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After $21bn Loss, FG Moves To Amend Deep Offshore Act

Nigeria misplaced a whopping $21 billion to its failure to implement the premium component governing the country’s oil and gasoline production sharing contracts (PSCs) as offered underneath the Deep Offshore and Inland Basin Manufacturing Sharing Contracts Act, the Minister of State for Petroleum, Dr. Ibe Kachikwu disclosed wednesday.

Accordingly, the federal government has initiated strikes to amend the Deep Offshore Act, so as to increase government’s income from crude oil gross sales when prices exceed $20 a barrel.

The Deep Offshore and Inland Basins PSC Act was enacted in 1993 to provide the fiscal framework for overseas investments in deep offshore and inland basin acreages in the oil and gasoline sector.

It was additionally targeted at addressing the challenges confronting the joint working agreements (JOA), which paved the way for the Nigerian Nationwide Petroleum Company (NNPC) to become the concession holder while the international oil corporations (IOCs) grew to become the contractors.

Following the agreements entered into by NNPC with eight IOCs in 1993, the country was ready to draw foreign investments working into billions of dollars to develop oil acreages located in deep waters offshore Nigeria.

A few of such oil fields embody the 225,000 barrel per day (bpd) Bonga oil subject operated by Shell, the 250,000bpd Agbami oil area operated by Chevron, and the 180,000bpd oil area operated by Complete. Others within the pipeline are the Egina and Zabazaba oil acreages.

But Kachikwu, while briefing State Home correspondents at the tip of yesterday’s weekly Federal Government Council (FEC) meeting presided over by Vice-President Yemi Osinbajo, stated failure to implement the related clause within the Deep Offshore Act governing the PSCs, effectively robbed Nigeria of $21 billion.

He mentioned under the Deep Offshore Act, once the worth of crude oil exceeded $20 per barrel, the “premium element” ought to have been distributed in accordance with the PSCs between the government and IOCs in a way that the nation would have derived extra value for its oil.

He stated because of the failure of the Nigerian government to take the required steps previously 20 years, the inertia had cost it such an enormous sum, thus prompting him to seek FEC’s approval to amend Section 15 of the Act, with a view to giving the policy the required bite.

In line with him, following council’s approval, the eventual modification of the Act was anticipated to yield $2 billion additional revenue to the government’s coffers.

“The first and most substantial for me is the choice to work with the Attorney-General of the Federation to amend Section 15 of the Deep Offshore Act.

“Under the Deep Offshore Act, there was a provision in 1993 that says once the value of crude exceeds $20 a barrel, the federal government will take steps to make sure that the premium element is then distributed under an agreed method in order that we will get extra from our oil. However over the last 20 years, nothing really was completed.

“From 1993 until now, cumulatively, we have misplaced a total of $21 billion just because the federal government did not act. We didn’t train our rights underneath the Act.

“In 2013, there was a discover to oil corporations that we had been going to do that, however we didn’t follow by way of by way of going to council to get approval.

“One of the things we’ve labored very onerous on is to get that amendment because as soon as we do, the web effect for us is close to $2 billion further income for the federation,” he explained.

The minister famous it would be troublesome to recoup previous losses, on condition that oil firms that weren’t paying the government a premium for sales over $20 a barrel weren’t breaking the law.

Nevertheless, the administration will explore whether or not there is an opportunity to get again some of the money, Kachikwu added.

Kachikwu additionally said FEC approved the award of a $2.7 billion contract to 3 consortia to construct the Abuja-Kaduna-Kano pipeline mission to enhance the movement of gas from southern Nigeria to the north.

In line with him, the pipeline will enhance energy technology and availability of fuel within the hinterland, mentioning that up to now, gas and power had been trapped within the southern corridor in the country due to the non-availability of pipeline infrastructure to convey it to the north.

Kachikwu additionally disclosed that FEC awarded another contract to a consortium for the development of the Odidi pipeline from Warri and the southern marshlands to also convey gas produced via the Nigerian Fuel Firm (NGC), a subsidiary of NNPC.

He said the two projects would not only boost gasoline supply but also facilitate Nigeria’s transition “from a crude oil nation to a gas environment”.

On the present gas shortages, Kachikwu mentioned concerted efforts have been being made to ease the queues at petrol stations, threatening that any petrol station caught hoarding gasoline henceforth, would lose your entire gas in its storage, which he mentioned can be offered to motorists for free of charge.

He mentioned only by fixing Nigeria’s refineries would the country ultimately bring an end to the recurring fuel shortages, whilst he spoke on the efforts being made to repair the refineries and in addition deliver new ones on board.

“I imagine that the refineries could be fixed. We got here up with a mannequin to search out personal sector funding for the refineries and that’s being accomplished.

“We count on that earlier than the end of this yr, we will at the very least get to the ultimate contracting stage in terms of saying these who are going to take these up.

“It takes about six months to do that and do it completely but that requires elevating close to N2 billion from non-public sector participants to get this executed.

“A lot is being achieved on refining, that is because we have now centered on it so much to the point where I have put my credibility on the line and that’s fine.

“But it is crucial that we stop importing petroleum products as a result of there’s just no justification for it. Multi-Stage Separator For Pyrolysis We now have encouraged the private sector and Dangote Group is working very onerous to bring their refinery on-stream.

“I have instructed the officials of Dangote that versus the 2020 completion date that they are taking a look at, they need to help us by attempting to ship their refinery in 2019.

“Our own refineries, if we complete the procurement processes by the tip of china petroleum pipeline machinery manufacture king this 12 months, they would begin their 12-18 months resuscitation or flip around upkeep (TAM) by early subsequent yr.

“So, if they do that, hopefully in the direction of the end of 2019, we should always have the three refineries being able to supply for the primary time in many years at the 445,000bpd name-plate capacity.

“We are also trying on the Agip refinery. We’re also trying on the Petrolex refinery that the vice-president and myself went wednesday to commission.

“We have commissioned their (Petrolex) storage facilities, and they’ve been granted approvals through us for an elevation of their refining plan from 150,000 barrels a day to 250,000 barrels a day.

“Given the historical past they have had within the success of building their storage and maritime services, I consider they’ll meet up.

“Then if you are taking the smaller modular refineries that are near nine in number and are getting nearer to the purpose of investment choices, you would see that holistically we’re addressing the refining subject.

“If we do china petroleum pipeline machinery manufacture king that, we are taking a look at the present refining functionality of less than one hundred,000 barrels in actual phrases – actually, lower than 50,000 barrels in actual terms – to refining functionality of 1.2million barrels per day.

“What this means is that we might be refining in excess of what our current share in the JV crude manufacturing is. The fact is that that is something that has been there for a very long time and we’re addressing it frontally,” he stated.