Federal Republic of Nigeria Minister of Petroleum, Diezani Allison-Muedeke. Reports released in early 2011 said that the production of oil was up during December 2010. Contrary reports have indicated that overall production of crude is down in Nigeria., a photo by Pan-African News Wire File Photos on Flickr.
Nigeria, others to earn N150tr from oil export
Monday, 25 July 2011 00:00
From John-Abba Ogbodo (Abuja), Obiora Aduba and Roseline Okere (Lagos) News
Govt initiates bill to protect local oil firms
Shell defends equity divestment in Nigeria
IN its current Short-Term Energy Outlook indicator, the United States (U.S.) Energy Information Administration (EIA) has disclosed that Nigeria and other Organisation of Petroleum Exporting Countries (OPEC) would earn $1 trillion from crude oil export this year.
The EIA report, released at the weekend by the agency, stated that the 12 OPEC members could earn $1.028 trillion (about N166.2 trillion) of net oil export revenues in 2011 and $1.108 trillion in 2012.
Also, the Federal Government has sent a bill to the National Assembly as part of efforts to shield indigenous oil companies from the vagaries of the industry.
It is titled: “A Bill for an Act to make provisions for regulations and fiscal incentives in connection with petroleum operations carried out by indigenous oil companies.’’
The bill has passed through first reading at the Senate.
In a related development, Shell Petroleum Development Company of Nigeria Limited (SPDC) has defended the divestment of its equity from some oil blocks in the Niger Delta, saying the action is in compliance with its contractual rights and regulatory frameworks which guide the oil industry in Nigeria.
Shell rejected allegations that its divestment exercise is illegal, non-transparent or done to undermine the interest of stakeholders.
Sources in the industry alleged that the assets divestment is a subtle way the oil giant has adopted to finally exit from Nigeria due to previous onslaught against it by militants in the oil-rich Niger Delta, which seriously affected its crude oil production.
But Vice President for Safety, Environment, Sustainable Development and Communications of Shell in Sub Saharan Africa, Tony Attah, explained at the weekend that the firm’s divestment is in support of government’s policy of encouraging the growth of Nigerian companies in the oil and gas sector, which will deliver many opportunities for them.
According to him, “suggestions that the company’s actions are driven by ulterior motives and are being carried out secretly and illegally to the detriment of stakeholders are untrue. Since we commenced the process last year, we have been open and transparent and have given equal opportunities to all interested buyers.
“We went through very rigorous regulated processes, often spanning several months, before possibly reaching any agreements, which are also subject to requisite government approvals.”
He stressed that SPDC has repeatedly made it clear that the planned divestments do not mean it is leaving Nigeria, but a strategic refocusing of its portfolio, including investment and necessary asset sales aimed at strengthening long-term position in the country.
Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, recently said Nigeria currently earns an average of N42.3 billion daily from sale of crude oil and condensate. The country produces 2.4 million barrels of crude oil and condensate daily.
Last year, OPEC earned $778 billion in net oil export revenues, a 35 per cent increase from 2009, EIA said.
According to it, forecast OPEC crude oil production declined by about 300 thousand bpd in 2011, but increases by 560 thousand bpd in 2012.
The 12 members of OPEC produced an estimated 29.2 million bpd of crude oil in the second quarter of 2011 and EIA expects that their production will increase to an average 29.6 million bpd in the third quarter.
The EIA projects that OPEC surplus capacity will fall from 4.0 million bpd at the end of 2010 to 3.5 million bpd at the end of 2011, followed by a further decline to 3.1 million bpd by the end of 2012.
In the report, forecast OPEC non-crude liquids production, which is not subject to production targets, increased by 0.6 million bpd in 2011 and by 0.4 million bpd in 2012.
“We assume that these exports are sold at prevailing spot prices. For countries that export several different crude varieties, we assume that the proportion of total net oil exports represented by each variety is equal to the proportion of the total domestic production represented by that variety,” the EIA said.
Section 2 of the proposed bill stipulates: “Notwithstanding the provisions of paragraph 34 of the First Schedule to the Petroleum Act (which provides in part for participation of the Federal Government in the ownership and operations of prospecting licences and oil mining leases held by private oil companies), participation by Federal Government shall not be applicable to petroleum operations carried out by an indigenous oil company whose aggregate production from petroleum operation carried out by such company is not more than 50TBD,’’ that is, 5,000 per day.
Section 3 of the bill read: “All oil prospecting licences in respect of areas that revert to the Federal Government of Nigeria as a result of revocation, relinquishment, surrender, cancellation, expiration or termination of oil prospecting or oil mining leases pursuant to the Petroleum Act, or any other revision of such licences or leases by operation of any other enactment shall be granted only to indigenous oil companies in accordance with such guidelines, procedure, terms and conditions of an oil prospecting licence allocation round organised by the minister from time to time.’’
The bill also states: “An indigenous oil company whose aggregate production of crude oil is not more than 35TBD shall be allowed to produce up to the technical allowable set for the licence, lease or sublease by the Department of Petroleum Resources.”
The bill proposes that targets must be clearly set out by the companies in Section 5(2): “Without prejudice to the foregoing provisions of subsection (1) and the powers of the minister to make general regulations of guidelines for indigenous participation in the petroleum industry, the regulation or guideline referred to in section (1) of this section shall set out, among others, targets for indigenous oil and gas reserves and production, personnel content and other measurable parameters for determining the level of indigenous participation from time to time.’’
It equally provides for periodic review of such parameters: “Such targets and parameters shall be reviewed from time to time as the minister may deem necessary and if upon such review, the level or target set to achieve by the guideline or regulation are not met, the regulation or guidelines shall be reviewed accordingly to ensure the attainment of an enhanced indigenous participation in the Nigerian petroleum industry.”
It provides for a minimum period of two years for the review of the set targets, thus: “Without prejudice to the foregoing provisions, the minister shall, not later than three years after the commencement of this Act and thereafter at intervals of two years, undertake a general review of the set targets, parameters and programmes for continuous increase in the level of indigenous participation in the Nigerian petroleum industry and set such new targets, parameters and programmes as shall be necessary to give full effect to the provisions of this Act.”
On the payment of Petroleum Profit Tax (PPT), the bill says in Section 7: “Determination and payment of petroleum profit tax shall be in accordance with the petroleum profit tax, provided, however, that the tax rate to be applicable to petroleum operations carried out by indigenous oil companies shall be a flat rate of 60 per cent.”
On the use of oil blocs, Section 12 of the bill says: “Oil blocs awarded to indigenous oil companies on lease that remain 100 per cent undeveloped after 10 years shall revert to the government’’. Section twelve (2) adds: “If after 10 years of lease and not more than 50 per cent of the bloc on lease had been converted from oil prospecting licence to oil mining licence by the leasee, then the total percentage of bloc not converted shall revert to the government’’.
Managing Director, SPDC in Nigeria, Mutiu Sunmonu, said Shell’s divestment would enable the company apply its resources where they would add the greatest value and to support the Federal Government’s aspiration of providing a broader platform for indigenous companies to participate in the upstream oil and gas business.
According to him, “selling assets is challenging for people who are directly affected, but this is part of what a company like SPDC must do to remain strong with a strong portfolio of assets in a world where economic activity is dynamic.
“We determine whether a large company such as ours is in best position to obtain optimum economic benefit from the fields or whether smaller indigenous players are better to exploit the resources.”