Home Business & Economy Nigeria losing $14.2bn annually from JV oil contracts RMAFC warns

Nigeria losing $14.2bn annually from JV oil contracts RMAFC warns

Nigeria losing $14.2bn annually from JV oil contracts RMAFC warns

… Production to start declining after 2020

UGO AMADI

Despite significant potential for growth in the oil and gas sector, Nigeria’s oil production is expected to start declining after 2020 a new report has said.

Experts at Afrinvest Research in “The Nigerian Oil and Gas Upstream Report’ released recently revealed that deepwater exploration had slowed considerably due to the fiscal uncertainty caused by the failure to pass the Petroleum Industry Bill, which was first drafted in 2008.

They said without clarity on fiscal terms, exploration would not be a priority, especially as international oil companies already had significant inventories of undeveloped discoveries, both onshore and in deepwater.

“However, while we expect fiscal reforms in the industry to proceed at a slow pace, there may be respite when deepwater production sharing contracts expire between 2023 and 2028 as long-lead projects will depend on the fiscal terms negotiated upon renewal,” the analysts said.

According to the report, another major constraint for explorers is the lack of any new licensing round since 2007.

It said limited recycling of acreage and blocks had stifled drilling opportunities despite good yet-to-find potential, adding, “Many licences that should have been relinquished in 2017 are still held by the same companies.

“Given these issues, the absence of supportive regulation and reforms, funding constraints, high upstream costs and ongoing fiscal uncertainty, the pipeline of major projects is very weak. And so, we expect production to start declining post-2020, despite significant potential for growth.”

According to Afrinvest Research, Nigeria produces oil and liquids from over 220 fields, most of which are relatively small and have an average production less than 10,000 barrels per day.

It said, “Condensate and natural gas liquids are often mixed with crude oil at the field facilities prior to evacuation; hence, it is not possible to obtain the precise split of these fractions. As a member of the Organisation of Petroleum Exporting Countries, Nigeria is subject to crude production quotas, with the main joint venture operators allocated a share of the country’s quota.

“However, production has been largely unaffected by quotas – given exemptions and low cuts due to already low output – and is more impacted by crude thefts, operational issues and project deferrals.

The analysts added, “Also, civil unrest and bunkering regularly disrupts production operations in the Niger Delta. This insecurity remains a threat even though a lot of progress has been made since 2009.

Meanwhile, the Revenue Mobilisation and Fiscal Allocation Commission, RMAFC, has lamented that Nigeria is currently not benefitting from existing Joint Venture Contracts, JVCs, disclosing that the country is currently losing $14.235 billion annually in revenue from JVs.

Speaking in Abuja at National Policy and Development, NPOD, Summit 2019, with the theme: ‘Interrogating the change agenda,’ Tuesday, acting Chairman of RMAFC, Mr. Shettima Abba-Gana, noted that the federation earns between 55 per cent and 60 per cent share of all JVCs operated by NNPC, while companies under Production Sharing Contracts contribute between 15 per cent and 20 per cent to the Federation Account.

According to him, the federation has not benefited significantly from the respective JVCs due to continuous decline in crude oil production, arising from pipeline vandalism, asset integrity issues and general low investment in JV crude production over time. He said: “Currently, JV crude oil production dropped from 1.8 million barrels per day to between 700,000 and 900,000 bpd leading to loss of revenue of about $14.235 billion annually.”

Abba-Gana noted that PSC was introduced in 1993 and had not been reviewed ever since, explaining that the review was expected when oil prices reached $20 per barrel or 15 years of production, which was 2008, whichever came first. Also speaking, Brigadier-General Mohammed Marwa (retd), said he was optimistic the Federal Government had learned its lessons that change was not possible without requisite human and material resources.

According to him, government is all about combining human and material resource to deliver services and projects, adding: “This is why anti-corruption must be a recurring decimal in governance because without it the goats will eat the yams.”

For a better society

Total Views: 135 ,

NO COMMENTS

Leave a Reply