Saturday, December 31, 2011

Nigeria in 2011: Not Quite Good for the Oil Industry

Nigeria: Year 2011 - Not Quite Good for the Oil Industry

Hamisu Muhammad
29 December 2011
Nigeria Daily Trust

The year 2011 has been a memorable one in the oil and gas industry. Some of the major activities that dominate discourse are scarcity of some major petroleum products and plan of subsidy removal by government. The following are some of the activities:

January 2011

Year 2011 started with high cost of Liquefied Petroleum Gas (LPG) or cooking gas.

Some distributors and marketers attributed the scarcity of the product to supply issues with the Nigerian LNG Limited, the major supplier of the product in the country.

Members of the National Association of Road Transport Owners (NARTO) withdrew their tankers from all fuel depots nationwide to protest high price of diesel, considered as a disincentive to profit needed to maintain and sustain the condition of fuel tankers lifting petroleum products.

Meanwhile, the failure of the Nigerian National Petroleum Corporation (NNPC) to pay up N450 billion debt owed the Federation Account has pitched the 36 state governments against the Federal Government.

Same time, price of kerosene soared to N200 per litre in most parts of the country, while stock keeps depleting at many depots and outlets. Oil marketers said NNPC has not supplied the market with kerosene for a year now, which led to the scarcity of the product.

While marketers and transporters decried high cost at which it was sold, between N105 and N110, in 2010, in January 2011, the product was sold at between N130 and N135 per litre at the filling stations across the country.

And Shell executives have insisted they would not pay compensation for up to 2,000 oil spills caused by sabotage. The company has also pledged to appeal a $100 million fine from a Nigerian court for a 40-year-old oil spill.

Government indicated interested to conduct hydrocarbon mapping in its oil exploration plan in the inland basins.

February 2011

In Lagos State, the Environmental and Special Offences Unit uncovered 100 illegal oil wells at Ilashe, a remote community in Oriade Local Council Development Area of the state, the coordinator, Anti-Vandalism team for the unit, Mr Dele Laleye, disclosed.

Within the month also, the Kaduna and Port Harcourt refineries resumed operations according to a statement by the spokesman of NNPC, Dr. Levi Ajuonuma. However, the company said over 450,000 litres of premium motor spirit (PMS) have been drained from an oil leak site at Isheri.

Shell Nigeria said it shut its offshore Bonga oil field for maintenance.

Within the month, the new Petroleum Products Pricing Regulatory Agency (PPPRA), Executive Secretary, Engineer Goody Chike Egbuji, assumed office.

On the PIB, oil workers called for final consultation before passage because, according to a report, the PIB had no provision for employment transition arrangement for the nationals in the existing joint venture companies as was made in the bill for their counterpart workers in the NNPC.

March 2011

In March, Transparency International in its 2011 report on global oil and gas companies revealed that NNPC is one of the eight most corrupt national oil and gas companies in the world. The report came a the time Shell and other government officials met in London to water down the Petroleum Industry Bill. Sources revealed that a partnership between key functionaries of the Petroleum Ministry, the NNPC and the National Assembly with support from Shell Petroleum Development Company (SPDC) have constituted a technical team to review the PIB and produce more friendly version for the international oil companies.

Also, Shell announced that the 225,000 barrels a day capacity Bonga deepwater oil field will remain shut for six weeks for maintenance work, even as the company blamed ineffective law enforcement for the incessant cases of pipeline vandalism and oil theft in the Niger Delta.

In the same month, NNPC, Addax, Maersk sealed a deal to produce 180,000 bpd from new partnership.

The fuel queues returned when NARTO members embarked on strike as a result of the dispute with PPPRA over freight rate increment, but the union later restored service.

President Goodluck Jonathan launched a gas revolution, targeting $25 billion investment, just as a Memorandum of Understanding (MoU) between Xenel/ NNPC, Nagarjuna and Chevron was signed.

Shell Nigeria agreed to sell a stake in a Nigerian oil field to two companies in an auction to a venture between Eland Oil & Gas and partners.

In the international circle, the Iranian Oil Minister Masoud Mirkazemi said the Organization of Petroleum Exporting Countries (OPEC) will not increase its crude output.

April 2011

In April, the Lagos State Government and NNPC signed MoU on $25 billion refinery and hydrocarbon industrial park after two years of intensive negotiations. While Shell resumed oil output at Nigeria Bonga field; maintenance began on February 28.

May 2011

The month of May began with fuel scarcity which crippled economic activities in Abuja, Kano, Jos, Kaduna and other parts of the country.

Meanwhile, the people of Bodo in Gokana Local Government Area of Rivers State dragged SPDC to court following a spill from its Trans-Niger pipelines which destroyed farm lands and fishing.

Nestoil completed an 18 inch by 3.2km Class 600 Gas pipeline NGC-Alaoji project. The contract was awarded by the Nigerian Gas Company (NGC), a subsidiary of NNPC on August 31, 2010, with a completion date fixed for February 28, 2011.

Among key tragic events was the Sapele NNPC pipeline fire explosion which killed 20 people. NNPC said the explosion was caused by pipeline vandals.

But on a happy note, in the same month, two major gas supply agreements intended to significantly boost gas supply by 70 per cent to Nigeria's largest power plant, Egbin were signed by the NNPC and its Joint Venture Partners in the upstream.

June 2011

In June, Shell Nigeria shut 3 billion mÂ'/yr (300mn ftÂ' /d) gas capacity because of a leak on a condensate pipeline. The company also said multiple fire incidents on its pipelines affected its plans to meet some contractual obligations for June or July. Shell had planned to deliver more than 240,000 barrels of Bonny Light crude.

Meanwhile, the Minister of Petroleum Resources, Diezani Alison-Madueke was accused of running the ministry from the comfort of her home but the minister denied the allegations.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) accused NNPC of not addressing the problem of scarcity of kerosene, even though the corporation said it has allocated 10,000 metric tonnes of the commodity to the independent marketers to ease scarcity of the product.

July 2011

NNPC said it allocated over 542 million litres of kerosene (DPK) to oil marketers between January and June, in a bid to end kerosene scarcity in the country. The figure is contained in the allocation records made available to newsmen, just as Minister of Petroleum Resources, Mrs. Alison-Madueke accused cartels for diverting kerosene abroad which led to the scarcity of the product.

In another development, the National Union of Petroleum and Natural Gas workers (NUPENG) handed down a 14-day ultimatum to government to halt the sale and transfer of oil blocks by Shell failing which it would shut the industry.

Oil workers went ahead to boycott fuel lifting and shut installations, the union set aside another three-day strike for oil and gas workers to withdraw their services in protest against treatment by Shell but after several interventions they called off the strike.

According to a report from Dow Jones News, Shell is losing 100,000 barrels of oil a day to theft in Nigeria. Shell does not see an end to the theft.

Minister of Petroleum Resources, Diezani Alison-Madueke had expressed hope that oil would be found in commercial quantity in the nation's inland basins.

Total second-quarter profit declined on Libya unrest, but in a bid to boost future output, the company planned to make final investment decisions on the Ichthys ...............LNG project off Australia, Egina in Nigeria, Moho Bilondo in the Republic of Congo and the Shtokman gas field in Russia's Barents Sea by the end of the year.

Shell defended its decision to divest itself of some of its equity in oil concessions in Nigeria's contentious Niger Delta region. SPDC maintains that its divestiture was compliant with laws.

At the same time Shell said it had resumed production on one of its crude oil flow stations in the onshore Niger Delta which was shut down by protesting Nigerian youths earlier in the month.

Iran retained its position as the second-largest producer in the OPEC, despite a recent report that Nigeria moved from the organization's third to second place.

August 2011

The Department of Petroleum Resources, the country's oil industry regulator announced that total crude oil and condensate reserves fell by 4.8 percent to 37.16 billion barrels from 38.76 billion barrels in 2010. Also another report in the months by the United Nations Environmental Programme (UNEP) on the contamination of Ogoniland has indicted Shell Petroleum Development Company (SPDC), concluding that cleaning up the mess could take as long as 30 years. The restoration could entail the world's "most wide-ranging and long-term oil clean-up" and it is estimated to cost $1 billion.

The Executive Secretary of Petroleum Equalisation Fund, Mrs. Sharon Adefunke Kasali denied any involvement in corrupt practices in running the operations of the agency after being arrested and detained by the EFCC operatives.

Nigeria indicates intention to take $2 billion loan from Japanese companies to fund Brass LNG, the decision followed a meeting between the NNPC and representatives of the Japanese companies on July 27 in Abuja.

The special committee includes finance minister, Ngozi Okonjo-Iweala; and oil minister Diezani Alison-Madueke. The head of NNPC, Austen Oniwon submitted a forensic audit report on NNPC to the president.

Shell declared a "Force Majeure" on its Bonny Light exports between August 23 and end of October.

The Corporate Affairs Manager of the compnay, to Tony Okonedo said the act was expected to stop about $1.75 billion (N280 billion) revenue. At the same time the company shut down a Nigerian gas plant following a series of pipeline leaks, causing a shortfall in gas supply for electricity generation, but it had restarted operations at its 270 million standard cubic feet per day in Nigeria's Utorogu Gas Plant

September 2011

The Fluid Catalytic Cracking (FCC) unit of the Kaduna Refinery was shut down temporarily for repairs following some faults in the system. The unit is the most important conversion process used in petroleum refineries which convert high-boiling and high-molecular-weight hydrocarbon fractions of petroleum crude oil to petrol, diesel and other products.

The Management team of Shell Nigeria Exploration and Production Company (SNEPCO) said the company paid N18.6 billion to Nigerian government as tax annually. Shell also confirmed a partial production shutdown of Nigerian Forcados crude due to pipeline leak.

Nigeria's production fell by 80,000 barrels a day to 2.15 million barrels in September from 2.95 million.

The NNPC agreed to pay the N450 billion debt owed the Federation Accounts Allocation Committee (FAAC) in 32 installments, with effect from September.

October 2011

Some marketers of bitumen accused the Pipeline Product and Marketing Company (PPMC), an arm of NNPC, of sabotaging the sales and distribution of locally refined bitumen.

Oil and gas production from Shell Nigeria shown a year-on-year decline for the first time in two years according to third-quarter data published by the company. The Royal Dutch Shell PLC, Europe's largest oil company, said profits doubled to nearly $7 billion in the third quarter because of higher oil prices and one-time gains.

The company recorded net profit of $6.98 billion, up from $3.46 billion in the third quarter of 2010. Revenues rose 33 percent to $127 billion

But the company in Nigeria faced another lawsuit from a Nigerian community accusing it of polluting their lands as a result of oil drilling activities. The suit was been filed in the US.

The NNPC has refuted the statement credited to the Auditor-General of the Federation (AGF), Mr Samuel Orkura, accusing the corporation of not having its reports audited since inception.

The Federal government said it would not remove kerosene subsidy from 2012 budget but that NNPC would need about $4 billion to address the gas pipeline infrastructure deficit by 2015.

The NNPC suspended further deductions from the Federation Account in the name of subsidies for petroleum products which the state governments described as illegal and vehemently objected to.

The Power Holding Company of Nigeria (PHCN) shut down five power stations in the country as Shell Petroleum Development Company (SPDC) shuts down five gas stations for maintenance.

Shell was accused of fueling human rights abuses in Nigeria by paying huge contracts to armed militants, according to a report published by Platform and a coalition of NGOs.

The Federal Government plans to invest about $2.68 billion in Indonesia to fund the construction of three oil refineries. The Jakarta Post, Indonesian Industry Ministry's Director-General for manufacturing-based industry, Panggah Susanto was quoted by as saying that both countries had agreed to build the refineries but the Nigerian officials denied such agreement.

November 2011

Shell Nigeria awarded a N7.8 billion ($49.9 million) contract to a Nigerian firm, S.C.C Limited, for the manufacture of line pipes, in an effort to boost local production capacity. But its 115,000 barrel-a-day offshore Nigerian EA oil facility was down for planned maintenance that started November 9.

The NNPC GMD, Austin Oniwon said oil earnings was $16.79 billion in January to October compared with the 2011 target of $13.9 billion.

It is within the month that the Oando hi-tech 18-inch's 128 kilometres natural gas transmission pipeline traversing Akwa Ibom and Cross River states was commissioned by the minister of petroleum Resources, Mrs Diezani Alison-Madueke.

A private refinery owned by Niger Delta Petroleum Resources Ltd (NDPR), a subsidiary of Niger Delta Exploration and Production Plc, begun operation at Ahaoda East Local Government in River State.

Nigeria lost over one million barrels of crude oil in a transaction between the Nigeria National Petroleum Corporation (NNPC) and the Liberian Petroleum Refining Company (LPRC), according to an audited report prepared for the Liberian government.

The Nigeria National Petroleum Corporation (NNPC), has said that over 5,000 cases of willful act of pipeline vandalism were recorded at the end of 2010 nationwide. The Managing Director of Pipeline Product and Marketing Company (PPMC), the marketing and distribution arm of the NNPC, Prince Haruna Momoh said the high rate of vandalism obstructed the supply and distribution of petroleum products both crude and refined during the period in review.

In Abuja and environs many filling stations were empty while the few that had fuel were crowded by desperate motorists. NNPC however attributed the queues to panic buying and assured that it will step up fuel supply to ensure hitch free Christmas.

Shell said it was containing a new oil spill in Nigeria's onshore delta, the latest in a string of leaks from the company's pipelines, which it has blamed on sabotage attacks and oil theft.

Mr. Reginald Chika Stanley was appointed as the new Executive Secretary of the Petroleum Product Pricing Regulatory Agency (PPPRA) and Mr. Osten Oluyemisi Olurunsola as new head of Department for Petroleum Resources (DPR).

An oil block, previously owned by Shell, Total and Eni was taken over by the First Hydrocarbon Nigeria (FHN), owned by Afren, and bought a 45 pct stake in OML 26.

Minister of Petroleum Resources, Diezani Alison- Madueke was alleged to acquired $25 million 'wondrous' home abroad, but the minister rejected the report, which she tagged as malicious.

December 2011

The Senate released names of the beneficiaries of fuel subsidy amounting to a grand total of N3.655 trillion for five years (2006 to 2011). The upper legislative chamber said fuel subsidy has guzzled N1.426 trillion between January and August, even thought the PPPRA faulted the figures.

An oil leak caused a production halt at a Shell facility off Nigeria capable of producing 200,000 barrels per day. The company said "less than 40,000 barrels" have spilled.

The NNPC GMD, Austin Oniwon could not account for 65,000 bpd out of the 445,000 bpd allocation for domestic refining but the corporation faulted the allegation.

Also the corporation blamed the resurfacing of fuel queues in Abuja to incidence of panic buying and indiscriminate hoarding of petroleum products by marketers.

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