Market News

By Dare Olawin

Apparently worried by the country’s dwindling oil revenue, the Federal Government says it has concluded plans to take over all idle oil wells from operators holding on to them.

The government also threatened to revoke all licences given to individuals and companies that have refused to start oil exploration.

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, disclosed this on Monday evening at an event held in Lagos by The Petroleum Club.

According to the minister, Nigerian has lost about $30bn to low oil production in the past two and half year.

Earlier in his opening speech, the Chairman of The Petroleum Club, Mr Austin Avuru, said the club had invited the minister to speak on the topic, ‘Funding Our Way Out of the Current Crisis: Looking Up to the Oil and Gas Industry.’

Avuru expressed worries that the country’s production keeps depleting while the government keeps giving figures different from those of the Organisation of the Petroleum Exporting Countries.

Speaking, the minister also expressed concern that Nigeria was losing about 480,000 barrels of crude oil per day due to the Seplat/ExxonMobil crisis.

He said the asset was producing about 600,000bpd until the crisis began in 2022, saying the nation was losing millions of dollars daily.

The PUNCH reported earlier that ExxonMobil and Seplat Energy had in 2022 announced a $1.6bn sales agreement deal that would see Seplat purchase ExxonMobil’s complete shares in the state-owned Nigerian National Petroleum  Company Limited.

However, just when all hopes were high for the completion of the deal, a letter dated May 16, 2022, by the Nigerian Upstream Petroleum Regulatory Commission to ExxonMobil, stated that the deal could no longer hold because the Nigerian National Petroleum Company had exercised its right of pre-emption first refusal on the assets.

Right of pre-emption is a legal right to parties in a joint venture to be the first to be considered for any planned sale or takeover of assets in the JVs if either party chooses to trade them off.

According to reports, the NNPCL objected to the sale of ExxonMobil’s equity to Seplat and insisted on exercising its first right of refusal, after which the corporation reportedly made an offer above $1.6bn to ExxonMobil.

 Lokpobiri said, “For the past two and a half years, oil has been hovering around $80 per barrel. 480,000bpd, multiply it by two and a half years, it will give you about $34bn. When I was on the table, I was doing a rough mathematics. If one asset was doing about 600,000 barrels; but because of the problems which we are trying to resolve, production declined to 120,000 barrels, which means we’ve lost about 480,000bpd. Multiply it by $80, every day you get about $240m; multiply it by two and half years; we are talking of over $30bn. Inject that into our economy today, the dollar will naturally drop. This exchange rate is a matter of demand and supply”.

Lokpobiri maintained that his target was to ensure the country ramped up production through investments and grow revenue, stressing that was the mandate given to him by President Bola Tinubu.

He said, “One of the things we want to do to ramp up production is to see that any well that is idle has to be allocated to people. The Petroleum Industry Act gives the opportunity that any well that hasn’t been used in the past few years could be farmed out and be given to people who have proven capacity to do exploration so that we can boost production.

“I am engaging stakeholders, the IOCs, the Nigerian National Petroleum Company Limited to say, ‘Look, if you have a multiplicity of oil wells and you are not using them, we will apply the law’

“One of the reasons why our production is low is because we have too many shut wells, some of them contiguous to our marginal fields or oil wells. But by the time we take those wells in line with the law and give you people, and we give a timeline upon which you must produce, we will be able to increase production.”

The minister disclosed that out of the over 60 companies that got approvals in the last marginal bid round, only about had five started production, saying he would not hesitate to cancel unused licences.

“I don’t need to know you to renew or sign your licence and I will also not look at your face for me to cancel it. Out of those who benefited from the last marginal bid round, out of about 60, maybe only about three or four or five have started producing. Their licences will expire sometime this year because it is for three years, and renewable for another three years. But the condition is that you have a work plan. if you don’t follow your work plan, I also have the discretion to cancel it.

“If somebody has the marginal oil licence and doesn’t have the capacity to raise funding, you’re just impoverishing him,” the former senator mentioned.

He said the government would no longer allow any company or individuals to hold on to licences as souvenirs, threatening to farm them out.

“The ‘Big Boys’ are holding on to these licences as souvenirs, they are not doing anything about them. That is why we are farming them out. We will not allow any company to do that. Let’s start to do things differently,” he noted.

The minister further said that, “the worst thing that will happen to Nigeria is for our refinery to be fully rehabilitated and we will have to import crude from another country. That’s why I’m here to engage you that together, let’s change this story.

“In solving the funding challenges, pull your resources together, go into partnerships, so that you can fund the investments in this sector”.

He spoke further that divestment is not peculiar to Nigeria.

“Everywhere in the world, companies divest for different reasons. But in Nigeria, the ‘Big Boys’ are not running away, they want to divest and go deep offshore. This gives opportunities to Nigerians who have grown capacity to take these assets, maximise the productivity in these assets and increase production locally. And Nigeria will not suffer energy poverty,” he advised.

Lokpobiri described the West’s campaign against fossil fuel as hypocritical, stating, “America is doing 40mbpd and they want Africa to stop oil production. Nobody wants to stop fossil fuel production, but they want Africa to stop it. Don’t worry about this campaign, fossil fuel will not go away.”

He called on members of the club to provide alternative funding for the oil sector as done in the Middle East.

“Saudi Arabia and the United Arab Emirates don’t have the problems that we have because they have money to fund investments in their jurisdiction. The only problem we have as Nigerians is that we still look up to the West to get the funds we need to invest in our own oil and gas sector.

“But if all of you here put your money together instead of going individual ways, we will fund some assets in this sector. I think that will be an alternative solution to our issues.

“The West and the Middle East have money made from oil to expand their investments, but we don’t have that money. So, one of the solutions is to put your investments in the upstream and then scale down to the midstream and downstream. You cannot limit your investments to the upstream alone,” he remarked.

The former lawmaker expressed hope that the nation could produce the oil it consumes locally, saying, “I am looking for a situation where we will complete our refineries in Port Harcourt, in Warri, in Kaduna, with the Dangote Refinery coming up, with the couple of modular refineries that we have given licences (and I am ready to give more), so that we can produce what we need to consume, not only in Nigeria but the entire West African sub-region.

On the proposed African Energy Bank, he said the Federal Government would do its best to have it located in Nigeria.

“For the African Energy Bank, we are running with Ghana. It is now between Nigeria and Ghana on which of them will be able to get the headquarters of the African Energy Bank. The African Energy Bank starts with $5bn, if we have it in Nigeria, in four to five years, it will grow to About $120bn. Imagine what that will do to the GDP of our economy. We must try our best to ensure we get the headquarters of the African Energy Bank to Nigeria,” he informed.

He spoke further, “The solution is to talk to ourselves to reach out to the banks we have in Nigeria. We should put funds into our banks to make them strong enough. As a government, we will do everything globally possible to attract the desired investments. We are willing to remove all bottlenecks in the industry. The president has directed that we should remove all the bottlenecks. And that is why we are trying to remove the problem of OML425, the popular Malabu Oil Field.

“If we don’t attract investments, this resource we have will just be buried under the soil with no value addition. I’ve accompanied the president to several countries of the world and I’ve heard him tell potential investors that, ‘bring in your money and take out your money at will’. That means, come and invest and divest at will. We are not against any company that wants to divest.

“If in the next few years, we are able to ramp up production and increase our revenue base, we will not necessarily need the Big 5’s to monopolise our investment”.

He added that an oil company had refused to invest $4bn into the Bonga North oil project this year unless the Seplat/Exxonmobil crisis was resolved.

The PUNCH recalled that OPEC recently disclosed that the country’s oil production had depleted from 1.4mbpd to 1.2mbpd, a situation the minister said was being addressed to grow production.

Lokpobiri said he was optimistic that Nigeria could produce more than 2mbpd if there is sincerity.