Nigeria’s average housing cost dwarfs S’Africa’s – Newtelegraph

The Deep Offshore and Inland Basin Production Sharing Contract (PSC) Amendment Bill assented to by President Muhammadu Buhari has caused an upheaval in Nigeria’s oil industry. Adeola Yusuf reports

 

The Nigeria’s proverbial oil and gas tree was, last week, shaken to its root by two events that happened.

First, which happened to Nigeria from far away London, the United Kingdom (UK), was President Muhammadu Buhari’s signing the bill, an Act, which amends the Deep Offshore (and Inland Basin Production Sharing Contract).

This was promptly followed, some hours after, by the news of plans by French super major, Total, to exit from Oil Mining Lease (OML) 118.

While the industry players and watchers are yet to establish an official link between the two events, Total immediately appointed Investment bank, Rothschild, to manage the $750 million asset sale in Nigeria.

Opinions have been pouring on the new PSCs law in no small measure; all trying to justify or repudiate the move, altering the entire firmament of the industry.

NEITI’s opinion

The recent PSC Amendment Bill, which was assented to by President Buhari would usher in significant improvement in oil revenue for Nigeria, the Nigeria Extractive Industries Transparency Initiative (NEITI) said.

The agency commended the Presidency and the National Assembly for the speedy manner, the amendment process was handled. The bill was signed by President Buhari in London just a few days after it was passed by the lawmakers.

Executive Secretary of NEITI, Waziri Adio, said in Abuja that the amendment of the law was long overdue.

“We commend the 9th National Assembly and the Presidency for breaking the jinx with the prompt action taken to amend the law in record time,” Mr. Adio said.

The development, he said, was quite consistent with NEITI’s agitation for urgent amendment of the law to forestall further revenue losses to the federation.

He recalled that in March 2019, NEITI had published a policy brief titled “the 1993 PSCs: the steep cost of inaction,” which revealed that Nigeria lost between $16 billion and $28.61 billion in ten years for failure to review the terms of the agreement in 2008 as required by the law governing the PSCs.

The official said there were two notable triggers for the review of the Act in 2004 when crude oil price crossed the $20 per barrel mark, and in January 2008 after 15 years of the 1993 PSCs.

Section 16 (1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act Cap. D3. LFN 2004 spelled out the conditions under which the PSCs should be reviewed.

The provisions of the Act stipulates that the law shall be subject to review to ensure that if the price of crude oil at any time exceeds $20 per barrel, the share of the revenue to the government of the federation shall be adjusted under the PSC.

The essence of the adjustment of the sharing formula was to ensure that the Production Sharing Contracts shall be economically beneficial to the government.

More revenue

The official expressed confidence that with the amendment of the law, revenue generation for the federation in the PSC arrangement in the oil and gas industry will witness significant improvement.

The Deep Offshore and Inland Basin Production Sharing Contracts Act was enacted on March 23, 1999, with its commencement backdated to January 1, 1993.

Bickering before review

Of late, the Federal Government, through the Office of the Attorney General of the Federation and Minister of Justice, Abubakar Malami, had been making a case for the recovery of over $62 billion from the international oil companies.

These are arrears of revenues that should have accrued to Nigeria over the years that oil sold above $20 a barrel.

Malami had accused the IOCs of frustrating efforts in the past for the government to negotiate the review of the PSC.

The morning after

Mass sack last Thursday loomed in Nigeria’s oil industry as more international oil companies mulled pull out from Nigeria’s oil bloc stakes.

The move, which came a few days after President Buhari assented to the bill, New Telegraph gathered, is to worsen the over 3500 job loss suffered by the Nigeria’s oil industry between 2016 and 2019.

French super major, Total, which pioneered the fresh exit plan from Oil Mining Lease (OML) 118, this newspaper gathered on Thursday, has appointed Investment bank, Rothschild, to manage the $750 million Nigeria’s asset sale.

Total is not the only international oil company that has stakes in the OML 118. The stake owners include Royal Dutch Shell 0- the operator, Exxon Mobil and Eni. While Royal Dutch Shell owns 55 per cent stake in the OLM 118, Exxon Mobil has 20 per cent, Eni and Total both own 12 per cent in the oil block.

There has been exchange of correspondences between the IOCs offices in Nigeria and their headquarters situated in their mother countries over this move, this newspaper can report authoritatively.

“While a lot of these correspondences centred on implications of the new law guiding Production Sharing Contracts (PSCs) to our bottomlines, our officers here in Nigeria have been tasked to take resolutions on the new bill as an emergency,” a top management staff of one of the oil majors told this newspaper.

Stating that there would be need for re-adjustment in revenues forecast and projections made on investments in Nigeria before the bill, he maintained that there would be “realignment in spending and possible right-sizing to reflect the new reality.”

Job loss fear

There has been mass sack of over 3,500 workers in Nigeria’s oil industry between 2016 and 2019, data compiled by this newspaper showed.

While the country’s economic recession was allegedly responsible for the sack of about 3,000 in 2016, the United States (U.S.) super oil major, Chevron, allegedly sacked 500 staff working on various projects of the company in Nigeria in 2019.

The two major unions in the oil and gas sector, Nigeria Union of Petroleum and Natural Gas (NUPENG) and Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), then, threatened to go on strike saying over 3,000 of their members were affected during the 2016 mass sack.

Total group is already looking for buyers for one of its major oil blocks in Nigeria. The oil company wants to sell off its 12.5 per cent stake and has already contracted an investment bank to manage the sale process of the deepwater oilfield.

Total’s 12.5 per cent stake in the deepwater oilfield, Oil Mining Lease 118, is estimated to worth $750 million. Part of the oil block includes Bonga field which began production in 2005.

According to report, the Bonga field has produced around 225,000 barrels of oil and 150 million standard cubic feet of gas per day at its peak. And with the $10 billion development of the Bonga Southwest field, production output is expected to grow.

OML 118 stakes

The decision to sell its stake in the OML 118, which is located some 120 kilometres (75 miles) off Niger Delta, is coming amidst Total’s expansion in Africa. The company was also reportedly planning to sell $5 billion of assets around the world by 2020; the sale of its stake in OML 118 is part of the assets’ sale.

The company appointed Investment bank, Rothschild to manage the sale process on its behalf.

Shell Nigeria Exploration and Production Company (SNEPCo), it would be recalled, invited interested bidders for the development of the Bonga South West Aparo (BSWA) oil field in February 2019.

It was reported that the project’s initial phaseincludes a new Floating, Production, Storage and Offloading (FPSO) vessel, more than 20 deep-water wells and related subsea infrastructure. The field lies across Oil Mining Leases 118, 132 and 140, about 15km southwest of the existing Bonga Main FPSO.

But Shell disclosed days after that the directive by the Nigerian government to foreign oil companies to pay $20 billion in taxes owed would delay the final investment decision (FID) on its Bonga Southwest deepwater oilfield.

OML 119 as a complement

What the government might lose in OML 118, it appears that it might gain from OML 119.

The Nigerian National Petroleum Corporation (NNPC) has publicly opened bids from the 14 companies for the financing and redevelopment of the oil bloc – OML 119.

The latest is that ten of the 14 firms jostling for the redevelopment financing deals for the oil  bloc are jittery over fate of their bids as four bids have already suffered “technical” disqualification.

The ill-fated bids submitted by four companies during an open bid round penultimate Friday, New Telegraph gathered exclusively yesterday, could not fly after a preliminary screening showed that the firms could not meet up with the financial requirement for the funding deals.

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, it would be recalled, publicly opened bids from the 14 companies for the financing and redevelopment of Oil Mining Lease (OML) 119.

OML 119 is a twin offshore block made up of Okono and Okpoho Fields located approximately 50 kilometers offshore south-eastern Niger Delta.

“As we speak, four of the 14 bids can not fly because even from the preliminary screening they have been technically knocked out for their inability to meet up with the financial requirement for the financing deal,” a source close to the deal said.

Noting that this development might have sent jitters down the spines of 10 other bidders, the source maintained that the NNPC “conducted an open bid because of its resolve to ensure that only those who are genuinely qualified are allowed to secure the deals.”

OML 119 is operated by the Upstream subsidiary of the corporation, the Nigerian Petroleum Development Company Limited (NPDC).

Speaking at the public opening of bids for the Funding and Technical Services Entity (FTSE) which held penulrimate Friday in Abuja, the GMD, according to a statement, said that OML 119 was one of the corporation’s critical projects.

This project, the statement issued by Acting Group General Manager, Group Public affairs division, Samson Makoji, read, “aligns wholly with the Federal Government’s aspirations of boosting crude oil and gas production, growing reserves, and monetizing the nation’s enormous gas resources.”

The GMD who was represented by the Chief Operating Officer, Corporate Services, Engineer Faruk Sa’id, stated that the selection process for the potential FTSE was transparent and in strict compliance with extant laws and overriding national interest.

He added that it was also in tandem with the Economic Recovery and Growth Plan (ERGP) and the TAPE agenda of the NNPC.

In his remarks, the Group General Manager, Supply Chain Management, Mr. Abdulhamid Aliyu, assured the companies that the selection process would remain transparent and fair.

Last line

The signing of PSC act shows that government can achieve anything if it is so desired to achieve. However, the investors/ concessionaire/oil companies must be carried along in the review as they are critical stakeholders that need co-operation rather than confrontation on any issue of national development.

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