Wednesday, April 21, 2010

Nigeria Oil Update: Shake-up Looms in Industry; Shell Case Dismissed

Shake-up Looms in Oil Industry

Subsidy: PPPRA pays N340bn to marketers

By Chika Amanze-Nwachuku, 04.21.2010
Nigeria ThisDay

A major shake-up is imminent in the oil industry, which is likely to affect key officials in the Petroleum Products Pricing Regulatory Agency (PPPRA), Nigerian National Petroleum Corporation (NNPC) and the Department of Petroleum Resources (DPR).

Meanwhile, the PPPRA has paid petroleum products marketers N340 billion between August last year and February 2010, as subsidy for imported petroleum products.

Although details of the planned shake-up were sketchy last night, sources said it may see Dr. Wole Oluleye returned as the Executive Secretary of the agency. Oluleye was sent on compulsory leave in 2008 over alleged irregularities in the disbursement of funds for the Petroleum Equalisation Fund (PEF) and Petroleum Support Fund (PSF).

Other key officials affected are to be removed or redeployed in the exercise, which is likely to be announced anytime from now.

Two NNPC group executive directors are to be retired, while the heads of at least two parastatals will be removed and redeployed.

THISDAY learnt that the new Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, has been mandated by Acting President Goodluck Jonathan to clean up the oil sector bodies.

A key change was made two weeks ago with the removal of Dr. Sanusi Barkindo as the Group Managing Director of NNPC and the appointment of Alhaji Shehu Ladan as his successor.

On subsidy, PPPRA's Executive Secretary, Mr. Abiodun Ibikunle, confirmed the payment to THISDAY and said government was finalising the payment process for March subsidy, which is the only month outstanding.
He said these payments are in respect of petroleum products subsidy on the 32 million to 35 million litres consumed per day in the country.

Statistics obtained from the Department of Petroleum Resources (DPR) yesterday revealed that between January and March this year, the NNPC, major and independent petroleum marketers imported a total volume of 3,053,184.40 Metric Tones of PMS, 995,393.68 Metric Tones of Automotive Gas Oil (AGO), 475,257.34, Metric Tones of Dual Purpose kerosene (DPK). The quantity of ATK imported was 111,793.99, while 109,331.25 Metric Tones of Low Pour Fuel Oil.

(LPFO) was imported.

However, as at January this year, the government had paid about N300 billion to the marketers, in an effort to ensure steady supply of fuel. Ibikunle put the agency’s outstanding debt as at then at N27 billion, and pledged government’s efforts to ensure that marketers get their subsidies at the right time.

To make good that promise, the agency is said to have processed the claims for the month of March, which will be disbursed to the marketers as soon as approval is given by the Ministry of Finance.

Delay in payment of outstanding subsidies had forced oil marketers to withdraw from fuel importation, a development which resulted in a crippling fuel crisis across the country. Although the NNPC, which was responsible for importation of about 47 per cent out of the 32 million litres of fuel consumed in Nigeria daily, was prompted to import 100 per cent of the national consumption, the crisis persisted until marketers resumed fuel importation after their subsidies were paid.

Industry sources spoken to yesterday commended the agency for the prompt payment of subsidies. They described the development as "healthy for petroleum products supply and the only short term solution to the incessant fuel crises since it is not feasible to get the refineries functioning overnight”.

PPPRA had initially awarded petroleum products importation licences for the second quarter, 2010 to 53 oil importers but whittle it down to 25. The agency’s decision to withdraw the allocation earlier granted to some marketers has elicited a lot of reactions in the industry, with many accusing it of foul play. However, the PPPRA has explained that the decision was for sanity and better co-ordination. Before now, only a handful of marketers applied to import products.

A senior executive of one of the major marketing companies commented: “The development is healthy for the industry. It is interesting seeing how major and independent marketers are now scrambling to import products, including those who, months back, did not want to have anything to do with PPPRA. It is an irony that some of them are now complaining of not being given much allocation. Did they expect PPPRA to consider them above those very few marketers that showed understanding when the agency was making efforts to resolve the issue of backlog?”

Economic watchers are however concerned that for a government to cough out over N2 trillion in fuel subsidy in the last five years is an indication that all is not well with the economy.

“What this points out is that Nigeria needs to drop the current arrangement fast. Deregulation has not been more urgent than now. Such huge amount could have been used to turn the economy around. We are throwing good money at bad business because we are not willing and ready to do the right thing,” a source who spoke on condition of anonymity said.

Meanwhile, indications have emerged that PPPRA workers have resolved their differences with the leadership of the agency. A section of the workers under the aegis of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) had written a letter to the Minister of Petroleum Resources seeking for an overhaul of the agency’s leadership cadre.

The workers had alleged the non implementation of salary increment, failure to implement the agency’s budget and other issues bordering on pension, medical entitlements and promotions. They also claimed that the Executive Secretary of the Agency did not resign from the DPR (from where he was appointed the PPPRA Executive Secretary) even after his appointment at PPPRA and had continued to earn salary from DPR.

A’Court Sacks Shell from Obio/Akpor

By Davidson Iriekpen, 04.21.2010
Nigeria ThisDay

The Court of Appeal in Port Harcourt has dismissed the appeal filed by multi-national oil giant, Shell Petroleum Development Company (SPDC), challenging its forfeiture of a parcel of land situated at Mgbuesilaru – and not the Bonny Island export terminal as erroneously reported by THISDAY yesterday.

Mgbuesilaru is in Obio/Akpor local government area of Rivers State.

The appellate court panel, made up of Justices Suleiman Galadima, Istifanus Thomas and Ejembi Eko, in a unanimous decision, re-affirmed all the findings and orders made by a Rivers State High Court in suit number PHC/1198/2005 that Shell should forfeit its terminal covering approximately 153.5 acres in Mgbuesilaru.

The court did not only uphold the judgment of the lower court, describing it as “substantially lacking merit”, it also set aside the order for alternative reliefs.

In the judgment read by Justice Ejemba Eko, the court agreed that it was the conduct of the appellant (Shell) that made the lower court to describe its action as “conscious unconscionable wrong doing both in law and in equity and unfitting of its standing locally and internationally”.

It added that the trial judge can hardly be faulted when it is taken into consideration “the totality of the appellant’s conduct from refusing to pay rents as and when due for its occupancy”.

The justices on the panel faulted the claim of Shell that the lease granted it in 1958 for 99 years was in existence when the Land Use Act was promulgated in 1978 which made it to become a deed holder of a statutory right of occupancy over the land by virtue of section 34(2) of the Land Use Act.

They, however, agreed with Shell that having regard to the earlier orders of forfeiture and perpetual injunction made in favour of the respondents as plaintiffs, that the judge of the lower court was no longer in a position, legally, to consider and grant the monetary claim in alternative.

The court submitted that having granted the orders of forfeiture and perpetual injunction against the Shell, the trial judge became functus officio to consider and grant the alternative claim as he did that out of sheer empathy or in view of the hardship the orders of forfeiture and perpetual injunction would cause it.

It, consequently, awarded cost to the tune of N90,000 against the multi-national oil giant, stating that while N60,000 should go the 1st and 2nd sets of respondents in the suit, N30,000 should go to the 3rd set of respondents.

The suit was initiated against Shell on behalf of Rumucheta-Mgbuesilaru family of Okporo Rumukoroshe town in Obio/Akpor local government area of Rivers State in 2005 over tenancy deed dated March 3, 1958.

The family claimed that according to the tenancy agreement it had with Shell, it was to hold the demised parcel of land for a term of 99 years from February 9, 1957 by paying them £2,686.5 representing 10 years rent in advance.

The family stated that following a dispute, which arose between them, the appellant and the Rivers State government, they went to High Court of Rivers State, which ruled in their favour.

The court held that the landlord and tenant relationship, which created the agreement reached by the family and Shell, was regulated by customary law and that of yearly tenancy.

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