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FG to Cut Stakes in JV With Shell, Chevron, Others

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  • FG to Cut Stakes in JV With Shell, Chevron, Others

The Federal Government plans to cut its stakes in joint oil ventures with international oil companies to 40 per cent this year, the Minister of Budget and National Planning, Senator Udo Udoma, has said.

The government is pushing ahead with efforts to boost revenue to grow an economy recovering from a recession.

The President Muhammadu Buhari-led administration had in its Economic Recovery and Growth Plan released in 2017, said it would reduce its stakes in JV oil assets, refineries and other downstream subsidiaries such as pipelines and depots.

Oil companies including Royal Dutch Shell, Chevron and ExxonMobil, operate in Nigeria through JVs with the Nigerian National Petroleum Corporation.

The NNPC owns 55 per cent stake in its JV with Shell and 60 per cent stakes with others.

The government has considered reducing its majority stakes in these joint ventures for more than a decade but was under little pressure as higher oil prices boosted state coffers.

Udoma was quoted by Reuters as saying in a statement that the government would intensify efforts to improve its finances including the “immediate commencement of the restructuring of the joint venture oil assets so as to reduce government shareholding to 40 per cent.”

He added during a presentation to lawmakers that Buhari wanted the oil restructuring completed this year.

In 2017, the debt office said the government wanted to raise N710bn ($2.32bn) via restructuring of its equity in JV oil assets and that it had captured the proposals in the 2018 budget.

In the past, Nigeria had held talks with oil companies regarding financing agreements for JVs after it struggled to fund its portion of such partnerships through cash calls, which had often been delayed in parliament.

The government has asked the Department of Petroleum Resources to collect past-due oil license charges and royalties, within three months.

The country has also ordered oil majors to pay nearly $20bn in taxes it says are owed to states.

Buhari has presented an N8.83tn budget for 2019, laying out plans to drive growth. He has directed the NNPC to take measures to achieve the targeted oil production of 2.3 million barrels per day this year, Udoma said.

The NNPC said on Wednesday that the oil industry would achieve the 2.3 million bpd target for the 2019 budget, adding that measures had been taken to attain it.

In his presentation to the Senate Committee on Finance on the 2019-2021 Medium Term Expenditure Framework, the Group Managing Director, NNPC, Dr Maikanti Baru, stated that with improved security in oil-bearing communities as a result of sustainable community partnership, the industry was confident of attaining the production target.

Baru, who was represented by the corporation’s Group General Manager, Corporate Planning and Strategy, Mr Bala Wunti, said although the country had a production capacity of over 2.5 million bpd, the unfortunate security situation of the past in areas of operation made it difficult to achieve desired production targets.

He was quoted in a statement from the corporation as saying, “Thankfully, the current administration is strongly focused on engagement and sustainable community partnership, which has resulted in improved security and production.”

On the possible impact of the Organisation of the Petroleum Exporting Countries’ quota on the country’s production target, Baru explained that the production target of 2.3 million bpd was a combination of liquid hydrocarbon production, comprising of crude oil and condensate, noting that the OPEC quota only covered crude oil production.

He further stated that with condensate production currently oscillating between 400,000 to 600,000 bpd, the country was in a good position to attain the overall production target.

Baru said the corporation was working assiduously with other relevant agencies to ensure the attainment of the 2019 budget assumptions.

Meanwhile, energy and financial experts, who spoke with our correspondents in separate interviews, have hailed the move by the government to sell some of its stakes in JV oil assets.

The Managing Director, Financial Derivatives Company, Mr Bismarck Rewane, said, “I think it is a good thing because I have always championed the cause of government exiting. But who are they going to sell their interest to?

“The fact that it would create some more liquidity so that we can use that to fund infrastructure is good. We should have done it five years ago. The earlier we sell those assets, the better. If we had sold them when oil price was higher, we could have got a better return. But it is better late than never.”

The Chairman/Chief Executive Officer, International Energy Services Limited, Dr Diran Fawibe, noted that the proposed sale of oil and gas assets had been an issue over the past two to three years, saying, “It appears the government is determined to push it through instead of going to borrow money. The level of domestic and external loans has been very much criticised.”

The Chief Executive Officer, Economist Associates, Dr Ayo Teriba, said, “Instead of borrowing money and piling up debt that is difficult to stand, it is better to sell assets to attract equity.

“Debt is a liability, equity is also a liability; debt you have to service and repay, which is not so with equity. So, it makes great sense if the Federal Government does more of it – relies more on equity and less on debt.”

Noting that Nigeria only owns 49 per cent in the Nigeria LNG Limited while foreign investors own 51 per cent, he said, “There are similar valuable assets that the government owns 100 per cent like the Pipelines and Product Marketing Company, the Nigerian Gas Company, and the Transmission Company of Nigeria.

“Instead of talking about reducing the 49 per cent in the NLNG, we should talk about reducing the 100 per cent in those valuable assets to cut it to 49 per cent to raise money to bring in competent foreign technical partners to run them and make sure that the assets work.”

The Director, Emerald Energy Institute, University of Port Harcourt, Prof. Wumi Iledare, said, “I think it is long overdue; we suggested that before the price of oil collapsed. My advice is that the government should be selective of who they sell the assets to; there should be a public offering.

“I am also concerned about the proceeds from the sale. It should not be used for recurrent expenditure; it should be used for infrastructure.”

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.

Economy

NNPC Supplies 1.44 Billion Litres of Petrol in January 2021

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The Nigerian National Petroleum Corporation (NNPC) supplied a total of 1.44 billion litres of Premium Motor Spirit popularly known as petrol in January 2021.

The corporation disclosed in its latest Monthly Financial and Operations Report (MFOR) for the month of January.

NNPC said the 1.44 billion litres translate to 46.30 million litres per day.

Also, a total of 223.55Billion Cubic Feet (BCF) of natural gas was produced in the month of January 2021, translating to an average daily production of 7,220.22 Million Standard Cubic Feet per Day (mmscfd).

The 223.55BCF gas production figure also represents a 4.79% increase over output in December 2020.

Also, the daily average natural gas supply to gas power plants increased by 2.38 percent to 836mmscfd, equivalent to power generation of 3,415MW.

For the period of January 2020 to January 2021, a total of 2,973.01BCF of gas was produced representing an average daily production of 7,585.78 mmscfd during the period.

Period-to-date Production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and Nigerian Petroleum Development Company (NPDC) contributed about 65.20%, 19.97 percent and 14.83 percent respectively to the total national gas production.

Out of the total gas output in January 2021, a total of 149.24BCF of gas was commercialized consisting of 44.29BCF and 104.95BCF for the domestic and export markets respectively.

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Economy

NNPC Says Pipeline Vandalism Decrease by 37.21 Percent in January 2021

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The Nigerian National Petroleum Corporation (NNPC) said vandalisation of pipelines across the country reduced by 37.21 percent in the month of January 2021.

This was disclosed in the January 2021 edition of the NNPC Monthly Financial and Operations Report (MFOR).

The report noted that 27 pipeline points were vandalised in January 2021, down from 43 points posted in December 2020.

It also stated that the Mosimi Area accounted for 74 percent of the total vandalised points in Janauray while Kaduna Area and Port Harcourt accounted for the remaining 22 percent and 4 percent respectively.

NNPC said it will continue to engage local communities and other stakeholders to reduce and eventually eliminate the pipeline vandalism menace.

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Economy

Nigeria’s Food Inflation Hits 22.95 Percent in March 2021

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Food inflation in Africa’s largest economy Nigeria rose by 22.95 percent in March 2021, the latest report from the National Bureau of Statistics (NBS) has shown.

Food Index increased at a faster pace when compared to 21.70 percent filed in February 2021.

Increases were recorded in Bread and cereals, Potatoes, yam and other tubers, Meat, Vegetable, Fish, Oils and fats and fruits.

On a monthly basis, the food sub-index grew by 1.90 percent in March 2021. An increase of 0.01 percent points from 1.89 percent recorded in February 2021.

Analysing a more stable inflation trend, the twelve-month ended March 2021, showed the food index averaged 17.93 percent in the last twelve months, representing an increase of 0.68 percent when compared to 17.25 percent recorded in February 2021.

Insecurities amid wide foreign exchange rates and several other bottlenecks that impeded free inflow of imported goods were responsible for the surged in prices of goods and services in March, according to the report.

The Central Bank of Nigeria-led monetary policy committee had attributed the increase in prices to scarcity created by the intermittent clash between herdsmen and farmers across the nation.

However, other factors like unclear economic policies, increased in electricity tariffs, duties, subsidy removal and weak fiscal buffer to moderate the negative effect of COVID-19 on the economy continue to weigh and drag on new investment and expansion of local production despite the Federal Government aggressive call for improvement in domestic production.

Nigeria’s headline inflation rose by 18.17 percent year-on-year in the month under review.

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