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Oil prices are dropping. August 1st, $104 per barrel; October 28th, $82 per barrel; and on December 15th, the price stood at approximately $58.65 per barrel. Are we at the bottom? Can it get worse than this? The prophets are prophesying already, “Doom awaits Nigeria”. Really? As an econo-jurist of this great nation, I hereby dissent.
Nigeria is a nation richly endowed with a variety of valuable resources. All 36 states of the country can boast of at least three, which range from minerals to metals to stones. It is pertinent to state here that crude oil and gas are only a tip of the iceberg compared to unexploited reserve of limestone, marble, iron-ore, lead/zinc, gold, gemstone, coal, kaolin, rock salt and more which are existent in Nigeria. In addition, the country also prides itself with over 40 million active young populations that are creative and filled with untapped potentials. An interesting quote from Myles Munroe reads: “One of the greatest tragedies in life is to watch potential die untapped.” It is therefore important that we learn from this and begin to maximize the potential in the intelligent young workforce we have.
Since the discovery of oil in the 1950s, Nigeria’s economy has been dependent on one major source of revenue – oil – which has failed to function as a catalyst for growth. This is, however, not the focus of this article. You can read my article titled “Oil and gas: The stimulant for wider national development” on my blog, www.kenetete.wordpress.com.
King Odewale in Ola Rotimi’s The Gods Are Not To Blame made an interesting point when he said, “When the wood insect gathers wood it is on its own head it carries them”. Financial and economic analysts see the current drop in oil price as a predicament for the world, particularly Nigeria. This is the time for us to wake up, remove the blindfolds, realize a grave mistake we have made for far too long, learn and benefit from it. Currently, petroleum accounts for up to 80 percent of all government revenue and over 90 percent of the country’s exports. However, if we begin to think of alternative sources of creating wealth by investing, principally, in our human capacity and also the several other mineral resources, we will not only be reckoned as the giant of Africa but as the giant of the world. Yes, quote me.
One of the world’s wealthiest men, Bill Gates, had Information Technology (IT) as the source of his wealth. The world’s youngest billionaire is Dustin Moskovitz and he was Mark Zuckerberg’s Harvard roommate and Facebook’s third employee. Source of wealth is IT. According to Forbes’ list of the world’s richest people, 20 percent of the first 100 people on the list derived their wealth from IT. Do you go a week without getting e-mails from Nigerians trying to hack your credit cards/passwords or getting you to click on a link that will clone your data? There are no excuses for such fraudulent activities, albeit the brains behind these e-mails can become IT geniuses if given the right opportunities in a favourable economy. IT is driving economies worldwide and it can do same in Nigeria.
In the past few years Brazil has been a reference agricultural powerhouse and now ranks amongst the world’s five largest agricultural producers and exporters. In essence, agriculture is driving the economy of the largest South American country despite their large oil and gas reserve. There is a lot to learn from their policies. We must strive to emulate the character and spirit of model economies we intend to surpass.
Nigeria is also largely an importing country and this stiffens the market for local producers, consequently leading to loss of jobs and incomes. According to the World Bank, Dubai’s economy was also initially built on revenues from the oil industry; however, revenue from petroleum and natural gas currently accounts for less than 2 percent of the economy’s GDP. Currently, Dubai is rapidly developing its manufacturing sector by producing a wide range of competitive export products and has focused its economy on tourism, aviation, real estate, IT and finance. Nigeria can also begin to focus on its manufacturing sector as a step in diversifying its economy.
Nigeria is arguably the biggest economy in Africa with a GDP of $510 billion. Next are South Africa and Angola. Kenya is fourth, but happens to be an inspiring model as she boasts of a GDP of $53.1 billion and her economy is highly diversified. The strong performers driving the economy are agriculture, retail and transport. In mid-2012, oil was discovered in Kenya with over 300 million barrels worth of reserve. A blessing? We shall find out in 2016 when production commences, or perhaps they should ask their “big brother” Nigeria.
This constant decline in the price of crude is the best thing that could happen to us as a nation despite the implications on our immediate national budget and economy. It serves as a pointer to the fact that we have been travelling 1,000 miles in the wrong direction. This is an opportunity to better secure the future of our great country. My fellow Nigerians, let’s shut our ears to the prejudiced negative analysis making the rounds. We know our story and reality better. We can now see that we cannot depend on petroleum for much longer. We can build an economy with multiple sources of revenue. We have the human capacity and the resources – let’s do it.
Ken Etete is the CEO of Century Group. He is on a number of Boards, including the Niger Delta Economic Blueprint, the Peredoaya City Project Gulf of Guinea. He is also a special business advisor to Sunterra Nigeria Limited. Mr. Etete has presented a number of papers at various international conferences, such as: Offshore West Africa; Paper on the economic development of marginal fields offshore West Africa with the FPSO Concept; Upstream Africa Cape Town (South Africa); Investment opportunities for Nigeria (London).
Nigeria lost out on $10.9 billion in potential oil revenues due to oil theft between 2009-2011, the chairman of the Nigeria Extractive Industries Transparency Initiative (NEITI) said on Tuesday.
"Over 136 million barrels estimated at $10.9 billion was lost to crude oil theft and sabotage," Ledum Mitee said in an emailed statement, after NEITI published an audit of the Nigerian oil and gas sector this week.
NEITI is a government agency that operates as part of a global EITI scheme aimed at improving transparency among commodity producing countries.
Oil theft in Nigeria is often associated with criminal gangs who tap crude from pipelines for local refining but the majority of stolen crude leaves the country in large tankers.
Security experts say the scale of the theft - estimated at up to 250,000 barrels per day - could not be achieved without the complicity of officials. (Reporting by Joe Brock; editing by Keiron Henderson)
Nigeria will earn less for its oil and struggle to replace reserves unless it can end years of industry stagnation, at a time its biggest customer is becoming self-sufficient and African rivals are boosting supplies. A domestic energy boom in the United States has already sharply cut demand for Nigerian oil, while legal uncertainty, political wrangling, corruption and insecurity plague an oil industry which is still Africa's biggest.
In addition, rivals on the continent - both East and West - are fast catching up, and hungry for returns to boost their smaller economies they are tempting foreign oil and gas companies with better terms and fewer bottlenecks than Nigeria. "Nigeria has multiple problems in its oil game - it has failed to meet reserve growth and production targets for many years ... while competition grows worldwide," said Duncan Clarke, Head of African oil experts Global Pacific & Partners.
"High crude prices have shielded Nigeria of late - but this may not last forever, and its reputation as the proverbial Land-of-No-Tomorrow continues."
With oil accounting for around 80 percent of government revenue and 95 percent of foreign exchange reserves, Africa's second largest economy is vulnerable to any negative shifts in oil and gas prices and demand.
The U.S. accounted for 35 percent of oil exports from Nigeria in 2011. But it imported around 40 percent less last year, taking purchases from Nigeria to their lowest in over 20 years, according to data from the Energy Information Administration (EIA), a U.S. government agency.
This drop in demand has already resulted in Nigerian barrels selling for around 40 cents lower than its official selling price and left dozens of cargoes unsold and rolled over to future months, according to research by Africa's Ecobank.
"Nigeria must make increased efforts to capture more of the rapidly growing Asian market," said Kayode Akindele, partner at Lagos-based financial adviser 46 Parallels.
"A big issue is that the growing East African oil and gas industry will prove to be a serious competitor, especially given its proximity to key Asian markets compared to Nigeria."
There have been around 70 discoveries in sub-Saharan Africa in the last five years with the majority coming in East African countries like Tanzania, Uganda and Mozambique.
Around 250 trillion cubic feet of natural gas may lie off those three countries alone, the US Geological Survey estimates.
Several East African LNG plants are expected to come online in the next 5 years, while Nigeria with similar gas reserves has stalled a new LNG project for the last 8 years, seeing oil major partners Chevron and Conoco give up stakes.
Shell has sold onshore oil blocks in Nigeria but is seeking to expand elsewhere in Africa. West African neighbor Ghana recently became an oil producer.
"There is a finite amount of money to be invested by oil and gas majors in the short to medium term, and Nigeria needs a slice of that cake," Mutiu Sunmonu, Shell's Nigeria country head, told an investor conference last week.
"The competitive landscape has changed ... Nigeria cannot afford to miss the boat."
Oil Minister Diezani Alison-Madueke looked to ease concerns last week when she told bankers and oil firms that Nigeria was entering "a new dawn to boost investment and production."
Alison-Madueke said Nigeria would fix its ailing refineries, expand oil and gas output, tackle insecurity in the Niger Delta and ensure the passage of a landmark energy law, which would make it competitive with rival producers. The minister made similar promises when she took office in 2010 but many targets have been missed.
Nigeria loses $6 billion annually to crude theft, offshore piracy is on the rise and oil majors say it's operating costs are among the most expensive globally. Energy consultants Wood Mackenzie forecast Nigeria's oil production could drop by 20 percent by 2020 because years of delay to a Petroleum Industry Bill (PIB) have blocked tens of billions of dollars in exploration investment.
Oil majors say they can't invest in major new projects until the PIB is passed and if it is passed as it stands with higher taxes, then new investment will be deterred. The Chinese have some interest in Nigeria through Addax, owned by Sinopec, which has said it wants to buy more onshore fields.
Two Nigerian oil firms last week said they did not think the PIB will ever become law because of vested interests blocking progress and an insurmountable gulf between oil firms, lawmakers and the oil ministry over terms. Nigeria state oil firm NNPC is at the centre of the country's energy business but is blighted by under-funding and corruption, according to several government probes.
But around half of sub-Saharan oil output still comes from Nigeria and oil firms say it could comfortably double crude production and unlock the world's ninth-largest gas reserves if Alison-Madueke comes good on her promises.
Changing global oil dynamics still offer an opportunity.
"Declining U.S. demand provides yet another incentive for the Nigerian government to conduct the reforms needed to reduce the losses, leakages and general dysfunction," said Roddy Barclay, West African analyst at Control Risks.
"(If not taken) investor appetite will remain muted by the array of complex political, operational and security risks that will continue to characterize Nigeria's oil sector."
(Editing by James Jukwey, Richard Mably)
Nigeria's troubles are once again in the news. Oil theft (ongoing) and flooding (temporary) have driven the country's oil and gas production down over 20%. As Africa's largest producer and OPEC's 2nd largest oil exporter, Nigeria has strategic importance. It is one of the few countries not in the Middle East which has a large and readily available source of oil.
Royal Dutch Shell
Shell is, and has long been, the dominant oil company in Nigeria. In 1999 Shell produced more than 90% of the country's oil. Since Nigeria derives some 95% of its foreign exchange from oil, Shell and Nigeria seem inextricably bound together. It's not, however, a marriage made in heaven.
Nigeria is rich, very rich, in oil and gas and its high quality oil sells at a premium to Brent. The problem? Mix vast oil wealth, 389 ethnic groups, a population which is half Christian, half Muslim and you have all the ingredients for disaster. Not surprisingly, the country is beset with ethnic strife, crime, pollution, poverty, violence, and corruption. Since the U.S. is the largest importer of Nigerian crude, it too is entangled - to a degree - in the mess.
It's sad that in a country so rich in oil and natural gas 1/2 the population goes without electricity due to lack of infrastructure. Much of the gas is simply flared off.
It should be noted that Exxon-Mobil (XOM), Chevron (CVX), Statoil (STO), Petrobas (PBR), Total (TOT), and Eni (E) have all recently increased their presence in Nigeria - mostly offshore. Chevron, for example, has a 68% interest in Nigeria's newest deep water oil field, the Agbami.
The Niger River Delta: Lots Of Oil, Lots Of Trouble
Nigeria's onshore Niger River Delta and adjacent offshore areas hold most of its considerable reserves of oil and gas. A single offshore Nigerian well can produce an amazing 10,000 barrels a day of oil. Compare that to Texas' Permian basin where 150,000 wells produce an average of 6-7 barrels of oil a day.
Problems for Shell in the delta run deep and span decades. They include ethnic protests, bribery charges, lawsuits, corruption, and rampant pollution. Especially problematic is oil theft. Oil theft is so entrenched an estimated 20% (150,000 barrels a day) of all Nigerian production is stolen. The Economist calls Nigeria is "The world capital of oil theft." Well organized gangs steal the stuff wherever they can, often causing spills, fire, and at times death. They then spirit it off to clandestine refineries for sale on the black market. Huffington Post has a summary of Shell's current and past problems in Nigeria.
One might think Shell would find refuge from its Nigerian problems offshore - where the risks of sabotage and oil theft are lower. No such luck. On December 20, 2011 Shell Nigeria Exploration and Production Company (SNEPCO) had a 40,000 barrel oil spill and now faces a $5 billion fine. Also, taking a cue from Somalia, pirates mounted over 50 piracy attacks in the Gulf of Guinea in 2011.
Shell, of course, is much more than Nigeria, but since Nigeria supplies the lion's share of Shell's oil a withdrawal would severely impact the company's reserves and profits.
Is Mart Resource A Viable Investment Option?
Mart Resources is an investment alternative. The company, so far, seems to have avoided most of Shell's problems and has been doing well lately. Mart has an excellent balance sheet with no debt, lots of cash, good cash flow, and an excellent return on equity. It now is paying an 11% dividend. The company has a dominant position in the newly discovered (2008) Umusadege oil field. The Umusadege, like many of Shell's fields, is located in the Niger delta.
Mart prides itself on working well with local, indigenous companies. Perhaps it does well because it does not have Shell's legacy of ill will, perhaps because management is more attuned to local concerns.
Mart, however, may not be immune to Nigeria's problems. The company is starting the process of building an alternative, second pipeline, partially to circumvent disruptions (reasons unspecified) in the original.
Nigeria LNG (NLNG) ships natural gas - 8% to 10% of world production - from Africa's largest LNG export facility on Bonny Island located just offshore the Niger Delta. NLNG is jointly owned by Nigerian National Petroleum Corporation (49%), Shell (25.6%), Total LNG Nigeria Ltd (15%) and Eni (10.4%) Europe is its largest customer. The first shipment was in 1999. The company has a wholly-owned subsidiary, Bonny Gas Transport, which provides NLNG shipping services.
Disruptions also affect Nigeria's LNG exports, see here and here. Allegations of bribery surfaced in the awarding of construction contracts when the export facility was built. Nigerian LNG, like the country's oil exports, is often adversely affected by instability in the Niger Delta.
Oil and Gas Investment Options
So, if you have the chutzpah for it, go ahead and consider investing in Royal Dutch Shell or Mart Resources. Any outbreak of hostilities in the Middle East will have all the world coveting Nigeria's vast reserves of readily accessible, sweet crude. Shell is the major most involved, while Mart is a more speculative "pure play."
Maybe the best investment in Nigerian oil is the admittedly speculative Mart Resources. Mart does not have Shell's "baggage" of ill feelings and I, at least, could find little negative commentary on Mart's relationship with either the government or ethnic groups in the area in which it operates. Nonetheless, be aware that Mart is dependent on a single field and (for now) a single pipeline. Any disruption of either will quickly drop Mart's share price.
Considering all Nigeria's risks, investing in Permian oil may not be such a bad idea after all.
Bruce Vanderveen writes at Seeking Alpha. The Federal Reserve has pegged interest rates to all time lows. This leaves fixed income investors in trouble.with very little income plus principal loss risk when rates eventually rise. Bruce looks at replacements to fixed income which have both safety and income: utilities, MLPs, Business Development Corporations,select energy companies, REITS and others. Bruce has degrees from Calvin College and the University of South Dakota
The petroleum industry in Nigeria in the largest industry in the country and the main GDP generator in the continent’s most populous nation. Since the British discovered oil in the Niger Delta in the late 1950s, the oil industry has been crucial to Nigeria’s development. Marred by political and economic strife in the past, international attention in the 1990s saw a reform of the sector which has produced some of Africa’s richest men. Tom Jackson profiles ten of them below.
Theophilus Danjuma (South Atlantic Petroleum)
Danjuma, 72, has a net worth of $600 million made through the 2006 sale for $1.7 billion of an oil block he was given by the regime of former Nigerian President Sani Abacha to a Chinese consortium. A former defence minister, Danjuma is chairman of oil exploration firm South Atlantic Petroleum. He is also the country’s biggest philanthropist, having endowed his charity, the TY Danjuma Foundation, with $100 million. He also advises President Goodluck Jonathan on state matters.
Prince Arthur Eze (Oranto Petroleum)
Prince Arthur Eze is the Chairman and CEO of Atlas Oranto Petroleum International Limited, as well as holding positions on various other boards in different sectors across Nigeria. His company has secured significant upstream positions in frontier plays in Nigeria, Sierra Leone, Liberia, Togo, Ivory Coast, Chad, Cameroon and Equatorial Guinea. He is also a notable philanthropist. His company has various technical partners, ranging from Roc Oil, Pioneer Natural Resources of the USA, Canoxy, Transworld of the USA, LukOil of Russia, Tetra, Noble, Kosmos Energy of the USA, Petronas of Malaysia, DNO of Norway, TransAtlantic Petroleum of the USA and Canada’s Nexen. He has been active behind the scenes on the political stage since the early 90′s.
Mike Adenuga (Conoil Producing)
The 59-year-old Mike Adenuga has a reputation as a reclusive tycoon, but his company Conoil Producing was the first Nigerian company to strike oil in commercial quantities in the early 1990s. It is now the country’s largest oil exploration firm, and Adenuga has a net worth of $4.3 billion. His other business interests include Globacom, the country’s second largest mobile telecom operator. Another tycoon to have hit big through links with a Nigerian president, in this case, Ibrahim Babangida, he made his first million at the age of 26 selling lace and distributing soft drinks.
Tonye Cole (Sahara Energy)
Cole is the Managing Director of Sahara Energy Resource Limited, which he co-founded in 1996 with his friends Tope Shonubi and Ade Odunsi. Sahara Energy started out as an oil and gas company whose core business at the time was the trading of excess fuel oil from the Port Harcourt and Warri refineries. It later moved away from being a middleman to become an established trading house diversifying into storage depots and vessel ownership as well as building depots in Lagos, Onne and Abuja with a combined capacity of 55,000 metric tonnes and a fleet of five vessels moving products across West Africa. Today, Sahara Energy is a major employer of labour with staff strength of just over 300 people.
Femi Otedola (African Petroleum/Zenon)
CEO of African Petroleum Plc (now Forte Oil Plc), Otedola appeared as one of only two Nigerians (the other was Aliko Dangote) to appear on the 2009 Forbes list of 793 dollar billionaires in the world, worth over $1.2 billion. Though his fortunes have slightly declined since, he remains a hugely rich man with much influence in the Nigerian oil sector.
He is also the owner of multi-billionnaira indigenous oil giant Zenon. Zenon, which is directly run by Otedola, is the dominant force in the diesel business among oil marketing concerns. It supplies diesel to power the generating sets of most Nigerian industries and nearly all the major manufacturing firms in the country. These include Dangote Group, Cadbury, Coca Cola, Nigerian Breweries, MTN, Unilever, Nestle, Guinness and others.
Tunde Folawiyo (Folawiyo Oil And Gas)
Folawiyo serves as the Managing Director of Yinka Folawiyo Power, and holds directorships with various other firms across all sectors. He lives his life away from the limelight, but is known to live in extreme luxury. He holds degrees from the London School of Economics and University College London.
Mohammed Indimi (Oriental Energy Resources)
A close ally of prominent figures in the Nigerian military, Indimi founded and now chairs Oriental Energy Resources, an offshore oil exploration and production company. It currently has three offshore oil and gas products, with daily production of 35,000 barrels. After over twenty years in the sector Indimi has established himself at the 30th richest man in Africa, with a notable international presence.
Ifeanyi Ubah (Capital Oil)
A tycoon who is probably best known for taking out adverts on the front pages of major newspapers to herald the celebration of his 40th birthday, Ubah’s company, Capital Oil, is said to have the biggest and most modern depot in Nigeria. With 28 loading bays, Capital is the only indigenous downstream player capable of pumping out 55 million litres of petroleum products each day.
ABC Orjiakor (Seplat Petroleum)
A trained surgeon, Orjiakor has now worked in the oil and gas sector for over 25 years. At Seplat he spears new business development and works on strategic stakeholder relationships. He has his own philanthropic foundation, and had links with former Nigerian military president Ibrahim Babangida.
Phillip Ihenacho (Seven Energy)
Executive Chairman of Seven Energy, Ihenacho is also the co-founder of investment firm Amaya Capital Partners. A graduate of Harvard and Yale, he is a believer that local companies should be at the forefront of Nigerian oil exploration.
Reuters reports that the 21 firms are among 50 oil companies which scaled the screening by the Nigerian National Petroleum Corporation. The 50 firms are to be allocated about three-quarters of Nigeria’s daily production or around 1.6 million barrels per day via term contracts to 50 companies including 21 Nigerian firms, a document sent to winning firms showed.
But the names of the Nigerian firms were not listed in the Reuters report. The oil – which amounts to around 580 million barrels sold over the next 12 months – is worth nearly $60 billion based on current premiums of the country’s light, sweet crude to Brent futures.
The tender result, awaited since April, showed that around 45 per cent of the allocated oil was earmarked for companies either based in Nigeria or owned by Nigerian companies, including NNPC subsidiary Duke Oil, which doubled the size of its contract from last year to 60,000 bpd.
Industry sources expressed surprise at the number of small Nigerian firms on the list after government pledges to cut back on cronyism in the sector and the introduction of tough new entry requirements for this year’s tender. “The first thing you notice is that this isn’t a significantly shorter list, so the promise to simplify and streamline hasn’t been met,” said an Abuja-based oil industry source who confirmed the contents of the document.
“On the surface, many of the public’s concerns haven’t been dealt with.” Global oil traders Glencore, Vitol and Trafigura, firms that have traditionally had a strong presence in the west African country and last year won the biggest contracts, had their supplies halved to 30,000 bpd.
Trafigura and Glencore spokesmen declined to comment and a Vitol spokesman was not available for comment. The volumes for Swiss-based traders Gunvor and Mercuria stayed unchanged from 2011 at 30,000 bpd. NNPC hardened the qualification terms for the supply contracts when it first released the tender document in March as part of a drive to reform the sector.
Nigerian oil minister: Mrs Madueke
These included at least 10 years’ experience in the industry, a minimum annual turnover of $600 million and a $5 million deposit, and were expected to help large international traders at the expense of local firms.
But the number of companies on the list grew from last year’s 45 and included many small African firms such as Tempo and Benny Peters, the document showed. “They (Nigeria) faced pressure and had to increase the list by around 20 companies. It was likely a struggle of back and forth and that also delayed the process,” said a trader with a company that won a contract.
The deadline for submissions was extended in April.
•North, South-South in battle royale over oil
Tension over the allocation of Nigeria’s oil wealth among the states of the federation is assuming an interesting dimension with key figures in the South-South taking on the North over its recent call for a fiscal redress. The North, through the Arewa Consultative Forum (ACF) appears set its goal of changing the revenue allocation formular in its favour while the South-South described such calls as idle and insulting.One of the Niger Delta leaders even said the North is ungrateful to the South.
ACF’s spokesman, Anthony Sani spoke with The Friday Edition declaring that the South cannot describe the north lasy because there is no diligence involved in having crude oil under ones soil.
Beneath the cross fire between the North and the South is the issue of who has juicy oil blocs in his kitty. The Friday Edition serves available details of owners of the multi billion naira oil blocs which insiders described as just a tip of the iceberg.
Unknown to many, more than eighty percent of ownership of the nation’s oil reserves is in the hands of some influential northerners who acquired marginal fields, Oil Mining Licenses (OML) and Oil Prospecting Licenses (OPL).
Curiously, such acquisitions were under the different military regimes of Generals Ibrahim Babangida (rtd), the late Sani Abacha as well as Nigeria’s last military leader, Abdusalami Abubakar.
This discovery is coming on the heels of the brickbat between the South-South and the North over the propriety or otherwise of the review of the revenue sharing formula which the later alleged was unduly advantageous to the former.
Governor Babangida Aliyu of Niger state, had, penultimate week, called for equality in the sharing of oil revenue accruing to the oil-producing states, saying it posed a big disadvantage to those without oil.
The position of the Chairman of the Northern Governors’ Forum had barely settled when Governors Rotimi Amaechi(Rivers), Emmanuel Uduaghan(Delta), Olusegun Mimiko(Ondo), Theodore Orji(Abia) and federal lawmakers from oil-producing states expressed their dismay at the outburst.
The debate had continued to take a new dimension in the last one week.
But Nigerian Tribune’s investigations showed that most of the oil and gas prospects had long been conceded to a particular section of the country.
According to documents exclusively obtained by the Nigerian Tribune, most of those to whom the nation’s juicy oil reserves have been conceded are individually richer than some African oil-producers such as Ghana and Sudan.
For instance, Cavendish Petroleum, the operators of OML 110 – with good yielding OBE field was awarded to Alhaji Mai Deribe - the Borno patriarch, by General Sani Abacha on the 8th of July, 1996.
OML 110 has a proven oil reserve in excess of 500 million barrels (more than the entire 300milliom barrels reserve of Sudan) with capacity to produce about 120,000 barrels of crude oil daily from its OBE 4 and OBE 5 wells.
At current production levels, the Mai Deribes net an average of N4billion monthly in crude oil sales (using oil price estimates of $100 p/b). Deribe, even in death is the richest man in the history of Borno state today.
Another major partaker in the oil and gas sector is Mallam (Prince) Sanusi Lamido, a cousin of the Central Bank Governor, who is a key shareholder and director in Seplat/Platform Petroleum, operators of the Asuokpu/Umutu Marginal Field with a capacity of 300,000 barrels monthly and 30mmfcsd gas plant capable of feeding 100MT of LPG.
But the oldest of all northern-backed oil and gas concerns is South Atlantic Petroleum Limited (SAPETRO). South Atlantic Petroleum (SAPETRO) is a Nigerian Oil Exploration and Production Company that was established in 1995 by General T. Y. Danjuma, who is also the Chairman of ENI Nigeria Limited. General Sani Abacha awarded the Oil Prospecting License (OPL) 246 to SAPETRO in February 1998.
The block covers a total area of 2,590km2 (1,000 sq. miles). SAPETRO partnered with Total Upstream Nigeria Ltd (TUPNI) and Brasoil Oil Services Company Nigeria Ltd to start prospecting on OPL246.
Akpo, a condensate field was discovered in April 2000 with the drilling of the first exploration well (Akpo 1) on the block. Other discoveries made on OPL 246 include the Egina Main, Egina South, Preowei and Kuro (Kuro was suspended as a dry gas/minor oil discovery).
But in June 2006, SAPETRO divested part of its contractor rights and obligations to China National Offshore Oil Corporation (CNOOC) for $1 billion (N160bn). Akpo exports about 230,000 barrels of condensate daily.
Condensate export is not regulated by OPEC, so SAPETRO/TOTAL exports as much as possible each day. Egina exports about 75,000 barrels of oil daily.
Akpo and Egina therefore, export over 300,000 barrels of oil/condensate daily (three times what Ghana currently exports).
Out of this volume, SAPETRO gets 25 per cent which, however, excludes the gas component that is about 2.5 trillion cubic feet.
Operators of OML 112 and OML 117, AMNI International Petroleum and Development Company, is owned by Alhaji (Colonel) Sani Bello from Kontagora, Niger State. In the production-sharing contract, AMNI gets 60 per cent for owning the oil block and Total gets 40 per cent for providing technical advice.
Although OML 112 was awarded on 12 February, 1998 and OML 117 on 4 August, 1999, all by former Head of State, General Abdulsalami Abubakar whose eldest daughter is married to Bello’s son, Abu, operations did not start on both blocks until 26 February, 2006.
Both licenses are due to expire on 11 February, 2018 and 5 August, 2019 respectively. AMNI produces twice as much as Cavendish Petroleum.
Nonetheless, a Former Petroleum minister, (names withheld), another Fulani multi-millionaire with fronted controlling holdings in Afren, manages AMNI oil blocks and with very key interest in the NNPC/Vitol trading deal.
Vitol is a London based oil trading company. Vitol, which lifts 350,000 barrels of crude oil daily from Nigeria is owned by the former minister.
The Okoro and Setu fields in OML 112 with about 50 million barrels in reserve, operated by Afren Energy, currently rake in below 20,000 barrels per day in exports.
Similarly, there is Oriental Energy Resources Limited, a company owned by Alhaji Mohammed Indimi, a close friend of General Ibrahim Babangida. Both, apart from being from Niger state, are in-laws (IBB’s first son, Mohammed is married to Yakolo, Indimi’s daughter). Yakolo is a director in Oriental.
Oriental Energy Resources Limited runs three oil blocks: OML 115, the Okwok field and the Ebok field. OML 115 and Okwo are OML PSC, while Ebok is an OML JV. All of them are crown offshore oil blocks.
OML 115 on its own is 228 sq Km with Oriental Energy Resources Limited controlling 60 per cent while Equity Energy Resources, has 40 per cent.
On Okwok, Addax has 40% and on the Ebok field, Oriental Energy Resources has 100%.
Alhaji Aminu Dantata’s Express Petroleum and Gas Limited floated for the purpose of winning oil block(s) on November 1, 1995, got General Abacha’s approval to operate OML 108. CAMAC Houston, a company owned by Kase Lawal bought 2.5% of Express Petroleum’s 60% holdings. The other 40% on OML 108 is owned by Sheba E&P Limited.
As the operator of OML 108, Shebah Exploration And Production Limited (SEPCOL) has an office in Lagos but the headquarters is in Minna. SEPCOL operates the Ukpokiti offshore field in Shallow water Nigeria, which was acquired from ConocoPhillips in May 2004.
The Alhaji Saleh Mohammed Jambo-owned NorthEast Petroleum Limited, registered as NorEast Petroleum, is the holder of OPL215 license, covering an area of 2,564 square kilometres in water depths between 200 to 1600 metres.
NorEast, which is the parent company of Rayflosh Petroleum, was awarded the blocks OPLs 276 & 283 closing thereupon, a Joint Venture Agreement with Centrica Resources Nigeria Limited and CCC Oil and Gas.
The license was awarded to him by General Ibrahim Badamosi Babangida in 1991 and then renewed in 2004 by former president, Chief Olusegun Obasanjo. It was learnt that, so far $50Million has been spent on the very promising Okpoi-1 and Egere -1 exploratory well.
Intels, owned by the three families of Yar’Adua , Ado Bayero and Alhaji Abubakar Atiku is another major northern concern in the oil and gas sector. The Oil and Gas Free Zone and Oil Services Centres, as well as Support Bases operated from government-owned facilities, are leased to Intels under long-term agreements.
Intels thus, runs a ‘private port’, as a counter venture to the Calabar, Warri and Port Harcourt ports. At the Port Harcourt’s facility of the company for instance, there are over one hundred major companies.
The argument put up by state governors for the removal of oil subsidy is not only sickening but exceedingly disdainful to the teeming Nigerian masses.
The governors, suddenly waking up to the reality that they might have bitten beyond their capacity to chew by promising to pay the N18,000 minimum wage, have been agitating for the removal of oil subsidy. Some of them have said without the removal of the subsidy, which would translate to an increase in their monthly allocation from the federation account, they would be unable to pay the new minimum wage. Bunkum. Some of them have even contended that the subsidy encourages corruption as the billions of naira put into the exercise always end up in private pockets and the poor, who are supposed to be the beneficiary of the gesture, are short changed by corrupt officials. Balderdash.
The import of the two positions canvassed for the withdrawal of subsidy from petroleum products, sadly, is that many of those who rule us are nescient of the essence of their high offices.
Let’s start with the second position. If the government has a programme for the citizenry and its officials abuse the programme, is the discontinuation of such programme, irrespective of its importance to the citizenry, the next line of action? Should the citizenry bear the brunt of the greed, incompetence and irresponsibility of government officials? If the system of the government is so lax as to allow government functionaries or a coterie to profit unjustly from a process, should the government further compound the woes of the masses by removing the little benefit that accrues to them from the common patrimony?
Stretching the argument further, will the government cancel its education programme because a clique has devised a way of cornering part of the funds allocated to the sector or because some people get question papers before the examination? Will the government stop funding its health care programme because some groups in the system have perfected a means of stealing drugs from the hospitals? So, what is the meaning of asking the federal government to remove oil subsidy just because some unidentified people are ripping off both the government and the people?
What the government should do, unless it is abetting the culprits, is to find a solution to the menace and that is not Herculean. According to experts, money is the easiest thing to follow in the world. If money meant for the subsidy leaves the government coffers and fails to arrive at its pre-determined destination, it is easy to know where it is detoured. Let the government do what it is supposed to do and stop annoying the masses continually by drawing our attention to its incompetence.
What’s more, all of this talk about subsidy would not have become an issue had the government been alive to its reponsibility. Between 1999 and now, the federal government realised over $500 billion from the sale of crude oil. I am told that what it costs to build a brand new refinery is less than $20 billion. So, why have we not built new refineries? If only a fifth of the sum had been invested in new refineries, we would have had five new refineries by now.
Governance, to my mind, is about solving societal problems for the good of the majority, not looking for an excuse to deepen the problems of the citizenry. The government should find a way to solve the problem of its saboteurs without further pauperising the people.
Now to the first issue raised by the governors. They need to know that they were not elected merely to pay salaries. The people that elected the governors did so in expectation that their rulers would improve their lot, not that they would make life more difficult for them. At the moment, majority of Nigerians cannot point to any benefit they enjoy from government. Many people provide their own water, electricity and even roads. The government has abdicated its responsibility in many respects. If oil subsidy is removed, it would make life more unbearable for the majority, especially the downtrodden masses as they will have to pay more for virtually everything. Now, the cost of food items has sky rocketed. By the time the oil subsidy is removed, it will go beyond the reach of the masses.
I will be the first to admit that the administration of subsidy in our country needs a review but the review will not be necessary until the government does what is right. Subsidy is essentially for the poor, not the rich; it is for those who are in deprivation, not those in abundance. So, before there can be talks about oil subsidy removal, there must be a system that will take care of the poor. There must be an effective mass transit system, the railway system must be functional. The removal must have a minimal negative effect on the poor. Until an effective mass transit system is in place, it will be out of place to talk about removing oil subsidy.
In 1978, the United States of America government came up with a flight subsidy to encourage airlines to patronise small communities with low air travellers.
Through the programme, the government pays up to 93 per cent of the cost of a flight. For instance, for a round-trip from Lewistown, Montana to Billings, a passenger pays $88, while the government pays the balance of $1,343. The subsidy was initially planned for 10 years because the government believed that the number of passengers would increase considerably over a period of 10 years. But the programme has continued for about 33 years and the subsidy has not been cancelled because of the convinction of the government that if it stops the subsidy, the communities would suffer as contrary to its expectation that there would be an exponential increase in the number of passengers, there has just been a marginal increase. Billions of dollars has gone into this programme that benefits just a fraction of the US community, yet the government has continued to support the programme at a huge cost because of its commitment to the good of the people.
How I wish Nigerian leaders would have such commitment to the people.
Irrespective of a damning United Nations Environment Programme (UNEP) report which says it would take 30 years and $1 billion to clean up the mess in Ogoniland, the Nigerian Petroleum Development Company (NPDC) will soon restart production on the 30 Shell oil wells in the community.
A senior source at the Nigerian National Petroleum Corporation (NNPC) told THISDAY at the weekend that NPDC had not shelved its plan to commence production on the wells abandoned by Shell in the wake of the crisis that greeted the hanging of former President of the Movement for the Survival of Ogoni People (MOSOP), Ken Saro-Wiwa, and eight of his kinsmen by the then military administration.
He said the re-entry plan was at an advanced stage and the NPDC would ensure that various stakeholders were carried along in whatever decision that would be reached at the end of the day. The Group General Manager, Group Public Affairs at the NNPC, Dr. Levi Ajuonuma, also confirmed in a telephone chat Sunday that the re-entry plan was on course.
He said NPDC would begin production from the oil wells after the necessary arrangements had been put in pace. “The re-entry plan is in progress. We have not shelved the idea because of the UNEP report. The NPDC will take over the operatorship of those oil blocks, but with a different philosophy. The philosophy will be that of unity, oneness and respect for the host community,” Ajuonuma said, adding that the corporation would have to appeal to the Ogoni people that producing oil in their community would improve their lot.
The Group Managing Director (GMD) of the corporation, Mr. Austen Oniwon, had in January disclosed that NPDC would soon commence oil production from the abandoned wells in line with NNPC’s mandate to produce 250,000 barrels of crude oil per day in 2015. He said to achieve the set mandate, the NPDC had grown its asset base three-fold preparatory to becoming a big player in the upstream sector, while the enabling environment had been provided by the Federal Government.
The news of the planned re-entry had elicited reactions from the Ogoni people who vowed to resist any attempt by NPDC, Shell or any company for that matter to restart oil exploration in the area. The Ogoni had also criticised the report that Shell and the NPDC, its appointed operator, were close to signing an agreement on the operatorship of the fields without the consent or approval of their people. A prominent Ogoni leader, Mr. Ledum Mitee, had told THISDAY that the Federal Government was yet to contact the Ogoni people on NPDC’s plan to restart oil production in their area.
He said any company that would be allowed to explore oil in Ogoniland must be acceptable by the people of Ogoni, pointing out that government should first consult the Ogonis on whoever would take over the operatorship of those oil blocks. "I have not been contacted about the plan by the NPDC to begin production, although the government was considering appointing it the new operator. Our position as always is that Shell must be replaced. So it is important that government first discusses whoever will be coming with us. I should expect government to contact us for discussion first and for us to know who is coming, what the company stands for and what they are bringing to the table. We don't want Shell or something like Shell or a company that will work for Shell,” Mitee said, adding: "The people of Ogoni should know who the company is, what the company stands for and what it is putting on the table, before being allowed to operate in their area.”
The Federal Government had on June 4, 2008, announced that oil fields abandoned by Shell in Ogoniland would be handed over to another operator. Government reasoned that since there was a total loss of confidence between the Ogoni people and Shell, the best thing was to allow an operator acceptable to them (Ogonis) to take over exploration activities in the area.
The pronouncement had pitted Shell against the Federal Government, with the oil giant insisting that it would not hands off those blocks to any operator other than a Joint Venture partner. Shell had faulted government’s decision and resisted initial plans to hand over the control of the Nigerian oil fields to Chinese oil companies.
However, the appointment of NPDC as the new operator had received the commendation of Shell, which said it would continue to be a shareholder in the Ogoniland operations even though NPDC would become the operator. UNEP recently indicted Shell Petroleum Development Company of Nigeria (SPDC) in a report that showed that pollution from over 50 years of oil operations in the Niger Delta had caused serious environmental contamination and threat to human lives in Ogoniland, Rivers State.
The landmark report set out scientific evidence for the first time of devastating pollution in Ogoniland, part of the country's main oil-producing Niger Delta region, where Shell operated. It said the pollution might require the world's biggest ever clean-up, while detailing urgent health risks, especially badly contaminated drinking water. Shell faced criticism from UNEP, which said: “Control and maintenance of oil field infrastructure in Ogoniland has been and remains inadequate.”
The SPDC’s Managing Director, Mr. Mutiu Sunmonu, however pledged that the oil giant would take "seriously" the UN study on unprecedented pollution, but reiterated that the company was not to blame for most of the spills.
"It's important for me to emphasise that we are taking the UNEP report very seriously," Mutiu Sunmonu told AFP in an interview after the report was released. "We are looking at it in greater detail. We are taking a comb through the report to see exactly what necessary follow-up actions will be required of SPDC." The House of Representatives over the weekend said it would take very “keen interest” in the proposed clean-up lands as well as the restoration of all other communities affected by oil spills in the Niger Delta.
The lower chamber of the National Assembly said it would put in place effective oversight mechanisms to monitor the restoration of the devastated lands and waters and provide sustainable legislative solutions to guard against a reoccurrence of the phenomenon.
Deputy Speaker of the House, Hon. Emeka Ihedioha, who disclosed this, stated that the 7th session of the House would intensify the current efforts to re-enlist the Petroleum Industry Bill (PIB) and ensure the passage of the legislation as soon as possible. He said the House would remain committed and unwavering in its determination to ensure that the principles of good governance, corporate social responsibility and international best practices were brought to bear in the oil and gas industry in the overall interest of oil-bearing communities and Nigeria at large.
“The passage of the Petroleum Industry Bill will be given expeditious attention when the House resumes from its recess, among other result-driven measures that would be taken to ensure that corporate actors and relevant government departments and agencies in the oil and gas industry do not shirk their responsibilities to reclaim and protect the environment in which they operate and as well as improve the lives and living conditions of the inhabitants,” he said.
Ihedioha described the submission of the UNEP report to the Federal Government as the first step in redressing the despoliation of affected communities in the oil rich Niger Delta. He however warned against the current attempts by operators and stakeholders in the petroleum sector to pass the buck rather than taking responsibility for their actions and inactions that resulted in the devastation of the environment. Ihedioha said all those involved must take full responsibility for the consequences of oil exploration and production activities as it is the case in developed countries where some of them also operate.
He recalled the rapid global response which greeted the oil spill in the Gulf of Mexico, United States of America last year and expressed hope that the Federal Government would waste no time in driving an implementation process that would address the grave environmental issues raised in the UNEP report on Ogoniland and other parts of the Niger Delta.
Source: ThisDay Newspaper
BY BOOTING out Royal Dutch Shell in 1993, the 500,000 inhabitants of Nigeria’s Ogoniland hoped to take the first step towards cleaning up their homeland, a small region within the creeks and swamps of the vast Niger Delta, Africa’s biggest oil-producing region. Almost 20 years later, a new report from the UN says it could take 30 years and at least $1 billion to rid the poisoned mangroves of a thick, black carpet of crude.
The report, the most extensive, scientific research carried out in the Niger Delta, found that some families were drinking water contaminated with 900 times as much benzene, a carcinogen, as is deemed safe by the World Health Organisation. It said areas that Shell had said were clean were in fact still polluted. It also exposed serious failures on the part of Shell and Nigeria’s national oil company NNPC, which it says failed to follow their own best operating practices. Some infrastructure, the report said, was unsafe and could cause further spills. Shell said the “report makes a valuable contribution”, and that it was reviewing its practices.
Shell pulled out of Ogoniland under pressure from the Movement for the Survival of the Ogoni People (MOSOP), founded by a writer, Ken Saro-Wiwa. Saro-Wiwa, who focused international attention on Ogoniland’s woes, fell out with Nigeria’s then-military government and was hanged in 1995 along with eight other dissident tribal leaders. Without admitting guilt, Shell agreed to pay £9.6m in an out-of-court settlement of a legal action that accused the company of collaborating in the executions.
Legal pressures on the company are increasing. The UN report came in the same week the European oil giant admitted liability for the first time under British jurisdiction for two big leaks in the delta. After half a century of working in Nigeria, Shell is pulling back. It is close to selling four productive oil blocks. It also paid out $1.7m in compensation to groups in the delta affected by spills.
After half a century of hostility to Shell and disappointment at broken promises from the government, MOSOP has so far shown little interest in the UN report. But Mr Saro-Wiwa’s son is more upbeat. “The report is a belated vindication of the allegations my father raised 25 years ago,” says Mr Saro-Wiwa Junior. “I think and hope that an important psychological barrier has been broken.