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Oil Producing Communities Want Derivation Fund Raised to 50%

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  • Oil Producing Communities Want Derivation Fund Raised to 50%

Oil producing communities in the Niger Delta region of the country have indicated their preference to have the new bill – the Petroleum Host and Impacted Communities Bill (PHICB) – contain a 50 per cent derivation payout to them as against the 13 per cent that exists at the moment.

The communities demanded that either that would be put in the PIHCB or 25 per cent of royalties paid to the government by oil-mining companies be made to come back to them in the bill.

They equally stated that they want the bill to be specific on how their environment would be managed by oil companies in such a way that they are protected from the hazards of oil exploration and production.

These communities made their positions known at a consultative meeting organised by the Emerald Energy Institute for Petroleum and Energy Economics, Policy and Strategic Studies at the University of Port Harcourt, as part of an ongoing legislative consultation to get the PHICB passed by the National Assembly.

A communique on the outcome of the meeting obtained in Abuja from the institute.

In it, the communities explained that the 13 per cent derivation allowance paid to states in the region; eight per cent littoral states fund; the Niger Delta Development Commission (NDDC) Act; Ministry of Niger Delta; and the Amnesty Programme of the government, had done very little to stem criminality in the region, hence the clamour for deeper communities’ involvement and some measure of control of revenues accruing from petroleum resources in their region.

They explained that the exclusion of the communities from control of oil revenues to them had often led to increased agitation; heightened insecurity in the Niger Delta Region; and incessant disruption of petroleum operations.

To this end, they noted their preference that the bill should contain, “50 per cent derivation pay-outs should be considered instead of the current 13per cent, or government should dedicate 25 per cent from the royalty payments for host communities.”

They also requested that the bill include, “Provision of opportunities for participation of the host communities in governance of the petroleum sector,” and asked to know how the bill will address the issue of environmental remediation, how communities impacted by already decommissioned oil and gas operations would be protected, as well as measures in it to evaluate the impact of the trust funds over time.

However, facilitators of the meeting stated in the communique, that the 50 per cent derivation request would require an amendment of the federal constitution.

They added that the proposed bill provided for participation in governance and management of the oil sector by host communities through a development and management fund.

In addition, they explained that environmental regulation and management were covered by the provisions of the bill for both decommissioning and abandonment of oil and gas operations, as well as environmental remediation.

With regards to monitoring and adequate supervision of the fund, they noted that the bill provided for oversight by a commission, which will monitor and assess the management and performance of the fund.

They explained PHICB was designed to facilitate community inclusiveness; fast-track infrastructure development in communities; end direct cash payments to community leaders; and enforce good governance, transparency and accountability in interventions in communities.

According to them, the PHICB provided for the incorporation of a Petroleum Host Communities Development Trusts (PHCDT) with the Corporate Affairs Commission (CAC), including the structure of, and funding for the trusts.

It also provided the governance guidelines for the PHCDT; sound financial management; and mechanism for dispute resolutions in the communities.

They noted that with the bill, it was expected that there would be a reduction in cost of oil and gas production for government and oil companies; recognition of host communities as stakeholders and joint protectors of petroleum facilities; active participation of host communities in resource allocation and development process; as well as conferment of direct measurable economic benefits from petroleum operations on host communities.

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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