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IOCs Reluctant to Sell Flare Gas to Third Parties – FG

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  • IOCs Reluctant to Sell Flare Gas to Third Parties – FG

International oil companies that are involved in the flaring of gas in Nigeria are often reluctant to sell the commodity to third parties, the Federal Government has said.

It was gathered that the oil producers preferred to pay the tiny cost incurred in gas flaring, rather than to deal with a third-party investor that might be interested in off-taking the commodity.

Flare gas is essentially associated gas that is produced with oil, as they both come out of the ground. But flare gas pollutes the environment, causing sickness and other environmental hazards, particularly in locations where these IOCs operate, like in the Niger Delta.

“Although the Federal Government owns the flare gas and has the power to take it, oil producers have, up till now, treated flare gas as if it is their own, to sell or to flare as they choose,” the Programme Manager, Nigeria Gas Flare Commercialisation Programme, Justice Derefaka, said.

In a copy of the presentation he made at the 3rd Lawyers in Oil and Gas conference in Lagos, Derefaka explained that IOCs were reluctant to sell flare gas because the cost of gas flaring to a producer had been tiny and tax deductible.

The presentation, which was entitled, ‘The Impact of Government Regulatory Policy and the Road to Sustainable Economic Growth Through The Lens of the NGFCP,’ was made available to our correspondent in Abuja on Wednesday.

The programme manager for the NGFCP said, “Typically producers have been reluctant to sell to third parties, preferring to make the miniscule flare payment than have the operational hassles of dealing with third parties, the poor technical gas evacuation system and the poor gas payment record.

“The result is that the low hanging fruit has been fully picked for producers’ own projects, and the higher hanging fruit, i.e. the 178 flare sites left, have been ignored.”

Derefaka, however, noted that “under the new regulations approved in 2018, the Federal Government has asserted its right to take gas free at the flare and will auction it off to third parties. Those third parties will have surety of title from the Federal Government. Under the regulations, flare payments have been increased substantially.”

Historically, associated gas is regarded as a waste product, as the commodity was separated from the oil and flared in situ.

Meanwhile oil was piped to local refineries or for export and progressively associated gas has been captured or harnessed and used for power generation; in industry for fertiliser, methanol and petrochemical plants; and for production of liquefied petroleum gas (and liquefied natural gas.

However, flare capture is expensive, therefore it is often only done at production sites where there are economies of scale

Derefaka noted that there had been no teeth in the flare payment structure that was set in 1998 at N10/million standard cubic feet, which was approximately $0.50 in 1998

He observed that currently, this flare payment sum had been eroded by inflation, as “the value of that flare payment today is approximately $0.028/mscf.”

He added, “This has equated to a total of about $8m in flare payments for 2017. The moral hazard is that these are tax-deductible which, at 85 per cent tax rate, means that the Federal Government received net $1.2m (gross export revenue of crude oil in 2017 was $33bn).

“This net figure expressed as an average cost per barrel of crude oil produced is less than $0.002 (one fifth of a US cent).”

But Derefaka noted that the 2018 regulations required a higher flare payment, expressed in $/mscf, adding that a legislative change was being developed to make the flare payment non-tax-deductible.

“The Flare Gas (Prevention of Waste and Pollution) Regulations 2018 has been approved by Mr. President and gazetted to underpin the implementation of the NGFCP. It was approved on July 5, 2018, and gazetted on 9th July, 2018,” he stated.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Dangote Sugar Refinery Raises ₦42.79 Billion in Successful Commercial Paper Issuance

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Dangote Sugar Refinery Plc

Dangote Sugar Refinery PLC has successfully raised ₦42.79 billion through the issuance of Series 4 and 5 Commercial Paper notes.

The issuance, announced on Friday, underscores the company’s robust financial strategy and strong market confidence in its operations.

The Series 4 notes, amounting to ₦12.93 billion, were issued for a tenure of 181 days with a yield of 23.00%.

The Series 5 notes, on the other hand, totaled ₦29.86 billion, were issued for a tenure of 265 days, and offered a yield of 25.00%. These notes were issued under the company’s ₦150 billion Commercial Paper Issuance Programme.

The issuance saw substantial participation from a diverse group of investors, including Pension and Non-Pension Asset Managers, as well as other institutional and individual investors.

This broad interest highlights the trust and confidence the market has in Dangote Sugar Refinery’s financial health and operational strategy.

Mrs. Temitope Hassan, Company Secretary and Legal Adviser of Dangote Sugar Refinery PLC, expressed her satisfaction with the successful issuance.

“This achievement is a testament to the strong investor confidence in Dangote Sugar Refinery’s business model and financial stability. The funds raised will be instrumental in supporting our short-term working capital and funding requirements, enabling us to continue our growth trajectory and maintain operational excellence.”

The successful issuance of the commercial paper notes aligns with Dangote Sugar Refinery’s strategic objectives of maintaining a flexible and diversified funding base.

By tapping into the commercial paper market, the company ensures that it has the necessary liquidity to meet its operational needs while also positioning itself to take advantage of growth opportunities in the competitive sugar industry.

Dangote Sugar Refinery PLC, a subsidiary of the Dangote Group, remains one of Nigeria’s leading sugar producers.

The company continues to play a pivotal role in the country’s sugar industry, contributing significantly to the economy and ensuring the availability of high-quality sugar products for consumers.

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Dangote Group Expands Refinery Storage Capacity to 5.3 Billion Litres

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Dangote Refinery

The Dangote Group has announced a significant expansion of its refinery storage capacity.

The expansion, disclosed by Alhaji Aliko Dangote, President of the Dangote Group, during his address at the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas.

Currently boasting a storage capacity of 4.78 billion litres, the Dangote Petrochemical Refinery is set to increase this figure by an additional 600 million litres, bringing the total capacity to an impressive 5.3 billion litres.

This expansion underscores Dangote’s commitment to transforming Nigeria into a hub for refined petroleum products and solidifies the refinery’s role as a strategic reserve for the nation.

Addressing stakeholders at the forum, Dangote highlighted the refinery’s pivotal role in addressing longstanding challenges in Nigeria’s energy sector, particularly the absence of strategic reserves for petrol.

“The country doesn’t have strategic reserves in terms of petrol, which is very dangerous. But in our plant now, when you came, we had only 4.78 billion litres of various tankage capacity. But right now, we’re adding another 600 million,” Dangote affirmed.

The expansion comes amidst various operational challenges faced by the refinery, including attempts by international oil companies to hinder its operations.

Dangote asserted that these challenges, aimed at impeding the success of the refinery, were indicative of broader resistance to change within the oil industry.

“We borrowed the money based on our balance sheet. I think we borrowed just over $5.5bn. But we paid also a lot of interest as we went along, because the project was delayed because of a lack of land, also the sand-filling took a long time,” Dangote revealed, emphasizing the resilience required to overcome these obstacles.

Moreover, Dangote expressed optimism regarding the refinery’s capacity to influence regional fuel prices, citing the success story of diesel price reduction following the refinery’s market entry.

He indicated that while petrol pricing remains a complex issue governed by governmental policies, the refinery’s operations would strive to offer competitive pricing and supply stability.

The expansion of the Dangote Petrochemical Refinery not only marks a significant milestone in Nigeria’s industrial landscape but also positions the conglomerate as a key player in reshaping Africa’s energy dynamics.

As construction progresses towards completion, the refinery aims to further consolidate its role in meeting regional energy demands and fostering economic growth across West Africa.

With plans to commence sales of refined products in the coming months, Dangote’s refinery is poised to play a transformative role in Nigeria’s quest for energy independence and regional economic integration.

As stakeholders await the refinery’s operational debut, expectations are high for its potential to drive down fuel prices and enhance energy security across the region.

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Musk Secures Shareholder Support for Compensation and Texas Relocation

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Elon Musk

Tesla Inc. shareholders have voted in favor of Chief Executive Officer Elon Musk’s compensation package and the company’s state of incorporation change to Texas.

The results, announced at Tesla’s annual meeting in Austin on Thursday, reflect shareholder approval despite challenges such as declining sales and a significant drop in stock price.

Musk had hinted at the likely outcome the night before the meeting in a post on X, stating that both resolutions were “passing by wide margins.”

The electric car manufacturer did not disclose the detailed breakdown of the votes.

The approval of Musk’s pay package, although advisory, demonstrates continued investor support for his leadership.

The package had previously been nullified by a Delaware judge in January, but Tesla plans to appeal. Should the appeal fail, relocating Tesla’s legal home to Texas may provide the board an opportunity to reintroduce the compensation plan under potentially more favorable legal conditions.

Originally approved in 2018 with 73% of the vote, Musk’s compensation plan makes him eligible for up to $55.8 billion in stock options if Tesla achieves specific milestones.

Currently, the value of these options is approximately $48.4 billion, according to the Bloomberg Billionaires Index.

Musk’s leadership has been a topic of significant debate, particularly in light of his oversight of six companies and his tendency toward abrupt strategic changes.

Earlier this year, Musk orchestrated Tesla’s largest layoffs to date, only to rehire some of the affected workers weeks later.

In addition to the compensation package, shareholders voted to reelect James Murdoch and Kimbal Musk to Tesla’s board.

Murdoch, son of media mogul Rupert Murdoch, has served on the board since 2017, while Kimbal Musk, Elon’s younger brother, has been a member since 2004.

Tesla’s stock saw a modest increase of 0.3% in extended trading following the announcement, though the stock had fallen about 27% over the year compared to a 14% gain in the S&P 500 Index.

During the annual meeting, held at Tesla’s Austin headquarters, shareholders showed enthusiastic support as Musk took the stage in a black Cybertruck T-shirt.

He shared updates on the company’s progress, including the introduction of three new models, the expansion of the Supercharger network, and record production levels for Cybertrucks.

“A lot of people said Cybertruck was fake, never going to come out. Now we’re shipping a lot of Cybertrucks,” Musk stated.

In addressing his substantial pay package, Musk clarified that it is structured as options requiring him to hold Tesla stock for five years. “I can’t cut and run, nor would I want to,” he said.

The push for shareholder support involved a dedicated “Vote Tesla” website and advertising on X, with Tesla investors and executives vocalizing their backing for Musk.

Despite some opposition from significant investors like Norway’s sovereign wealth fund and the California Public Employees’ Retirement System, the measures passed.

The relocation to Texas has been formalized, with the certificate of conversion available on the Texas Secretary of State website.

However, any future compensation plan will need to be restructured to comply with Texas legal standards, should the Delaware appeal fail.

The recent shareholder vote may enhance Tesla’s position in the forthcoming appeal. Delaware Chancery Court Judge Kathaleen St. Jude McCormick’s January decision to void the compensation package cited conflicts of interest and inadequate disclosure.

The appeal’s outcome, expected later this year, will determine the next steps for Musk’s compensation plan.

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