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Oil Reserve Crisis Looms Over Delay of Blocks



  • Oil Reserve Crisis Looms Over Delay of Blocks

The delay in the award of new oil blocks and uncertainties over existing marginal oilfields are upsetting industry players, amid a warning that the country’s economic development could be jeopardised.

Nigeria is projected to witness a shortage of crude oil, as new refineries may have to compete with the sale of the product at the international market where the country earns the bulk of its hard currency. Also, some experts think the Nigerian National Petroleum Corporation’s (NNPC) bid to increase crude oil reserves by one billion barrels yearly to meet targets would remain elusive.

The Federal Government has repeatedly failed to meet a 40-billion reserve target for about eight years. Instead of making progress, the country could be inching backwards, according to statistics from the Department of Petroleum Resources (DPR), showing that the reserves declined by 961.47 million barrels between 2012 and 2016 alone.

Experts said the challenges that have frustrated meaningful exploration and production activities from marginal fields for the past 13 years could spell doom for the future of the nation’s oil sector.The country had recently targeted daily earnings of $4.23 million (N1.29 billion) from an average of 90,000 barrels of oil per day, which the experts said could have been feasible from 18 of about 30 marginal fields awarded in the country, if they were operating optimally. Of the 30 marginal fields awarded since 2004, only 12 are active and currently produce about 2.6 per cent of daily oil production and 2.5 per cent of the estimated 4,000 MMscf gas production in the country.

Considering it has been over a decade since the country conducted a bid round, Minister of State for Petroleum Resources Ibe Kachikwu recently insisted that unless there are new oil and gas regulations, the country might not award oil blocks.Awarding new oil fields or creating the needed environment that would ease exploration, especially for marginal field operators, are key ways the country could add to national oil reserve and boost revenue, especially when demand rises on the backdrop of new refineries and needed supply to the international market.

With the failure of President Muhammadu Buhari to assent to the governance fragment of the four-part Petroleum Industry Bill (PIB) and the delay that has impeded the entire legislation for about two decades, stakeholders said the stagnation would continue to frustrate desired objectives in Nigeria’s oil and gas sector.

The chairman, International Energy Services Limited, Dr. Diran Fawibe, said: “The passage of the PIGB will not really affect the oil bidding angle. We are talking about corporate governance in respect to PIGB. It doesn’t touch the heart of oil and gas upstream development, which is the fiscal arrangement that will govern the operation of the oil and gas sector.

“The ambition to process oil through a number of refineries, whether Dangote or through collocated refineries, will become a challenge because we would have less crude for international markets to sell and earn foreign exchange.”The president, Nigerian Gas Association (NGA), Dada Thomas, whose organisation, Frontier Oil Ltd, plays a leading role in the marginal field, said it was shameful that Nigeria had not held a bid round since 2007.

“In that time, other African countries have held many bid rounds that people have watched and discovered were transparent. But for 11 years, Nigeria has not held one,” he noted.According to him, a new bid round is viable under a new legislation, considering that major oil companies are being deterred by the obscurity in the sector. He however warned that the country must ensure the passage of the PIB before the end of the current administration.

“I am worried and sad for Nigeria. We need to rescue the Nigerian E&P sector. It’s a big problem and we need to solve it collectively as a nation,” he said.On the marginal fields, Thomas said government had been frustrating growth by not honouring the terms of agreement it signed with the operators. “For example, the marginal field was supposed to be taxed at a 55 per cent PPT rate not the 67.5 per cent or 85 per cent that other fields are being taxed. That has never been implemented. Marginal fields are being taxed just like everybody else,” he said.

The former president, Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, said any process that would give an individual power to award oil blocks discretionarily must be corrected. He called for a scrapping of bureaucratic rules surrounding the process.

“Licensing rounds are a simple auctioning process that shouldn’t be unnecessarily elongated. We need to look at those processes very well, to be sure that they are smooth, transparent and quick,” he added.When The Guardian enquired at the Ministry of Petroleum Resources, the Director of Press, Idang Alibi, declined to comment, stressing there was a need for wide consultation on the oil block cum marginal bid rounds matter, given the sensitivity of the matter.

On transparency in the process, he said the DPR could equally give details.But as at the time of press, the joint response of the ministry and DPR were yet to be received. A call to DPR spokesperson, Paul Osu, did not yield results, as his phone was switched off.

According to the Managing Director and Chief Executive Officer, Cowry Asset Management Limited, Johnson Chukwu, given the status quo, Nigeria is unlikely to meet the target of the Organisation of Petroleum Exporting Countries (OPEC), if the body goes ahead with its plans to increase members’ output.

According to him, the failure to deregulate the entire petroleum industry, from upstream to downstream, will continue to deter potential investors, whose investments would go a long a long way in boosting operations, especially in the upstream segment.

“Failure to define the industry’s regulation has put oil production at minimal levels, and with OPEC and non-OPEC countries looking to increase output, Nigeria is unlikely to meet up, given its current fiscal regime. Unfortunately, we are not finding it easy meeting up with our 1.8 million barrels per day output target,” Chukwu said.He added: “What happens when output increases is that price will fall. Thus, Nigeria will be unable to benefit from the output increase and will also suffer from the price reduction. We need good regulation to grow production.”

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


US Senate Passes $1.9 Trillion Stimulus Package



US Senate Passes $1.9 Trillion Stimulus Package

President Biden’s $1.9 trillion economic stimulus plan would have far-reaching effects on society as the country tries to turn the corner on a pandemic that has killed more than half a million people in the United States.

The mammoth bill approved by the Senate on Saturday would provide direct payments to Americans, extend jobless benefits and provide a huge financial infusion to states and local governments as well as to schools to help them reopen. It provides funding for priorities like coronavirus testing and vaccine distribution. And it amounts to an ambitious antipoverty program, offering significant benefits for low-income people.

Here’s a guide to what’s included in the plan, which is scheduled to go before the House for final approval on Tuesday and then would head to Mr. Biden for his signature.

Individuals making under $75,000 and married couples making under $150,000 would receive direct payments of $1,400 per person. The bill would also provide $1,400 per dependent.

The payments would gradually decrease above those income levels and disappear entirely above an income cap: $80,000 for individuals and $160,000 for married couples.

Those caps were lowered from the thresholds in the House’s version of the stimulus plan, which set the cutoffs at $100,000 for individuals and $200,000 for married couples.

The Senate bill extends unemployment programs through early September, including the $300-per-week federal supplement provided in the last stimulus plan passed in December.

Mr. Biden had proposed bumping up that supplemental benefit to $400 per week, which the House agreed to, but the Senate kept it at $300 weekly.

The Senate bill also includes a provision intended to avert surprise tax bills for people who lost jobs, waiving federal income taxes for the first $10,200 of unemployment benefits received in 2020 for households earning under $150,000.

For 2021, the bill would temporarily expand the child tax credit, which is currently worth up to $2,000 per child under 17. Under the legislation, the tax credit would be as much as $3,600 for children up to age 5 and as much as $3,000 for children 6 to 17.

The bill would make the full value of the credit available to low-income people who are currently ineligible or receive only a portion. And for the second half of this year, it would have the federal government send advance payments of the credit to Americans in periodic installments, akin to a guaranteed income for families with children.

The legislation would also expand the child and dependent care tax credit for 2021, and it would expand the earned-income tax credit for workers without children for this year as well. Through 2025, it would exempt student loan forgiveness from income taxes.

The bill would provide funding for vaccine distribution as well as coronavirus testing, contact tracing and genomic sequencing. It would give money to the Federal Emergency Management Agency as well.

It would provide $350 billion for states, local governments, territories and tribal governments, and it contains about $130 billion for schools. It also includes funding for colleges and universities, transit agencies, housing aid, child care providers and food assistance.

In addition, the bill contains funding to help businesses, including restaurants and live venues, and it includes a bailout for multiemployer pension plans that are financially troubled.

The bill would temporarily increase subsidies for people purchasing health insurance through the Affordable Care Act’s marketplaces. It includes billions of dollars for public health programs and veterans’ health care.

It also seeks to help those who have lost jobs keep the health insurance coverage they had through their employer, covering the full cost of premiums through a federal program called COBRA through September.

As part of the stimulus plan, Mr. Biden wanted to raise the federal minimum wage, which is now $7.25 per hour, to $15 per hour.

The stimulus bill passed by the House would increase the wage to $15 per hour by 2025, but the Senate parliamentarian said the provision violated the strict rules that Senate Democrats had to follow to pass the bill through a special process that shielded it from a filibuster and allowed for its approval with only Democratic support. A vote in the Senate on Friday to add the wage increase back to the bill failed.

The Senate bill also dropped funding for a rail project in Silicon Valley in Northern California and a bridge between upstate New York and Canada, two provisions that were included in the House bill and drew criticism from Republicans.

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Seplat Petroleum Pays US$564.165 Million to Federal Government in 2020



Seplat Petroleum, an indigenous Nigerian upstream exploration and production company, announced it paid a total sum of US$564.165 million to the Federal Government in 2020.

In the report on payments made available to the Nigerian Stock Exchange and seen by Investors King, Seplat Petroleum paid US$389.576 million to the Nigerian National Petroleum Corporation (NNPC) as production entitlement in 2020.

Production entitlement is the government’s share of production in the period under review from projects operated by Seplat.

This comprises crude oil and gas attributable to the Nigerian government by virtue of its participation as an equity holder in projects within its sovereign jurisdiction (Nigeria).

Also, Seplat paid US$130.009 million to the Department of Petroleum Resources in 2020. A breakdown of the amount showed US$111.633 million was paid as royalties while US$18.376 million was paid as fees.

Similarly, US$579,361 was paid as a fee to the Nigeria Export Supervision Scheme.

The energy company made another payment of US$17.935 million in fee for 2020.

While the Nigerian Content Development and Monitoring Board received US$4.826 million in fee from Seplat in 2020.

Seplat paid US$21.239 million in taxes to the Federal Inland Revenue Service in 2020.

Therefore, Seplat Petroleum paid a total sum of US$564.165 million to the Federal Government in the 2020 financial year. See the details below.

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FIRS Sets N5.9 Trillion Revenue Target for 2021




FIRS to Generate N5.9 Trillion Revenue  in 2021

Mohammed Nami, the Chairman of Federal Inland Revenue Service, FIRS, on Friday said the agency is projecting total revenue of N5.9 trillion for the 2021 fiscal year.

Nami stated this while meeting with the House of Representatives Committee on Finance led by Hon. James Falake on the Service’s 2021 budget defence of its proposed Revenue and Expenditure Estimates.

According to the Chairman, N4.26 trillion and N1.64 trillion were expected to come from non-oil and oil components, respectively.

However, Nami put the cost of collecting the projected revenue at N289.25 billion or 7 percent of the proposed total revenue for the year, higher than the N180.76 billion spent in 2020 to fund the three operational expenditure heads for the year.

He said: “Out of the proposed expenditure of N289.25 billion across the three expenditure heads, the sum of N147.08 billion and N94.97 billion are to be expended on Personnel and Overhead Costs against 2020 budgeted sum of N97.36 billion and N43.64 billion respectively. Also, the sum of N47.19 billion is estimated to be expended on capital items against the budgeted sum of N27.80 billion in 2020. The sum is to cater for on-going and new projects for effective revenue drive.

Speaking on while the agency failed to meet its 2020 target, Nami said “There’s lockdown effect on businesses, implementation directive also for us to study, research best practices on tax administration which involves travelling to overseas and we also have to expand offices and create offices more at rural areas to get closer to the taxpayers, we pay rent for those offices and this could be the reason why all these things went up.

“And if you have more staff surely, their salary will go up, taxes that you’re going to pay on their behalf will go up, the National Housing Fund contribution, PENCOM contribution will go up. Those promoted you have to implement a new salary regime for them. There’s also the issue of inflation and exchange rate differential”, he said.


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