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‎Oil price fall: Nigeria’s JV budget slash by 40% in 2015 Q1

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….47% reduction in rig count

By Kunle Kalejaye
The free fall of international crude oil price has forced the National Petroleum Investment Management Services, NAPIMS, the investment arm of Nigeria National Petroleum Corporation, NNPC to slash Joint Venture, JV projects by 40 percent in the First Quarter of 2015.

Oil Rig

Oil Rig

The 40 percent slash  has led to the stalling and suspension of several ongoing projects while new opportunities have been deferred or out rightly cancelled.

This singular move led to a significant drop in the Nigerian rig count from 51 in September 2013 to 27 in June 2015 – a 47 percent reduction.
 The drop in rig count has had a negative effect on other manufacturing and services businesses such as drilling fluids and chemicals, drill bits, casing services, and marine vessels to name a few, leading to multimillion dollar losses to indigenous services companies who have made substantial investments towards acquiring assets, technologies and capacity to execute projects.
The Chair of the Nigeria Natural Resource Charter (NNRC) and former Minister of Petroleum Resources, Mr. Odein Ajumogobia, who noted that crude oil prices had fluctuated over the years, said the current decline highlighted the importance of planning.
Speaking at a policy dialogue entitled ‘Implications of the Falling Oil Price for Policy in Nigeria’, organised by the Centre for Public Policy Alternatives, a Lagos-based think-tank, he commented on the need for a hedging mechanism, saying, “because we don’t have a hedging mechanism, we are completely left at the mercy of the oil price.”
Some participants at the event ‎said highest losses in oil price dip are being incurred by indigenous rig owners who are stipulated by the NOGICD Act of 2010 to acquire by direct purchase at least 50 percent of deep water assets which can be valued at as much as $650m and above.
Others argued  that these local companies are expected to demonstrate this ownership at the tendering stage with no guarantee of contract commitment noting that   tendering is unusually lengthy because of bureaucracy and outdated manual processes with cases of tendering going on for over five years with no conclusion in sight.
 The Group Lead of the NNRC Expert Panel Core Sector group, Mr. Gbite Adeniji, said oil companies were beginning to renegotiate contracts, adding that some clients were delaying payments.
According to him, “there is a general waiting game in the industry. In the service sector, several companies will go out of business. Borrowing from the banks in this kind of environment is almost suicidal. Contractors are beginning to lay off staff.
“The implications remain that projects will be cut, while the optimism that brought those indigenous companies into the industry is dampening.
Vivid examples of indigenous companies that have caved in to the pressure are Seawolf Lonestar and NRG Drilling to mention a few. Seawolf has since gone out of business with the Asset Management Corporation of Nigeria (AMCON) seizing its three rigs.
“The company terminated the contracts of its 450 employees who are presently being owed 22 months outstanding salaries and the company has been unable to service its loan agreement of NXXX million with First Bank Nigeria.”

 

Oil

FG Introduces New Incentives To Revitalize Nigeria’s Oil & Gas Industry

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In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.

The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.

The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.

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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.

The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.

This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.

These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.

The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.

 

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Tinubu set to approve ExxonMobil-Seplat oil deal, expands CNG bus initiative

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By Yemie Adeoye

NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.

The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.

“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”

The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.

“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.

Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.

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ExxonMobil To Invest $10bn In Nigeria’s Deep-Water Oil Operations

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As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.

Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”

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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.

Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.

We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.

“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.

On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.

 

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