• Removes NAPIMS’ control over oil projects costing
• Crude oil price hits two-month high at $52.33
• Dangote Refinery to save Nigeria $7.5bn yearly
The Federal Executive Council (FEC) has approved a new petroleum
policy, restructuring the Nigerian Petroleum Investment Management
Services Limited (NAPIMS) and stripping it of its responsibility of
regulating costing of projects.
Projects costing would now be done by an independent regulator,
which would emerge from the restructuring of the Department of
Petroleum Resources (DPR).
NAPIMS would now be a pure asset management agency while cost
regulation would reside with the sector regulator.
The content of the new policy christened the National Petroleum
Policy, which is awaiting gazetting by the federal government,
indicated that the Ministries of Petroleum Resources and Finance
had been given the nod to restructure NAPIMS using a competitively
procured global level consultant.
NAPIMS, a subsidiary of the Nigerian National Petroleum
Corporation (NNPC), was established to manage the federal
government’s investments and interests in the upstream sector of
the country’s oil industry.
It specifies minimum expenditure during oil exploration; reviews
and approves contractor’s annual work programme, budgets, and
costs; as well as creates the data bank for benchmarking and cost
estimation in hydrocarbon projects in Nigeria.
However, it has been repeatedly fingered as being corrupt,
inefficient and easily manipulated by political influences,
especially at its tasks. For instance, the agency told the Senate
in March 2017 that it spent $9 million to transfer and resettle its
staff within a year.
It was similarly fingered in the $289,202,382 allegedly collected
in 2015 and housed in Ikoyi by the National Intelligence Agency
(NIA). Investigations into the cash deposit had subsequently
resulted in the suspension of NIA’s Director-General, Ambassador
Ayodele Oke.
Buttressing these claims against NAPIMS, the petroleum policy in
its description of the agency and need for its shake-up, stated
that: “NAPIMS’ cost of managing government’s interest is
significantly higher than it ought to be. An expenditure of over
$200 million per year is unjustifiable in the current oil price
environment. These costs, when applied across the JVs and PSCs,
make some of the government equity interests in the joint venture
unprofitable.”
It added that: “NAPIMS has 10 divisions but only three are
operational (JVs, PSCs, Gas). There are no written rules,
procedures or policies to guide its activities; institutional
capacity (management and staff capability) is weak; there is no
compliance unit, which should be a given; costs per barrel within
operations under its supervision are unacceptably high; there is
poor data management, information asymmetry both internally and
with NNPC Corporates and the organisational structure is
fractured.”
It noted on the proposed reform: “The petroleum policy considers
that NAPIMS is incapable of reforming itself because of the
internal organisation. Effective NAPIMS reform can only come from
fundamental restructuring with commercial discipline, and reform
must come from outside NAPIMS.
“NAPIMS will be substantially restructured and may ultimately
become independent and with full autonomy from the (National Oil
Company of Nigeria) NOCN.”
“The restructuring and reform process, to be led jointly by the
Ministry of Petroleum Resources and the Ministry of Finance will
include: a global level management consultancy to be hired to help
with the restructuring; a value-for-money audit; enable faster
contracting cycles (3-6 months); priority focus on low-cost oil
operations ($9-10/bbl); NAPIMS will be limited to a pure asset
management function whilst cost regulation will reside with the
sector regulator,” it stated.
It also explained that NAPIMS would be made to share data with
other relevant sector agencies to ensure transparency and
efficiency.
Meanwhile, the Vice-Chancellor of the University of Maiduguri
(Unimaid), Prof. Ibrahim Njodi, has described as an act of God, the
recent ambush and murder of a team of explorers involved in NNPC’s
search for commercial hydrocarbon deposits in the Bornu axis of the
Chad Basin.
Njodi also stated that the 48-man team, comprising the staff of the
university and NNPC, military and civilian security personnel
sacrificed their lives for the economic well-being of Nigeria.
He added that while the university grieved its deaths, it would not
give up on NNPC’s search for oil in the basin.
He said these in a statement in Abuja by the Group General
Manager, Public Affairs of the NNPC, Mr. Ndu Ughamadu, which
explained that a delegation of the Minister of State for Petroleum
Resources, Dr. Ibe Kachikwu, and the NNPC led by its Chief
Operating Officer, Gas and Power, Mr. Saidu Mohammed, were in
Maiduguri, capital of Borno State, at the weekend to sympathise
with the state and the university over the development.
Njodi said the university was distraught by the incident, but
could not ‘chicken out’ from doing what it was supposed to do when
eventually the NNPC re-organises and returns to exploration work in
the area.
He said the school’s partnership with NNPC started some 12 years
back when the corporation restarted the Chad Basin exploration
activities, adding: “The situation, painful as it might appear,
must be seen as a necessary sacrifice for the development of the
country.”
He also called on the NNPC to stand firm with the university and
families of the bereaved and provide support to overcome the
setback.
Responding, the statement quoted Mohammed to have told Njodi
that the corporation would support the university and the families
of the victims of the attack.
“We have been great partners with the University of Maiduguri for
many years and certainly when losses like this happen and under
these circumstances, we cannot abandon our partners to their fate,”
Mohammed said.
Crude Oil Price Hits Two-month High
In the same vein, crude oil prices were near two-month high
Monday, putting July on track to become the strongest month so far
this year, as news of oil producers’ meeting next week added to the
bullish sentiment driven by the threat of United States sanctions
against Venezuela.
This is coming on the heels of the Minister of State for Petroleum
Resources, Dr. Kachikwu’s charge to oil companies operating in
Nigeria to cut down the cost of production or shut down operation,
stressing that it is better to leave the oil in the ground than to
produce at the current $27 per barrel, which according to him, does
not make sense.
Also, Africa’s richest man and President of Dangote Group,
Alhaji Aliko Dangote, has said that the Dangote Refinery will save
the country over $7.5 billion yearly through import
substitution.
The global benchmark Brent crude traded at $52.33 per barrel
Monday, after hitting $52.92 a barrel earlier in the day, its
highest since May 25.
The US light crude oil traded down at $49.31 a barrel, after
jumping above $50 a barrel for the first time in two months early
in the session.
This followed threats by US officials that sanctions on Venezuela
could be announced as early as Monday.
Reuters reported that the United States is considering imposing
sanctions on the country’s oil sector in response to Sunday’s
election of a constitutional super-body, which Washington has
denounced as a “sham” vote.
Even though the White House has said that “all options are on
the table,” the most likely action, banning Venezuela from
importing US oil, could come as early as Monday.
US production has hampered efforts to rebalance the market but
signs that the market is tightening have emerged after heavy
inventory falls and slower new oil rig additions last week.
But drilling for new US production is also slowing, with just 10
rigs added in July, the fewest since May 2016.
However, some OPEC and non-OPEC members will meet on August 7-8
in Abu Dhabi to assess how the group can increase compliance with
production cuts that began on January 1.
Speaking yesterday at the annual conference of the Nigerian Council
of the Society of Petroleum Engineers (SPE) in Lagos, Kachikwu said
that the cost of oil production in Nigeria has remained high,
despite efforts to cut costs.
He noted that while Saudi Arabia produces oil at a cost of $9 per
barrel, Nigeria produces at $27 per barrel.
“When you look at the cost of production in Nigeria, it remains
blatantly high, and even though we have been singing over the last
two years that we need to drive cost down, the current figure that
I still have showing me the numbers of last year have not shown me
a major dramatic reduction in the cost of production. So, we are
going to not just force this, we are going to compel it because
there is no way this country will produce oil at this sort of
swelling prices that we see, there will be no margins left for this
country. Only oil companies who are able to be efficient, who are
able to drive down costs will have a footage in Nigeria. For me,
you rather leave the oil in the ground than produce at a cost that
doesn’t make sense. So, the cost is going to be a very high driver.
So that is certainly one area we are focusing on; we are working
collaboratively with oil companies. But let’s make no mistake about
it: If we cannot negotiate it down, we will compel it or we will
stop the production; it does not make any sense,” Kachikwu
explained.
Kachikwu also dismissed claims by the producing companies that
security is a major component of the production, stressing that the
cost of security is only $2 – $3 per barrel.
“It is no longer sufficient to say, ‘You know Nigeria is unique,
security consideration. But what is the security component in the
cost of production? $2 to $3 per barrel. Collaborative means of
addressing security problem must begin to take place so that those
costs must be driven down. If there is any single item that is
required to be dealt with yesterday is the issue of cost,” the
minister added.
“The other thing we need to do is focus on our infrastructure.
We have a huge infrastructural gap, and we need to begin to address
that. We need to begin to set incentives for Nigerian companies who
are willing to fund and invest in infrastructure. We need to take
away government’s monopolies in infrastructure so that the industry
can grow. There is too much monopoly in the industry. I am going to
be working with the NNPC and all the parastatals to loosen the grip
in the industry,” Kachikwu said.
Dangote Refinery to Save Nigeria $7.5bn
In a related development, Africa’s richest man and the President
of Dangote Group, Alhaji Dangote, has said that the Dangote
Refinery will save the country over $7.5 billion annually through
import substitution.
Speaking Monday when Kachikwu visited the refinery complex at
the Lekki Free Trade Zone in Ibeju Lekki, Lagos, Dangote said the
foreign exchange spent in fuel importation would be saved by the
refinery when completed in December 2019.
‘‘We will be adding value to our economy as all these projects will
be creating about 4,000 direct and 145,000 indirect jobs. We will
also save over $7.5 billion for Nigeria annually, through import
substitution,’’ he said.
Dangote praised Kachikwu for his efforts towards ensuring
availability of petroleum products and championing a comprehensive
overhaul of the energy sector in Nigeria.
According to Dangote, the efforts of the minister would make the
country a self-reliant nation, adding that his company is committed
to playing its part in the efforts of the minister and the federal
government to comprehensively address the energy crisis in the
country.
‘‘As you are aware, we are currently building the world’s
largest single line Refinery, Petrochemical Complex and the world’s
second largest Urea Fertiliser plant. The Refinery will have the
capacity to refine 650,000 barrels of crude oil per day while the
Petrochemical Plant will produce 780 KTPA Polypropylene, 500 KTPA
of
Polyethylene while the Fertiliser project will produce 3.0 million
metric tonnes per annum (mmtpa) of Urea,” Dangote explained.
Dangote added that the company will also be building the largest
sub-sea pipeline infrastructure in any country in the world, with a
length of 1,100km, to handle three billion SCF of gas per day.
According to him, the company also plans to construct a 570 MW
power plant in the complex, adding that gas from its gas pipeline
will augment the natural domestic gas supply with an additional
12,000MW of power generation added to the grid from its gas
system.
In his speech, the minister urged Dangote to task his engineers
to go back to the drawing board and complete the refinery before
the scheduled December 2019 to make his dream of ending importation
in the same year a reality.
He said he was overwhelmed by the dimension of the project,
adding that the present government has always believed that the
private sector holds the ace in industrialisation efforts of the
government and noted that that belief has been reinforced by what
the Dangote Group is doing.
“It is good to say that the private sector is the answer to
Nigeria’s problems with a project as big as this. The challenge I
will give you today is that of time, I see your time for completion
is 2019 December but I am sure you will understand my greed if I
tell you that the refinery component of this project should come
earlier than the set date.
“I have made a very firm commitment to Nigerians that I must
stop the importation of petroleum products by 2019 and I am going
to keep to it. It is absolutely important that we do this early and
given the feat that we have achieved in terms of speed of
construction and I urge you to do all within you to achieve its
completion before the due date.
“I am sure His Excellency, President Buhari will be absolutely
enthused if he were to find himself, not only crystallising the
policy position we have taken so far but also coming here himself
to come and open a facility as big as this before the end of his
first term. Whatever configurations your engineers have come up
with, I urge that they go back to the drawing board and get me my
refined products before your said date,” Kachikwu explained.
• Removes NAPIMS’ control over oil projects costing
• Crude oil price hits two-month high at $52.33
• Dangote Refinery to save Nigeria $7.5bn yearly
The Federal Executive Council (FEC) has approved a new petroleum
policy, restructuring the Nigerian Petroleum Investment Management
Services Limited (NAPIMS) and stripping it of its responsibility of
regulating costing of projects.
Projects costing would now be done by an independent regulator,
which would emerge from the restructuring of the Department of
Petroleum Resources (DPR).
NAPIMS would now be a pure asset management agency while cost
regulation would reside with the sector regulator.
The content of the new policy christened the National Petroleum
Policy, which is awaiting gazetting by the federal government,
indicated that the Ministries of Petroleum Resources and Finance
had been given the nod to restructure NAPIMS using a competitively
procured global level consultant.
NAPIMS, a subsidiary of the Nigerian National Petroleum
Corporation (NNPC), was established to manage the federal
government’s investments and interests in the upstream sector of
the country’s oil industry.
It specifies minimum expenditure during oil exploration; reviews
and approves contractor’s annual work programme, budgets, and
costs; as well as creates the data bank for benchmarking and cost
estimation in hydrocarbon projects in Nigeria.
However, it has been repeatedly fingered as being corrupt,
inefficient and easily manipulated by political influences,
especially at its tasks. For instance, the agency told the Senate
in March 2017 that it spent $9 million to transfer and resettle its
staff within a year.
It was similarly fingered in the $289,202,382 allegedly collected
in 2015 and housed in Ikoyi by the National Intelligence Agency
(NIA). Investigations into the cash deposit had subsequently
resulted in the suspension of NIA’s Director-General, Ambassador
Ayodele Oke.
Buttressing these claims against NAPIMS, the petroleum policy in
its description of the agency and need for its shake-up, stated
that: “NAPIMS’ cost of managing government’s interest is
significantly higher than it ought to be. An expenditure of over
$200 million per year is unjustifiable in the current oil price
environment. These costs, when applied across the JVs and PSCs,
make some of the government equity interests in the joint venture
unprofitable.”
It added that: “NAPIMS has 10 divisions but only three are
operational (JVs, PSCs, Gas). There are no written rules,
procedures or policies to guide its activities; institutional
capacity (management and staff capability) is weak; there is no
compliance unit, which should be a given; costs per barrel within
operations under its supervision are unacceptably high; there is
poor data management, information asymmetry both internally and
with NNPC Corporates and the organisational structure is
fractured.”
It noted on the proposed reform: “The petroleum policy considers
that NAPIMS is incapable of reforming itself because of the
internal organisation. Effective NAPIMS reform can only come from
fundamental restructuring with commercial discipline, and reform
must come from outside NAPIMS.
“NAPIMS will be substantially restructured and may ultimately
become independent and with full autonomy from the (National Oil
Company of Nigeria) NOCN.”
“The restructuring and reform process, to be led jointly by the
Ministry of Petroleum Resources and the Ministry of Finance will
include: a global level management consultancy to be hired to help
with the restructuring; a value-for-money audit; enable faster
contracting cycles (3-6 months); priority focus on low-cost oil
operations ($9-10/bbl); NAPIMS will be limited to a pure asset
management function whilst cost regulation will reside with the
sector regulator,” it stated.
It also explained that NAPIMS would be made to share data with
other relevant sector agencies to ensure transparency and
efficiency.
Meanwhile, the Vice-Chancellor of the University of Maiduguri
(Unimaid), Prof. Ibrahim Njodi, has described as an act of God, the
recent ambush and murder of a team of explorers involved in NNPC’s
search for commercial hydrocarbon deposits in the Bornu axis of the
Chad Basin.
Njodi also stated that the 48-man team, comprising the staff of the
university and NNPC, military and civilian security personnel
sacrificed their lives for the economic well-being of Nigeria.
He added that while the university grieved its deaths, it would not
give up on NNPC’s search for oil in the basin.
He said these in a statement in Abuja by the Group General
Manager, Public Affairs of the NNPC, Mr. Ndu Ughamadu, which
explained that a delegation of the Minister of State for Petroleum
Resources, Dr. Ibe Kachikwu, and the NNPC led by its Chief
Operating Officer, Gas and Power, Mr. Saidu Mohammed, were in
Maiduguri, capital of Borno State, at the weekend to sympathise
with the state and the university over the development.
Njodi said the university was distraught by the incident, but
could not ‘chicken out’ from doing what it was supposed to do when
eventually the NNPC re-organises and returns to exploration work in
the area.
He said the school’s partnership with NNPC started some 12 years
back when the corporation restarted the Chad Basin exploration
activities, adding: “The situation, painful as it might appear,
must be seen as a necessary sacrifice for the development of the
country.”
He also called on the NNPC to stand firm with the university and
families of the bereaved and provide support to overcome the
setback.
Responding, the statement quoted Mohammed to have told Njodi
that the corporation would support the university and the families
of the victims of the attack.
“We have been great partners with the University of Maiduguri for
many years and certainly when losses like this happen and under
these circumstances, we cannot abandon our partners to their fate,”
Mohammed said.
Crude Oil Price Hits Two-month High
In the same vein, crude oil prices were near two-month high
Monday, putting July on track to become the strongest month so far
this year, as news of oil producers’ meeting next week added to the
bullish sentiment driven by the threat of United States sanctions
against Venezuela.
This is coming on the heels of the Minister of State for Petroleum
Resources, Dr. Kachikwu’s charge to oil companies operating in
Nigeria to cut down the cost of production or shut down operation,
stressing that it is better to leave the oil in the ground than to
produce at the current $27 per barrel, which according to him, does
not make sense.
Also, Africa’s richest man and President of Dangote Group,
Alhaji Aliko Dangote, has said that the Dangote Refinery will save
the country over $7.5 billion yearly through import
substitution.
The global benchmark Brent crude traded at $52.33 per barrel
Monday, after hitting $52.92 a barrel earlier in the day, its
highest since May 25.
The US light crude oil traded down at $49.31 a barrel, after
jumping above $50 a barrel for the first time in two months early
in the session.
This followed threats by US officials that sanctions on Venezuela
could be announced as early as Monday.
Reuters reported that the United States is considering imposing
sanctions on the country’s oil sector in response to Sunday’s
election of a constitutional super-body, which Washington has
denounced as a “sham” vote.
Even though the White House has said that “all options are on
the table,” the most likely action, banning Venezuela from
importing US oil, could come as early as Monday.
US production has hampered efforts to rebalance the market but
signs that the market is tightening have emerged after heavy
inventory falls and slower new oil rig additions last week.
But drilling for new US production is also slowing, with just 10
rigs added in July, the fewest since May 2016.
However, some OPEC and non-OPEC members will meet on August 7-8
in Abu Dhabi to assess how the group can increase compliance with
production cuts that began on January 1.
Speaking yesterday at the annual conference of the Nigerian Council
of the Society of Petroleum Engineers (SPE) in Lagos, Kachikwu said
that the cost of oil production in Nigeria has remained high,
despite efforts to cut costs.
He noted that while Saudi Arabia produces oil at a cost of $9 per
barrel, Nigeria produces at $27 per barrel.
“When you look at the cost of production in Nigeria, it remains
blatantly high, and even though we have been singing over the last
two years that we need to drive cost down, the current figure that
I still have showing me the numbers of last year have not shown me
a major dramatic reduction in the cost of production. So, we are
going to not just force this, we are going to compel it because
there is no way this country will produce oil at this sort of
swelling prices that we see, there will be no margins left for this
country. Only oil companies who are able to be efficient, who are
able to drive down costs will have a footage in Nigeria. For me,
you rather leave the oil in the ground than produce at a cost that
doesn’t make sense. So, the cost is going to be a very high driver.
So that is certainly one area we are focusing on; we are working
collaboratively with oil companies. But let’s make no mistake about
it: If we cannot negotiate it down, we will compel it or we will
stop the production; it does not make any sense,” Kachikwu
explained.
Kachikwu also dismissed claims by the producing companies that
security is a major component of the production, stressing that the
cost of security is only $2 – $3 per barrel.
“It is no longer sufficient to say, ‘You know Nigeria is unique,
security consideration. But what is the security component in the
cost of production? $2 to $3 per barrel. Collaborative means of
addressing security problem must begin to take place so that those
costs must be driven down. If there is any single item that is
required to be dealt with yesterday is the issue of cost,” the
minister added.
“The other thing we need to do is focus on our infrastructure.
We have a huge infrastructural gap, and we need to begin to address
that. We need to begin to set incentives for Nigerian companies who
are willing to fund and invest in infrastructure. We need to take
away government’s monopolies in infrastructure so that the industry
can grow. There is too much monopoly in the industry. I am going to
be working with the NNPC and all the parastatals to loosen the grip
in the industry,” Kachikwu said.
Dangote Refinery to Save Nigeria $7.5bn
In a related development, Africa’s richest man and the President
of Dangote Group, Alhaji Dangote, has said that the Dangote
Refinery will save the country over $7.5 billion annually through
import substitution.
Speaking Monday when Kachikwu visited the refinery complex at
the Lekki Free Trade Zone in Ibeju Lekki, Lagos, Dangote said the
foreign exchange spent in fuel importation would be saved by the
refinery when completed in December 2019.
‘‘We will be adding value to our economy as all these projects will
be creating about 4,000 direct and 145,000 indirect jobs. We will
also save over $7.5 billion for Nigeria annually, through import
substitution,’’ he said.
Dangote praised Kachikwu for his efforts towards ensuring
availability of petroleum products and championing a comprehensive
overhaul of the energy sector in Nigeria.
According to Dangote, the efforts of the minister would make the
country a self-reliant nation, adding that his company is committed
to playing its part in the efforts of the minister and the federal
government to comprehensively address the energy crisis in the
country.
‘‘As you are aware, we are currently building the world’s
largest single line Refinery, Petrochemical Complex and the world’s
second largest Urea Fertiliser plant. The Refinery will have the
capacity to refine 650,000 barrels of crude oil per day while the
Petrochemical Plant will produce 780 KTPA Polypropylene, 500 KTPA
of
Polyethylene while the Fertiliser project will produce 3.0 million
metric tonnes per annum (mmtpa) of Urea,” Dangote explained.
Dangote added that the company will also be building the largest
sub-sea pipeline infrastructure in any country in the world, with a
length of 1,100km, to handle three billion SCF of gas per day.
According to him, the company also plans to construct a 570 MW
power plant in the complex, adding that gas from its gas pipeline
will augment the natural domestic gas supply with an additional
12,000MW of power generation added to the grid from its gas
system.
In his speech, the minister urged Dangote to task his engineers
to go back to the drawing board and complete the refinery before
the scheduled December 2019 to make his dream of ending importation
in the same year a reality.
He said he was overwhelmed by the dimension of the project,
adding that the present government has always believed that the
private sector holds the ace in industrialisation efforts of the
government and noted that that belief has been reinforced by what
the Dangote Group is doing.
“It is good to say that the private sector is the answer to
Nigeria’s problems with a project as big as this. The challenge I
will give you today is that of time, I see your time for completion
is 2019 December but I am sure you will understand my greed if I
tell you that the refinery component of this project should come
earlier than the set date.
“I have made a very firm commitment to Nigerians that I must
stop the importation of petroleum products by 2019 and I am going
to keep to it. It is absolutely important that we do this early and
given the feat that we have achieved in terms of speed of
construction and I urge you to do all within you to achieve its
completion before the due date.
“I am sure His Excellency, President Buhari will be absolutely
enthused if he were to find himself, not only crystallising the
policy position we have taken so far but also coming here himself
to come and open a facility as big as this before the end of his
first term. Whatever configurations your engineers have come up
with, I urge that they go back to the drawing board and get me my
refined products before your said date,” Kachikwu explained.
Read more https://www.nairalaw.com/fec-approves-new-petroleum-policy/