Crude oil lifting: Nigeria seeks long-term contracts

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18 January 2017, FCT, Abuja – The Federal Government is planning to move Nigeria away from holding annual contracts for the award of contracts for the lifting of the nation’s crude oil.

The plan is to replace this with long-term contracts that would see the government select companies that would lift the crude for periods longer than one year as against the current arrangement whereby beneficiary companies were awarded rights for only a year.

For the 2017/2018 period, the Federal Government recently awarded the crude oil lifting contracts to 39 companies, including 18 Nigerian firms, 11 international traders, five foreign refineries, three national oil companies, NOCs, and two Nigerian National Petroleum Corporation, NNPC, trading arms.

Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, revealed the plan towards adopting long-term contracts in his recent online outline of his ministry’s plans for the new year, where he also hinted of government’s plan to undertake an oil and gas roadshow in the United States in the wake of the new administration of President Donald Trump, who assumes office, Thursday as America’s 45th president.

There would also be road shows in the United Kingdom and other parts of Europe, to attract more investors into the nation’s oil industry, the minister said.

In a podcast posted on his Facebook page titled: “Nigeria Petroleum Sector 2017 Outlook,” Kachikwu stated that his preference for a long-term crude oil lifting contract against the current short-term regime was based on the need to create some level of contract certainty in marketing Nigeria’s crude oil grades.

According to him, “We are going to firm up long-term markets, we must stop the year-to-year crude terms contracts and gas sales. We have to go to the long-term markets that is what everybody in the world is doing.

“Nobody is letting their oil to circulate and be priced inappropriately in the international market. You have got to find who your term partners are, what do they want, how do you sign five, six, seven, 10 years contract and gravitate away from the year-to-year contract that you see in this industry.”

The minister said the oil and gas sector would run in ‘rocket pace’ this year and that government also hoped to finalise all the Memorandum of Understanding, MoUs, it entered into with China and India on crude oil export during the year.

He said, “We are going to accelerate Federal Government revenues, look into areas where we could have made more money, so as to support the 2017 financing.

“We are going to be seeking to attract investments and complete all the MOUs; the one in China, the one in India. We are looking to do a roadshow to the UK, we are looking to do a roadshow to the US with President Donald Trump coming in.

“We are looking quite frankly to draw on the relationship that President Buhari has built over time. We are going to be conducting oil blocks allocations and marginal field awards to try and raise money for the government,” he added.

He disclosed other plans for the petroleum industry under the current fiscal year, which include conducting a new licensing round for the award of oil blocks and allocation of marginal fields in order to raise revenue for the country.

The minister promised that the long-awaited Petroleum Industry Bill, PIB, which has been renamed Petroleum Industry Governance Bill, PIGB, would be passed this year, while petrol consumption in Nigeria would be reduced from an estimated 50 million to 28 million litres daily, thereby saving about N3.2 billion daily from unaccounted volumes.

He stated that the areas of fiscal policy in the Petroleum Industry Governance Bill was being finalised and would be looked at by the executives arm of government and pushed out as the PIB.

He stated: “We have so much to do. We should be able to gazette our oil and gas policies and pass the PIB. We are going to accelerate Federal Government revenues by looking at more areas where the government can make more money.

“There is going to be improvement in royalty collection, improvement in early renewal of leases and every other area where we feel there is a gap.”

Kachikwu praised Nigeria’s “influential role” in stabilising oil prices, saying he expects oil to trade in the $60s for the better part of 2017.

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