- FG sues firm for alleged violation of Nigerian Content Act
Ejiofor Alike with agency reports
Nigeria is about losing one of its major oil customers, India, as the world’s third-largest oil importer has found a new market in cheap crude oil supplies from Iraq, according to a report yesterday by Reuters.
Also after nine years of using the persuasive approach and warnings to compel oil and gas industry stakeholders to comply with the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, the federal government through the Nigerian Content Development and Monitoring Board (NCDMB) has finally entered the legal fray by filing a suit at the Federal High Court, sitting in Warri, Delta State, against Sterling Global Oil Resources Limited, an indigenous oil producer, for alleged violation of the Act.
India oil imports from Iraq increased to a record high for the first time as it bought about 1.32 million barrels per day (bpd) of Iraqi oil in August. This was 29 per cent higher than its August imports in 2018.
Its crude oil imports from Nigeria, Angola, Cameroon and Chad, which are known for its sweet crude also dropped significantly in August by 18.3 per cent which amounts to 764,500 barrels of crude oil drop as its prices rose.
India became Nigeria’s biggest export destination for its crude oil from 2013 after the United States made a shift in crude oil demand by turning its attention to shale production.
Statistics from the Observatory of Economic Complexity (OEC), an international trade database tool that visualises data about countries and the products they exchange, showed that from 2008 to 2018, Nigeria earned $96 billion from crude oil exports to India.
However, this oil trade partnership between Nigeria and India is likely to be threatened with Iraq’s cheap oil type called Basra heavy crude, which is sold to India at a lower premium price compared to the grade’s official selling price, OSP, through tenders.
The shift of its biggest oil partner due to the proximity of Iraqi’s crude to India and its cheap prices puts Nigeria’s oil sale in a precarious state. Nigeria depends on proceeds from crude oil that constitutes about 90 per cent of the country’s total revenue to finance its budget.
“In the spot market, Saudi and the UAE (United Arab Emirates) barrels are not available while Iraqi oil was easily available in spot markets at attractive prices, prompting refiners to maximise purchases of Iraqi oil,” the report said.
The Organisation of Petroleum Exporting Countries (OPEC), and its allies have agreed to cut production by 1.2 million barrels per day through to the end of the first quarter of 2020, but US sanctions on Iran and Venezuela have decreased crude oil supplies.
This action has enabled Iraq, OPEC’s number six oil producer, to gain its crude oil market share in India.
Currently, Iraq’s crude oil output is at 4.8 million, bpd, above OPEC’s target of 4.5 million bpd, while Saudi Arabia has been producing below the targets due to attacks on its oil installations.
Indian refiners are set to maximise production of very low-sulphur fuel oil (VLSFO) to supply ships from 2020 in compliance with January 1, 2019 deadline by the International Maritime Organisation (IMO) to ban ships from using fuel with more than 0.5 per cent sulphur to reduce air pollution.
“Some complex Indian refiners like Reliance can even produce very low-sulphur fuel oil with high-sulphur oil like Basra Heavy,” the report stated.
Indian oil-based industries doubled Iraqi oil imports in August from the same month last year to about 1.8 million tonnes, the report hinted.
This indicates that India’s crude oil demand from Nigeria is expected to reduce to accommodate Iraqi’s crude oil supplies.
India is reputed to be the world’s third-biggest crude importer, meeting 83 per cent of its demand from imports from the Middle East and other countries such as Nigeria, Mexico, Venezuela and the US.
FG Sues Firm for Alleged Violation of Nigerian Content Act
Meanwhile, the federal government has sued Sterling Global Oil Resources Limited for alleged violation of the NOGICD Act of 2010.
It was learnt that NCDMB took legal actions against Sterling Global Oil Resources because the firm was deemed to be a serial defaulter of the provisions of the NOGICD Act and did not exploit the remediation opportunities offered to it by the NCDMB.
According to court papers obtained by THISDAY, the suit is between the Federal Government of Nigeria versus Sterling Global Oil Resources Ltd, with number FHC/WR/55C/19.
The suit is being prosecuted by a private law firm, G.C Arubayi & Co for the Attorney General of the Federation, as provided under Section 174 (1) of the 1999 Constitution of the Federal Republic of Nigeria.
In the five-count charge against Sterling Global, the firm was accused of refusing to maintain a bidding process in all the contracts it awarded in connection with oil activities between 2013 to 2017, thereby not giving fair opportunity to Nigerian indigenous contractors, contrary to Section 15 of the NOGICD Act and punishable under Section 68 of the Act.
It was also alleged that the firm which operated Oil Mining Lease (OML) 277 and OML 280 blocks in Ndokwa-East Local Government Area of Delta State failed to locate within its project office manned by personnel to be approved by the NCDMB, in violation of Section 26 of the NOGICD Act and punishable under Section 68 of the Act.
In the third charge, the firm was accused of not giving Nigerians first consideration for employment and not providing employment and training plan for Ndokwa people to cover the skill gap between Nigerians and expatriates in violation of Section 28, 29 and 30 of the NOGICD Act and punishable under Section 68 of the Act.
Sterling Global was also accused of ”deploying expatriates without submitting to the NCDMB an appropriate succession plan for any position not held by Nigerians in violation of Section 31 of the NOGICD Act and punishable under Section 68 of the Act.”
The fifth count stated that the company “did not obtain or receive the approval of the Board of the NCDMB before making any application for expatriate quota to the Ministry of Internal Affairs or any agency or ministry of the federal government rather you appointed 402 undeclared expatriates working on various projects in Nigeria without due approvals in violation of Section 33 of the Nigerian Content Act and punishable under Section 68 of the Act.”
A senior official of the NCDMB told THISDAY that the suit was part of the intensified efforts by the NCDMB to ensure strict compliance with the provisions of the NOGICD Act by local and international operating and service companies in line with the Nigerian Content 10-Year Strategic Roadmap.
The official added that the increased focus on the local firms became necessary because most Nigerian owned firms had believed erroneously that they were exempted from the Act and they continued to engage in non-complaint acts.
NCDMB had earlier moved against Heritage Energy Operational Services Limited (HEOSL), an indigenous oil producing company, for allegedly contravening the NOGICD Act.
The agency had accused HEOSL of working to derail the Nigerian Content Law by frustrating local service companies working for them, through acts ranging from unilateral contracts cancellation, non/late payments of contractors’ invoices and downward review of contract rates.
It also accused the company of terminating the appointment of two Nigerians in the Well Operations department because they do not want them to promote Nigerian companies and deploying non-compliant expatriates on its operations.
The company was also accused of non-payment of the one per cent Nigerian Content Development Fund (NCDF) in line with Section 104 of the NOGICD Act, 2010.
THISDAY, however, gathered that Heritage Energy had since executed Nigerian Content Non-compliance Remediation Activities, as a penalty for its breaches.