of ammunition without fear. People show them without fear. I am urging the Federal Government to withdraw the contract from Tompolo because as the custodian of this country it cannot leave Niger Delta in the hands of few persons to manage.”

FG pays IOCs $4bn in cash call arrears

Meanwhile, latest figures from the national oil company on cash call arrears repayment indicated that the Federal Government, through NNPC, had so far paid $4.04bn to five of its joint venture international oil companies as at July 31, 2022.

Cash calls are sent by joint venture operators to non-operating partners for payment in the light of anticipated future capital, operating expenditures or the need for additional capital contributions.

The Federal Government, through the NNPC, has, over the years, piled up unpaid bills, referred to as cash calls, which it was obliged to pay the IOCs with which it had joint ventures for oil exploration and production.

The government’s joint venture partners in this arrangement include: Shell Petroleum Development Company, Mobil Producing Nigeria, Chevron Nigeria Limited, Total Exploration and Production Nigeria, and Nigeria Agip Oil Company.

The report showed that the government had completely cleared its cash call debts to Mobil and Chevron, while a total $925.4m had been paid to Shell, leaving an outstanding balance of $447.12m

 Total payments to date (July 31, 2022) to Total and Agip by NNPC were $545.86m and $634.22m, while outstanding balances to the companies were put at  $65.11m and $140.44m respectively.

The total renegotiated debt between the government and the five IOCs was 44.689bn, while $4.04bn has been paid so far, leaving a balance of $652.66m.

In 2016, the national oil company signed the cash call repayment agreements with the five IOCs to defray the cash-call arrears within a period of five years after many years of its indebtedness to JV partners.

Also, the government, through the Federal Ministry of Petroleum Resources, negotiated a discount with the five IOCs in December 2016.

The negotiations led to the reduction of the debt from about $5.1bn to $4.68bn, as the Federal Government, through NNPC, had since continued to reduce the debt payments in installments.

 Nigeria’s oil production crashes to 900,000b/d

 Nigeria’s crude oil revenue has continued to slump as the Organization of the Petroleum Exporting Countries’ newly released Monthly Oil Market Report for September revealed that the country’s crude oil output fell to 900, 000 barrels per day (b/d) last month.

According to the OPEC report, Nigeria’s crude oil production (according to data reported by direct sources) dropped from 1 million b/d recorded in July, to 900, 000b/d in August.

This is as the price of the country’s crude grade, Bonny Light, also dropped by 10 per cent within the space of one month (July-August). Bonny Light, which was sold for $117/b in July, dropped to $106/b in August.

However, the country’s revenue from crude oil rose significantly year-on-year, as Bonny  Light price rose by 64 per cent between 2021 and August 2022.

According to the report, the price of Bonny Light as of 2021 was $67 per barrel. However, this increased to $110 per barrel in August 2022.

 Bonny Light is a light-sweet crude oil grade produced in Nigeria. It is an important benchmark crude for all West African crude production, and usually $1+ higher than international crude grade, Brent.

Nigeria’s crude oil production has been witnessing significant drops for some years now, as the country last recorded a 1.4mb/d in 2020.

Production gradually crashed further to 1.3mb/d at the beginning of 2021,and further  to 1.2mb/d in the first quarter of this year.

As at the second quarter of this year, output dropped to 1.1mb/d, to 1mb/d in July, and 900, 000b/d last month.

Further checks by The PUNCH revealed that the country’s rig count went from 16 recorded in 2019 to 10 in August 2022.

 Professor of Economics and Public Policy at the University of Uyo, Akwa Ibom State, Akpan Ekpo, told The PUNCH during an interview that despite crude oil retaining 80 per cent of the total trade, Nigeria needed to diversify as oil revenue was no longer reliable.

“Oil prices are volatile, and we need to think of other ways to boost revenue,” he said.

This is the U.S oil rig count rose by four to 763 in the preceding week to Sept. 16, its highest since August, according to energy services firm Baker Hughes Co said.

Baker Hughes said that put the total rig count up to 251, or 49 per cent over this time last year.

OPEC has said demand for its crude in 2023 remained unchanged from the previous MOMR to stand at 29.8 mb/d, which is around 0.9 mb/d higher than in 2022.

Despite the continuous rise in demand for OPEC crude, Nigeria’s low output puts its earnings at risk, as the country has been unable to benefit fully from the rise in demand.

The Group Chief Executive Officer, the Nigerian National Petroleum Corporation Limited, Mele Kyari, had, in an interview late last month, blamed the country’s low crude oil outputs on theft resulting from pipeline vandalism in the Niger Delta.

According to him, 295 illegal connections had been located around the pipeline, which, according to him, led to the shutdown of production.

On his part, Lawyer advising NNPC Ltd on oil and gas projects and transactions and partner at Bloomfield Law Practice, Ayodele Oni, advised the Federal Government to provide solutions to the oil theft challenges bedeviling the country.

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