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FG to Pay First Tranche of $5.1bn Cash Calls Debt to IOCs in April

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Emmanuel Ibe Kachikwu
  • FG to Pay First Tranche of $5.1bn Cash Calls Debt to IOCs in April

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has disclosed that the federal government will next month disburse the first tranche of the $5.1 billion Joint Venture (JV) cash calls debt it owes international oil companies (IOCs) operating in the country.

The government last December had negotiated terms with the IOCs to formally exit the JV cash call obligations it owes Shell, Chevron, Total, ExxonMobil and Nigeria Agip Oil Company (NAOC).

It got a discount of $1.7 billion from the companies and agreed to pay the balance of $5.1 billion over a five-year period.

Kachikwu said on Wednesday during the opening session of the maiden Nigeria Oil and Gas Opportunity Fair (NOGOF) in Uyo, the capital of Akwa Ibom State, that the government was in the final stages of making the first payment by April.

The NOGOF was initiated and organised by the Nigerian Content Development and Monitoring Board (NCDMB) to showcase opportunities for advancing local content application in the country’s oil industry.

Kachikwu equally explained that as part of the government’s four-year economic recovery plan during which the country hopes to grow its crude oil production to 2.5 million barrels per day (mbpd), the government also wants the IOCs and other operators to extend their investment commitments to other aspects of the country’s oil and gas sector.

He said the government would expect the oil majors to go beyond exploration and production activities, to refining in the country.

“Unless you find the funding, everything we say is entertainment, and so we must begin to focus very seriously as a nation on dealing with the financial challenges of the sector, not just for the big players but indeed more importantly the small players.

“So, we have taken the very first steps in the ‘7 Big Wins’ launched by the president to look at how to exit the cash calls.

“We had reached an agreement with the majors in December. We are trying to finalise the first stage of the payment in April,” Kachikwu said in his comments on the challenges facing Nigeria’s oil industry.

Speaking on capacity in the oil and gas sector as well as the opportunities, the minister said: “We have the capacity to grow oil production in this country in excess of three million barrels per day, so when we sit crying about the difficulties, I think we need to focus on the opportunities that are there with the resources that we have been given to find solutions to the problems that we see.”

He added: “We are focused on local refining because after 40 years, our refineries are decrepit, so the time has come to move away from transporting and exporting crude, to being able to refine petroleum in its every facet.
“The supply chain in the world has changed. Being a supplier of crude does not confer on you any advantage.”

He further argued that the business model in the country’s oil industry cannot continue to be all about drilling for oil for transportation and exports, adding: “It must be to drill to refine and export.”

Kachikwu also called on operators in the industry to deepen their areas of specialisation and prevent overcrowding in certain areas which he said muddles up the sector.

“The greatest problem of the Nigerian space is overcrowding. There are tonnes and tonnes of opportunities but we must succeed in creating business models.

“Once we succeed in creating business models, the time for individual selective creativity would emerge. For us to move forward as a country, we have to reduce the time we spend on bureaucracy,” he stated.

He equally explained that his ministry had begun processes to reduce the amount of time lost to bureaucracy, adding that it is absolutely necessary to provide services and not add more bottlenecks to the system.

In his opening remarks, the Executive Secretary of NCDMB, Simbi Wabote, explained that the conference was initiated to showcase the business opportunities available to local content providers in the industry’s upstream, downstream and midstream segments.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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