Ibe Kachikwu, minister of state for petroleum resources, says the federal government has recovered N1.2 trillion in royalty arrears from oil companies operating in the country. 

Kachikwu was speaking during the Crude Oil and LNG Tracking (COLT) and other automation initiatives, launched by the ministry through the Department of Petroleum Resources (DPR), in Lagos on Monday.

The minister said the launch of new automation processes that track production and shipment of crude oil was what helped in “aggressive royalty recovery”.

“The process of determining royalties in the past was largely driven by the initiatives of oil companies, which determined what they produced, and we calculate royalties on the basis of that,” he said.

“Now, we are able to, using the systems we have, see what actual production volumes are to determine royalties.

“Apart from tracking the production, we are also able to track the movement of the crude – the vessels that come in and go out of the country.

“We have raised N1.2 trillion so far as a result of this aggressive royalty recovery.

“Clearly, when we finish, we will at least have a situation where everybody who is operating is current in terms of their payments.”

Kachikwu said oil firms yet to remit outstanding royalties to the government at the expiration of the agreed deadline, may lose their operating licences.

“Under the rules, you will not get renewal unless you pay your outstanding royalties,” he said.

“What we have done is that for those who have shown the seriousness in mapping out how they intend to settle that, we will renew (licences) but we won’t give them the final certificate until they have liquidated the outstanding royalties.”

The minister said a “benchmarking system” has been launched to track expenses and ultimately reduce the cost of producing oil in the country.

“Given the oscillating price of oil globally, unless we are able to do this, you will produce oil and not make money out of it. So, this is very helpful for us.”

The Federation Allocation Account Committee (FAAC) disbursed a total of N8.52 trillion to the three tiers of government in 2018.

The amount disbursed exceeded N2 trillion in three consecutive quarters — the first of such occurrence since the third quarter (Q3) of 2014.

This information is contained in the 10th issue of the Nigeria Extractive Industries Transparency Initiative (NEITI) quarterly review.

A break down of the figures revealed that the highest quarterly amount of N2.299 trillion disbursed in Q4 2018.

This is the highest quarterly disbursement since Q2 2014 which recorded N2.520 trillion.

The lowest quarterly disbursement within the four year period was recorded in Q2 2016 with only N886 billion shared among the three tiers of government.

This was the period Nigeria eased into its worst recession in the last 29 years, on the back of low levels of crude oil prices which reduced to $50 per barrel between January and July of 2016.

Drawing comparison between the amounts disbursed between 2017 and 2018, the report said there were “striking increases” within the one year period.

For Q1 2018, total disbursements were N1.938 trillion, while total disbursements in the first quarter of 2017 were N1.411 trillion, representing an increase of 37.3 percent over the 2017 figures.

Total disbursements in Q2 2018 were N2.008 trillion while corresponding figures for 2017 were N1.377 trillion, an increase of 45.8 percent.

Total disbursements of N2.278 trillion was recorded in Q3 2018 and increased by 18.1 percent over the 2017 figures of N1.929 trillion.

Total disbursements in Q4 2018 was the highest at N2.299 trillion while corresponding figures for 2017 were N1.7 trillion, representing an increase of 35.2 percent.

“With the exception of the third quarter of 2017, there has been a consistent rise in quarterly disbursements since the second quarter of 2017,” the report read.

“These figures suggest that the nation might be getting back to the levels of revenue observed prior to the drastic fall in oil prices that started in 2014.

“However, disbursements have not yet reached the levels recorded in 2013 and 2014.”

FAAC disbursements to the three tiers of government were highest in December and lowest in February, with the exception of the record low of N128.30 billion local government councils received in April.

Oil revenue boosts FAAC allocation

The NEITI review gave an insight into the significant rise in FAAC disbursements to the three tiers of government, recorded in 2018.

Oil revenue was said to be the major contributor to the increase in FAAC allocation.

Going back to average daily oil production and prices from January 2015 to August 2018, the report explained that while prices started falling in 2015, production was still relatively stable.

However, oil production started falling in 2016 as a result of consistent attacks on oil facilities by militants and the subsequent shut-ins that major producers had to enforce as a result of the attacks.

This contributed to the plunge in the nation’s revenue and resulted in the drastic fall in FAAC disbursements which started in the fourth quarter of 2014.

In a remarkable turnaround, both oil production and oil prices started rising around the same time in 2017.

“The sustained rise, particularly in oil prices, has led to the continuous increase in FAAC disbursement,” the report read. 

‘FAAC disbursements will keep rising in 2019’

Using trend analysis, the review projected that FAAC disbursements will keep rising in 2019.

Renewed optimism as a result of an increase in Nigeria’s oil production together with consolidated efforts by the Organisation of Petroleum Exporting Countries (OPEC) to keep oil prices from falling is expected to maintain the rise.

“With the concerted efforts by OPEC to limit oil production, coupled with sanctions on Iran and Venezuela oil exports, it is expected that oil prices will not fall to the very low levels experienced from 2014 to 2017,” the report read.

“Oil production is also expected to increase in 2019. An important offshore field – Egina – started production in late December 2018.

“With an optimum capacity of 200,000 barrels per day, production from this field and other shut-in fields whose production is expected to come back on-stream will increase the nation’s oil production.

“Increased oil prices and oil production bode well for government revenue.

“Thus, it is anticipated that FAAC disbursements will continue rising in 2019.”

Members of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Enugu Depot have shut down filling stations across Anambra, Ebonyi and Enugu states over an alleged leadership crisis.

NAN reports that all private filling stations in Awka, Enugu and Ebonyi were still closed to the public on Tuesday with only NNPC mega stations at selling petroleum products to customers.

Gladys Onyia, a commuter in Enugu, expressed disappointment at the development adding that there was no warning about the strike.

“I took my children to school in the morning but by the time I could get to my office, there were complaints of fuel scarcity in the state,” she said.

“This is a terrible period for such action because of the upcoming elections. How can they be so insensitive to national development?.”

It was, however, a different situation in Ebonyi state capital, Abakaliki as there was no compliance to the strike directive.

Confirming the shutdown, Cletus Obi-Okafor, chairman of Petrol Dealers Association of Nigeria (PEDAN), said the total shutdown would persist until there was a counter directive to members.

“We were directed to close our outlets over a crisis at our Enugu Depot office, the compliance will be total until we get further directive,” he said.

However, a top IPMAN official told NAN that the action was to counter the move by some people to forcefully take over the depot leadership.

The source alleged that some unidentified persons attacked the office of IPMAN in Enugu and beat up their staff.

He explained that the shutdown was in solidarity with Ikechukwu Nwankwo, chairman of Enugu in charge of Anambra, Ebonyi and Enugu states.

The source said IPMAN members in the affected states were protesting unconstitutional removal of Nwankwo as seen in their obedience to the national body to shut operation.

In a reaction to the industrial action, the Department of Petroleum Resources (DPR) said it did not anticipate the current situation.

Ahmed Gwaram, DPR’s head of operations in Enugu, said the department was already working to ensure that there was no artificial scarcity and price hike in the sale of the petroleum products as a result of the strike in the state.

Gwaram urged motorists to patronise major marketers and NNPC outlets that are open to business, assuring the public that the DPR would hold a meeting with the IPMAN executive as soon as possible to resolve the current crisis

Adebayo Ojo, former minister of justice and attorney-general of the federation says he collected only $10 million as “legal fees” out of $50 million agreed with Dan Etete, former minister of petroleum resources, for the sale of the deepwater oil block, OPL 245 to Malabu Oil and Gas (Malabu) in 2011.

Located on the southern edge of the Niger Delta, OPL 254 is said to have about nine billion barrels of crude oil, estimated to worth half a trillion dollars.

In a Milan court proceeding on Thursday, Ojo said he provided legal advice to Etete between 2009 and 2011, while seeking possible buyers for the lucrative oil block.

However, investigation documents made available to the court said the $10 million “legal fees” Ojo received is just a tranche of a “$50 million bribe” paid by Italian oil giant, Eni, for the purchase of the oil block from Malabu.

The $50 million represents five percent of $1.1 billion allegedly used to bribe local politicians, intermediaries and others involved in the case.  

Royal Dutch Shell and Eni, alongside a number of their senior executives have been involved in lawsuits for their alleged role in the deal, which both companies have denied.

In February 2017, both companies had through their Nigerian subsidiaries, asked a federal high court to reverse an order that revoked the award of OPL 245 to them after purchasing the block from Malabu.

During the Thursday trial, Sergio Spadaro, the lead prosecutor, questioned Ojo about the “legal work” he had done as claimed, but the former minister did not provide details of his assignment, claiming “professional secrecy”.

Ojo, however, specified that during that time, he didn’t know about the lawsuit initiated by Shell nor that both Shell and Eni “could be buyers” of OPL 245.

He confessed that he still had dealings with Vincenzo Armanna, a former manager at Eni and had in 2012 paid the Italian $1.2 million for a business in the “gold sector that aims to expand to the renewable energy sector and oil”.

The money paid to Armanna according to him, was from his $10 million “legal fees” which was transferred from one “Rocky Top Resources to his personal account because his firm did not have a foreign account.”

Referring to the payment made to Armanna, the former minister said: “The money has not been asked back because we still want to work together.”

Abubakar Aliyu, a Nigerian businessman who is also under trial for his alleged complicity in the case, was not present for court proceedings on Thursday as scheduled.

Aliyu said he only just discovered the same day his trial was to hold that he is being investigated in a related case.

The businessman claimed not to know the accusations made against him, adding that he “cannot assess whether or not to answer”.

His case was adjourned to February 13.

After resuming the search for hydrocarbon resources at Kolmani River II oil well in the Gongola basin of Benue Trough, Bauchi state,  the Nigerian National Petroleum Corporation (NNPC) will soon commence drilling activities in Benue state.

President Muhammadu Buhari made the announcement when he was received by Samuel Ortom, Benue state governor and traditional rulers in Makurdi, the state capital, on Wednesday.

A directive by Buhari had extended oil exploration to six frontier basins including the Benue Trough and those located in Chad, Bida, Dahomey, Sokoto, and Anambra.

According to a statement by Garba Shehu, presidential spokesman, while giving an address, Buhari recalled his time as a former minister of petroleum in the 70s.

The president said he had seen “very interesting seismic surveys” that promised oil and gas from the Chad Basin through the Benue Trough down to the Delta region.

During a visit to the state in November, 2017, Maikanti Baru, group managing director, NNPC, had disclosed that Integrated Data Services Ltd, the corporation’s upstream company, will commence seismic data acquisition work as a prelude to drilling.

“I am convinced that the success of the results from IDSL’s seismic data acquisition will lead to the drilling of exploration wells in these areas, which hopefully, would launch Benue state into the league of oil producing states in the country,” Baru had said.

He said for mostly commercial reasons, investment was directed to the Niger Delta given the “promise of quicker results”.

The statement said Buhari recounted his “past efforts” as military head of state to “diversify the country’s sources of oil to strengthen its unity”.

He promised that his administration will “intensify efforts in this direction”.

Austin Okere, founder and executive vice chairman of Computer Warehouse Group (CWG) Plc, says stakeholders in Nigeria’s oil industry should collaborate on assets and compete on contracts to grow sustainable local companies.

In this interview with TheCable, Okere, who is also the entrepreneur-in-residence at the Ausso Leadership Academy, speaks on innovation and efficiency in the oil and gas industry, local content development, and the new grounds/ markets the ICT company is breaking into.

What are the trends and innovation that will drive efficiency in Nigeria’s oil and gas industry?

Thank you very much. We just finished a session on innovation and efficiency in the oil industry, and throughout the session at the NIPS (Nigeria International Petroleum Summit), the common theme has been collaboration, partnership, and trust. But also, the issue of local content came out very strongly.

Local content is welcome and is good, but local content must be complemented by local competence, local capability, and local capacity.

If you look at the oil industry and the structure of it when it was run by the International Oil Companies (IOCs), a lot of the policy formulation and strategy came from the headquarters in the Hague or Houston.

So that’s why they set a five-year vision and here was where we had our managers that would implement the strategy and follow policy directives.

So the kind of trainings that were given to the managers in the local companies was mainly operational training, technical training or financial training. But there was hardly any leadership development.

Now, it is by leadership that they would be able to grow our local oil companies to become sustainably successful to see a purpose and a vision for taking are the assets that are being sold by international oil companies and being able to manage them successfully and sustainably. And that is the component that we spoke about that seems to be missing.

In fact what I did after my retirement from CWG was to set up an academy called the AUSSO leadership academy.

What we do at the AUSSO leadership academy is to mentor leaders experientially — to become people with an ownership mindset, innovate mindset — people that act with performance and accountability, pace and agility in this changing world.

Another trend driving the industry is cost reduction. If you look at the oil industry, because of the oil price drop, a lot of the international companies have brought down their cost of production per barrel by 60 percent

If we are are not able at our local oil companies to do the same, and they’re bidding for jobs with these international companies, and they’re competing solely on lowest price, then their margins are squeezed and they would die if they are not sustainable over a long period of time with squeezed margin that is not covering your cost.

But for you to bring down your cost and do more with less, you need what we call “efficiency innovation” which comes through research and development (R&D).

What I propose is a form of competition — collaborating and competing.

Can you please expatiate on this?

If you look at artificial intelligence, what it does best is that learns from its mistake. It would never make that mistake ever again.

Secondly, what artificial intelligence does is that once it learns something, it updates all the artificial intelligence nodes in the network so all of them know what has been learnt.

It’s important in our oil and gas industry to have what we call a body of knowledge, especially now that we’re digitising a lot of the data sets and analysing them, so that that body of knowledge is shared by all in the industry so that an accident that happens as a result of safety carelessness will never ever repeat and that will help with 100 percent safety achievement and better process and project delivery.

The other thing is to compete with the assets. What happened in the telecoms industry was that the common assets such as the mast were shared by all telecoms, not everybody building their own mast one beside the other and that brought down the cost and it helped tremendously in bring down the price and speed of roll out.

The oil industry has to collaborate on assets, so that they compete on long-term contracts.But there are also contracts called call off contracts which are short-term contracts. When you have those call off contracts, it’s better that the assets are in a pool so that whoever has excess capacity in the asset can give the other one to use it, rather than everybody holding it in silos and the person that won would go to Europe and Asia looking for an asset that a local operator has here.

These are some of the things that I think that would help us prepare better to take charge of our oil assets and grow sustainable local oil companies.

What services does CWG bring to bear to meet the technological needs of its clients in the oil and gas industry?

CWG has worked very tightly with the oil companies more in the maintenance of technical equipment, especially in the area of information technology.

So apart from the fact that some of them collocate in our data centre, we also provide managed services and personnel to them, on the basis of the personnel working in-house with them as staff so that they can focus on their core business.

But what is interesting is what we call the smart metering. And the smart metering is what we’re partnering the federal government on.

If you look at Sura market for instance, they’re using the smart meter for more efficient measurement of power — where you can measure anything with it — but also using those same devices for providing network to the people that are using those meters, and CWG is showcasing the smart meters here at the NIPS.

What new technology and market, is CWG looking to extend or break into?    

Now let me illustrate this with an example. CWG is going more deeply into platforms. Platforms that provide sharing of technical facilities for everybody to use and learn from.

For us to continue with this R&D that provides efficiency, we have to embrace disruptive innovation.

But there are three types of innovation. There is market substituting innovation, which is just making a better product of what you have. There is market efficiency innovation, which is doing more with less, and that is what a lot of the oil majors did in order to bring the pricing down by 60 percent. The biggest innovation is what we call market-creating innovation. Market-creating innovation are the kind of things that provide jobs, that expand the industry. So two companies in the same business will be competing for who will have the most people buying their products but another company would not. It would come with something different and non-consumers would be brought into the market and they will take over that market.

This is precisely what CWG is doing. CWG is investing more in market-creating innovation for the industry, so that we can look at how to have sustainable projects rather than everybody scraping the barrel and competing for a shrinking part.

President Muhammadu Buhari has flagged-off drilling activities in the Kolmani River II oil well in the Gongola basin of Benue Trough, Bauchi state.

The “spud-in”, as it is known in the oil industry, is the second attempt at actual oil drilling in the basin following an earlier undertaking by some international oil companies (IOCs) in the early 90s but was abandoned midway.

The president also ordered the Nigerian National Petroleum Corporation (NNPC), to extend oil exploration to six basins in the country.

A statement by Ndu Ughamadu, spokesman of NNPC, said the state oil firm acquired advanced data and technology to drill deeper for more discoveries in the Gongola basin, following a presidential directive.

Speaking at the inauguration ceremony on Saturday, Buhari commended the NNPC for its role in “re-invigorating exploration operations in the basin”.

He said the exercise would help Nigeria secure her energy sources, making for a “balanced resource distribution, strong economic base, and industrialisation”.

Buhari, who also doubles as the minister of petroleum resources said that a key aspect of the Economic Recovery and Growth Plan (ERGP) is to “ensure national energy sufficiency” which can only be achieved by exploring for hydrocarbon resources not only in the conventional basins but also in the frontier basins.

A frontier basin is a basin where exploration activities have not been carried out or a basin with short-term exploration activities with a significant volume of undiscovered hydrocarbon resources.

Buhari said exploration would soon commence in other basins located in Chad, Bida, Dahomey, Sokoto, and Anambra.

In his presentation, Maikanti Baru, group managing director, said neighbouring countries were making hydrocarbon discoveries from their own end of the basin, hence the corporation’s drive to resume exploration activities at a higher level.

He explained why the IOCs withdrew from the frontier basins, adding that government will take on the initial risks that come with exploring in the host communities.  

“While the IOCs who previously explored the basin through Kolmani River-1 well, drilled down to less than 9,000 feet, the corporation would go as deep as 14,500 feet in the Kolmani River-II well,” Baru said.

“There is already a well that was drilled back in 1999 by SNEPCo, and at that time, the amount of hydrocarbons were not commercial in their own judgement but when we reviewed the data, we felt they did not complete the process and we came here based on the 3-dimensional seismic and other studies we have done.

“Of course, as you are aware, the Niger Delta is well explored and exploring frontier basins in areas that have not been explored are normally very risky and costly, and because the private sector does not want to take that risk, they expect the government to go out and look for it and once the reserves are established, then the private sector will come in and develop them.”

Ahmadu Kida-Musa, deputy managing director (deepwater) at Total Exploration and Production Nigeria Limited (Total), says the Egina oilfield is as at Wednesday producing 60,000 barrels of oil per day (bpd).

This is 140,000 barrels below the expectations of President Muhammadu Buhari, who in his 2019 budget speech said he expects Egina to add 200,000 barrels per day to Nigeria’s production numbers.

Speaking during a presentation on the success recorded on the deepwater project thus far, Egina DMD said output will hit 200,000 bpd by March.

This may impact negatively on the 2019 budget, which had factored in 200,000 barrels from Egina in its revenue projections.

While presenting the 2019 budget, President Buhari told the joint session of the national assembly that the executive had set oil production benchmark at 2.3 million barrels per day — as it was in 2018.

The president, however, acknowledged that Nigeria did not produce as much as the budgetary benchmark in 2018, but expressed optimism for 2019.

“In 2018, average oil production up to end of the third quarter was 1.95 mbpd, as against the estimated 2.3 mbpd for the entire year,” Buhari had said.

Despite producing just 1.95 million barrels per day for the better part of 2018, the president said Egina will come on stream and add 200,000 barrels per day to Nigeria’s production capacity.

“With regard to the oil and gas sector, crude oil production continues to increase steadily towards budgetary targets and will receive a further boost when the 200,000 barrels per day Egina oil field starts operations,” he added.

Nigeria’s oil production levels for 2019 is still below budget benchmark.

Ibe Kachikwu, minister of state of petroleum resources, says Nigeria will deal with the cap on oil production by the Organisation of Petroleum Exporting Countries (OPEC), by focusing on refining crude oil locally and consuming what is produced.

Kachikwu made this known while speaking with TheCable Petrobarometer during the ongoing Nigeria International Petroleum Summit (NIPS 2019) in Abuja on Monday.

During the last OPEC and non-OPEC ministerial meetings in December, Nigeria voluntarily agreed to curb her quota by some 53,000 barrels per day (b/d), bringing it down to around 1.68 million barrels per day (mbpd) excluding condensates.

There are speculations that this will affect the implementation of the 2019 budget since the daily production will be below the budget benchmark in relation to oil prices.

But according to the minister, even if there new deepwater projects coming on stream, as long as the nation’s refineries are operating at full capacity and most of what is produced is consumed locally, then the nation’s contribution to OPEC can be “minimal”.

“Nigeria’s Crude Oil production is currently between 1.74 million barrels of oil per day (mbpd) and 1.75 mbpd. Condensate production is about 400,000 b/d,” he said.

“It is good enough to say we are cutting. The realism, what I see in the market today is that despite the cuts–the more we cut, the more the Shale keeps pumping back into the market.

“I have not tried to restrict production (by the producers), I have tried to say, first of all, respect the OPEC quota. What can we do to develop in-house consumption.

“Refineries are 400,000 barrels of oil per day (bpd). Dangote is about 650,000 b/d. if we can develop in-house production and just feed into our refineries, then what we are taking out becomes very minimal. That is what we are going to focus on.”

Egina output not affecting Nigeria’s OPEC quota

Citing the example of Total’s Egina field, Kachikwu said the OPEC cuts will not “have much application” if it is discovered that most of its (Egina) production are condensates.

“The more discoveries we’ve had, the more we struggle with the (OPEC) cuts, but luckily we are trying to look at Egina more as a condensate production,” he said.

“We are looking at the crude configurations of Egina. My guys are working with Total to look at the mix, because once we can certify that some of that, if not most of that is from condensates, then it (production cap) really won’t have much of an application.

Also speaking during his goodwill address, Nicolas Terraz, managing director, Total E&P Limted, represented by Ahmadu Kida-Musa, deputy managing director (deepwater), told the minister that the company’s new projects—Ikike and Preowei–would need government’s support.

“We shall also…introduce our new projects, Ikike, which is ready for sanctions and preowei, both of which my MD went to Paris to defend,” he said.

“I do understand honourable minister that… we need your attention on these advancements on the (FDP) field development plan.”

Emmanuel Ibe Kachikwu, minister of state for petroleum resources, says he is ready to clarify misunderstandings on the renewal of oil mining leases.

In a statement issued by Idang Alibi, director of press in the ministry, on Friday, Kachikwu denied handing out illegal rebates and discounts that denied the government revenue.

According to the statement, the early lease renewal programme introduced by Kachikwu is a way of earning revenue for the government.

“The Ministry of Petroleum Resources would like to affirm most definitely that there are no irregularities associated with any lease renewal undertaken by the Ministry of Petroleum Resources and particular, the Department of Petroleum Resources,” the statement read.

“It would be of essence to note that the early lease renewal programme is a process ingeniously developed to expand and speed up earning potential from the renewal programme for the Federal Government and to also create security of title to leaseholders so as to allow them continue the massive investments needed to improve production from their fields.

“The Minister of State and the DPR await the advertised invitation from the House of Representatives, and as always, would respond to clarify any misunderstandings the House may have on the renewed leases as part of the normal oversight functions of the Assembly.”

The renewal process is said to begin with an application from the leaseholder and end with a recommendation for approval by President Muhammadu Buhari who doubles as the minister of petroleum resources.

Early in January, Kachikwu said all oil blocks due for renewal would be approved in the first quarter of 2019, adding that over $2 billion dollars had been generated from the early renewal policy to fund the budget.