The distribution of assets, income, revenue opportunities and projects among the federating units that form the Nigerian state has remained the central focus of discourse in the country, in recent times. There has been a renewed clamour for increase in the level of equity in access to productive assets and distribution of the proceeds of production.
With Nigeria anchoring all budgetary revenue on the accruable proceeds from oil exploration from the Niger Delta, there are expectations of a commensurate economic development in the region to justify the huge sacrifice. However, the Niger Delta, nay Nigeria, is caught in the web of fundamental contradictions, linking global oil politics, that oil is mostly located in parts of the world different from where it is desperately needed.
This accounts for why the rustic Niger Delta communities from which oil is extracted rarely have access to it. Rather, the predominant feature of the Niger Delta has been unremitting pollution of the natural environment, agitation and conflicts. Thus, the Niger Delta has remained comparatively irrelevant in the main activity of wealth creation as a result of inactivity in oil production.
It is in contention of these sad realities that the recent disclosure by the Minister of State for Petroleum Resources, Timpre Sylva, a Niger Delta son, that the Federal Government would conduct fresh oil block bid in 2020 has continued to generate reactions among critical stakeholders. While many applaud the decision as a bulwark to the development of the Nigeria oil and gas sector, others consider the decision as belated, given the fact that many oil blocks in the country have remained forlorn, while the ones mostly allocated were done based on vested interests and political patronage.
Pundits, therefore attributed the stunt in oil production and revenue generation in the country to these snags and imbalances in the allocation of oil blocks.
Although, the minister did not disclose the oil acreages that would be put out in the expected rounds, or processes to be adopted, he explained that the decision was not only to increase oil revenue but to also expand the space in the oil and gas sector by getting more people involved in the industry.
In apparent reaction to the planned oil blocks bid by the Federal Government, some stakeholders in the Niger Delta have advised the Federal Government to use the opportunity to address what they refer to as conspicuous denial of rights of indigenes of the oil rich region to own oil blocks.
A group known as Host Communities of Nigeria Producing Oil and Gas (HOSTCOM) in a reaction, cautioned against a repetition of the skewed processes that characterised previous allocation of oil blocks in the country, particularly during the military era, which it noted, “undermined the principles of due process and competitive bidding”.
National chairman of HOSTCOM, Dr Mike Emuh, who spoke with The Tide in an interview, said the Federal Government should allocate oil blocks to indigenes of the Niger Delta in the next rounds of bidding, to assuage the injustices and the brunts of oil politics which the people have suffered over the years.
He said: “despite the huge sacrifices the Niger Delta has made in the development of the Nigerian economy through their natural resources, the region still wallows in gross poverty and underdevelopment. The people of the Niger Delta are denied participation in the oil and gas sector through denial of oil blocks ownership, this negates the principles of natural justice. I am using the opportunity to call on the Federal Government to allocate oil blocks to the people of the Niger Delta as part of measures to address issues of under-development in the Niger Delta”.
Another stakeholder in the oil and gas sector and indigene of the Niger Delta, Comrade Inimgba told The Tide that the new bidding process should be able to address the anomalies in the allocation of oil blocks in the past.
He recalled that oil blocks allocation under the military era was not representative of the collective interest of all Nigerians because of the centralised command and discretionary system.
Inimgba, who is the chairman of the Port Harcourt branch of the Independent Petroleum Marketers Association (IPMAN), said discretionary system of allocation of oil blocks amounted to the concession of the nation’s treasures and common wealth to few individuals.
He said: “The politics of oil blocks allocation in Nigeria has been highly contentious as it has not reflected the principle of equity and justice. Most of the people that benefited from the allocation in the past got their allocations on share compromise at the expense of other Nigerians, particularly the Niger Deltans. The idea that the people of the Niger Delta are not technically fit or experienced enough to play key roles in the oil and gas sector is totally erroneous and deceitful”.
He added that the Niger Delta has people who are qualified technically and otherwise to operate oil blocks.
In her views, an activist, Ann Kio Briggs, also raised concern over the injustices perpetrated against the Niger Delta in oil politics.
She said that the Niger Delta had always been at the receiving end of the oil economy, as the dorminant activities of oil production are carried out in the region, noting however, that the indigenes play barely, “passive roles while billions of petrol dollars are carted away from their land to develop other parts of the country”.
She pointed out that such politics of “exploitation, deprivation and exclusion” amounted to gross injustice and urged the Federal Government to give due consideration to the Niger Delta in the planned allocation of oil blocks.
Also in a reaction to the planned allocation of oil blocks by the federal government, human rights activist and fiery lawyer, Femi Falana (SAN), said it was unconstitutional to allocate the nation’s oil blocks to a few individuals.
Quoting section 16(2)(c) of the 1999 constitution as amended, Falana in a letter to the presidency said the constitution prohibited the concentration of wealth in the hands of few individuals or group.
He noted that majority of the owners of the oil blocks belonging to the Nigeria people usually sublease them to offshore companies as they lack the fund and technical expertise to develop the oil and gas industry, and called for the revocation of such oil blocks and marginal fields.
The letter which read in part stated: “By merely collecting huge rents, the oil blocks owners become stupendously rich, while the federal, state and local governments, depend on loans and bail outs to pay salaries and carry out basic infrastructural development”.
Also, former Minister of State for Petroleum, Ibe Kachikwu, while speaking at the Nigeria oil and gas fair in Yenegoa, early this year, lamented that crude oil production in the country had been hovering around 1.9 million barrel per day over the past years.
Kachikwu noted that despite been a major oil producing country, Nigeria was yet to lead investors and producers that are operating across Africa, and emphasised the need for the country to explore its capacity to produce four million bpd of crude oil and abundant gas reserves to generate power.
Report shows that more than 50% of Nigeria’s oil and gas blocks remain untapped even as crude oil production continues to hover around 1.9 million bpd. Out of 390 oil blocks in the country, 211 are reported to be lying untapped due to non allocation by the Federal Government.
With many other countries are increasing efforts to ramp up their oil and gas production and reserves, industry experts have expressed concern over the lack of oil licensing rounds in Nigeria since 2008.
According to the institutional regulator of the petroleum industry, the Department of Petroleum Resources, (DPR), 179 blocks have been allocated as at December 2017, comprising 111 oil mining leases and 68 oil prospecting licenses.
It could be recalled that previous efforts to hold licensing rounds for major and marginal oil fields during the tenure of Dr Ibe Kachikwu as Minister of State for Petroleum Resources were not successful, as the recommendations were reportedly turned down by President Buhari.
Nigerians, however, look up to the planned allocation of oil blocks by the Federal Government in 2020 as an opportunity to address perceived imbalances in the oil economy.
Nigeria Earns N2.7trn From Domestic Crude Oil Sales In 2019
The latest report by the Nigeria Extractive Industries Transparency Initiative (NEITI) has put Nigeria’s earning from domestic crude oil sales in 2019 at N2.7 trillion.
According to NEITI’s 2019 Oil and Gas Industry Audit report, the country earned N2.72 trillion from just domestic crude oil sales.
It added that of this figure, N518.07bn was deducted for Petroleum Motor Spirit, PMS, under-recovery by the Nigerian National Petroleum Corporation, NNPC.
This figure is N213.07bn above the approved sum of N305bn for under-recovery in 2019.
Similarly, the sum of N126.66bn was incurred by the corporation as costs for pipeline repairs and maintenances, which showed a difference of N96.38bn from the approved sum of N30.29bn for the purpose.
The report also pointed out that N31.84bn was deducted for crude and product losses due to theft and sabotage in 2019.
The sum of $34.22bn was recorded as revenue from the oil and gas sector in 2019.
The $34.22bn revenue represented an increase of 4.88 percent over the $32.63bn garnered from the sector in 2018.
A breakdown of the earnings showed that payments by companies accounted for $18.90bn, while flows from federation sales of crude oil and gas accounted for $15.32bn.
The report showed that 10-year (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.54bn, with the highest revenue flow of $68.44bn recorded in 2011, while the lowest revenue flow of $17.06bn was recorded in 2016.
According to NEITI, the total crude oil production in 2019 was 735.24 million barrels, representing an increase of 4.87 per cent over the 701.101 million barrels recorded in 2018.
Production Sharing Contracts contributed the highest volumes of 312.042 million barrels followed by Joint Venture and Sole Risk, which recorded 310,284 million barrels and 89.82 million barrels respectively.
Others include Marginal Fields and Service Contracts which accounted for 21,762 million barrels and 1,330 million barrels respectively.
The report also showed that total crude oil lifted in 2019 was 735.66 million barrels, indicating a 4.93 per cent increase to the 701.09 million barrels recorded in 2018, with companies lifting 469.01 million barrels, while 266.65 million barrels was lifted by the Nigeria National Petroleum Corporation on behalf of the federation.
Egbin Power Plant Plans 1,900MW Boost
A boost for electricity generation is on the horizon.
This indication comes on the heels of a planned additional 1,900 megawatt (MW) to the country’s power generation capacity by the Egbin Power Plant.
Its Chairman, Temitope Shonubi, made this known while unveiling expansion plans for the Egbin (Expansion) Phase 2 Investments, which is expected to add between 1,750MW and 1900MW to power generation.
Shonubi, conducting a delegation of the NNPC led by its Chief Operating Officer (COO), Gas and Power, NNPC, Yusuf Usman, an engineer, through the plant’s post-privatisation, said the plant has gone through major overhauling, which he said has helped to increase its generation from the low capacity it had before 2013.
“Egbin has 1,320 MW capacity. As at the time we took over, the plant was generating 300MW which is an abysmal 22 per cent. As at today, our generation capacity has surged and we do 89 per cent. We have reached 970 MW, the peak generation for the year and we are working hard to ensure sustainability of this feat. The 970MW we hit is the highest for the year and based on our core value of sustainability, we are working round the clock to make sure that we sustain the gains we have made,” Shonubi explained.
Listing challenges being faced by the company to include, grid limitation, gas constraints, and liquidity, Sonubi added that stakeholders, including the NNPC, Central Bank of Nigeria (CBN), and the Transmission Company of Nigeria (TCN) have been trying to solve the problems.
He called on the NNPC to keep exerting efforts towards gas development and supply of the product to keep turbines at Egbin working productively at optimal capacity.
Responding to the call and obviously satisfied with efforts put in so far in the thermal plant, Usman assured of the corporation’s commitment towards gas optimisation and supply for gas to power. He said NNPC will be joining the Egbin Power Plant to deepen gas supply for power generation.
He maintained that the NNPC was impressed with the turnaround at the thermal power station.
By: Tonye Nria-Dappa
Rising Oil Prices’ll Create Problems For Nigeria – NNPC
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, has warned that rather than being a positive development, the rising prices of crude oil in the international market could cause major challenges for resource-dependent nations like Nigeria.
He spoke just as the International Monetary Fund (IMF) expressed concern over the re-emergence of fuel subsidy in Nigeria in the face of the country’s low revenue mobilisation.
The Washington-based institution, however, welcomed recent moves by the Central Bank of Nigeria (CBN) to unify exchange rates, certifying Nigerian banks as being liquid and well-capitalised.
Kyari, at the virtual Citizens Energy Congress, tagged: “Securing a Sustainable Future Energy System through Strategy, Collaboration and Innovation,” yesterday described the rising price of crude oil as a “chicken and egg” situation.
He added that oil prices had started exiting the comfort zone set by the NNPC, and becoming a burden.
The forum was organised by DMG Events, a London-based Public Relations company, which said the occasion was to provide an opportunity for players to reset the energy agenda post- COVID-19 and connect the divergent and polarising perspectives.
Kyari put the comfort zone globally at $58-$60, saying that for the NNPC, anything above $70-$80 will create major distortions in the projections of the corporation and add more problems to the company.
Brent crude, Nigeria’s oil benchmark, is currently selling for over $74 and is likely to increase further in the coming days as the NNPC continues to battle the dilemma of shouldering the payment of petrol subsidy, which has made it unable to contribute to the Federal Account Allocation Committee (FAAC) on two occasions.
Kyari expressed the concern that as the commodity prices rise, buyers of Nigeria’s crude may be compelled to accelerate their investment in renewable sources of energy, thereby leaving the industry in a quagmire.
He said: “In a resource-dependent nation like Nigeria when it gets too high, it creates a big problem because your consumers shut down their demand. Demand will go down and obviously even as the prices go up, you will have less volume to sell.
“So, it’s a chicken and egg story and that’s why in the industry when people make estimates for the future, they always make it about $50 to $60. Nobody puts it beyond $60.
“But for us as a country, as prices go up, the burden of providing cheap fuel also increases and that’s a challenge for us but on a net basis, you know, the high prices, as long as it doesn’t exceed $70 to $80, it’s okay for us.”
According to him, Nigeria will have no problems supporting the restoration of about 5.8 million barrels a day that the Organisation of Petroleum Exporting Countries (OPEC) still has offline since the pandemic, due to the curbs in production quota imposed by the oil cartel.
He said adding that number to demand will stabilise and probably bring oil prices down to about $60 level or a little below $60, stressing that that’s a comfort zone for every producing company or country.
“I don’t see them (Nigeria) having any difficulty agreeing to add additional volume to cushion the effect of these high prices for this period,” he said.
He stated that Nigeria is already producing well below its capacity, because in early 2020, the country actually produced up to 2.4 million barrels of oil per day for both oil and condensates.
With declining investments in the oil sector, Kyari stated that in a short time, most likely the next five years, the world may experience an energy crisis if the current situation is not properly managed.
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