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A big gathering of global oil companies operating in Nigeria held in Madrid, Spain on October 3 this year, where deliberations were about the prospect of engagements that could yield up to $10 billion worth of investments in Nigeria’s oil and gas sector.
The prospect was however hinged on the conditionality of peace in the often restive Niger Delta area and government’s resolve the settle the recurring fiscal and governance issues around the sector.
At the meeting, stakeholders like oil service giant, Baker Hughes, Shell, Chevron, Eni, ExxonMobil and Total recognised the fact there is appetite for dollar inflows into Nigeria’s oil industry.
Sources close to the meeting said the participants were however concerned that other oil dependent economies are not on their knees like Nigeria which has her oil production crippled as a result of the resurgence of militancy in the oil rich Niger Delta.
Read also:https://businessday.ng/news/article/pib-seeks-creation-of-3-new-agencies-development-of-host-communities/
If the deal is eventually consummated, it could help revitalise the local content aspect of the country’s oil and gas sector and lift daily production by 600,000 barrels per day within six months. Standard Chartered Bank, arranging the deal, will see each of the multinational oil companies contributing between $1.5bn and $2bn to the fund.
BusinessDay investigations reveal that the financial arrangement which was to come through the “Modified Carry Agreement’’ was designed to finance Joint Venture Upstream projects where these companies had agreed to use their money to salvage the production situation in the oil and gas sector.
The Modified Carry Agreement is a financing agreement whereby the International Oil Companies (IOC’s) would advance loans to the Nigerian National Petroleum Corporation (NNPC) for the purpose of investing in upstream projects. The “Modified Carry Agreement’’ (MCA) introduces greater transparency and accountability, with repayment and compensation being through getting some percentage of crude oil.
This arrangement, if it scales through, would also enable government to pay the $8 billion cash call arrears which has been outstanding for the past years, along with the settlement of the $10 billion.
However, the major concern of the IOCs is the onslaught of Niger Delta militants on oil facilities, the latest being the recent bombing of the main pipeline to the Bonny Export Terminal.
“No matter the billions of dollars you bring into the oil sector, once there is no peace, it cannot yield anything”, an industry source said.
They fear that it would be difficult for investors to commit their money if security cannot be guaranteed. The joint venture production has come to a third of the typical 1.2 million barrels per day production in normal circumstances on account of restiveness in the region.
Experts say what the country needs today is bulk money to significantly lift production.
Meanwhile, the country is faced with an estimated loss of about N4.7 billion ($15,180,000) daily, with the damage done to the trunk line which supplies crude to the Bonny Export Terminal.
This is an indication that efforts to get the country out of recession may be a herculean task, industry watchers say.
This figure is arrived at, considering that the pipeline gets supply from the Nembe Creek Transmission Line (NCTL) which has capacity to supply 150,000 barrels of crude per day, as well as the 180,000 barrels per day capacity Trans-Niger Pipeline (TNP), the two major pipelines used by Shell and other upstream companies operating in the Eastern Niger Delta to evacuate crude to the Bonny Export Terminal in Rivers State.
However, about 600,000 barrels of liquids can be evacuated at the Cawthorne Channel end of the facility.
According to the NNPC monthly financial operations report released recently, crude oil production in Nigeria rose to 1.77mbopd due to completion of repairs, along with the fact that there had been no major new attacks since mid-June, 2016. But this output was however still 10.72 percent lower than June, 2015 production (the second lowest in over two decades).
The NNPC reported that crude volumes from Production Sharing Contracts (PSC), mainly deep-water assets, remained steady, compared to Joint Venture (JV) & Independents producing predominately from onshore and shallow water locations impacted by security breaches and militant activities.
“Onshore and shallow water assets were severely damaged by militant activities. Hence, securing Onshore & Shallow water locations which are the predominant terrain for JV production is of Priority & Critical to production restoration,” the report said.
The relative lull in militant activity is helping to shore up crude oil production which to rose 1.77million barrels per day in July. The NNPC reported about 311 vandalised points on oil and gas infrastructure in Nigeria in the month of July.
There are also bright prospects for gas. Out of the 205.90 BCF of gas produced in July 2016, a total of 114.86 BCF was commercialised, comprising of 20.30 BCF and 94.56 BCF for the domestic and export market respectively. This translates to an average daily supply of 654.78 mmscfd of gas to the domestic market and 3,050.40 mmscfd of gas supplied to the export market.
This implies that 55.78 percent of the total gas produced was commercialised, while the balance of 44.22 percent was either re-injected, used as upstream fuel gas or flared. Gas flare rate was 10.58 percent for the month of July 2016 which is 702.83 mmscfd compared with average Gas flare rate of 8.87 percent i.e. 668.91 mmscfd for the period August 2015 to July 2016.
This 12th publication of NNPC Monthly Financial and Operations Report however indicated a trading deficit of N24.18Billion in July 2016 as against N26.51Billion deficit reported in June, 2016, the net cash flow improved by 8.77 percent or N2.32billion in July 2016.
“This improvement was largely due to increase in revenue stream from NPDC and PPMC, despite the upsurge in upstream and downstream vandalised points. NPDC, substantial portion of crude oil sales for the month estimated to be in excess of N27Billion could not be realized due to Force Majeure declared by SPDC as a result of vandalized 48-inch Forcados export line,” the report said.
OLUSOLA BELLO & FRANK UZUEGBUNAM
