Economy

$5.1bn Cash Call Dispute With Nigeria Over —IOCs

Published

6 years ago

July 12, 2018

$5.1bn Cash Call Dispute With Nigeria Over —IOCs

The $5.1bn joint venture cash call argument between the Federal Government and international oil companies operating in Nigeria is over, the IOCs have said.

In 2016, the IOCs gave the Nigerian National Petroleum Corporation, which represents the Federal Government in different JV partnerships, a discount of $1.7bn from the $6.8bn cash call indebtedness of the NNPC to the oil majors.

The discount reduced Nigeria’s debt to the IOCs to $5.1bn and the NNPC subsequently started paying off the money, as confirmed by the IOCs at the just-concluded 2018 Nigeria Oil and Gas Conference and Exhibition in Abuja.

The firms stated that efforts being made by the NNPC to end the issue of JV cash call had not only addressed arguments about the subject, but had boosted investor confidence in the Nigerian oil and gas industry.

Although they expressed satisfaction with the repayment efforts of the Federal Government, the oil firms warned that the industry was still fraught with operational uncertainties that should be addressed.

The chief executives of the IOCs, who took turns to speak on what needed to be done to unlock investment potential in the industry, stated that they were glad because the issue that always brought about argument and obstructed negotiations for investments in Nigeria at their respective boards had been resolved.

The Country Chair, Shell Companies in Nigeria and Managing Director, SPDC, Osagie Okunbor, said, “For as long as I have been in this industry, we have been discussing cash call as a never-ending issue. I think that we were able to sit down together as an industry and government to try and tackle that issue and we should not underrate the importance of that.

“What that has done is that it opens up the appetite to have a conversation about investment. Nigeria is competing for capital with every other country in the world and, sometimes, we forget that and think that we are world unto ourselves. But the reality is that each of these companies (IOCs) operate in 20, 30, 80 countries and people are competing for capital.”

Osunbor observed that for the first time in a long while, some IOCs in Nigeria recently closed their year financial year without being owed cash call obligations by the NNPC.

Osunbor also stated that issues around security, contracting cycle, sanctity of contracts and thresholds of JVs and Production Sharing Contracts still needed to be sorted, as well as the reform laws in the industry.

“We have talked about the Petroleum Industry Bill for some time, just like the funding. For the first time we actually see very serious efforts to try and address this and what is helpful is that we don’t have a cacophony of voices. The PIB needs to be passed to remove uncertainties but not a PIB that does not encourage investments.”

The Managing Director, Chevron, Jeff Ewing, noted that there had been less argument on the JV issues and that this had restored confidence in the industry.

He said, “The government and our partners have done good things on the JV arrears. The execution of those agreements have gone very well, and it has really boosted our confidence in the JV. Some of the things that have happened have increased our activities in the JV because we now have some confidence.”

Ewing also stated that the gradual rise in crude oil price had further boosted the confidence of IOCs, but stressed that the firms were still selective in their investments.

“And so Nigeria needs to be competitive globally in the fiscal policies and ease of doing business. This is the discussion we have been having with the government and making sure that they understand the implication of the competitiveness of the industry.”

The Chevron boss added, “We have also talked about our concerns in the public hearing on JV gas in deep-water terms because they need to be competitive to draw more money into Nigeria. We see so much potential in Nigeria. There are big oil and gas reserves here but we just need to have the right framework in place to have a globally competitive fiscal price to help us develop.”

On his part, the Managing Director in Nigeria, Mobil Producing Nigeria, Paul McGrath, said the PIB and the reform in the National Assembly were laudable, but stressed that there was a need for an end result.

He said, “We need to have an industry reform bill or set of bills that will attract international investment, not push it away. I’ve been very encouraged with the dialogues we’ve had with the National Assembly and the technical teams till date.

“They have listened; they are listening and tried to engage the industry, and I think that is very interesting. But at the end of the day, we need to stop talking about industry reform, have industry reform and then move on and unlock the potential.”

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Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Economy

Fed Slashes Interest Rates by 0.5% to Steady Job Market and Inflation

Published

1 day ago

September 18, 2024

Samed Olukoya

The Federal Reserve on Wednesday enacted its first interest rate cut since the early days of the Covid pandemic, slicing half a percentage point off benchmark rates in an effort to head off a slowdown in the labor market.

With both the jobs picture and inflation softening, the central bank’s Federal Open Market Committee chose to lower its key overnight borrowing rate by a half percentage point, or 50 basis points, affirming market expectations that had recently shifted from an outlook for a cut half that size.

Outside of the emergency rate reductions during Covid, the last time the FOMC cut by half a point was in 2008 during the global financial crisis.

The decision lowers the federal funds rate to a range between 4.75%-5%. While the rate sets short-term borrowing costs for banks, it spills over into multiple consumer products such as mortgages, auto loans and credit cards.

In addition to this reduction, the committee indicated through its “dot plot” the equivalent of 50 more basis points of cuts by the end of the year, close to market pricing. The matrix of individual officials’ expectations pointed to another full percentage point in cuts by the end of 2025 and a half point in 2026. In all, the dot plot shows the benchmark rate coming down about 2 percentage points beyond Wednesday’s move.

“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the post-meeting statement said.

The decision to ease came “in light of progress on inflation and the balance of risks.” Notably, the FOMC vote was 11-1, with Governor Michelle Bowman preferring a quarter-point move. Bowman’s dissent was the first by a Fed governor since 2005, though a number of regional presidents have cast “no” votes during the period.

“We’re trying to achieve a situation where we restore price stability without the kind of painful increase in unemployment that has come sometimes with this inflation. That’s what we’re trying to do, and I think you could take today’s action as a sign of our strong commitment to achieve that goal,” Chair Jerome Powell said at a news conference following the decision.

Trading was volatile after the decision with the Dow Jones Industrial Average jumping as much as 375 points after it was released, before easing somewhat as investors digested the news and considered what it suggests about the state of the economy.

Stocks ended slightly lower on the day while Treasury yields bounced higher.

“This is not the beginning of a series of 50 basis point cuts. The market was thinking to itself, if you go 50, another 50 has a high likelihood. But I think [Powell] really dashed that idea to some extent,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income. “It’s not that he thinks that’s not going to happen, it’s that he’s not he’s not pre-committing to that to happen. That is the right call.”

The committee noted that “job gains have slowed and the unemployment rate has moved up but remains low.” FOMC officials raised their expected unemployment rate this year to 4.4%, from the 4% projection at the last update in June, and lowered the inflation outlook to 2.3% from 2.6% previous. On core inflation, the committee took down its projection to 2.6%, a 0.2 percentage point reduction from June.

The committee expects the long-run neutral rate to be around 2.9%, a level that has drifted higher as the Fed has struggled to get inflation down to 2%.

The decision comes despite most economic indicators looking fairly solid.

Gross domestic product has been rising steadily, and the Atlanta Fed is tracking 3% growth in the third quarter based on continuing strength in consumer spending. Moreover, the Fed chose to cut even though most gauges indicate inflation well ahead of the central bank’s 2% target. The Fed’s preferred measure shows inflation running around 2.5%, well below its peak but still higher than policymakers would like.

However, Powell and other policymakers in recent days have expressed concern about the labor market. While layoffs have shown little sign of rebounding, hiring has slowed significantly. In fact, the last time the monthly hiring rate was this low – 3.5% as a share of the labor force – the unemployment rate was above 6%.

At his news conference following the July meeting, Powell remarked that a 50 basis point cut was “not something we’re thinking about right now.”

For the moment, at least, the move helps settle a contentious debate over how forceful the Fed should have been with the initial move.

Economy

Condemnations Trail Dangote-NNPCL Fuel Price Deal As Petroleum Crisis Persists

Published

1 day ago

September 18, 2024

Ugwoke Ogbodo

There is widespread condemnation over the fuel price deal by the Dangote Refinery and the Nigerian National Petroleum Company Limited (NNPCL).

This is coming as some Nigerians have said that their hope of easing sigh of relief following the sector’s deregulation appeared to have been dashed as the price of the Premium Motor Spirit (PMS) commonly known as petrol has continued to hit the roof.

For the Minority caucus of the House of Representatives, the N980 per litre of pump price as agreed by NNPCL and Dangote Refinery is outrageous and exploitative.

Chairman of the caucus, Kingsley Chinda, said the development was a burden added to the already struggling Nigerians.

In a statement that he signed, the lawmaker expressed his outrage over the pump price that varies from N950 to N980 and above N1000 per litre depending on the parts of the country.

The statement said, “We find this pricing regime to be not only burdensome but utterly unacceptable, particularly in light of the fact that this fuel is refined locally.”

The lawmaker emphasised that locally refined fuel should be priced significantly lower than imported fuel, as it avoids costs such as landing charges and import duties, insisting that the pricing model was wrong for all intents and purposes.

“It appears Nigerians are unfairly exploited, especially at a time when many are facing severe economic challenges,” he said, urging NNPCL and Dangote Refinery to reconsider their stand in the interest of the poor masses.

The statement warned that allowing the current pricing arrangement to continue would only deepen the economic hardships of millions and erode trust in local refineries’ ability to deliver affordable fuel.

The caucus called on regulatory bodies and the government to urgently review the pricing framework to ensure Nigerians are not subjected to unsustainable fuel prices.

Also reacting, Senior Advocate of Nigeria and human rights activist, Femi Falana, condemned NNPCL for its role in setting the price of petrol, asserting that the actions of state oil companies are illegal and violate the Petroleum Industry Act (PIA).

In a statement, Falana cited Section 205 of the PIA, emphasising that the law requires petroleum prices to be determined by free market forces, not by the NNPCL.

He argued that the company’s involvement in price-setting contradicts the very deregulation process outlined in the law.

Economy

Ubeta Project to Produce 350 Million Standard Cubic Feet of Gas Per Day Once Operational – FG

Published

1 day ago

September 18, 2024

Ugwoke Ogbodo

The Federal Government of Nigeria has said that once the Ubeta gas field is fully operational, it will produce 350 million standard cubic feet of gas per day.

With this dream realised, the Federal Government said the anticipated achievement would enhance energy security, attract investments, and strengthen collaboration with key partners.

This was made known by the Special Adviser to President Bola Tinubu on Energy, Olu Verheijen, at the inaugural US-Nigeria Strategic Energy Dialogue, hosted by the US State Department in Washington, DC.

Recall that the Nigerian National Petroleum Corporation (NNPC) Limited, in partnership with French energy giant TotalEnergies, had in July planned to invest a significant $550 million to develop gas facilities in oil-rich Rivers State.

Verheijen had announced the kickoff of a $550 million upstream gas project between Nigerian National Petroleum Corporation Ltd. (NNPCL) and TotalEnergies for the development of the Ubeta field.

At a luncheon during the dialogue, Verheijen mentioned that the upstream gas project would produce 350 million standard cubic feet of gas per day once operational.

A statement from Morenike Adewunmi, Stakeholder Manager, Office of the Special Adviser to the President on Energy, quoted Ms. Verheijen as informing the gathering that President Bola Tinubu’s major energy reforms since June 2023 have been aimed at enhancing energy security, attracting investments, and strengthening collaboration with key partners, including the US government.

According to her, the reforms have significantly improved the viability of Nigeria’s gas-to-power value chain.

She explained that in support of the reform efforts, the President issued five new executive orders designed to offer fiscal incentives for investment and reduce the cost and time required to finalize and implement contracts for developing and expanding gas infrastructure.

Verheijen said that the directives aim to immediately unlock up to $2.5 billion in new oil and gas investments in the country.

She acknowledged the valuable support of financing and technical partners, including the US government, the World Bank, and the African Development Bank, in efforts to expand electricity access and reliability through both grid and off-grid solutions.