Nigeria loses N1.7 trillion deals to non-passage of PIB

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• OPEC’s $40b projects face setback with unsteady crude prices
• Brent oil price drops to $44.97 per barrel
• Concerns as NNPC delays monthly report
Nigeria has lost estimated $10 billion (N1.7 trillion) fresh investments to the non-passage of the Petroleum Industry Bill (PIB). The Chairman of Petroleum Technology Association of Nigeria (PETAN), Bank Anthony Okoroafor, who made the disclosure at the on-going Offshore Technology Conference (OTC) in Houston, Texas in the United States (U.S.) said Nigeria lost a huge opportunity by not passing the bill when the oil price was high.

But he lauded the Nigerian National Petroleum Corporation (NNPC) for supporting the operations of indigenous companies even in the midst of cash crunch.

His words: “We lost a very big opportunity by not passing the Petroleum Industry Bill (PIB) when oil price was above $100 per barrel. If we had passed the PIB when the price of oil was high, a lot of companies would have sealed more than $10 billion investment into the country.” Okoroafor argued that the non-passage of the bill presented a confused system that had no direction.

While decrying domestic borrowing as anti-business, the PETAN boss said it was time for the deployment of over $500million that has accrued to the Nigerian Content Fund (NCF) that can be used to build capacity, saying “that is how Korean companies were built. We don’t know why the fund is not used for the benefits of the indigenous operators because this fund belongs to us. There is nothing wrong if the Nigeria Content Development Monitoring Board (NCDMB) decides to empower companies with $20million each with low interest rate to empower their capacities.”

According to the PETAN boss, indigenous companies would continue to partner foreign firms owing to the dynamism of the sector, which is ruled by technology and innovations. He rued the inability of Nigeria to grow its reserves in the last 10 years which may come back to haunt the country.

“There have to be aggressive exploration activities to identify all our reserves and efforts made to develop them. This neglect is what has brought the downstream sector almost to its knees. We need to be proactive because as at today we are not doing exploration and we are not also developing the wells,” he explained.

Also speaking at the event, the Minister of State for Petroleum Resources, Dr.Ibe Kachikwu, stressed the need for the sector to look inwards and see how to reduce the cost of production in order to remain in operation.

Represented by the Group Executive Director, Gas and Power,Seidu Muhammad, Kachikwu added: “With the capacity building that is today going on with fabrication of so many equipment that we need in the oil and gas industry, you can be sure that of course, Nigeria is going in the right path, although, so many things are happening with the oil and gas industry particularly with the dwindling prices of crude oil.”

The minister also hinted that the Federal Government has concluded plans to extend fiscal incentives to all investors that have oil and gas facilities close to rural oil-producing communities. He said that government was refocusing on in-country capacity development as a way of cutting cost and improving efficiency in the oil and gas sector.

Kachikwu said government was pushing to harness the country’s hydrocarbon resources for industrialisation. He noted that government’s emphasis was no longer to generate revenue from exporting crude oil but also to process locally to meet petrochemical, power, energy and domestic home needs of the people.

Kachikwu spoke as the Director, Monitory and Evaluation, Nigerian Content and Development Management Board (NCDMB), Tunde Adelana, disclosed that the local content development fund operating model was undergoing review in order to enhance its accessibility to local service companies for their capacity enhancement activities.

He said the government was determined to accelerate the implementation of the Nigerian Oil and Gas Park Scheme to enable the country’s Small and Medium Enterprises to focus on production and services while infrastructure and facilities are being developed to support domiciliation imperatives.

Adelana stated: “Government is determined to keep our populace productively engaged, as such we are working on enforcing local content practice in other sectors especially power, construction and information and communication technology. The National Assembly is currently in the process of amending our public procurement laws with stricter local content provisions. The cross sectorial synergy that will be created therein will expand market opportunities for oil equipment manufacturers that set up in Nigeria beyond opportunities in the oil and gas sector”.

On his part, the Vice Chairman of PETAN, Geoff Onuoha, stated that Nigerian indigenous companies were making attempts to ensure the full implementation of the country’s local content initiative.

Meanwhile, the fate of the Organisation of Petroleum Exporting Countries (OPEC)’s $14 billion upstream investment plan for this year may be hanging in the balance with crude oil price resuming a downward trend yesterday.

The Brent crude benchmark dropped from $45.63 per barrel on Monday to $44.97 as at 5:00 p.m. yesterday, while WTI crude dropped from $44.42 per barrel to $43.68 per barrel.

This situation, according to analysts may jeopardise the $14 billion investment plan by the 13-member OPEC nations.Besides, concerns have continued to trail the delay in publishing the NNPC monthly report for the March edition.

The cartel’s investment plan showed that about 23 major upstream projects are due for implementation in 2016, while $30 billion and $45 billion were projected for 2017 and 2018 respectively.

It stated: “Regardless of all the challenges and uncertainties, OPEC member countries continue to invest in additional upstream capacities. On top of the huge capacity maintenance costs that member countries are faced with, they continue to invest in new projects and reinforce their commitment to the oil and gas market and as well as to the security of supply for all consumers. Needless to say, this is only a reflection of OPEC’s well-known policy that is clearly stated in its long-term strategy and its statute,”

It noted that in the medium term, about 117 projects, with an overall estimated cost of some $270 billion, are being undertaken by OPEC member countries.

The investment plan showed that the cartel recorded a peak investment of $120 billion in 2014 on 45 major upstream projects undertaken during the period.The price of OPEC basket of 13 crudes yesterday stood at $42.47 a barrel, compared with $42.70 the previous Friday.

The new OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

The crude prices have largely impacted on the price modulation strategy of the Federal Government, as the margin between the landing cost of refined product (petrol) and the regulated pump price widens.

The crude prices had risen from $38 per barrel last month to peak at $47 last week before resuming the downward trend. This situation, according to the new template by the Petroleum Product Price Regulatory Agency (PPPRA) has increased the fuel subsidy to N12.62 per litre on NNPC products and N12.88 per litre for other oil marketers.

This shows that the government should be paying about N515 million subsidy daily based on the 40 million litres daily consumption estimates of the NNPC.

The Federal Government said it was able to save about N10 billion as a result of selling the product above the expected open market price in last quarter.

According to the new template, the expected open market price of the Premium Motor Spirit (PMS) has risen to N99.38 per litre for independent and major oil marketers and N98.62 per litre for NNPC retail outlets.

A breakdown of the template revealed that for NNPC retail outlets and independent and major oil marketers, the landing cost of PMS imported into the country was N84.32 and N85.08 per litre respectively, It stated that the distribution margin, which include retailers, transportation, bridging fund and dealers margin, among others, stood at N14.30 for both the NNPC and other marketers.

Kachikwu had disclosed that from May 2016, the price of PMS would be reviewed to go in line with current trends in the global petroleum industry.

The NNPC monthly report was expected to have been published on May 1, just as it has been doing since the past five months. But an NNPC official confirmed to The Guardian that the report had not been released for technical reasons.

The last report for February showed that the three refineries produced 90,628 metric tonnes of finished petroleum products out of 32,352 metric tonnes and intermediate product of 74,167 metric tonnes of crude and intermediate processed at an average capacity utilisation of 1.84 per cent compared to 14.10 per cent average capacity utilisation achieved in the month of January 2016.

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