•DPR remits N2tn to govt coffers
Emmanuel Addeh in Abuja
The federal government is considering a regulatory forbearance for banks to encourage them to restructure oil companies’ loans.
Minister of State for Petroleum Resources, Chief Timipre Sylva, said yesterday at the 2021 Society of Petroleum Engineers Oloibiri Lecture Series and Energy Forum (OLEF) in Abuja that the decision followed the banks’ exposure to debts from the oil firms, whose revenues have been hampered following the devastating impact of the COVID-19 pandemic on the industry.
The policy involves regulatory authorities permitting banks and financial institutions to continue operating even when their capital is fully depleted and reflects the unwillingness of regulators to take disciplinary action against problem banks for a given period.
In a report by Fitch Ratings in December 2020, it predicted that Nigerian bank assets’ quality was expected to weaken over the next 12 months to 18 months, saying that though earnings are expected to recover gradually with the economy, the banks remain exposed to further economic shocks from oil price volatility.
This year’s edition of the OLEF, the 30th in the series, was tagged “Operational Excellence and Portfolio Optimisation, a Way Forward for the Oil and Gas Industry Post-Covid-19.”
Sylva, who was represented by his Chief of Staff, Mr. Moses Olamide, an engineer, explained that in recent years, global commodity prices, particularly oil, has been moving downward.
He said the trend was exacerbated by the global pandemic in December 2019 with negative feedback on the oil and gas industry and invoking the critical need to recalibrate operations.
The minister stated that President Muhammadu Buhari recognised the significance of the oil and gas industry as an enabler of national growth and development, stressing that his ministry has carried out some strategic priorities to ensure the sustainability of the Nigeria economy, create jobs and take millions of Nigerians out of poverty.
“In this regard, all stakeholders were brought together to find a cost reduction strategy in the upstream sector through contract negotiations, reduction of contracting circle time, sharing of common facilities, curtailment of personnel logistics, review of crude handling contracts and installation of least automatic custody transfer unit.
“Government is equally considering the granting of regulatory forbearance to banks to restructure terms of facilities to oil and gas investments that are currently facing debt servicing challenges due to the COVID-19 pandemic,” Sylva added.
On the petroleum industry, the minister said in the downstream sector, market-driven price of petrol was being considered to complete full deregulation of white products in Nigeria.
He added that in the gas sector, the federal government has inaugurated the national gas expansion programme to spearhead the adoption and use of natural gas products like Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG) to fuel all prime movers across the length and breadth of Nigeria as an alternative to carbon-heavy products.
In his remarks, the Director, Department of Petroleum Resources (DPR), Mr Sarki Auwalu, said the department generated N2 trillion for the country in 2020, despite the downturn in the oil and gas industry caused by the pandemic.
According to him, since the business environment in the industry remains fragile, operators must learn to eliminate inefficiencies by reducing cost, building partnerships and entrenching collaboration in the industry.
He stated that the DPR had moved from an iron fist law enforcer to a business enabler, and instead of penalties, it is interested in collecting more royalties.
“The DPR takes seriously its mandate to generate and optimise revenue for the government, serve as advisors to the government on petroleum matters and implement applicable policy directions.
“For instance, the DPR continues to exceed government revenue targets by emplacing different systems and processes that ensure transparency and accountability in oil and gas revenue generation, computation, collection and reconciliation.
“Last year alone, the DPR generated over N2 trillion for this country and we intend to exceed this value this year, despite the triple forces. This is anchored on operational excellence which allows free flow of revenues to government,” he stated.
Also, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, stated that the corporation has sustained cost-cutting and survival strategies due to the pandemic.
Kyari, who was represented by the Chief Operating Officer, Upstream, Mr. Adokiye Tombomieye, added that the new focus is now on increasing oil production, growing domestic gas utilisation and maturing hydrocarbon reserves to generate revenue for the nation.
According to him, the growth in the industry led to the escalation of key cost drivers namely: human resources, logistics, security, direct lifting and occasional maintenance, adding that these cost drivers have become a major source of concern to stakeholders
Kyari said although some of the reasons for the high cost were attributable to global economic factors, part of it was due to operational factors.
The oil and gas industry, he stated, was already facing challenges even before the COVID-19 pandemic which disrupted crude oil production, demand and supply chain as well as the financial markets.
He said these developments compelled oil and gas companies to either suspend or reduce the cost of operations in the face of shrinking profit margins, adding that the industry embarked on the renegotiation of ongoing contracts, deferment of capital spend and process optimisation.