FG loses N6.75bn oil revenue to flood daily

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By Clara Nwachukwu & Kunle Kalejaye with Agency report
LAGOS—Nigeria is losing about $43million  or N6.75billion daily to production cut back on account of recent flooding that hit many parts of the country, particularly, the oil-rich Niger Delta.

Industry regulator, Department of Petroleum Resources, DPR, said, yesterday, that the country’s daily production fell by about 18 per cent from 2.6million barrels daily, bpd, to 2.1 million bpd, even as it plans to hold a new licencing round by the year end to boost production reserves.

Furthermore, Shell, Nigeria’s biggest producer, last week declared force majeure, a legal condition which frees it from contractual obligations on Bonny Light and Forcados exports.

Flood submerged buildings at Umueze Anam, Anambra west LG

Bonny Light and Forcados are two of the country’s most important oil grades, which accounted for 427,000 bpd or 20 per cent of the nation’s total exports of 2.048 million bpd in October.

The developments compound Nigeria’s revenue projections, and will impact negatively on the 2012 Budget, and will affect the execution of capital budget for the remaining part of the year, as the country depends on more than 90 per cent of oil proceeds for its survival.

Already, the National Assembly and the Presidency are at loggerheads over the poor budget implementation, and if the flooding continued, the controversial 2013 national budget will also be impacted.

DPR Director, Mr. Osten Olorunsola, addressing journalists on the state of the industry said: “Our production dropped f rom 2.6 million barrels per day to 2.1 million as at yesterday. But it is gradually coming back to 2.3 million bpd because the flood is gradually receding and the companies are coming back to put on wells as well as their facilities.”

Damage toll

Olorunsola said that the floods caused the shutdown of many of the fields, particularly those of the indigenous producers and some multinationals.

“Actually, some companies went out, companies like Sterling Energy and some little companies especially some marginal fields players. But even the big boys were seriously hit, as Total (French), was completely out in OML 58, which produces 90,000 bpd. Agip (Italy), was seriously hit at Obiafor, Obikro, Mbede, they were really down. Total shut down at a peak of about 500,000 barrels per day.”

The revelation contradicts earlier claims by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, that the recent floods did not affect oil facilities, after visiting some of the flooded areas in the Niger Delta.

Licencing round

In another development, Alison-Madueke told a foreign news agency that the Federal government will hold its first oil exploration bidding round after five years by the end of this year, while licence renewal talks with Shell and Chevron over existing onshore fields are in their final stages.

In an interview, the minister said: “We expect within the next couple of months a marginal bid round will be announced. We hope a major bid round will follow before the end of the year.

“Shell and Chevron (onshore licence renewals) are in the final stages now, those will definitely be out before the end of the year,” she added.

Exxon Mobil signed 20-year oil licence renewals on Nigerian onshore assets producing around 550,000 bpd in February, but other oil majors are still negotiating terms with the government.

Some industry experts have questioned why licences are being renewed before the National Assembly has passed the Petroleum Industry Bill (PIB), which will adjust terms on these types of contracts.

“It would have become slightly cumbersome to keep waiting on the PIB before the renewals,” Mrs Alison-Madueke said in reply.

The National Assembly is currently debating the PIB, a wide-ranging law which has been delayed for more than five years on disputes between oil firms and different arms of government.

If it becomes law, the bill may end years of regulatory uncertainty that has blocked billions of dollars of investment.

Foreign oil majors, including Shell and Exxon, have said the tax terms in the current version of the PIB would make exploration deep offshore, which is the key to growing Nigeria’s oil and gas output and reserves, non-viable.

“I think it is very difficult in general if you have been receiving a certain level of profit over quite a long period of time, to adjust to a slightly lower level of profitability,” Mrs Alison-Madueke said of the oil majors’ complaints.

“We went over these terms several times, we kept ourselves competitive,” she added.

She said after the changes were made in the PIB, Nigeria’s “government take” on offshore projects would increase by 10 per cent to 73 per cent, lower than in rival producers Angola, Norway and Indonesia.

The PIB is meant to overhaul everything from fiscal terms to the state-owned Nigerian National Petroleum Corporation.

Oil, gas  production

DPR’s Olorunsola put Nigeria’s actual crude oil plus condensates production in quarter three at 2.5m, while reserves stood at 31.2 billion Barrels for oil, 5.02 billion barrels for condensate; 92.6 trillion cubic feet, TCF for Associated Gas, AG; and 90.150 TCF for Non-Associated, NAG.

He recalled that “a major enhancement to deepwater oil production was achieved when Total’s Usan FPSO, with capacity to process 180 million bpd was commissioned in April.”

However, he disclosed that associated gas flared average was 1.4 billion cubic feet per day, cf/d, approximately 18 per cent of total gas produced, even as the flare rate is  a reduction of about five percent of 2011 rate.

To enhance gas resources, he said the agency is “actively participating in the development and implementation of the Gas Network Code.”

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