Stop Outsourcing of Refineries, Reps tell NNPC

  • Production falls to 1.4m bpd as crude price nears $50 with drop in US supply
  • NEITI seeks implementation of audit report recommendations

Ejiofor Alike with agency reports, Damilola Oyedele in Abuja Emmanuel Addeh in Yenagoa

The House of Representatives Committee on Privatisation has asked the Nigerian National Petroleum Corporation (NNPC) to suspend the proposed outsourcing of the nation’s three refineries in Kaduna, Warri and Port Harcourt.

The legislature’s request came on a day oil prices approached the $50 per barrel target, rising as much as one per cent to above $49 per barrel after the United States reported a larger-than-expected drop in crude stocks for last week.
Sadly, however, the resurgence of militancy in the Niger Delta, which has forced production down to 1.4mbpd, out of its allocated 2.2mbpd, has denied Nigeria the opportunity to benefit maximally from the rise in oil price.

The House committee chaired by Hon. Ahmed Yerima (Bauchi APC) at its sitting wednesday accused the NNPC of acting unilaterally without consulting other stakeholders on its proposed outsourcing of the refineries, saying the NNPC had violated section 11 of the Bureau of Public Enterprise (BPE) Act 2009.

Although the committee was miffed by the absence of the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who was represented by the Group Executive Director for Refineries, Mr. Anibor Kragba, it, however, commenced its enquiry into the proposed outsourcing following the executive director’s assurance that he had the minister’s mandate and was, therefore, competent to handle any question on the refineries.

Kragba clarified that the refineries were not being privatised, but rather being outsourced to core investors, explaining that it was aimed at getting investors to invest and rehabilitate the refineries, which he said was cost intensive.
Tempers flared when he could, however, not respond to queries on the authorisation of the outsourcing, without the knowledge of the National Assembly or the BPE.
He explained that he could not provide an answer as he was new in office.
The response did not go down well with the lawmakers, some of whom reminded him that they had wanted to postpone the meeting due to the minister’s absence and fear that he (Kragba) might not be able to handle all the queries.
Speaking earlier, the acting Director General of BPE, Mr. Vincent Akpotaire, said the organisation was not involved in the outsourcing exercise.

In a similar development, the Deputy Speaker, Hon. Yussuff Sulaimon Lasun, lamented the downward trend of oil production, now at 1.4 million barrels per day, saying that Nigeria did not own its oil industry.

He spoke while receiving the 2013 Audit Report by the Nigeria Extractive Industries Transparency Initiative (NEITI) of the oil and gas industry and solid minerals sector wednesday.

Lasun said Nigeria was being short-changed by the multinationals operating in the sector. “Nigeria as a nation has lost the oil industry. We don’t have the skills, the technology, we have not even mastered the politics or the marketing of oil. We swap 450,000 bpd and collect just PMS. What about other by-products of crude? We are probably the only country that is not getting the best of our oil deposits,” Lasun said.

He added that the legislature had not been able to effectively carry out its oversight functions in the sector as it was constantly accused of interference by the executive arm.

He charged NEITI led by the Executive Secretary, Mr. Waziri Adio, to submit draft bills that would ensure effective reforms in the extractive resources sector.

“You are in the best position to tell us the challenges you have encountered in the course of doing your job. Draft the bills, we would fine tune them, you are the experts,” he urged.

Adio in his presentation, noted that the survival of Nigeria, with crude as the mainstay of its economy, depended on the implementation of the recommendations of the report.

He said there was need for more thorough oversight and for disciplinary actions to be taken against those who had been indicted by the report.

“Our mandate is critical, to beam the searchlight on a vital sector of national economy. The work of NEITI is also critical to that of the legislature especially now that the country is undergoing reforms,” Adio said.

Meanwhile, in Bayelsa State, the Nigerian Agip Oil Company (NAOC) yesterday shut down its operations at Brass Oil Export Terminal, off the state’s shoreline as a result of militant attacks on its facilities, declaring a force majeure on oil exports from the terminal.

A spokesperson of Eni, who confirmed the development in a response to a query, noted that the oil giant was closing its operations in the area due to circumstances beyond its control.

An earlier attack in the area on May 18 had resulted in a shutdown of some 1,000 barrels bringing a cumulative production loss to 5,200 barrels of the oil firm’s share of oil output.

It was, however, not clear how long it would take to fix the damaged gas pipeline which was pivotal to the company’s operations in the axis.

Exxon Mobil had earlier slowed down its production projections at Nigeria’s Qua Iboe crude oil facility after it also declared force majeure on exports.

In a short e-mail yesterday, Eni disclosed that the oil firm’s production was cut by 4,200 barrels per day following Sunday’s attack on its pipeline in the state.

“I can confirm the attack to the Ogbaimbiri – Tebidaba pipeline, with 4,200 bop/d (Eni’s equity) of production affected.

“I can (also) confirm that Force Majeure has been placed on Brass Oil Exports from May 22, 2016,” the email from Eni’s Media Relations Unit said.

Eni’s business decision also followed on the heels of Shell Petroleum, which had temporarily halted production, following leaks and vandalism of its oil pipelines in the region and declared force majeure after continued attacks on its Nembe creek trunkline in the state.

Nigeria currently loses as much as 800,000 barrels per day as a result of the activities of militants in the region.
The series of force majeure would deny Nigeria the benefit of the rise in oil prices, which yesterday approached the $50 per barrel target, rising as much as one per cent to above $49 per barrel after the United States reported a larger-than-expected drop in crude stocks for last week.

This came as rising political tensions between Iran and Saudi Arabia will potentially threaten the production deal by the member countries of the Organisation of Petroleum Exporting Countries (OPEC), when the cartel meets on June 2.
The United States Energy Information Administration said crude inventories fell 4.2 million barrels in the week to May 20, though the American Petroleum Institute had forecast 5.1 million drop.

Futures of Brent and US crude’s West Texas Intermediate (WTI) fell briefly after the EIA data, then consolidated and traded at the lower end of the day’s gains.

Brent rose by 1.3 per cent to $49.21 a barrel after a session high at $49.69, while WTI rose to $49.02, after peaking at $49.62.

Reuters reported that oil bulls have been hoping in recent weeks that crude would rise to $50 a barrel or more, after global crude flows declined nearly 4 million barrels per day due to wildfires in Canada’s oil sands region, a near economic meltdown in Venezuela and a spate of violent attacks on oil and gas facilities in Libya and Nigeria.
After the lifting of the western sanctions, Iran refused to join OPEC’s initiative to boost prices by freezing output but signalled it would be part of a future effort once its production had recovered sufficiently.

However, less than six months after the lifting of Western sanctions, Iran is close to regaining normal oil export volumes as supply disruptions in Nigeria and Canada helped the country to successfully add extra barrels to the market in an unexpectedly smooth way.

Reuters reported that the outages in Nigeria and Canada have resolved OPEC’s dilemma as Iran added extra oil without worsening the global glut in the oil market.

According to International Energy Agency (IEA) figures, Iran’s output has reached levels seen before the imposition of sanctions over its nuclear programme.

However, Tehran has said that it is not yet there.

But while Iran may be more willing now to talk, an increase in oil prices has reduced the urgency of propping up the market, Reuters quoted an OPEC delegates as saying.
According to Reuters, a senior OPEC delegate, who was asked whether the group would make any changes to output policy at its June 2 meeting, said: “Nothing. The freeze is finished.”

Saudi thinking, however, has moved on from the days when Riyadh cut or increased output unilaterally. Talks in Doha on the proposed output freeze by OPEC and non-OPEC producers fell through after Saudi insisted that Iran participate.
Indeed, differences between Saudi Arabia and Iran, which helped found OPEC 56 years ago, over OPEC policy have made cooperation harder – to say nothing of more fundamental disagreements.

For more than a decade after oil crashed to $10 in 1997, the two set aside rivalries to manage the market and support prices, although they fell into opposing OPEC camps with Iran wanting high prices and Saudi more moderate.
Now, the Sunni-Shia conflicts setting Saudi Arabia and Iran at each other’s throats, particularly in Syria and Yemen, make the relationship between the two even more fraught.

The two disagree over OPEC’s future direction. Earlier in May, OPEC failed to decide on a long-term strategy as Saudi Arabia objected to Iran’s proposal that the exporter group aim for “effective production management”.
Iran notched up output of 3.56 million barrels of oil per day in April, the IEA said, a level last reached in November 2011 before sanctions were tightened.

Saudi Arabia produced a near-record-high 10.26 million barrels per day in April and has kept output relatively steady over the past year, its submissions to OPEC show.

Iran, according to delegates from other OPEC members, is unlikely to restrain supplies, given that it believes Saudi Arabia should cut back itself to make room for Iranian oil.

Sources familiar with Iranian oil policy see no sign of any change of approach by Riyadh under new Saudi Energy Minister Khalid al-Falih – who is seen as a believer in reform and low oil prices.