Petroleum Sector Study in Nigeria

The Challenge of Growth, Jobs, Security &

Nigerian Content in The Petroleum Industry

Compiled by Gemstraworldwide, Inc; January 2006 Page 1 of 123

THE CHALLENGE OF GROWTH, JOBS, SECURITY

& NIGERIAN CONTENT

IN THE PETROLEUM INDUSTRY

FEDERAL REPUBLIC OF NIGERIA 2006

Which Way Forward? Compiled and Edited by Gemstraworldwide, Inc

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Oil Companies Not on Trial, Says Obasanjo From Josephine Lohor in Abuja, 02.28.2006

President Olusegun Oba-sanjo has admonished chief executives of oil companies not to see the Nigeria Extractive Industries Transparency Initiative (NEITI) as an inquisition or a judicial enquiry.

He said they should rather take the process as part of the reform agenda of his administration to engender transparency, openness and accountability in the sector.

Obasanjo was speaking at a meeting with the NEITI and heads of the oil companies operating in the country at the State House yesterday.

He said that the Federal Government decided on its own to form NEITI to be part of reforms it had embarked upon, adding that it was not forced on the country.

“NEITI is a very important aspect of our reform, and like the others, we are doing it because we believe it is good for us. It is in our best interest to do it and we can confidently tell the world that everything is accounted for,” he said.

While appreciating the fact that the beginning might not be easy, however, Obasanjo stated that the companies in the extractive industry should also be committed to transparency.

He said that companies in the extractive industries would have a better bargain because “it will be to your benefit in the international community.”

The President also challenged all companies that had not submitted required templates to do so, to enable the government meet its commitment for a March 31, 2006 global report.

Speaking earlier, the Minister of Solid Minerals and Chairperson of the NEITI, Mrs. Obiageli Ezekwesili, said that progress was being made with respect to the comprehensive NEITI audits.

She added that NEITI had called for Expression of Interest (EOI) from interested auditors, sent out Request for Proposal (RFP) solicitation documents to the shortlisted firms on January 31, 2005 and then the National Stakeholders Working Group (NSWG) went on to select the Hart Group to do the financial, process and physical audits of Nigeria’s oil and gas industry on March 15, 2005.

Ezekwesili also recalled that on March 30, 2005, NEITI invited the chief executives of all oil producing companies in Nigeria to the State House where Obasanjo reiterated that the audit by NEITI was one of the transparency programmes of his administration.

According to details, the response by oil companies to the NEITI audit programme, which was made available to THISDAY yesterday, the NEITI said till date, it was experiencing difficulties in assessing the general ledger and trial balance for Petroleum Profit Tax (PPT) assessment review. The agency also stated that it was experiencing difficulties in obtaining complete assess to the general ledger in order to validate PPT assessment.

"There are promises that this will change but valuable time is being lost. Information on royalties and licenses is awaited," it added.

Furthermore, while the auditors had set a March 8, deadline for the submission of information on Well Data, it stated that "a few companies have forwarded the data to us."

"A committee has been set up to work on Physical/Financial Volumes Reconciliation from 1- 3 March, 2006. The success of the work of this committee will determine whether existing timeline can be met or not," said NEITI.




NEITI Directs Oil Firms to Submit Fresh Production Figures By Mike Oduniyi, 02.14.2006

Nigerian Extractive Industry Transparency Initiative (NEITI) has directed multinational oil joint venture partners to deliver by Friday, February 17, new data on oil production as well as exports from Nigeria.

The operators namely Chevron, Mobil Producing Nigeria, Shell, Nigerian Agip Oil Company, Elf and Pan Ocean, were directed to provide the annual volumes of oil, gas and water produced in the past six years.

NEITI, which is currently auditing the Nigerian petroleum industry, said the request for the fresh exportable volumes of oil, was to be able to reconcile the different figures supplied by the oil companies and government agencies, and also to be able to reconcile Royalty payments.

THISDAY gathered that the directive was handed down to the oil firms at a meeting the NEITI “Physicals Team” held with the companies, the Crude Oil Marketing Department of the Nigerian National Petroleum Corporation (NNPC), Federal Inland Revenue Services (FIRS) and the Department of Petroleum Resources (DPR), in Lagos last Wednesday.

Sources close to the meeting told THISDAY that the NEITI team had noted that the discrepancies in the figures quoted by the oil companies, NNPC and the DPR and the Central Bank of Nigeria (CBN) on crude export volumes, stemmed from the different modes of calculating the oil flow.

It was noted that while export volumes provided by the oil companies are ones calculated from oil leaving the flowstations, the DPR took its recordings from the Oil Export Terminals.

According to the NEITI, there is always a difference between oil volumes leaving the flowstations and that of the Terminals. “Hence any unaccounted oil, between what left the flowstations and what arrived at the terminals, was not being demonstrated,” the NEITI said.

“It is essential that all volumes leaving the flowstations and entering the gathering network are shown and compared with volumes leaving the gathering system,” it said, adding, “the delivery of this data was agreed for a deadline of Friday, February 17th.”

Already, the DPR was said to have held reconciliatory meetings with Shell, Elf and Chevron, while the remaining companies were still arranging their own meeting.

Sources disclosed further that the producing companies were also asked to provide the annual volumes of oil, gas and water produced by each of their wells for the six years under review, by March 8.

The NEITI last month released the interim report of the first independent audit of Nigeria's oil and gas industry, which revealed serious weaknesses in the way the various government agencies account for oil exports.

The report of the NEITI auditors, The Hart Group, represented the first phase of the three-pronged exercise containing verified accounts of all payments and receipts as recorded in the account books of oil companies and relevant government institutions.

According to the report, the total amount oil companies claimed to have paid the Federal Government in 2003 and 2004 amounted $4.719 billion and $8.614 billion respectively, while




at the same period, CBN records showed the receipt of $4.822 billion and $8.932 billion.

NEITI officials said the group staged last week’s meeting to among other objectives, * give an overview of the “Physical” activity progress to date; *clearly define the objectives of the NEITI audit, which are to include provision of a clear presentation of production streams, both schematically and oil volumes produced.

*provide an overall Hydrocarbon Balance to demonstrate that all well fluids are accounted for, highlighting any unaccounted oil;

*provide reconciled oil volumes per shareholder; the volumes used for PPT and for Royalty calculations;

*establish procedural systems to protect the interests of Federal Government; and

*clarify outstanding issues and establish a timetable to resolve them.

2005 Bid Round: FG Nets $1bn Revenue Nigeria, Sao Tome approve Addax operator of JDZ oil block

By Collins Edomaruse in Abuja and Mike Oduniyi in Lagos, 02.08.2006

The Federal Government yesterday said it realized about $1 billion (N130 billion) from the auction of oil acreages at the 2005 Bid Round conducted by the Department of Petroleum Resources (DPR) last August.

Also, the Joint Develop-ment Authority (JDA), the body administering hydrocarbon resources in the Joint Development Zone, has approved Swiss oil firm, Addax Petroleum, as the operator of oil block 4 in the Gulf of Guinea.

Minister of State for Petroleum Resources, Dr. Edmund Daukoru, while officially declaring the licensing round closed in Abuja, said that revenue represented what he called the full payments made in bonds by 25 firms that fulfilled all conditions set out for the exercise.

He, however, said that the list of the 25 firms would not be available until another week when it was expected that all relevant bodies in the industry, would have completed the audit of the process.

The minister, at the event that was attended by the industry’s big names like Group Managing Director of Nigerian National Petroleum Corpora-tion (NNPC), Engineer Funsho Kupolokun, and the Ambas-sador of Norway to Nigeria, Mr. Tore Nedrebo, explained that of the 44 awards that were made at the end of the exercise, 25 companies made full payments for the blocs they won, eight of the firms dropped partial payments while others couldn’t fulfill any financial obligations associated with the exercise.

“But we have ordered that the monies paid by the firms that lost out, just about $83m, be refunded to them immediately.”

The minister also said that, “the government, in keeping with the mood in the country, has ordered the DPR to refund all payments partially made by some companies as a way of mitigating their losses. In other words, those who made full payments, gained their blocs, those who made partial payments had their deposits back while those who did not make any payments at all and the other second category, are advised to take another opportunity which comes up before the end of this year, but must learn to bid more sensibly.




He described the bid rounds as encouraging, adding that the post-bid process holds more potential for improvement in the industry. “What we have done in the upstream, is the replication of what is happening in the downstream. If in the process, there is default, we blame that on first time operation, because funds are very difficult to access from the banks. But if it were in the downstream, banks are always ready to finance obligations to export cargos of downstream products.”

Earlier, the report of the committee of international oil experts that reviewed the bid process was presented to the federal government and the participants.

Chairman of the panel and Norwegian oil expert, Mr. Willy Olsen, expressed satisfaction, on behalf of the panel, with the process, which he scored as transparent, but added there was still plenty of room for improvement.

Presented by the Norway’s Ambassador, the report indicated that: “The 15 members of review panel had extensive discussions on potential improvements in future licensing rounds in Nigeria. The members of the panel represented both international oil companies and indigenous companies. Representatives from the US Embassy, the British High Commission and the Canadian High Commission took an active part in the review. Three representatives of the Norwegian Petroleum Directorate were also members of the review panel as part of the close and ongoing co-operation between DPR and the Norwegian Directorate.

“As part of the review, a major questionnaire was sent to 200 companies that had showed an interest in the 2005 bid round. The panel had, when it met, received 35 responses from a wide range of international and indigenous companies, some of which had won in the bidding round, others that had lost. The majority of the companies saw the bid round as a step in the right direction, but they also emphasized the potential for improvements. Future license rounds should be organised quite similarly to the 2005 round, but the message is that you have to be firm – and not accept alterations after the bids have been delivered.

“ The review panel recommended that a firm schedule should be established to close the 2005 bid round. A clear recommendation in the panel's report was also to allow sufficient lead time to plan and prepare the next license round with a focus on key objectives and processes. The next round has to be executed with firm terms and schedules.

Receiving the report, Daukoru said government would look at the report dispassionately. He assured the participants that the government was preparing for another bid round adding that the forthcoming exercise would afford the authorities the opportunity to right whatever imperfections were noticed during the previous exercise.

Meanwhile, the Joint Development Authority (JDA) has approved Addax Petroleum, as the operator of oil block 4 in the Gulf of Guinea. Addax replaces US independent oil firm, Pioneer Natural Resources which pulled out from the consortium with ERHC Energy, the US-based company in which Nigerian indigenous oil firm, Chrome Energy, has a majority stake.

President and Chief Executive Officer of ERHC Energy, Mr. Walter Brandhuber told newsmen yesterday that Addax would be bringing to bear on the consortium, its wealth of experience in oil exploration and production particularly in Nigeria’s offshore area.

"The JDA has approved Addax as the operator for block 4. The approval was given last week," Brandhuber said, adding that ERHC has already communicated to the JDA its readiness to sign the Joint Operating agreement (JOA) and Production Sharing Contract (PSC) for block 4.

According to the ERHC chief executive, the consortium is now ready to sign the Joint




Operating Agreement (JOA) and the Production Sharing Contract (PSC) agreement on block 4. “If the JDA calls for the signing now, we are optimistic that we are prepared to sign the PSC," he said.

A spokesman for the JDA also confirmed the approval for Addax saying "I can confirm that both parties (Nigeria and Sao Tome) represented in the Joint Ministerial Council have now approved the Addax operatorship of block 4.”

By the JDA approval, Addax has now replaced all the major American oil firms in the consortia with ERHC Energy in exercising all the rights granted it by the JDA in the five oil blocks awarded last May. The consortia included the ERHC/Devon/Pioneer in Blocks 2 and 3.

Meanwhile, the Joint Ministerial Council (JMC) of the JDA yesterday, agreed to convene a meeting on February 28, 2006 in Abuja, to consider and approve the Production Sharing Contract (PSC) guiding operations in the five oil blocks awarded last year.

The JMC, which consists of representatives from Nigeria and Republic of Sao Tome and Principe, which began meeting on Tuesday, also rejected the judicial report purportedly issued by the Office of the Attorney General of Sao Tome and Principe, condemning the process of award of the blocks.

The Sao Tomean Attorney General late last year, released a report alleging "serious flaws" in the way the blocks were awarded. The said several of the companies chosen to explore the JDZ blocks, lacked the technical know-how and the financial muscle necessary to carry out the work, and that the procedures used to select the companies which received concessions contained serious flaws and did not satisfy the minimum standards required for the award of such licenses.

The tiny archipelago island also picked holes in the preferential rights granted ERCH Energy, in many of the blocks. ERCH Energy is a quoted company on the New York Stock Exchange in which a Nigerian indigenous oil company Chrome has major equity interest. The country said it would lose about $58 million in expected income if the award to ERHC was allowed to stay.

The Joint Ministerial Council has the overall responsibility for all matters relating to the exploitation and exploration of hydrocarbon resources in the JDZ. It has the final say on all matters bordering on the treaty.

At stake is the princely sum of $283 million to be earned from the award, based on the signature bonuses offered by the winners of the blocks. The amount is made up $71 million for Block 2, $40 million on Block 3, while partners in Block 4 including Conoil, will pay $90 million signature bonus. The signature bonus on block 5 fetched $37 million while Block 6 fetched $45 million.

According to the treaty, Nigeria will get 60 percent of the revenue and Sao Tome, 40 percent.

Shonekan Blames Brain Drain on Poor Wages From John Iwori in Port Harcourt, 02.28.2006




The Chairman of the Presidential Committee on the Consolidation of Emoluments in the Public Sector in Nigeria, Chief Ernest Shonekan has blamed the unrealistic wage system in the public sector for the continued migration of capable hands from the sector to other sectors of the economy, including going abroad.

Shonekan who made the disclosure in his speech at the South-South Zonal interactive session of the committee held at the Presidential Hotel, Port Harcourt said the Federal Government was desirous of streamlining these disparities with a view to motivating public sector workers for greater productivity.

Shonekan who was the former Head of the Interim National Government, described a situation where people with similar educational qualifications and experience received different salaries for work of the same value, saying that the trend was capable of reducing the morale of public servants and cause labour mobility.

The former number on citizen of the country disclosed that his committee would put in place a mechanism for effective adjustment in the income of workers on a regular basis in accordance with the economic realities, without necessarily setting up panels or commissions, saying that the measure would enhance transparency, stability and industrial harmony in the country.

He said the committee would come up with a remuneration package that would be sufficient to attract and retain the best materials in the public sector, and enjoined Nigerians especially public sector workers to contribute meaningfully to the success of the work of the committee. Shonekan also disabused the minds of the people from the erroneous impression that the setting up of the committee was a political gimmick, assuring that his committee would develop a plan of action that can be implemented on short, medium and long term arrangements, and thanked the Rivers State Government for accepting to host the committee.

In his key note address, the Rivers State Governor, Dr. Peter Odili called for a drastic, radical and well intentioned intervention in the emolument of both public and private sector workers in the country, saying that all workers go to the same markets.

Odili said the situation in the South-South and Rivers State in particular was special since according to him the presence of oil and gas companies and the remuneration paid have rendered the wages in the public sector so inconsequential.

“So you have our poor workers, labourers, civil servants going to the same market to buy the same food that their neighbours who are paid in hard currencies also buy from”, Dr. Odili stressed, calling for some bridging of the gaps between them, so that those working in the public sector would not feel unhappy.

“Let us identify with this efforts by ensuring that we work out a mechanism that ensures that government does not spend one naira more that she needs to spend on any issue”, the Governor opined, enjoining the committee to adopt the Principle of utmost frugality in its recommendations.

Odili also favoured a system where those at the same level in the public sector are made to do the same amount of work positing that the package of incentives should be tied to productivity, adding that automatic promotion was not fair to those who work hard.

He argued, that salaries and wages should not be uniform across the country, but should reflect the peculiar differences and problems in such areas in line with the principle of federalism.




He assured the Committee of the support of the people of the South-South in the realization of set goals and in ensuring that their recommendations are given necessary legislation that would enhance its implementation.

The interactive session which has already been held in South West, North Central, and North West Zones of the Country attracted participants from all the state in the zone, and those from the public sectors of the economy who presented papers at the forum.

Nigeria's external reserves hit $28.26b, says CBN By Jane Frances Ajemba

NIGERIA's gross external reserves at the end of December 2005 increased by 4.4 per cent to US $28.26 billion from US $27.08 billion recorded in November 2005.

Also currency in circulation at N553.3 billion in December, 2005 rose by N6.0 billion or 1.1 per cent over the level in the preceding month.

In its just released monthly report for December 2005, the Central Bank of Nigeria (CBN) disclosed that at the current rate of foreign exchange commitments, the level of reserves could finance about 18.4 months of foreign exchange disbursement, compared with 21.8 months in the proceeding month.

The report also noted that the foreign exchange inflow and out flow through the CBN, in December 2005, amounted to US $2.70 billion and US $1.49 billion, respectively, representing a net inflow of US $1.21 billion.

Compare with the respective levels of US $4.10 billion and US$1.19 billion in the proceeding month, inflow declined by 34.1 per cent, while outflow increased by 24.6 per cent, the report stated.

Cumulative inflow and outflow through the CBN from January to December 2005 stood at US $33.43 billion and US $22.98 billion, respectively, compared with US $24.97 billion and US $15.34 billion in the corresponding period of 2004.

Provisional data on aggregate foreign exchange flows through the economy in December 2005, indicated that total inflow fell by 24.9 per cent to US $ 4.19 billion.

Oil sector receipts, which accounted for 52.5 per cent from the proceeding month's level to US $2.20 billion.




Non-oil public sector, however, rose substantially by 166.4 per cent and accounted for 12.0 per cent of the total, while autonomous inflows increased marginally by 0.6 per cent and accounted for 35.55 per cent of the total.

The report also noted that at US $1.54 billion, aggregate foreign exchange outflow from the economy rose by 23.7 per cent.

The increase was attributable to the rise in other official payments, which increased from US $ 0.20 billion in November to US $0.75 billion in December 2005.

Others, namely, drawings in L/Cs, funding of the Dutch Auction System (DAS) and autonomous outflows increased by 77.0, 1.1 and 0.3 per cent to US $37.57 million, US $646.99 million and US $51.22 million respectively.

National priority projects and external debt service, however, declined from their levels of US $63.06 million and US $274.34 million to US $0.0 million and US $55.91million, respectively, during the review period cumulative inflow and outflow through the economy during the period January through December 2005, stood at US $50.19 billion and US $23.58 billion, respectively, compared with US $ 35.40 billion and US $15.85 billion in the corresponding period of 2004.

Consequently, the cumulative net inflow stood at US $26.62 billion compared with the net inflow of US $19.56 billion in the corresponding period of 2004.

Talking specifically on the currency in circulation, the apex bank disclosed that the rise in the currency in circulation was traceable to the increase of N8.4 billion at 1.8 per cent in currency outside the banking system as vault cash declined during the period.

The CBN also disclosed that total deposits at the CBN amounted to N598.5 billion, indicating a decline of N49.9 billion of 7.7 per cent from the level in the preceding month.

This, it said was attributable entirely to the fall in federal government deposits, which declined by N72.5 billion of 15.5 per cent.

The report noted that the shares of the federal government, banks and "others" in total deposits at the CBN were 65.8, 27.3 and 6.9 per cent, respectively, compared with the shares of 71.9, 23.8 and 4.3 per cent in November, 2005.




Nigeria to repay foreign debts with excess oil funds From Madu Onuorah, Abuja

NIGERIA yesterday broke the ice on the modalities for repaying the balance of $12 billion it owes the Paris Club of creditors.

The country's economic managers, drawn from the federal economic team and the 36 states of the federation, who met in Abuja, agreed to clear the debt from the nation's excess crude oil earnings. They met under the umbrella of the National Economic Council (NEC), chaired by Vice President Atiku Abubakar.

Other members of the Council are the 36 state governors, officials of the Federal Ministry of Finance, those of the Debt Management Office (DMO) and the President's Chief Economic Adviser.

The council unanimously agreed that the incidence of the repayment of the debt relief granted Nigeria by the Paris Club must fall on the federal and state governments, which incurred them.

The Paris Club of creditors last year cancelled about $18 billion or 60 per cent of the nation's debt. But under the agreement for Nigeria's exit from debt over-hang, the country is to buy back the remaining $12 billion or 40 per cent on concessionary basis.

The meeting had considered two options: Whether to take the outstanding debt as a national issue and pay centrally with the Federal Government and the states equally bearing the cost; or whether the Federal Government and the states should pay the debt according to the amount owed.

The Council settled for the second option and mandated the Federal Government to pay off the entire debt stock through the proceeds of the excess crude fund while the Ministry of Finance and the DMO were asked to work out the amount each state and the Federal Government would pay.

Under the arrangement, some states will have deficit to collect from their share of the excess crude oil fund based on the amount of foreign debt owed by them while some will have little to pay.

The Governor of Imo State, Chief Achike Udenwa, flanked by the Deputy Governor of Lagos State, Mr. Femi Pedro, the Deputy Governor of Kebbi State, Alhaji Suleiman




Argungu, and the Economic Adviser to the President, Dr. Osita Ogbu, said the option was the only rational way to ensure that states, which owe less do not subsidise their counterparts and the Federal Government with huge debt portfolio.

According to Udenwa, "each state pays what it owes. I think that it is more rational that each state pays what it owes. Each state and the Federal Government are to pay their debts through the excess crude fund. This was agreed and the details worked out by the Federal Ministry of Finance and the DMO."

Pedro added that under the preferred option, "certain states will still have shortages. Certain states would have to lend to those with shortages. Externally, the debt would have been wiped out. But internally, states and the Federal Government owing would have to pay what they owe."

Other issues addressed by the Council include:

• draft bill for a National Health Act, which seeks to create a standard process nationwide with respect to the delivery of health services;

• accelerated immunisation exercises in Nigeria with states and local councils taking ownership and immunisation fund. States will supervise and monitor immunisation services at the council and health facilities with progress report submitted to the Council in six months;

The Council was briefed on the avian influenza with agreement that the state governments should collaborate, partner and cooperate with the Federal Government to fight the flu.

The meeting also discussed deducting at source of long standing states/councils' liabilities to the Federal Government and Value Added Tax (VAT) accounts as at May 2004.

The Council equally agreed on the need for all residents to stay and be counted in their places of residence during the forthcoming national census.

Nigeria's workforce is ageing, says Adegoroye From Martins Oloja, Wellington, New Zealand




THE essence of Nigeria's reform agenda was highlighted yesterday at the on-going Commonwealth Advanced Seminar on Leadership and Change in Public Sector in Wellington, New Zealand while focussing on the nation's civil service.

The Director-General of the Bureau of Public Service Reforms, Dr. Goke Adegoroye, shared his experience as a reform leader who has been facing some serious challenges of selling the agenda at home. He also warned of dire consequences if the current trend of ageing officers in the country's public service was not addressed.

Adegoroye revealed that unless the Federal Government urgently implements the policy of strategic right-sizing, with a view to injecting fresh blood into the system, the federal civil service in Nigeria faces the danger of imminent collapse.

He attributed the dismal development of the service to 12 years of embargo on employment. He also disclosed that the negative indices just discovered in the system explained why the Federal Government had been trying to ensure that the reform process was fast-tracked to fill the gaps created by the ageing workforce and succession crisis in the service.

The report he showed to participants identified ageing workforce, succession crisis and poor graduate optimal age band as critical factors that might soon ruin what was left of the service.

According to him, a survey of 20 ministries and agencies showed that the Federal Ministry of Works tops the list of ageing workforce with 94.43 per cent, followed by Labour and Productivity Ministry with 95.37 per cent. The Petroleum Resources Ministry has 94.87 per cent, Inter-Governmental Affairs Ministry 94.70 per cent, Commerce Ministry 94.08 per cent, Ministry of Industry 93.81 per cent, Ministry of Solid Minerals 92.20 per cent and Women Affairs Ministry 91.97 per cent.

Others are Culture and Tourism Ministry 91.82 per cent, Housing and Urban Development Ministry 91.03 per cent, Transport Ministry 90.84 per cent, Water Resources 90.36 per cent and Defence Ministry 89.82 per cent.

The rest are Aviation Ministry 89.79 per cent, Finance Ministry 89.69 per cent, Power and Steel 88.94 per cent, Communication Ministry 88.06 per cent, Ministry of Co-operation and Integration 87.56 per cent, Police Affairs Ministry 86.85 per cent, Police Service Commission 78.02 per cent and National Poverty Eradication Programme (NAPEP) 66.41 per cent.




According to the study, the ratio of graduates on (Grade level 08-17) was less than 50 per cent in 11 ministries out of the 20 ministries analysed and over 50 per cent in nine ministries.

The ministries of Police Affairs, Commerce as well as Labour and Productivity were said to have had the lowest graduates to a total officer ratio at 30.2 per cent, 32.6 per cent and 34.7 per cent respectively. The Women Affairs Ministry has 70.5 per cent, Finance Ministry with 70.7 per cent and Water Resources 72.3 per cent.

The report warned of dire consequences if the trend was not checked. It declared: "These results have serious implications for both the quality of output and the productivity of public servants as well as the sustenance of the service itself."

The analysis shows that while the total number of graduates is lower than 50 per cent of the total number of officers across the Grade Levels, a majority of these graduates is not in the age band that makes them agile for the assignments of their Grade Levels.

It queried: "How effective do we expect a 56-year old on GL .10 doing the work of Protocol Officer? Or what is the relative spin-off effect on the system, of the training given a GL.12 or 17 who is already 59 years old compared to that of officers of optimal age bands on these grade levels?"

The report says detailed analysis of succession potential across Grade Levels of the ministries reveal that the middle levels- GL 12 -14 and to a large extent, the lower officer levels GL.08-10 have virtually collapsed in all the ministries and agencies analysed. Reason: Zero number of Graduates of Optimal Age (GOA) with corresponding 100 percent ageing were recorded in at least one Grade Level within the middle level 12-14 in all 14 of the 20 ministries analysed.

Accordingly, out of the six ministries that do not record zero in any of the middle level GL 12-14, Defence, Housing and Urban Development, Industry, Transport and Water resources record zero GOA in at least one of the lower officer Grade Levels GL.8-10. In other words, only the ministries of Defence, Housing as well as Urban Development and Power and Steel, out of the 20 analysed, did not record zero GOA in any Grade Level from GL08-14. Power and Steel got the highest succession potential of 19.12 percent.

In contrast, 11 out of the 20 ministries analysed scored zero GOA in at least three Grade Levels. According to the report, the worst case scenario occurred in the




ministries of Culture and Tourism, Inter-Governmental Affairs, Petroleum Resources and Women Affairs with zero Graduate Optimal Age in at least five Grade Levels.

The report added: "With zero GOA and consequently 100 percent Ageing in the five succeeding Grade Levels and another zero on Grade Level 16 for the Inter-Governmental Affairs Ministry, four succeeding Grade Levels 10-14 for Petroleum Resources Ministry, and on Grade Level 12-15 and another Zero for Grade Level 09 for women Affairs Ministry, these Ministries appear to be heading for total collapse".

Adegoroye, however, told the participants that the pay reform being pursued by the Federal Government and recruitment of first class graduates that the President had authorised would take care of the succession crisis and ageing workforce.

Adegoroye said that the Nigerian civil service that evolved from colonial rule still "has a serious challenge" of aligning individual interests with those of the nation.

He admitted, however, that the situation was not incurable, as it was already being seriously tackled by President Olusegun Obasanjo. Adegoroye told the participants that the implementation of the reform agenda had been facing some "parallax snaps", a critical element he identified as capable of slowing down the rhythm of the process.

He said: "The service has a serious challenge in its hands --the challenge of soul searching and alignment of interests to ensure that our interests are not self -- designed but indeed national interests; through proactive institutionalisation of a service anchored on globally cherished public service ethics and values".

The former Director-General of FEPA, who told the senior public officers and civil servants from the Commonwealth countries that President Obasanjo is the main driver of reforms in Nigeria, explained his theory thus:

"The main driving force of the Nigerian reforms is the President himself. This in itself has generated widespread anxieties among Nigerians on what will happen to reforms post 2007. The President is supported by a handful of political appointees, who also constitute the economic team. Buoyed by the success achieved in their respective portfolios, this group of political appointees readily gets the listening ears of the President. Arising from this, is the emerging trend where they are constant targets of most attacks on the president by people who feel uncomfortable about their perceived influence on governance and the president".




He continued: "The Economic Team regularly derides the Civil Service as being anti-reform, too slow, ultra-conservative, lacking in initiative and utterly incapable of reforming itself. The top hierarchy of the Civil Service, on the other hand, sees political appointees as a bunch of "short-timers" who show no respect for laid down rules, regulations and procedures in their inordinate pursuits of political goals. This has arisen because the reform response trajectories of our bureaucratic and political drivers are out of alignment. In the middle of the divide is the Bureau of Public Service Reforms whose success in facilitating reforms at all sectors of governance is largely contingent upon its ability to bridge the divide".

The technocrat, who holds his doctorate degree on Ecophysiology from the University of British Columbia, in Vancouver BC Canada in 1980, said he had taken solace in the light which had appeared at the end of the tunnel while reviewing his one year in office, in February last year.

His words: "I believe that we have broken down the initial divide that existed between the political appointee drivers and the core civil service drivers of reform, and begun to remove from our vocabulary the stereotype-induced stigmatisation that enveloped the reform agenda at inception."

He continued: "The positive note of my assessment was more deliberate than out of conviction. It was designed to engender a centrifugal spin of the polar divides towards a perfect alignment at the centre'.

Adegoroye spoke in the presence of his current supervisor, Mallam Nasir el-Rufai, a member of the team he called "short timers." He said that what he noticed as "parallax trouble" occurred in August 2005 at the Presidential Retreat on Public Sector Reforms and Private Sector Partnership, where Obasanjo said of the Head of Service of the Federation:

"As a civil servant, the head of the civil service is often caught between loyalty to the civil service, his constituency and national interest, but I am happy to say that more often than not, he has stood on the part of national interest".

Adegoroye explained how the President's statement affected his psyche this way: "Of course there was a sound applause for this statement, particularly from civil servants, but for me, over several days later, I could not stop ruminating on the full meaning of the statement. This was because, like the HCSF, the Civil Service is my constituency and I owe it my loyalty. Many questions went through my mind:




"Are the loyalties to the Civil Service and national interest mutually opposing? Isn't the bureaucracy the traditional guardian of national interests? At what point was the bureaucracy overtaken in this sacred duty by the short-timers? Outside national interests, what other interests do civil servants pursue?"

The former Director of Special Duties in the SGF's office concluded the grave implications of the parallax (apparent change of position) this way:

"I believe, and very strongly too, that when political leaders, particularly the President of a nation, begin to think that Civil Service's interests are outside national interests then there is a crisis of confidence. It is not enough to strive to align Civil Service interests with national interests; because, no matter whatever angle one looks at such alignment (political drivers' or the bureaucracy's), there would always be an error of parallax. The underlying issue is the speed and projectile of the responsiveness of the bureaucracy to reform initiatives".

He said that is the challenge that has affected the colour of the reform in a diverse and big country like Nigeria.

But he told the audience that, the serious challenge had been tackled as the Federal Executive Council had last week approved some critical guidelines that would certainly put the reform on fast track very soon.

Earlier on Monday, when the seminar was opened, participants were treated to the beauty of integration in New Zealand when the Maori, the indigenous people of the four million nation, welcomed them in their cultural centre and temple built right inside the Victoria University in Wellington.

In the evening, when the Office of the Mayor of Wellington organised a reception for the participants at the City Council Chambers, it was the indigenous people who also welcomed the participants from all over the world in their traditional way and in their dialect. The children who also entertained were simply magnificent in their rendition in Maori language.

Even the FCT Minister, who later responded on behalf of guests, said he was thrilled by "the challenge of integration" that he witnessed in Wellington.

THE PUNCH, Tuesday, February 21, 2006




Nigeria attracts 75 % of foreign direct investment in West Africa

07-06-00 Nigeria attracted $ 7.7 bn as foreign direct investment between 1994 and 1999, representing three quarters of the total amount in the West African sub-region, said a report issued by the African Development Bank. The report, which was made available to Xinhua, said that most of the investment Nigeria attracted went to the country's oil and gas sector. "The expectations are that Nigeria's return to civilian rule will attract even larger inflows over the next few years, while the region as a whole is likely to become more popular with foreign investors, as the economic reforms take root," the document said. According to the document, Nigeria's current economic liberalisation and policy reforms designed to encourage the private sector are likely to enhance its appeal to investors especially in the fields related to infrastructure development, construction and transportation.

The pace of economic reform in West Africa accelerated in 1999 mainly as a result of the return to civilian rule in the region's largest economy, Nigeria, and the quickened steps taken towards regional co-ordination of monetary and fiscal policies by the Economic Community of West African States, the document said. Nigeria's money supply growth has been reduced to less than 20 % in recent years as a result of the declination of inflation, the document said, noting that "Nigerian inflation which peaked at 72 % in 1995 fell steeply to 8.21 % and 10.32 % in 1997 and 1998, respectively." The document praised Nigeria's new democratic government which it said has chosen an expansionary path that will raise the economic growth rate to nearly 4 % in 2000. The document also predicted that Ghana is expected to recover from its economic recession in 1999 and score a 5 % growth this year.

Source: Xinhua via Newspage

Nigeria has highest foreign direct investment in sub-Saharan Africa

11-05-04 As a result of the growth rate of Nigeria's upstream activities and operation, the nation has been identified as having the highest foreign direct investment (FDI) in sub-Saharan Africa with annual investment put at between seven and $ 8 bn. The Group General Manager, (GGM) of the National Petroleum Investment Management Services (NAPIMS), Engr. Phillip Chukwu said the emerging frontiers in the nation's deepwater has been the attraction of investors lately. He noted that




Nigeria's deepwater presently is the focus and it attracts more players than any other province in the world.

He said that Nigeria has many oil companies which comprise the most reputable international companies that operate elsewhere in the world. These companies come because the emerging trend is important to them. The deepwater of Nigeria is important, he reiterated. To derive optimal advantage of this development, Chukwu said that the Federal Government is taking its local content targets seriously and wants many indigenous entrepreneurs to participate in various activities in the industry. This, according to him, is to bridge the capacity gap particularly now that focus is shifting from land and shallow water to deep and ultra deepwater.

He said: "We have taken some giant steps at looking at ways of helping indigenous entrepreneurs. We structure our contracting processes in a way that will help them (Nigerian entrepreneurs) to get jobs. Nigerians have fabricated a number of facilities including wellhead, platforms, and pressure vessels, among others, in Nigeria. By doing this consistently, Nigerians who have acquired skills will now be able to exhibit their skills.” “Creating avenues for participation in the activities of the industry will also help to check the restiveness in the Niger-Delta. We have also taken the initiative that all jobs meant for Nigerian companies are done as far as possible in the country.” “When many activities are done in-country, many youths will be gainfully employed. I do not think that people would like to fight, kidnap and destroy facilities when they are gainfully employed. This is part of the strategy government applies to ensure there is peace or minimal unrest in the oil-producing areas.” “To ensure maximum security of investment of investors in the industry, the government has in addition to provision of employment, directed that oil companies make provision for community development and as much as possible, integrate the hosts in the business. This will go a long way in establishing better industrial relations,” the NAPIMS boss said.

Meanwhile, the current downsize of workforce by various multinational oil companies is causing rift in the industry. The national bodies of the oil workers, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas workers (NUPENG), it was gathered, are brainstorming on how to check the indiscriminate sack of their members and also how to ensure that the affected staff get their due benefits. For example, Texaco Nigeria workers have been on strike for about three weeks over benefits for their members who have been marked for sack, still there is no




indication that the solution is forthcoming. The same issue is hanging in Shell and Schlumberger, among others.

Source: Vanguard

The paper investigates the impact of foreign direct investment (FDI) on economic growth in Nigeria, for the period 1970–2001. The ECM results show that both private capital and lagged foreign capital have small, and not a statistically significant effect, on the economic growth. The results seem to support the argument that extractive FDI might not be growth enhancing as much as manufacturing FDI. In addition, the results show that export has a positive and statistically significant effect on growth. Financial development measured as M2/GDP ratio has significant negative effect on growth, which might be due to high capital flight it generates. Finally, the results show that labour force and human capital have significant positive effect on growth. These findings suggest the need for labour force expansion and education policy to raise the stock of human capital in the country.

The paper investigates the impact of foreign direct investment (FDI) on economic growth in Nigeria, for the period 1970–2001. The ECM results show that both private capital and lagged foreign capital have small, and not a statistically significant effect, on the economic growth. The results seem to support the argument that extractive FDI might not be growth enhancing as much as manufacturing FDI. In addition, the results show that export has a positive and statistically significant effect on growth. Financial development measured as M2/GDP ratio has significant negative effect on growth, which might be due to high capital flight it generates. Finally, the results show that labour force and human capital have significant positive effect on growth. These findings suggest the need for labour force expansion and education policy to raise the stock of human capital in the country. ‘Brass LNG, Key to Full Value for Natural Resources’ From Onyebuchi Ezigbo in Abuja, 02.21.2006

Group Managing Director, Nigerian National Petro-leum Corporation (NNPC), Engineer Funsho Kupolokun, yesterday described the Liquified Natural Gas project located in Brass Rivers State, as the centre piece of the nation's strive to achieve full economic value for her huge natural gas resources. Kupolokun, who represents the Federal Government’s interest as Chairman of LNG




board, said government considers the gas project as fundamentally sound, with excellent value propositions. In a statement shortly after holding a closed door meeting with stakeholders, Kupolokun said the Brass project is proceeding on the original design premise of two trains of five MTPA each. He said the Front End Design Engineering Design (FEED) stage is completed, and that the project is about to commence on the Engineering Procurement and Construction (EPC) tender process. Contract for the EPC, NLNGSix project at its existing liquefied natural gas facility, was awarded to a joint venture team, which includes KBR, the wholly owned engineering and construction subsidiary of Halliburton (NYSE:HAL). The partners of the equal joint venture team, known as TSKJ, include Technip, Snamprogetti, KBR and JGC Corporation. This is the fourth project that TSKJ has contracted with NLNG. Kupolokun said government is presently undertaking a structural and strategic re-alignment of gas projects in the country, with operators re-examining various gas monetisation opportunities and optimising the use of available gas reserves. "Government will ensure that such re-alignment matches national interests and that any gas project strategic to the nation has a strong and committed shareholders’ group and sufficient physical availability of gas reserves to satisfy the plant production requirements,",he said. Nigeria LNG Limited is a joint venture company incorporated in May 1989. Ownership interests are as follows: NNPC 49%, Shell Gas B.V. 25.6%, TFE 15% & Agip International (N.A.) 10.4%. Shell Gas B.V. is the Technical Adviser. NLNG was developed to be a major exporter of LNG, targeting the Atlantic Basin markets. In addition to allowing Nigeria to monetise its extensive gas reserves of over 160 tscf, the Project will have significant environmental benefits as it will reduce the amount of associated gas currently flared in Nigeria by oil producers in accordance with Nigeria's stated objective to eradicate gas flaring by 2008. This objective has significant strategic rationale, as the shareholders of NLNG are also shareholders in the largest upstream gas producing fields in Nigeria.

FG Signs N52bn Contract for 13 Gas Turbines From Onyebuchi Ezigbo in Abuja, 02.21.2006

Federal Government yesterday signed a $400m (N52 billion) contract with Japanese firm, Marubeni International for the erection of 13 power generation gas turbines as part of the efforts to actualize the seven power stations sited in the Niger Delta region.




The contract agreement with Marubeni, which was sealed in Abuja between the Minister of Power and Steel, Senator Liyel Imoke and Managing Director of Marubeni, Mr. Toru Sato, is expected to deliver 1,463MW and has a completion deadline of two years. A statement by the Chief Press Secretary to the Minister, Mr. Clinton Oni said the proposed power stations that are to benefit from the contract are those of Calabar with 551MW, Eyaen (451MW) and Sapele (451MW). In a speech at the signing ceremony, Imoke applauded FG for taking a bold step to tackle the development of power which according to him "is not just to meet the needs of today, but a system that would sustain the needs of many years to come". The Minister 10% said in keeping with the contract terms, 10% of the contract sum will be paid in local currency while the balance are to be in foreign currency. He urged the contractor handling the project to ensure compliance with standards as well as deadline set for it. Sato assured that the company would move to site this month to commence work. FG late last year put up a proposal to execute 7 new thermal power stations to be located in the Niger Delta region as part of the strategy to enable the country generate 10,000MW of electricity by 2007. Government said most of these stations would be completed and commissioned before the life span of the present administration expires.

Govt unfolds N42b fund for local oil firms By Yakubu Lawal, Asst. Energy Editor

INDIGENOUS operators in Nigeria's oil and gas industry, whose operations are hampered by fund paucity and dearth of core workers, are to enjoy a special financing package and training scheme from the Federal Government.

The measures, which are contained in the Federal Government's medium-to-short term plans for the sector, are aimed at raising the country's local content in the oil and gas sector to 45 per cent by 2007.

The window of opportunities for the local firms includes the government's establishment of a N42 billion ($300 million) oil and gas fund to enable the operators finance their exploration and production activities.

These packages were unfolded by the Minister of State for Petroleum Resources, Dr. Edmund Daukoru, in Lagos at the weekend during the launching of an indigenous oil service company, DetlaAfrik Engineering Ltd.




Though details of the management of the fund have not been made public, Daukoru stated that the facility would act as working capital for local companies operating in the industry.

"Already, government plans to set up a fund, with take- off grant of about $300 million (about N42bn) to cater for the working capital needs of local companies," "he said.

The minister, therefore, urged Nigerian professionals to take more active part in the nation's oil and gas industry to enable the country achieve the target of raising local content in the industry to 45 per cent by 2007.

In an address delivered on his behalf by the Special Assistant to the President on Petroleum Matters, Alhaji Jafar Paki, Daukoru said that while the oil and gas sector was a major contributor to the national economy, it was employing few Nigerian professionals with limited use of local materials and services.

"The resultant effect of this is that the nation is denied enhanced benefits derivable from the industry," the minister said, adding that as a nation, "we need to join the league of oil producing and developing countries that have made remarkable progress in achieving high local content in their respective oil and gas industry."

Key areas where indigenous participation would need to be increased, according to Daukoru, are engineering design, fabrication, construction, materials, manufacturing, banking, insurance, shipping and logistics.

The minister commended DeltaAfrik for its efforts at ensuring that Nigeria derives maximum value from the industry through local participation and use of indigenous materials and services.

Also speaking at the occasion, the Executive Dierector, Exploration and Production of the Nigerian National Petroleum Corporation (NNPC), Dr. Edmund Ayoola, explained that the corproation was putting in place structures in collaboratton with its joint venture partners to ensure that Nigerian engineers are trained and engineering design centres were utilised and developed to optimum levels in the short-to-medium term.

Ayoola said that the NNPC's vision for engineering services in the oil and gas sector, was to train and equip Nigerian engineers with the relevant skills to enable them participate in the industry within and outside the country.




He disclosed that between $250 million and $300 million would be set aside to cater for local companies working capital. It is scheduled for launch in the second quarter of this year.

"From a strategic perspective, partnership is being encouraged between indigenous and internationally reputable companies to ramp up in-country capabilities and build world class engineering institutions," said the NNPC chief. He commended the pact between DeltAtek and WorleyParson of the United States (U.S) to form DeltaAfrik Engineering Ltd.

The Managing Director of DeltaAfrik, Mr. Akinwunmi Odumakinde, said the challenges facing the government and stakeholders in realising the local content drive include:

• evolving an aggressive training and retraining of inexperienced and experienced Nigerian engineers,

• the need to simplify visa processing procedures of expatriates wishing to come to Nigeria by the nation's embassies

• attracting a broad and reciprocal gesture from foreign embassies to ease visa processing for Nigerian engineers on training or special assignment abroad, and

• for NNPC, the review of the contracting methods, particularly, bidding period which is currently too long.

He also identified the urgent need to improve on the hourly rates of local engineers due to increased cost of doing business in Nigeria, to improve on staff remuneration and increased investment and development of infrastructure that impact on the industry.

Hostages may be freed tomorrow * FG, Shell lose $27.3m per day

By Funmi Komolafe, Omoh Gabriel, Kingsley Omonobi & Victor Ahiuma-Young Posted to the Web: Thursday, February 23, 2006

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ABUJA— THERE were strong indications in Abuja yesterday that the nine foreign oil workers kidnapped by Ijaw militants may be released in the next 24 hours




following Federal Government’s agreement not to carry out any military attack or arrest the kingpins and their foot-soldiers whenever the hostages are released.

The Federal Government is already losing a total of $27.3 million per day to the activities of militants youths in the Niger Delta. From Shell Petroleum Development Company alone, government may have lost a total of $819 million in revenue from oil export as a result of the decision of Shell to shut in a total of 455,000 barrel of crude oil export per day for the month of January alone even as it has evacuated all its 600 workers in its Western division

Reliable security sources told Vanguard that the militants are also basing their commitment to release the hostages on the grounds that a trusted ally of theirs whose identity should be protected is allowed to come for the hostages.

In addition, the hostage takers want the government to guarantee that there will be no reprisal of any sort on them since they kept their promise of not harming the hostages.

Already, President Olusegun Obasanjo who is said to be monitoring the situation closely, is said to have told the Military High Command to create the atmosphere of non-confrontation around the creeks where the hostages are suspected to be held up.

According to the source, “we have reasons to believe that the hostages are so frightened that one or two of them may have fallen ill and the militants knowing the implications of anything happening to them would not want to incur the wrath of the Nigerian government as well as the international community.

FG loses $27.3m

Given an average oil price of $60 per barrel, the country is losing an average of $27.3 million from non export of crude by Shell. In a week, the country would have lost a total of $191.1 million while in a month, the loss would rise to $819 million if the crisis is allowed to linger.

Nigeria, a developing country with a myriad of social economic problem, needs every cent it can earn for developmental purposes. Shell on Tuesday said it had extended force majeure on Nigerian exports from the EA and Forcados fields after a string of militants attacks at the weekend. Forcados and EA off takes have been extended as of today.




Shell declared force majeure on liftings in January after a wave of militants’ attacks but extended it Tuesday after another string of attacks on its facilities at the weekend. The company, which pumps over 40 per cent of Nigeria’s oil, has shut in a total of 455,000 barrels per day as a precaution after militants at the weekend bombed the Forcados terminal, sabotaged two pipelines and kidnapped nine foreign oil workers. The militants snatched the nine oil workers—three Americans, two Egyptians, two Thais, one Filipino, one Briton—from a barge operated by US services company, Willbros, that was working on a Shell project off Forcados.

President Obasanjo, fearing that more attacks against the oil industry will force oil giants to pull out from the winding creeks of the Niger Delta thus leading to greater loss of revenue for the country, has ruled out military action to free the hostages. According to President Obasanjo, “we believe that very, very soon we should be able to reach the hostage takers. We’ve put in place a very powerful committee,” said Abel Oshevire, a spokesman for the Delta State government.

The panel is chaired by Chief Edwin Clark and will seek to contact the Ijaw youths who are holding the oil workers. The Niger Delta militants, in statements to the media, have said the men will not be released, and attacks on oil facilities will not stop until Shell pays $1.5 billion in compensation to polluted Ijaw communities. On the international oil market scene, European oil refiners were taking the latest disruption to Nigerian crude exports in their stride because of ample supply, despite delays of more than two weeks in Forcados loadings, traders said Monday. Royal Dutch Shell was forced to shut in production feeding Nigeria’s Forcados export terminal and its 115,000 EA oilfield after militants bombed the terminal and sabotaged two pipelines.

Nigerian oil output was reduced last month after armed gunmen kidnapped four oil workers from the offshore EA field. Buyers since then have been looking for replacement barrels. “Refineries have already started working to solve the shortage because the problem started on January11,” a trader said Last month, Shell told traders that loadings of Forcados in the second half of February would be pushed into March, according to market sources. For example, cargoes loading February 19-20 would load March 6-7, and those loading February 17-18 will load March 2-3. It was too early to say whether the rescheduled February loadings will be delayed further as a result of the latest disruption to supply.

In the meantime, refiners have taken measures to substitute the gaps in their




supply of Nigerian crude. “There is lots of crude out there besides Forcados,” a trader said.

NLC appeals for hostages’ release

Meanwhile, the Nigeria Labour Congress (NLC) has appealed to militants holding the oil workers hostage to release them and ensure that no harm is done to the workers even as it acknowledged the political marginalisation of the Niger-Delta people.

In a statement in Abuja yesterday, the NLC president, Mr Adams Oshiomhole said: “The Nigeria Labour Congress (NLC) wishes to once again passionately appeal for the release of the nine oil workers being held in captivity since last Saturday. We strongly appeal that no harm be done to these workers.

“Oil workers, irrespective of their nationalities, are not responsible for the situation in the Niger Delta or for the immediate grievances being canvassed by our compatriots.

The NLC added that it “recognises that the political marginalisation and colossal injustices suffered by our compatriots in the Niger Delta area are real, legitimate and required to be redressed urgently.” On efforts by the Federal Government, the NLC said: “While we endorse the strategy of negotiation adopted by the Federal Government, it bears emphasis that redressing the injustices requires fundamental political, welfarist and constitutional solution.”

Hostage crisis cuts oil output, raises prices By Onojomo Orere and Yakubu Lawal, (Lagos) and Chido Okafor (Warri) (with agency reports)

WORLD attention shifted to Nigeria yesterday as oil prices rose by more than $1 as a result of hostage-taking by militant youths in the Niger Delta. The militants claimed they have launched more attacks on a military houseboat and an oil pipeline.

The development has resulted in a production cut in the country, the world's eighth largest exporter.




As at press time, there was no clue on the whereabouts of the nine foreign oil workers taken hostage by militant youths at the weekend. But Chief Edwin Kiagbodo Clark, the leader of a team raised by the Delta State government to hold talks with the militant youths, said that one of the hostages is diabetic.

Nigeria's oil exports have fallen by 15 per cent, shooting up the prices of the product. The price of Brent crude was up $1.44 to $61.33 a barrel in lunchtime trade yesterday.

There was no movement to the benchmark United States (U.S.) Light crude, as the New York Mercantile Exchange was closed yesterday for the American President's Day holiday.

The Movement for the Emancipation of the Niger Delta (MEND) said it would decide the hostages' fate "in the coming days", and threatened to start launching rockets at international tankers.

The group is seeking the region's greater control of the oil wealth produced in the area.

The Royal Dutch Shell, which has substantial interests in Nigeria, said at the weekend that it had suspended 455,000 barrels per day of production following the latest attacks.

"Patrol units ... carried out attacks on one houseboat belonging to the Nigerian Army and the Shell Ughelli Odidi-Escravos manifold. Both were destroyed with explosives," the militants were reported to have disclosed in an e-mail, by one Jomo Gbomo, adding that the soldiers in the houseboat fled before it was destroyed.

It was not immediately possible to confirm the information independently, but the militants have provided accurate details of their attacks in the past.

Shell said it had suspended 455,000 barrels a day of oil production, 19 per cent of the Organisation of Petroleum Exporting Countries (OPEC) member's output.

Shell said it closed 340,000 barrels a day of production from fields feeding its Forcados tanker platform, which was bombed on Saturday, and it shut another 115,000 barrels daily by closing the offshore EA field as a precaution.




The Forcados closure includes 106,000 barrels a day from a pipeline, which has been shut since an earlier attack in January.

The militants said that Shell was planning to use one manifold on the Forcados loading platform, which was not damaged in Saturday's attack, to export oil.

"Regardless of whatever security arrangements they depend on and time of the day, we will attack this vessel and execute everyone on board. It is needless to say what will happen to the surviving manifold in the next few hours," they said.

But "the Federal Government says the militant movement is a cover for thieves siphoning crude oil on a commercial scale from pipelines across the vast wetlands region of the Niger Delta.

The militants accused Nigerian military and security commanders in the area of being responsible for the theft.

"Oil is not like diamonds and requires ships to come in unhindered. This is facilitated by the heads of these security organisations who are paid a standard fee for every vessel loaded," Gbomo said.

The militants admitted that until recently, the illegal bunkering was done under the cover of the night but not any more as it claimed it was now being done in the day time.

"The people of the Niger Delta are too poor to bring in these ships or engage in the complexities of marketing this product".

The militants said they blew up a military houseboat and an oil pipeline yesterday, extending a campaign of sabotage in the country.

The restive youths, who are holding nine foreigners hostage, vowed to prevent Shell from using the damaged Forcados export loading platform, which accounts for 15 per cent of Nigeria's output, and threatened an even more devastating series of attacks on the whole region.

Ijaw leaders yesterday said that they were heading into the creeks in search of the hostage-takers.

They expressed support for the youths' demand for using more oil wealth to improve the impoverished oil-producing states, but condemned hostage-taking.




The nine hostages were working for Willbros, a U.S. oil service firm, which is a Shell sub-contractor, in the Forcados River, when they were abducted.

The militants said they launched Saturday's attacks to avenge a series of helicopter strikes on local Ijaw villages.

The military said it targeted barges being used by militants to smuggle stolen oil.

The Delta State government yesterday set up a committee to secure the release of the nine oil workers.

It also gave assurance that Ijaw communities would no longer be attacked by the soldiers of the Joint Task Force (JTF) code named "Operation Restore Hope."

The 10-man committee, which comprises five persons each from Ijaw communities and from the State government, was yesterday tasked to meet with the hostage takers to secure their release of the oil workers soon.

It is headed by Ijaw leader Chief Clark.An emergency security meeting was yesterday held at the Governor's office in Warri.

Ijaw leaders from different councils in the state had before the meeting met at the Warri home of Clark to form a common front.

Briefing reporters after the meeting at which the state Governor, Chief James Ibori, and the heads of the security agencies were in attendance, Clark said Ijaw leaders and government officials discussed many things on the weekend hostage incident in Escravos.

He said: "The Ijaw told the government team made up of the Secretary to the State Government (SSG), SSS, Police, Military and many other officials., that while we condemn the action of the boys in kidnapping the oil workers, we made it clear to them that the boys were provoked by the activities of the army."

The Ijaw leader continued: "We conducted our own investigation. We learnt soldiers attacked defenceless villages from the air and the ground. The attacks continued on Thursday and Friday. When the boys found it hard to fight with the military, they resorted to kidnap. The kidnap was a shield to prevent army from attacking them."




Clark recalled that at a recent meeting in Yenagoa, Bayelsa State, the federal government and military authorities pledged to ensure a return of peace to the militarised region.

The Ijaw leader described as "amazing" that "the army started attacking Ijaw villages claiming to be fighting illegal oil bunkerers."

Noting that oil theft had been going on in the Niger Delta for about 20 years, Clark said that the culprits were "well known".

According to him, oil theft is "a commercial thing done by everybody including the military."

He added: "The action of the military came at a very wrong time. While we condemn the action of the military, we appeal to the hostage takers to release the hostages because one of the hostages is a diabetic patient."

He confirmed that contact had been established with the kidnappers adding that the hostages were in good condition."

Shell Closes Operation in Western Division By Ike Abonyi in Lagos, Segun James in Warri and Onyebuchi Ezeigbo in Abuja, 02.20.2006

The threat action of the Niger Delta militants yesterday took a heavy toll on the nation's oil sector as Shell Petroleum Development Company shut down its entire operation in the western division and declared "force majeure". The action means that over 600,000 barrel of oil have been shut in with the consequence that the company would not be able to meet its crude oil loading commitment to buyers. The External Affairs Manager Western Division of the oil giant Harriman Oyofo told THISDAY that the action will remain till further notice. Three days after Niger Delta militias took nine foreigners hostages, the oil firms and families are yet to establish contact with them. THISDAY checks however gathered that the informal group in the negotiation has been able to establish that the hostages are alive and in good health. Intelligence source told THISDAY yesterday that possible contact with the militants is expected today when they would be stating their demands. THISDAY gathered that unlike in the last incidence when the militants were more civil, this time they appear very hot and determine to face the wrath.




Barely 48 hours kidnapping the foreigners the group under the name, Movement for the Emancipation of the Niger Delta (MEND) gave a fresh seven-day notice to multi-national oil firms in the region to vacate their offices. The group also said that they will detain the nine oil workers in the Creeks until their demands which is the demand of the Niger Delta people are met. Shell Petroleum Development Company on Sunday suspended the export of over 380,000 barrels daily from its Forcados Terminal. The company is also evacuating all its workers in the volatile area of the Niger Delta. Weekend’s attack on oil facilities by the militant group has now put under serious threat, the supply of petroleum products and electricity in some parts of the country. The militant group, however, said the attacks on the oil facilities were in retaliation for the military air raids on the Ijaw community of Okerenkoko last week. In an e-mail sent to media houses, MEND said it would keep the nine expatriate oil workers until the Federal Government met their demands including withdrawal of troops from the Niger Delta and allowing the communities control of their oil resources. MEND also threatened to fire rockects at international oil tankers and attack any person or group of persons found in any oil company in the region after seven days of releasing the statement. Militants had weekend set fire on the oil export terminal, attacked a barge belonging to US oil service firm, Wilbros, taking hostage nine expatriate oil workers in the process and also blew up the crude oil pipeline in the Chanomi Creek area. Officials of the Nigerian National Petroleum Corporation (NNPC) yesterday lamented the attack on the pipeline, which could disrupt product supply to the Kaduna refinery and also cripple operations at the Warri refinery. The Chanomi Creek pipeline was only fixed last November after more than two years it was out of use following a similar attack, which led to the closure of the Kaduna and Warri refineries. According to the officials, the attack came at a time the corporation’s fuel supply programme had been structured on fewer imported cargoes and an increase in domestic supply. NNPC spokesman, Dr. Levi Ajuonuma, however, said the corporation would immediately put contingency measures in place to ensure that the development did not create fuel scarcity in the country. “The latest incident although came just when all the refineries were operating at an average of 80 percent, nevertheless, the NNPC management is reassuring the nation that it will do its best to ensure that fuel scarcity never reoccur,” he said.




“At the same time we are appealing to the community to allow repairs of the damaged pipeline so that normal operations could be restored,” he added. Meanwhile, Nigeria's electricity generation yesterday lost another 850MW to disruptions in gas supply brought about by the disturbances in the Niger Delta area. The PHCN had last week reported a 550 MW cut down on its power generation as a result of shortfall in gas supply to its power stations. Authorities of the Power Holding Company of Nigeria (PHCN) said the drop in power generation came about as a result of destruction of pipelines used in pumping gas to three of the nation's key power stations, Egbin, Afam and Delta. In a statement issued yesterday evening and signed by PHCN Acting General Manager, Public Affairs, Mrs. Effuru Igbo, the management said "recent disturbances in the Niger Delta have affected installations for supply of gas to our power stations at Afam, Egbin and Delta". "The disruption in gas supply to these stations will mean a reduction in power generation up to 850MW. To amilorate the situation we will increase generation from our Hydro Dams at Kainji and Jebba", she said. Only last week, the power utility company reported a loss of 550MW resulting from the shutting down of some of the units in its power stations due to shortage in gas supply. The statement said while it is taking advantage of the result of better managment of the reservoir at the Dams to urgent power supply, there will still be need for load shedding to maintain system stability. "Where we are pleased to report that this year we can take advantage of the result of better management of the reservoirs, however until the gas facilities are fully restored, there will still be need for daily load shaedding to maintain system stability". The company said it wishes to "appeal to its esteemed customers to over the development and to seek for their understanding during this difficult period". The action of the militants received tacit suppoprt of the the Ijaw elders when the National Leader, Chief Edwin Clark has said that the kidnap of the nine expatriate oil workers is the people’s way of protecting themselves from further bombardment by the Nigerian Armed forces.

“They used them men as protective shield from further attack by the military”, he disclosed. Clark said this in Warri while briefing newsmen of the outcome of the meeting Governor James Ibori had with Ijaw Leaders on how to secure the release of the oil workers.




According to him, the leadership of the people have resolved to work with government and that, as part of this effort, a 10 man committee of five Ijaw leaders and five government officials have been set up to go to the area where the kidnap took place and find ways to secure the immediate release of the men. Clark was however very angry at what he called “the uncouth language” the Federal government used in condemning the action of the youths as it is capable of sending wrong signals to the militants. The elder statesman accused the military of provoking the action by attacking the Ijaw communities where many persons were killed and wounded. “We met in Yenagoa a few days ago, we decided that a truce should be maintained soon after the four other expatriates were released, but we were embarrassed that within four days, the military attacked” He therefore appealed to the kidnapers to release the men as one of them is diabetic and requires medical attention regularly. Meanwhile, the traditional ruler of Ogulagha, Captain Joseph Timiyan, the Ebenanaowei of Ogulagha Kingdom, whose territory houses the Forcados Terminal where the kidnap took place, has condemned the action and disassociated his people from the attack. The royal father, a press statement signed by the Kingdom’s secretary, Chief Okekiri Iyelagha said that “he was embarrassed by the action, as our youths who are law abiding are not party to this dastardly action directed at Government property in our area”. He therefore urged government to do all it can to secure the release of the men and ensure the protection of lives and property in his Kingdom.

Militants Threaten More Attacks; Vow to hold hostages •Power supply threatened By Mike Oduniyi in Lagos, Josephine Lohor in Abuja and Segun James in Warri, 02.19.2006

Niger Delta

The militant group, Movement for the Emancipation of the Niger Delta (MEND), which claimed responsibility for the attack on the Forcados Oil Export Terminal on Saturday, yesterday issued another seven-day ultimatum, for oil companies to vacate the region or face more attacks. Weekend’s attack on oil facilities by the militant group has now put under serious threat, the supply of petroleum products and electricity in some parts of the country. The militant group, however, said the attacks on the oil facilities were in retaliation for the military air raids on the Ijaw community of Okerenkoko last week.




In an e-mail sent to media houses, MEND said it would keep the nine expatriate oil workers until the Federal Government met their demands including withdrawal of troops from the Niger Delta and allowing the communities control of their oil resources. MEND also threatened to fire rockects at international oil tankers and attack any person or group of persons found in any oil company in the region after seven days of releasing the statement. Militants had weekend set fire on the oil export terminal, attacked a barge belonging to US oil service firm, Wilbros, taking hostage nine expatriate oil workers in the process and also blew up the crude oil pipeline in the Chanomi Creek area. Officials of the Nigerian National Petroleum Corporation (NNPC) yesterday lamented the attack on the pipeline, which could disrupt product supply to the Kaduna refinery and also cripple operations at the Warri refinery. The Chanomi Creek pipeline was only fixed last November after more than two years it was out of use following a similar attack, which led to the closure of the Kaduna and Warri refineries. According to the officials, the attack came at a time the corporation’s fuel supply programme had been structured on fewer imported cargoes and an increase in domestic supply. NNPC spokesman, Dr. Levi Ajuonuma, however, said the corporation would immediately put contingency measures in place to ensure that the development did not create fuel scarcity in the country. “The latest incident although came just when all the refineries were operating at an average of 80 percent, nevertheless, the NNPC management is reassuring the nation that it will do its best to ensure that fuel scarcity never reoccur,” he said. “At the same time we are appealing to the community to allow repairs of the damaged pipeline so that normal operations could be restored,” he added. Similarly, the Power Holding Company of Nigeria (PHCN) said electricity generation already under strain, might be hit further following the escalating violence in the oil-producing Niger Delta region. The PHCN Managing Director, Engineer Joseph Makoju, told THISDAY last night that the violence and threats to oil and gas facilities had become major concerns to the company. “There is surely fears that electricity supply may be affected with this threat to attack pipelines,” Makoju said. Already, power generation by PHCN on Saturday dropped by 600 Mega Watts (MW) to 2,691 MW, which was blamed on gas supply restriction. Shell has already evacuated from the EA shallow water oil field, shutting in 115,000 barrels per day (bpd).




The military said it would do whatever necessary to ensure tankers remain safe. "I don't know their (militants) capabilities but we're not leaving anything to chance," said Maj. Said Hammed, spokesman of the Joint Military Task Force in the Niger Delta, told AP. "The assurance has been given at the highest level of government that oil tankers are safe in Nigerian waters. That assurance remains," he said. An Ijaw youth leader, Comrade Joseph Evah told THISDAY yesterday that the “unprovoked” attack by the Nigeria Air Force on the Ijaw community precipitated the weekend attack on the oil facility. “The Federal Government cannot claim that its air strikes were as a result of illegal bunkering. The Okerenkoko community was in the hither land, so how could barges the military claimed it attacked be in the hither land. If they don’t cease fire, the violence will continue,” Evah said. The Governor of Delta State, Chief James Ibori, who yesterday relocacated to Warri, is expected to meet with his Niger Delta colleagues to discuss ways of ensuring the safe release of the hostages. The Governor of Bayelsa State, Dr. Goodluck Jonathan, who disclosed this yesterday shortly before departing Abuja after Saturday night’s meeting with President Olusegun Obasanjo and security chiefs over the unfolding events in the Niger Delta, said that the governors will join hands with different groups towards finding a lasting solution in the restive area. Disclosing that this time around Ibori is the “arrow head of negotiations for the release of the hostages as they were kidnapped in his state", Jonathan also stated that “between today (Sunday) and tomorrow (Monday) we will be able to establish some reasonable facts and I believe that this time around, all the groups will work in concert unlike the other time that people were working on their own. If we will work in concert, we cooperate among ourselves, we will be able to get to the root and see what we could do”. He, however, stated that efforts aimed at securing the release of the hostages had begun as “even before we came for the meeting, we have already sent out boys, because this thing is being done by boys within the Niger Delta. We have their friends who are not involved and who have regards and respect for. “As we are going back now, we will start getting feed back. All the information we have been receiving is that the military bombed some of their camps and that they were reacting to that”, Jonathan added. Recalling what he did to secure the release of hostages that were recently taken from his State, he said that “we got that thing through because as the Governor of Bayelsa State, I got all the Ijaw leaders from Ondo, Edo down to Akwa Ibom together. And in concert, we started the committee and negotiated. We are working for the interest of the Federal Government, the interest of the Ijaw people. That was




paramount”. He also disclosed that “over the period, we have telling our boys that the time for aggression is over. This is the time for negotiation and to see how we can change things for ourselves. And I think that they are listening to us. We are really surprised that this thing came on this way. Like you know, this thing is happening in Delta State. An area where as Governor of Bayelsa state I have no political control over but the Niger-Delta is the Niger-Delta and we are all from the Niger-Delta so we all have the same feelings.” Also, yesterday, United States demanded the unconditional release of the hostages. State Department spokesman Noel Clay said that the US was “working with the Nigerian government and talking with them about this.” Meanwhile, Osubi Airport operated by Anglo Dutch oil company, Shell Petroleum Company, was shut down yesterday in response to the worsening security situation in the region. SPDC management, which confirmed the closure of the airport, last night, said it would remain closed until the security situation in the region improves. Meanwhile, Ibori who has relocated to Warri in the bid to find solution to the lingering crisis yesterday held meetings with the leaders of Gbaramatu clan whose community Okerenkoko was bombarded by the military last week. Ibori told the four man delegation of Chief Jonathan Ari, George Timinimi, Dan Ekpebide and Kingsley Otuaro that nhe has had the assurance of President Olusegun Obasanjo that their community would no longer be bombed. Ibori’s position was also confirmed by the Commander of JTF, Brig. Gen. Elias Zamani, in a telephone interview with our correspondent on Sunday night. Besides he gave them the assurance of government that it will take up the bill for wounded. He however demanded for the immediate release of the nine hostages. Meanwhile, activities in the nation’s oil fields are gradually grounding to a halt as most noil servicing companies have been moving out their staff from the fields. THISDAY gathered that Daewoo Nigeria Limited, Berger and Bilfinger Oil and Gas Company and Hyundai Heavy Industries have pull out their men. Daewoo has sent back to Korea 45 of its 63 Korean nationals and 10 of the 13 filipino workers.

NNPC to contribute $49.3bn to GDP by 2010 The Nigerian National Petroleum Corporation on Monday projected that it would contribute $49.3 billion to the gross domestic products between now and 2010. The GDP is the total volume of goods and service produced in an economy in one year.




The Group Managing Director, Mr. Funsho Kupolokun, said this at the opening ceremony for course 036 and 037 of the Chief Officers Management Development Programme of NNPC where he said that the corporation currently contributes $18 billion to GDP. He said that NNPC would contribute about 60 per cent to the Federal Government’s efforts at doubling the GDP by 2010. The projected $49.3 billion addition to the GDP was broken down to $20 billion from direct contribution, $11.3 from indirect contribution and $18 billion from other sectors or multiplier effects in the economy. THE PUNCH, Tuesday, February 21, 2006

Delta, Shell raise teams to free hostages • JTF kills Ijaw youth, one hostage ill

Sola Adebayo, Semiu Okanlawon and Clara Nwachukwu with agency reports The Delta State Government and the Shell Group have constituted two separate committees to work out ways of freeing the nine expatriates kidnapped on Saturday by Niger Delta militants. The committees were raised on Monday amid tension in a riverine community in Delta State over the alleged killing of an Ijaw youth by a soldier attached to the Joint Task Force on the Niger Delta, code-named “Operation Restore Hope.” The Ijaw National Leader, Chief Edwin Clark, heads the 10-member Delta State Government committee, while the Managing Director of the Shell Petroleum Development Company, Mr. Basil Omiyi, leads the Shell Group. Omiyi, in a memo to all SPDC employees in Lagos, Warri, Port Harcourt, Bonny and Abuja, said his company was determined to support the Federal, the states and contracting firms to ensure that the hostages were freed unhurt According to him, “The team will also consider all aspects of the situation, including security, travel advice, co-ordination with Exploration and Production and the Group on any step to be taken during the crisis period.”




The SPDC boss disclosed that the company had issued an advisory restricting business travels to Warri, Delta State. He also confirmed “the shut in of all production and evacuation from some locations in the Western operations in the interim and for precautionary reasons.” He said, “It was decided that we evacuate staff from a few field locations to logistic bases in the East while SNEPCO has also elected to shutdown the Sea Eagle Production and evacuated all staff. “A travel advisory has been issued restricting all international business visit to Warri. It is appreciated that there is no direct threat on Warri township. “However, you (employees) are all requested to restrict all in-country travel from Lagos, Port Harcourt, Abuja, to Warri, to essential business critical only, due to added safety risk from traffic exposure”. Clark, who spoke with journalists after a meeting between Governor James Ibori and his committee in Warri, gave assurance that the hostages would be freed soon. Disclosing that there was uncertainty over the health of one of the expatriates, he said, “We have made contact with them, we hope there would be better result in the next few days.” Clark claimed that the oil workers were picked up by the militants to save their communities from further attacks by the JTF. He said, “We have investigated the whole incident and it was discovered that our boys carried out the action in order to protect themselves from military bombardment of their communities by the soldiers of the Operation Restore Hope. “The boys were provoked by the activities of the Army. We were told that the military launched unprovoked atttacks last Wednesday and Friday in the various communities from the air and ground.” Clark who praised President Olusegun Obasanjo for ordering the JTF to ceasefire, condemned the attacks as untimely and uncalled for.




“It is surprising and embarrassing that the JTF launched such attack just four days after we met recently in Yenegoa that peace should be given a chance. While we agreed that action of the JTF was condemnable, we appeal to our youths to free the hostages,” the Ijaw leader said. Clark also warned officials of the Federal Government to “stop calling the militants as terrorists and criminals, as doing so was capable of sending wrong signals to them.” There was, however, tension in Ogulagha, Burutu Local Government Area as youths threatened a showdown with the JTF following the alleged killing of one of them. A reliable JTF source said the soldier suspected the deceased to be leading a group of militants to attack Forcados Tank Farm of the SPDC. Early on Monday, the Movement for the Emancipation of the Niger Delta said it carried fresh attacks “on one houseboat belonging to the Nigerian Army and the Shell Ughelli-Odidi-Escravos manifold.” Army spokesman, Mohammed Yusuf, however denied the attack, saying it was “a bunch of lies,” and “psychological warfare employed by the faceless gang to create unnecessary tension in the region.” The MEND had, in e-mail statements to the media, insisted that attacks would continue until Shell paid $1.5 billion to polluted fishing communities. It also vowed to sustain its offensive until the Federal Government released the former Bayelsa State Governor, Chief Diepreye Alamieyeseigha and the leader of the Niger Delta Peoples Volunteer Force, Alhaji Mujaheedeen Asari-Dokubo. Last month, the MEND killed at least 14 soldiers in an attack on a Shell flow station and kidnapped four foreign workers, who were later released unharmed after 19 days. Meanwhile, an environmental rights group, the Environmental Rights Action has condemned what it called the continued bombing of Ijaw communities, saying the action was a crude manifestation of military’s penchant for excessive use of force. The ERA, in a statement by its Executive Director, Mr. Nnimmo Bassey, said a unit




of the Nigerian Air Force attached to the JTF had been pounding some Ijaw communities in Delta State, claiming that the operation which killed over 30 persons was targeted at oil bunkerers. The news of fresh attacks in the Niger Delta prompted oil prices to rise from $59.88 to $61.39 per barrel. The prices rose as Thailand rated Nigeria as a risky country in Africa. Thai’s Foreign Minister, Mr. Kantatui Suphamin said that his country Ambassador to Kenya had been sent to Nigeria to help the two Thai hostages identified as, Arak Suwama and Sonsak Mhadmho regain their freedom. The foreign minister said Thailand was also seeking assistance from the US for the release of the oil workers. Modernisation of Nigeria's rail system to cost N6 trillion, says minister

THE modernisation of the Nigerian railway system under the Federal Government's proposed 25-year development plan may gulp between $35 billion and $50 billion (N6 trillion.

The Minister of Transport, Dr. Abiye Sekibo, dropped the hint at a parley with newsmen at the weekend, during a train ride from Kano to Port Harcourt to inspect railways facilities.

The minister who was represented by the director of land transport in the Ministry of Transport Sekibo said that to rehabilitate the existing rail network, which the Federal Government planned to do, would cost between $3 billion and $4 billion.

"This amount could be used to ensure that the railway can cope with the existing passenger traffic by helping to correct some of the technical problems with the rail tracks, the station and the communication equipment," he said.

He explained that rehabilitation of the existing rail network was still the most viable option for the nation rather than a complete overhaul to a modern one, noting that between $4 and $5 billion was required to construct about one kilometre of modern rail line.




The minister, who said that the government was still shopping for funds to improve rail transportation, disclosed that the Korean president would visit Nigeria in the next three weeks to discuss ways his country could assist to revitalise the NRC.

He said that the rehabilitation of the NRC would begin with the minimal funds at the government's disposal as time was of the essence.

"The plan for the rehabilitation of the railways will be completed in 24 months. Once the whole process is started with the minimum funds we have now, it would get consecutive governments committed to the 25-year development plan for the railways,"

The rehabilitation of the Nigerian railway system is an integral part of the 25-years development plan and a forerunner of the concessioning programme.

As part of efforts to revitalise the ailing corporation, the Federal Government only recently reduced its workforce to 50 per cent, close to 7,000 workers.

An 11-man concessioning steering committee was also set up to work out modalities for the exercise. The committee, which included the Bureau for Public Enterprise, was expected to complete its work by Dec. 31, 2005.

NNPC to launch national gas master plan By Yakubu Lawal

THE Nigerian National Petroleum Corpo-ration (NNPC) has concluded plans to put in place a National Gas Development Master Plan (NGDMP) for the country to boost the utilisation of the resources and enhance its economic value for industrial and commercial development.

The NGDMP, which will be presented to all oil and gas operating companies before the end of this month, is also designed to create further investment windows in the sub-sector to be propelled by the national gas policy that will launch Nigeria as a major gas producer before the end of the year.

Details of the plan shows among other objectives, that the issue of gas supply for the power sector in line with several Independent Power Plants (IPP) in the country are being addressed as well as parameters for exploitation of the resources to determine the actual national proven reserves.




The plan, which The Guardian learnt will be subscribed to by all the oil operators, will also address development of Liquefied Natural Gas (LNG) as another strategy for exporting the resources to the world market.

General Manager, Group Public Affairs of the NNPC, Dr. Levi Ajuonuma, who confirmed this development at the weekend in Lagos, said the document will be a legacy for the corporation and will boost the place of gas in the overall energy mix for the development of the country as a whole.

"The IPP holds the key to total emancipation of Nigerians from our power instability. The IPP will be a veritable aspect or the crux of the national gas master plan," Ajuonuma stated.

He added that the master plan will also address the issue of gas allocation for both domestic and export use as current development in the sub-sector showed that demand is higher than supply.

The third leg of the master plan is to put in place all parameters that will facilitate the realisation of zero-flare target of the government by the year 2008.

The master plan is also expected to address the question of infrastructure that will be used for the distribution of the gas through laying of pipes to both industrial, power generation plants and export market terminals or routes without much challenges to the operators.

"The aim of the NNPC group Managing Director is to ensure that Nigeria earns more revenue from gas than oil in line with President Olusegun Obasanjo's directives, so we need to pursue the master plan as a further step in the commercial and magnetisation goals for gas resources in the country," he said.

As part of preparatory steps towards achieving the implementation of the master plan, the corporation has made it mandatory for companies to submit gas plans as part of their yearly exploration and production work programmes failure of which will lead to non-approval of such programmes for the year.

NNPC is the major stakeholder in the Joint Venture (JV) operation with the multinational oil firms and approves all expenditure in the JV. Similarly, as the concessionaire or 100 per cent owner of all the Production-Sharing Contracts (PSC) oil blocs in the country, the corporation approves all expenditure relating to the business in the country.




In the gas development agenda for year 2003-2007 prepared by the NNPC, gas recovery reserve for Associated Gas (AG), those produced in the course of oil production is estimated at 114 trillion cubic feet (tcf) while for the Non-Associated Gas (NAG) is estimated at 78tcf

Some of the export-oriented projects which are at various development and completion stages are, Nigeria NLNG trains, 1-8,Escravos /West Africa gas project, Escravos/GTL3, Brass LNG and OK LNG all designed to increase gas output from the country into the world industrial markets.

Ajuonuma declared: "This document will be a pointer to where this gas can be found, what it can be used for and what is the best location vis-a-vis industrial plans for industries that want to come into operations. They will be interested in getting gas without much difficulties."

The Guardian learnt that the implementation of gas master plan coupled with national gas policy expected before the end of this year, the entire gas sub-sector would have been completely deregulated to allow full participation of the private players in the exploitation and production as well as distribution of gas resources in the country.

Challenges and prospects of Nigerian content in oil sector By Yakubu Lawal

WITH 45 per cent target set for Nigerian content in the oil and gas industry by the year 2007, the task before the industry operators and indeed the authorities of the industry is no doubt daunting. Development in the sector had shown that for over 40 years of oil and gas exploration and production in the country, the local operators or service companies have not really feared well. This may have informed the decision of the present administration since 1999 to tackle the issue with all the seriousness it deserves.

A lot has been achieved within this period and more will still be achieved going by the effort of some determined local industry operators. Industry analysts believed that this year would be a defining moment for the government's local content drive in this strategic sector. According to the Nigerian National Petroleum Corporation (NNPC), between 2005 and 2008 as much as $67 billion is expected to be invested in the industry made up of $34.4 billion for oil and $32.7 billion for gas. This level of investment is not only an evidence of growth, but shows the level of confidence the investing global community has in the Nigerian economy.




However, the Federal Government is determined in ensuring that unlike in previous years, a significant proportion of the projected investment would be domiciled in Nigeria. To achieve this objective according to NNPC Group Managing Director, Dr.. Funso Kupolokun, the focus would be on five key areas, namely engineering design, fabrication and construction, materials and manufacturing, banking and insurance, shipping and logistics.

The government has directed that from 2006, all Front end Engineering and detailed design will be done in the country. This will grow in-country engineering man-hours from 200,000/hr to 5 million per year. To deliver this, 3,000 additional jobs will be needed over the next 15 months to bridge the current engineering manpower gap. Positioning itself to make the government's vision a reality and also blazing the trail in showcasing Nigeria's indigenous capability in the highly technical and capital intensive where several indigenous firms including DeltaAfrik Engineering Limited operates.

As part of its quest to continuously provide efficient services and meet its set goals, DeltaAfrik had embarked upon a program for quality certification of its facilities. The company was awarded the ISO 9001:2000 certification by an international certification body, BVQI. This certification has provided the company a competitive edge among its

Peers. With this, the company has been able to streamline its operations such that it consistently provides quality service to its clients.

According to the Managing Director of the company, Engr. Akin Odumakinde, there is a pressing need to increase the capabilities of Nigerian engineers as very soon, there will be more demand than supply.

The Federal Government cannot do this he said, alone so the initiative must come from the private sector. "Therefore it is incumbent on the Nigerian engineering companies to train up Nigerians to ensure the success of the Local content policy."

"In the Oil & Gas engineering design landscape, there is a significant human resource skills gap and the company is committing huge resources to fill the vacuum," said Odumakinde.

DeltaAfrik Engineering Limited, a design engineering company providing world class engineering services to all the major exploration and production companies, power,




process and other allied industries in Nigeria, is owned jointly by Deltatek Engineering Limited, a wholly owned Nigerian Company and WorleyParsons.

WorleyParsons is a global engineering company based mainly in the United States of America and Australia and with offices in over 37 countries worldwide. ,

WorleyParsons core businesses are oil & gas, power, refinery and petrochemicals. The company is very strong in both offshore and onshore projects and has performed these severally in many parts of the world.

Together, they recorded a rare feet of winning the front-end-engineering design (FEED) for Chevron's Escravos Gas Project onshore in 2001 at a time offshore patronage for such a job was exclusive preserve of the foreign companies.

Before it went into partnership with WorleyParsons in August 2003, DeltaAfrik Engineering was incorporated in August 2003 but commenced full operations in January 2004, with about 60 staff from DeltaTek. The company has handled several projects on the ExxonMobil Engineering service agreement, which was signed in 2003.

"These are just in line with our vision and mission," said Odumakinde, adding that since the formation of DeltaAfrik, the company has since grown in leaps and bounds. DeltaAfrik has a vision of providing world-class engineering services focused on creative solutions with an absolute commitment to safety, quality and integrity. "Our goal is to be the

Engineering company of choice in Africa through our state-of-the-art quality control management system targeted at the provision of quality services that ensures clientele satisfaction and meets global engineering standard practices," he added.

"The dedication to the delivery of quality service is attested to by the recent award of the highly respected ISO 9000:2001 certification by the Bureau Veritas Quality International (BVQI).

This demonstrates that services rendered by DeltaAfrik conform to global standards. He said further: "The association with WorleyParsons (a company with over 50 years of quality engineering service) means DeltaAfrik now has access to time tested information and to cutting edge technology to further drive her pursuit for engineering design supremacy in the nation's Oil and Gas industry."




"This relationship also means that DeltaAfrik now benefits from preferred global software license agreements and other intellectual property from the

WorleyParsons Group Operational support is tied back to Houston for readily available technical engineering, management and system support."

Driven by the vision to be the engineering company of choice in Africa by empowering Nigerian Engineers in the Oil and Gas sector, DeltaAfrik currently has a staff strength of 215 of which 175 are Nigerians Odumakinde said that the relationship with WorleyParsons means that our staff will participate in specialised training in Oil and Gas engineering and also garner a wealth of experience from international exchange programs. The company recently added nine expatriates to bolster its engineering capabilities.

The excellence displayed by the company he added could not have been achieved without a strong IT infrastructure. 9 servers in a 42u-netshelter rack and over 200 power the company's network

Computers are linked by fibber cable on 3rd, 6th and 7th floors through 4 Cisco switches. A 1MBS bandwidth Internet conductivity is provided via VSAT and links Lagos, Port Harcourt and the World.

To demonstrate its rising profile in the Oil industry, DeltaAfrik currently boasts of patronage from ExxonMobil, Chevron, Shell, Total and other EPC

Contractors handling such high profile jobs including the Agbami deepwater project. Pigging Facilities Upgrade Project, Usari C Slot Optimisation Project, Qua Iboe Terminal gas flare elimination, among others With DeltaAfrik's strong bias for FEED, detailed engineering, procurement support, and construction management for offshore and onshore Oil and Gas projects, the government's local content drive is surely on course. DeltaAfrik will hold a formal unveiling of its achievements and new logo later this week, which is expected to be graced by industry big wigs and members of the diplomatic community.

Audit: NEITI Records N71bn Tax Underpayment by Oil Companies From Onyebuchi Ezigbo in Abuja, 02.19.2006

The audit inquiry commissioned by Nigeria Extractive Industry Transparency Initiative (NEITI) to understudy the operations of the country's oil and gas industry from 1999 - 2004, has posted a report, which charged 11 oil companies of tax




underpayment amounting to $509,698m (about N71.36bn) and accused the Nigerian National Petroleum Corporation (NNPC) of inability to account for domestic crude oil sold to it between 1999 to 2002. The second interim audit report of financial flows in the oil sector released in Abuja over the weekend listed the companies involved in the tax underpayment as Chevron, Amni International Petroleum, Texaco Overseas, Agip Energy, Nigeria Petroleum Development Company, PanOcean Oil. Others are Moni Pulo Ltd, Dubri Oil, Addax Petroleum, Continental Nigeria Ltd and Cavendish Petroleum Ltd. According to the report, following discovery of discrepancies in tax computations between Department of Petroleum Resources (DPR) and Upstream companies, caused by use of different variables and parameters by both parties, DPR set up a joint review team comprising officials of DPR, NNPC and FIRS to verify data on royalty. The report said the auditors could not verify the figures but that the outcome of joint committee that reviewed the computations for the period 2000 Ã± 2004 consequently found some of these oil companies guilty of tax under-payments. The auditors whose second interim report coincided with NEITIÃs second anniversary said in their findings that NNPC was not able to produce necessary documents to support its claims on domestic crude oil obtained from Crude Oil Marketing Department (COMD). COMD is a department within NNPC charged with the responsibility of selling equity crude on behalf of the federation and in course of performing this function; the department also disburses domestic crude oil to the corporation Ã¬As a result of the mode of payment applied in 1999-2002, there appeared to be a balance outstanding indebtedness against NNPC brought forward at 1st January, 2003. There is considerable uncertainty in the quantification of the balance outstanding. NNPC considers that there is no balance, but the documentation to support that view has not yet been received by usÃ®, said the auditors. The report saw as a fundamental the existing situation where NNPC is the purchaser as well as acting as the seller, adding that it would not be conducive for strong control. Ã¬We consider there may be benefits in introducing an element of independence between NNPC, as purchaser of domestic crude on behalf of the federationÃ®, said the Auditors. Ã¬A clear set of accounts was not maintained by COMD on the one hand and NNPC Finance and Account Department on the other hand for crude supplied to NNPC that is classified as domestic crudeÃ®. The report further held that for the period 1999 to 2002, the exchange rate that




COMD should use to account for payments for domestic crude was not stated. Federal Government has a standing policy of allocating certain quantity (445 barrels pd) of crude to NNPC for use in running local refineries. A total of 827 million barrels of crude were said to have been supplied to NNPC under the domestic crude allocation arrangement within the period. However the Group General Manager for NNPC Public Affairs, Dr. Levi Ajuonuma yesterday responded to the contents of the report, saying the corporation was not entirely in agreement with its findings especially the aspect on payment for domestic crude. Ajuonuma told THISDAY that the corporation has assured the auditors that it was ready to give further information to adequately clear the ambiquities. While the audit spotted some weaknesses in the Central Bank of Nigeria (CBN) oil revenue accounting mechanism, it indicted the Federal Inland Revenue Service (FIRS) for failing in its duty to provide independent tax assessment for the upstream oil companies. On the performance of FIRS, the report queried the rational behind the dependence by the revenue agency on computations and documents submitted by oil companies. The auditors said CBNÃs accounting and archiving system does not facilitate the recording of accounting data for the federation account. The 2nd interim audit report put an aggregated Cash-call expenditures for the five-year period (1999-2004) at $16.7 billion. Minister of Solid Minerals and Chairperson of NEITI, Dr. (Mrs.) Obiageli Ezekwesili in her speech during the public presentation of the report over the weekend, said there should be a collective effort towards dismantling the climate of opaqueness in our extractive industries and institutionalizing a regime of preventive transparency. She said the strategy of the agency was two pronged, to identify the problems and then fix them. Ã¬We intend to set up mechanisms that will follow up the findings of the Audit Report to ensure that the recommendations are translated into positive actionÃ®, she said. Ezekwesili spoke of the need to empower members of the media and civil society groups to enable them play their roles as informed partners in the promotion of transparency and accountability in the nationÃs extractive industry.

Chevron Pulls Out of $3.5bn Brass LNG Project By Mike Oduniyi, 02.17.2006




The nation’s quest for greater economic utilization of its huge gas resources may have suffered a setback yesterday after US oil major, Chevron pulled out of the $3.5 billion (N455 billion) Brass LNG project. The Nigerian National Petroleum Corporation (NNPC), which holds a major equity in the project to be located in Brass River, in Bayelsa State, however, said the 2009 scheduled delivery date of the project would not be affected by the sudden withdrawal of Chevron. The Brass LNG, designed to produce 10 million tones of liquefied natural gas from two trains, is one of the key projects targeted by the Federal Government to monetise the country’s gas reserves, a larger proportion of which is currently being flared. Although circumstances surrounding the withdrawal of Chevron from the project it kicked off in 2003 along with the NNPC, Italian firm, Nigerian Agip Oil Company (NAOC) and another US firm ConocoPhillips, still remained hazy, sources told THISDAY that it was to enable the company concentrate on other ongoing priority gas projects. "The company has a mutual understanding with the Nigerian government to that effect," said a source of the company’s withdrawal from the gas project adding, “Our pulling out is very much with the understanding of the government to let us continue with other gas projects.” The official disclosed that Chevron is not only the leading firm in the OK LNG project but also the lead supplier of gas to that project. Chevron holds 17 percent equity in the Brass LNG project. The NNPC owns 49 percent shares, while Agip and ConocoPhillips hold 17 percent shares each. Chevron on the other hand, is the project leader in another key Nigerian gas project, the $6 billion Olokola (OK) LNG, which is to be sited in the border town of Ogun and Ondo states. Other partners in this project are the NNPC, Shell and BG Nigeria. The final investment decision (FID) on the Brass LNG was to have been signed late last year, but was shifted to the fourth quarter of 2006, following the delay in completion of the feasibility studies. Only last month, BP Plc said it signed a memorandum of understanding (MoU) with Brass LNG to purchase 2 million tonnes a year of liquefied natural gas. The deal, which is expected to be concluded later this year, will cover a 20-year period from 2010. Industry officials expressed concern that the rising tension and continued violence in the Niger Delta may have been behind Chevron’s decision to pull out. The US government only last week advised its nationals to quit the Niger Delta where four foreign oil workers were kidnapped in January for more than two weeks by a




militant group that identifies itself as the Movement for the Emancipation of Niger Delta (MEND) for more than two weeks. MEND has also issued threats to launch fresh waves of attacks in the oil-producing region. Chevron, however, denied any link to the crisis for pulling out of the gas project. “We told the government to let us continue with other gas projects. It (the pull out) is in line with the government’s strategy to optimizing gas utilisation in the country,” an official said. Apart from the OK LNG, Chervon is the project leader of the $590 million West African Gas Pipeline (WAGP) project, which entails the piping of natural gas from Nigeria to Ghana, Togo and Benin Republic. Also, the company is building the $1.9 billion Gas-to-Liquids (GTL) project in Escravos, Delta State. The NNPC has, however, assured that Chevron’s withdrawal from the Brass LNG project would not affect work on the project. "The Brass LNG is still very much on course and the target date of completion will not be affected by Chevron's withdrawal," a senior official of the corporation said yesterday. "We already have companies jostling to take up Chevron's equity in the project and this will be concluded very soon," the official added. He, however, declined to name the interested parties. US engineering firm Bechtel was to handle construction of the Brass LNG plant, using the Cascade technology patented by ConocoPhillips, a shareholder in the project. The plant is to be fed with gas from Agip and Chevron oil fields scattered in the Niger Delta.

Ajaokuta: Solgas Protests Deal with Indian Firm By Mike Oduniyi, 02.19.2006

Solgas USA, the parent company of Solgas Energy Limited, which was previously granted a 10-year ‘Concession Agreement’ by the Federal Government to manage the Ajaokuta Steel Company Limited (ASCL) has protested transfer of the concession to India’s Global Infrastructure Holding, saying that the new Concession Agreement was fraudulently conceived. In a statement at the weekend and made available to THISDAY, the Solgas management said Global Infrastructure Holdings, Minister Liyel Imoke, and Dr. Gbenga Obasanjo, son of President Olusegun Obasanjo were integral parts of a conspiracy that led to the wrongful termination of the government’s agreement with Solgas on the Ajaokuta Steel Company. The management of the company pointed out that it was pursuing Global Infrastructure Holdings in litigation in the United States based on breach of a Confidentiality Agreement with Solgas, adding that it is therefore understandable




why Mr. Love Kumar Sharma of Global Infrastructure Holdings would erroneously state that Solgas “has been bellyaching over the past two years of being shortchanged.” Although Global Infra-structure Holdings claims that the relationship between the Federal Government and Solgas was properly terminated by agreement, Solgas said this was sheer misinformation, noting that since it was fraudulently conceived, it is wholly invalid. “Few know this better than Mr. Sharma as he was present in the early hours of August 14, 2004, and participated actively in the fraudulently conceived ‘new’ Concession Agreement between the Federal Government and Global Infrastructure Holdings,” the statement said. “It is rather disappointing that Minister Liyel Imoke and other misinformed officials continue to characterise the enormous contribution of Solgas to Ajaokuta Steel Company as having ‘run down the place,” said Solgas, adding that the company should be given credit for resuscitating a project already labeled as moribund or dead by the world. “Solgas success and achievements at Ajaokuta within its short tenure made Nigerians, and indeed the whole world, aware that Nigeria’s dream of producing liquid steel was possible. The details of Solgas’ positive strides and future plans were known within certain privileged government and political circles, some of whose members were relentlessly furious in demanding both immediate and/or future gratification,” it added.

Niger Delta Militants Kidnap 9 Oil Workers; Set Forcados terminal on fire • Blow up Escravos-Lagos pipeline • Threaten lives at Warri Airport • Obasanjo summons security chiefs From Segun James in Warri, 02.18.2006

Barely 10 hours after helicopter gunship of the Nigeria Air Force launched the second in the series of planned raids on oil bunkerers in the Niger Delta at the Ijaw community of Okerenkoko, Ijaw militants in retaliation yesterday hit four oil industry facilities in the area and in the process kidnapped nine expatriates. The militants also set on fire the multi- billion dollar Forcados Oil Terminal Loading Platform. The resultant inferno has however been extinguished. The attack on the oil facilities and kidnap of the nine oil workers led President Olusegun Obasanjo to convene a security council meeting after he came back from the convocation ceremony of the Nasarawa State University, Keffi. But in an e-mailed statement, the militants listed those kidnapped as three Americans - Malcolm Hawkins, Cowdy Oswalt and Pussel Spell; a Briton, John Hudsmith; two Egyptians, Shadety Senary and Feisal Mohammed; two Thais,




Semsak Mhadmhe and Arab Suwani and a Phillipino, Anthony Santos. The militants, sources said, also blew up the Escravos- Lagos pipeline and went ahead to threaten users of the Warri Airport built by Shell. As a result of the activities of the militants, the airport is said to have been shut down. Royal Dutch Shell Plc, the country's biggest international oil producer, said the hostages were taken from a boat operated by a venture of Willbros Group Incorporated. A spokesman of the company, Mr. Don Boham, said the militants also attacked three Shell facilities. Also, the pipeline which supplies crude oil from the Escravos Terminal belonging to Chevron Nigeria Limited to the Warri and Kaduna Refineries was blown off at Chanomi creek at a point near Madangho, an Itsekiri community. Following an agency report, a spokesman of the joint military task force in the Niger Delta, Operation Restore Hope, Major Said Hammed, he heard that an attack had taken place but stated that he had no details about whether the attack was on Excravos pipeline. A self-described spokes-man of the militants, Jomo Gbomo, said in the e-mail statement that, "that the Nigerian military have been preparing for weeks only for their incompetence to be revealed in mere minutes is enough warning to oil companies and their workers that they stand no chance against any of our units in the event of an attack." The militants in a commando-like operation launched the surprise attack on the Forcados Loading Platform by out-flanking a detachment of the Nigerian Army and Navy permanently stationed at the terminal. The action of the militants, THISDAY gathered, caught the men of the Nigerian Navy which has just opened a Forward Operating Base (FOB) in Beniboye Island near Forcados napping as the militants methodically set the Platform from which crude oil is pumped into vessels that come to load on fire, but the quick intervention of the men of the Shell Fire Service stationed at Forcados put out the fire. It was learnt that the militants invaded the terminal under the cover of darkness spread out in groups. While some proceeded to blow up the loading platform, another group went into the camp where expatriates staff of Wilbros were lodged and abducted nine of them. It would be recalled that the deadline given by the militant Movement for Emancipation of the Niger Delta (MEND) expired at midnight Friday. The action of the militants signaled the first direct confrontation between the Nigeria Armed Forces and the militants in recent time. In attendance at the security council meeting convened by President Obasanjo were service chiefs and chief executives of oil companies operating in the Niger Delta. Though yesterday’s development in the Niger Delta dominated deliberation at the




parley the outcome of the meeting was not immediately clear last night. Last month, MEND kidnapped four oil workers from a Tidewater Incorporation supply boat near the EA offshore field run by the Shell venture and held them for 19 days. MEND had among other things demanded the immediate release of the president of Niger Delta Peoples Volunteer Force (NDPVF), Alhaji Mujahid Dokubo Asari, who is facing a treason trial and former governor of Bayelsa State, DSP Diepreye Alamieyeseigha, who is standing trial for alleged corruption. But the four hostages were released unharmed. Meanwhile, former Chief of Army Staff, General David Ejoor has justified the action of the youths of the Niger Delta. Ejoor who spoke to newsmen at the Warri residence of the Ijaw National Leader, Chief Edwin Clark, said the action of the youth was the outcome of the refusal of the Federal Government to listen to the leadership of the people on how to solve the problem in the region. Ejoor, who called the region a colony of Nigeria, said the only solution to the problem is for the Federal Government not only to dialogue with the people but increase the derivation and also, ensure that the people from whose land the wealth of the nation is gotten have a fair share of the resources. Speaking with THISDAY last night, Comrade Joseph Evah, the Coordinator of Ijaw Monitoring Group, said the group was very sad that the new hostility caused by the Federal Government had brought the reprisal attack.

Warri Refinery Shut for Three Weeks By Mike Oduniyi, 02.06.2006

Warri Refinery has been shut down after attack on an Escravos oil pipeline cut crude supply to the plant.. The Nigerian National Petroleum Corporation (NNPC) said that the refinery might be out of operation for three weeks to allow for the repairs of the crude pipeline, which was vandalized about three weeks ago. NNPC officials told THISDAY last night that the management of the Warri Refinery and Petrochemicals Company (WRPC) had been running the plant before now, on crude earlier stocked since the pipeline was damaged. "We have had to shut down the (Warri) refinery after we finally run out of crude," an official said. “We were cut out of crude after unknown persons blew up the pipeline supplying the plant about three weeks ago. We had stocked up crude and reduced output in the refinery thinking the pipeline would be fixed before the stock is fully used up,” the official added.




The plant was operating at about 75 percent before the attack on the crude supply line, officials said. Sources said that assessment of the impact of the damage carried out by a team of engineers from the Pipelines and Products Marketing Company (PPMC) on the vandalized line, indicated a major damage to the facility. “We envisage that it will take up to three weeks to fix," a source disclosed. The 125,000 barrels per day (bpd) Warri refinery is one of Nigeria's four state-owned refineries. The plant was also shut down between May 2003 and November 2005, when militants blew up the crude supply pipeline at Chanomi Creek also in Warri. The closure of the refinery along with the 110,000 bpd Kaduna refinery then, forced Nigeria, Africa's biggest oil producer, to rely on huge imports to meet domestic gasoline demand. The country was at a point importing as much as 72 cargoes of petrol, only dropping to around 3o cargoes when the Warri and Kaduna refineries came back on stream. The Federal Government has directed that the NNPC retain full ownership of the Warri Refinery while privatizing the Port Harcourt and Kaduna refineries.

India invests $485m in Nigerian oil blocks By Mike Oduniyi in Lagos and Donald Andoor in Abuja, 02.02.2006

Chairman of the House of Representatives Comm-ittee on Petroleum, Hon. Cairo Ojougboh, yesterday said the committee set up by the Nigerian National Petroleum Corporation (NN-PC) to investigate the lingering cash-call controversy between it and the Shell Petroleum Development Company (SPDC), has indicted Shell for not exhibiting enough transparency in the matter. India has also given approval to its state-run Oil and Natural Gas Corporation (ONGC), to pay the total $485 million (N63.05 billion) signature bonus for two oil blocks won by the company in the 2005 Bid Round. Speaking to newsmen in Abuja, Ojougboh recalled that the report of the committee set up by the NNPC had alleged that Shell could not properly account for the various sums of $800 million at one instance as well as another $400 million and £150 million. Although he acknowledged that the report of the NNPC committee had been sent to the Presidency, he added that "The Petroleum Commit-tee will conduct an independent investigation based on the allegations contained in the report for the House to arrive at its own decision." The committee which had earlier given the condition that unless the report of the NNPC Committee on the cash call controversy was made available to it, it would not recommend the passage of the corporation's budget, said the over five years




controversy was a source of embarrassment to the entire country. The NNPC Group Man-aging Director, Engr. Funsho Kupolokun, had in response said the report had already been laid on the Minister of State for Petroleum’s table and waiting to be forwarded to President Olusegun Obasanjo. Ojougboh lamented that the House had in the last four years made several efforts to get to the root of the matter but their efforts were frustrated by the NNPC top management before it then insisted that unless a copy of the report was made available to the committee to have a critical look at it with a view to also making its own recommendations towards the amicable resolution of the matter, it would not recommend the passage of the Corporation’s budget. Meanwhile, Shell in its response yesterday said “This issue was first raised in 2000 in a letter from the NNPC, following a special audit of our transactions between 1991 and 1996. A number of issues were raised by the audit. Since 2000, we have had joint reviews of the issues raised in NNPC's letter and we have been able to explain the basis for the misconceptions on many of the issues. “It is instructive to note that during the period in question, our JV partners subjected our accounts and transactions to annual audits as provided for in the Joint Operating Agreement, and no wrongdoing was found. It is not correct that SPDC has agreed to make any refund on the subject. “We wish to restate that SPDC conducts its business in compliance with relevant regulations and the law, and in line with the Shell Business Principles underpinned by the core values of honesty, integrity and respect for people”, shell said in a statement. In a related development, India yesterday commenced moves to reclaim two deep offshore oil blocks won by its company at the 2005 Bid Round, giving approval to the state-run Oil and Natural Gas Corporation (ONGC), to pay the total $485 million (N63.05 billion) signature bonus for the blocks. The approval by the Indian cabinet, according to a report by the Indian Express newspaper yesterday, was to ensure that ONGC and its partner, Videsh Limited, take 100 percent equity in the two blocks, OPLs 321 and 323. ONGC Videsh Ltd (OVL), originally won the two blocks at the bid conference offering to pay signature bonus of $310 million for OPL 323 and $175 for OPL 321. However, the blocks were handed over to Korean National Oil Company (KNOC) on the basis of the right of first refusal granted the company by the Nigerian government. But KNOC has been unable to raise the total $485 million to pay for the blocks as the company has been unable to get approval to pay such an amount from the Korean Parliament. The report said that the Department of Petroleum Resources (DPR) had asked




ONGC Videsh Ltd. to pay the signature bonus for OPLs 321 and 323 in full on behalf of all partners on the OPLs as KNOC failed to sign the contract. "OVL offered a signature bonus of $310 million and work commitment of $525.5 million in OPL 323 and a $175 million signature bonus and $397 million work commitment for OPL 321,” the paper quoted an Indian Energy expert, Amitav Ranjan, as saying, adding “with the change in Nigeria's thinking, ONGC Videsh Limited would get 100 percent equity in both blocks.” THISDAY checks further revealed that the approval for ONGC to pay the $485 million has been backed up by bank guarantee from State Bank of India. The Petroleum Ministry while reacting to reports last week that the Koreans had not been able to meet deadline for payment of the signature bonus, said that KNOC was still interested in paying and that they remained the bonafide owner of the two oil blocks. The ministry said then that KNOC and ONGC, which has been on standby to pay for the two blocks, were negotiating on equity participation. The deadline for payment of the signature bonuses for the oil blocks awarded at the licensing round held last August, lapsed December 15, 2005. A report of a panel set up last week by the DPR to review the Bid Round, called on the department to set a firm date for the signing of the Production Sharing Contract (PSC) with winners and to close the 2005 Licensing Round. Presenting the report to the DPR yesterday, panel chairman, Mr. Willy Olsen said the 18-member panel although observed from responses from industry operators that the 2005 bid round was a major step in the right direction, it however, noted that the process adopted still has potential for improvements and for making the next round even more successful It suggested among others that: The DPR should make more time available to plan and process license round; Focus on key objective and processes; Execute with firm terms and schedule, and; Do no allow post bid alteration. “It is five months tomorrow (today) since we had the bidding round last August. If anyone had told me five months ago that we would be having a postmortem in the end of January and it will still not be finished I would not have believed him,” said Olsen. Meanwhile, Shell has resumed production from its 120,000 barrels per day (bpd) EA shallow water field. This has cut down Nigeria’s oil production loses to 106,000 bpd from 221,000 bpd following insurgence in militant attacks in the Niger Delta. The EA field was shut down about two weeks ago due to technical reasons.




FG, Oil Majors to Build 1m BPD Refinery; 2005 Bid Round winners sign PSC with govt By Mike Oduniyi in Lagos and Onebuchi Ezigbo in Abuja, 01.18.2006

The Federal Government, in collaboration with five major multinational oil companies operating in the country, is to embark on the execution of two green field refineries capable of refining one million barrels of crude oil per day. Production Sharing Contract (PSC) agreements will also today be signed between the Federal Govern-ment and companies that had paid the signature bonuses for oil blocks won in the 2005 Bid Round. The refineries would be sited in the Eastern and Western parts of the country with an installed capacity of 300,000bpd and 700,000bpd respectively while the oil majors involved are Shell, Chevron, Mobil, Total and Agip. Group Managing Director of the Nigerian National Petr-oleum Corporation (NNPC), Engr. Funsho Kupolokun, while briefing newsmen yesterday on the immediate and future plans of the country's petroleum sector, said FG had, however, set aside the sum of N75bn to manage fluctuations in the domestic products market and ensured that the cost of Premium Motor Spirit (petrol) remained at N65 per litre throughout the year. According to him, government’s decision to venture into product refining, an area it previously opted out, was due to an attractive opportunity for investment which exists to fill the refined product capacity gap in the West African Sub-region and other markets. "Over the years, incremental investment in refining has not caught up with products demand hence there is investment gap that needs to be bridged", he said. He disclosed that the projects whose feasibility studies have already commenced would on completion be used to supply domestic market as well as meet the needs of Nigeria’s West African neighbours. Against the background of public skeptisms over the desirability of another state-owned refinery, the GMD said alth-ough NNPC will buy into the two plants, majority shareholding will be vested in the industry following the NLNG model, in terms of financing, operation and ownership stakes. Last year, NNPC/Chevron Joint Venture began the process of constructing a mini refinery in the Escravos, Niger Delta region, with a capacity of 30,000bpd which is to supply fuel for fueling boats, helicopters, fixed wing aircrafts, drilling rigs and offshore /onshore facilities. Commenting on the downstream sector of the petroleum industry, Kupolokun said a significant increase has been recorded in local sourcing of products as the refineries are now producing steadily bet-ween 70 -75 per cent capacity.




For instance, he said the corporation has witnessed a major drop from the quantity of petroleum product import from about 70 cargoes down to 30 cargoes in the last quarter of 2005. According to him, a modulator mechanism will be funded with the N75bn to sustain product availability while keeping the range of fluctuation at the pump at "an acceptable level". Speaking on the investment projections in the country's oil and gas sector, Kupolokun said a total of $67bn is likely to be pumped into the industry between now and 2008. He said the estimated amount is made up of $34.4bn for oil and $32.7 for gas, adding that unlike previous years, a significant proportion of this investment will be domiciled in Nigeria through local content and participation initiative. He said government has given a 50 per cent mandatory scope of fabrication and construction work to be domiciled in the country in pursuance of the Nigerian content policy and that this applies to all FPSO topside including pristine vessels up to 75mm and all offshore platforms. "This directive will grow fabrication tonnage in Nigeria from between 3,000 - 5,000 tons per year to 50,000 ton per year in 2006. Through to 2010 over 10,000 new jobs will be created in the fabrication industry", he said. The GMD said the country's effort at developing more oil wells to raise both production capacity is yielding fruits as proven oil reserves now stands at 35 billion with production capacity of about 3mbd. He said about 7 billion barrels of oil and 19 TCF of gas have been discovered in Nigeria's deepwater since 1996 with the Bonga which commenced production only last month contributing 60,000b/d while Erha is coming up with a 210,000b/d in the second quarter of 2006. Meanwhile, the Federal Government will today sign the Production Sharing Contract (PSC) agreement with companies that had paid the signature bonuses for oil blocks won in the 2005 Bid Round. Also, oil exports from Nigeria has again taken another round of bashing as Shell said yesterday it had declared force majuere on loading of crude oil produced from the EA shallow water field, following its closure on Tuesday. Signing of the PSC agreement will be done between the Nigerian National Petroleum Corporation (NNPC), which has been designated concessionaire of the blocks on behalf of the Federal Government, is coming more than three months after the initial period scheduled for the agreements to have been concluded. It was, however, not clear as at press time how many of the 44 operators that were awarded the oil blocks at the bidding conference held August 2005, will be eligible to sign the PSC today in Abuja on account of having paid for the licences.




Although the Department of Petroleum Resources (DPR) said last month that only 15 of the winners had fully paid their signature bonuses at the expiration of the December 15, 2005 deadline, THISDAY checks revealed that the Federal Government granted a subtle approval to winners, mostly indigenous companies to meet up payment for the licenses up till this month. "The position now is that anyone that had not paid by today (yesterday) will not come for the PSC signing," a source disclosed. Indigenous companies alre-ady cleared to sign the PSC include Conoil for block OPL 257 on which it paid $100 million and Sahara Energy for OPL 332 having paid signature bonus of $51.5 million. While the DPR said President Olusegun Obasanjo had even given approval for the revocation of the remaining 29 blocks which their winners could not meet the payment deadline, officials insist that government's position was to meet the $2.6 billion (N338 billion) revenue target it set for the licensing round. The results of the bid conference had shown that investors snapped up eight blocks in the deepwater region, which was expected to fetch about $1 billion (N129 billion). Some indigenous firms also won five blocks in the Anambra Basin, two in the Benue trough, while four blocks were won in the Chad Basin. All the six blocks put on offer in the onshore Niger Delta were snapped up, as well as the six acreage in the Continental Shelf. Meanwhile, exports of crude oil produced from the EA field, offshore Warri in Delta State, will experience considerable delays for the next two months after Shell declared force majuere on loadings yesterday. "Some 115,000 barrels of EA production remain shut in as a result of technical problems. Consequently, force majeure was declared yesterday for EA offtake for the rest of January and February," the company said in a statement. In a related development, a coalition of Civil Society organisations in Nigeria, under the aegis of 'Publish What You Pay' (PWYP), yesterday called for a reform of the revenue reporting mechanism of all Federal Government agencies dealing with collection of oil an gas revenue, such as the NNPC, Central Bank of Nigeria (CBN), Federal Inland revenue Service (FIRS), and the Department of Petroleum Resource (DPR). Rising from an apprasial meeting held to analyse the interim report of Nigerian Extractive Industry Transpa-rency Initiative (NEITI) sponsored audit on the country oil and gas sector, the group asked government to urgently institute a mechanism to correct the observed lapses in the operations of the affected agencies with regard to tracking of oil revenues accruing to the country. The group, which professes support for transparency in oil sector, observed that the interim NEITI report revealed systematic, operational and procedural problems in




the Nigerian extractive industry. It also said that there some lapses in the procedural and operational agreements betw-een relevant government agencies and all the players in the oil industry as far as oil revenue is concerned.

Shell Begins Evacuation of Staff; NEITI probes oil firms over $541m tax underpayment By Mike Oduniyi with agency report, 01.16.2006

Following the siege on its facilities, Shell Petroleum Development Company (SPDC) yesterday said it had commenced evacuation of workers from the four flowstations which had been under attack by militants. This is coming as a militant group which called itself Movement for the Emancipation of the Niger Delta, was reported to have e-mailed a letter to Reuters yesterday, vowing to cripple crude oil production in the Niger Delta and promised to carry out another attack shortly that would "set Nigeria back 15 years and cause incalculable losses". This development concides with the decision of the Nigerian Extractive Industry Transparency Initiative (NEITI) to investigate discrepancies in the payment of Petroleum Profit Tax (PPT) by Nigeria’s joint venture partners for the 2003 and 2004 financial years totaling $541 million. The four Shell’s flowstations namely Benisede, Opukushi, Ogbotobo and Tunu, had been shut down since January 11, after the explosion of the Trans Ramos crude pipeline, resulting in the loss of 106,000 barrels per day (bpd) of oil production. The resurgence in violence in the oil-producing Niger Delta has continued to send jitters to the international market, as oil prices have risen by six percent since the Nigerian crisis started closing at $63.18 a barrel yesterday. Shell in a statement signed by its Corporate External Affairs Manager, Mr. Don Boham, said that about 10 persons were currently being hospitalised at the company’s hospital in Warri, Delta State following an attack by gunmen on Shell’s Benisede flowstation in Bayelsa State on Sunday. Fourteen soldiers guarding the flowstation were feared dead in the attack, while the flowstation was also blown up. Shell said one of its catering contractor staff died in the attack where the assailants stormed the flowstation arriving by speed boats, burned down two houseboats, and damaged part of the processing facilities. “Following the growing insecurity in the area, SPDC commenced evacuation of some personnel on duty from Benisede, and neighbouring flowstations (Opukushi, Ogbotobo and Tunu),” said Shell. “Following the general insecurity in the Benisede area, the company thought it prudent to minimise the risk to personnel by evacuating staff from the station and




neighbouring fields,” it said, adding however, that it had no current plans to pull out entirely of the Niger Delta. The attack on Benisede flowstation on Sunday was the fourth attack in five days, and it was believed Shell might have withdrawn over 300 workers from the affected flowstations. THISDAY gathered that the growing wave of insecurity in the Niger Delta, where more than 90 percent of Nigeria’s crude oil is produced, was already giving the Federal Government a lot of concern. The Minister of State for Petroleum Resources, Dr. Edmund Daukoru, had to cancel an assignment in Lagos yesterday as he was summoned by President Olusegun Obasanjo for full briefing on the development. Last week, armed men stormed Shell’s EA offshore field and abducted four expatriates. Another militant group had earlier blown up Shell’s Opobo Channel oil pipeline leading to the loss of 180,000 bpd of oil for nearly two weeks. The Movement for the Emancipation of the Niger Delta, also believed to be behind the kidnapping of four foreign oil workers last week, said in an email to Reuters that it had 5000 fighters to cripple oil production in the country. "We seek control of our resources to improve the lives of our people," the email statement said. "We are committed to destroying the capacity of Nigeria to export oil." The group promised to carry out another attack shortly that would "set Nigeria back 15 years and cause incalculable losses". Directing its message to oil companies operating in the Niger Delta, the group said: "It must be clear that the Nigerian government cannot protect your workers or assets. Leave our land while you can or die in it." Meanwhile, the Nigerian Extractive Industry Transp-arency Initiative (NEITI) has said it was investigating discrepancies in the payment of Petroleum Profit Tax (PPT) by Nigeria’s joint venture partners for the 2003 and 2004 financial years totaling $541 million. Also, a reconciliation of the royalty payments by the multinational oil companies carried out jointly by the Department of Petroleum Resources (DPR), the Federal Inland Revenue Services (FIRS) and the Nigerian National Petroleum Corporation (NNPC) for the period in review, revealed under payments totaling $295.66 million. Details of the interim report of the financial audit of Nigeria’s petroleum sector, sponsored by the NEITI and obtained by THISDAY, showed that the differences discovered in the payment of PPT stemmed from the amount claimed by the oil firms to have paid and payments recorded by the Central Bank of Nigeria (CBN) in 2003 and 2004. According to the report, PPT payments amounting to $97 million the CBN recorded




that Chevron paid in 2003 and 2004, could not be traced to the oil firm’s records. Also, the CBN and the FIRS recorded PPT payments by Shell Petroleum Development Company (SPDC) showing a difference of $281 million, an amount Shell itself had no record of. Also, the CBN reported payments by Nigerian Agip Oil Company (NAOC) for 2004 that showed a difference of $13 million compared to what the oil firm reported, while the CBN incorrectly recorded tax payment for Elf in 2004 to the tune of $150 million. The PPT, which is collected by the FIRS, is one of the financial flows into the Federal Government account. According to the NEITI report, while the CBN recorded PPT payments by the joint venture partners of $3.053 billion and $6.296 billion in 2003 and 2004 respectively, records presented by the companies showed $2.948 billion and $5.977 billion, respectively. “The payments recorded at CBN and specifically attributed to companies, but not recorded by the companies, required careful follow up. These issues have been referred to the companies and they have commenced checking on these items,” said the NEITI. The interim report blamed the lapses on the flawed procedure of assessing taxes by the FIRS, stating that the FIRS does not challenge the computation by upstream companies. On royalty, the NEITI report stated that while the oil companies claimed they paid $1.755 billion and $2.621 billion in 2003 and 2004 respectively, records with the CBN showed receipt of $1.753 billion and $2.62 billion, respectively. It stated that a joint review team comprising the DPR, FIRS and NNPC set up in 2004 to verify the royalty payments claimed by the oil producing companies, showed underpayments totaling $295.66 million. The affected companies are Chevron, Amni International Petroleum Development Company, Agip Energy and Natural Resources, Nigerian Petroleum Development Company (NPDC), Panocean Oil Corporation, Moni Pulo Limited, Dubri Oil Company, Addax Petroleum Development Company and Continental Nigeria Limited. According to the report, the oil companies independently assessed what they deemed as royalty payable and thereafter paid the amount to the Federal Reserve account in New York. “Even though DPR computed royalty liabilities, these assessments were never filed on the upstream producing companies for payment,” the NEITI noted. The NEITI report is the first independent audit of Nigeria's oil and gas industry, which has revealed serious weaknesses in the way the various government agencies account for revenue inflows. According to the NEITI, “the current state of




reporting and recording on material information in the hydrocarbon sector is chaotic and significantly impedes the ability of NEITI, or any government agency, to confirm and reconcile what is being reported, much less analyse it.”

Niger Delta Violence: Stakeholders Renew Commitment to Halt Militancy From Chuks Okocha in Port Harcourt, 01.09.2006

Worried by the continued violence within Niger Delta Youths, stakeholders within the zone have commenced processes on how to curb the youths militancy which usually affect crude oil production. It was in this regard that the Rivers State Government, the Niger Delta Development Commission and the Nigeria National Petroluem Corporation met over the weekend to review increasing level of youths militancy in the region.The stakeholders met in Port Harcourt on Saturday. Speaking when the stakeholders visited him in Port Harcourt, Governor Peter Odili reiterated the commitment and determination of stakeholders, including all the state governments in the Niger Delta region, to do everything humanly possible to reduce the level of violence associated with oil and gas production in the region. . He spoke when the Minister of State for Petroleum Resources, Dr Edmund Daukoru led stakeholders including the Group Managing Director of the NNPC Mr. Funsho Kukpolokun, the Chairman of NDDC, Ambassador Sam Edem and the Management of NDDC and other stakeholders in the Niger Delta Peace Process, on a courtesy visit at Government House, Port Harcourt. The governor who observed that so much lip service had been paid to the problem of the Niger Delta said it was now time for actions to bring about solutions to the issues at stake He observed that with the present Petroleum Minister Chief Edmund Daukoru, who understands the issues at stake, and is taking the right steps to bring about the desired results, he was optimistic that the process would, at the end of the day, see the Niger Delta people as sustainable financiers of the Federal Republic of Nigeria and as one of the most peaceful part of the country. Dr Odili commended the Petroleum Minister, the NNPC and other parties involved in the process including Dr Judith Asuni the Director of Academic Associate Peace Works, and assured her of the support and collaboration of the Rivers State Government in driving the process to a logical conclusion .â??We have committed ourselves to the process, be rest assured that you will get all the support you need from us in driving the processâ??, Dr Odili said and thanked the minister for showing appreciation to the support the government has so far made to the process, adding that other state governments would do the




same when approached. Earlier, Dr Edmund Daukoru said they were in Government House to brief the governor on the successes so far achieved in the Niger Delta Peace Process which was started by President Olusegun Obasanjo in April 16th 2005, and to present a blue print of what they intended to do in the region. Dr Daukoru said although the group was made up of representatives from the security forces, its strategy was to approach the issue of security indirectly by getting the youths productively engaged in activities that have multiplier effects on the people thereby bringing about peace and security in an indirect way. He disclosed that stakeholders in the Niger Delta Peace Process which included NDDC, Agip, Shell, Chevron and the major Niger Delta States of Akwa Ibom, Rivers, Bayelsa, Delta and Edo have been meeting regularly on the issue, saying that the meetings have been very successful and rewarding. The Petroleum Minister thanked the Rivers State governor for his robust contributions to the body, and for the opportunity of receiving them in the new Government House Complex, describing it as next to none in the country, and urged other states in the region to borrow an example from Governor Odili in the effective utilization of oil resources.

Chinese Investors Offer $2bn for Nigerian Oil Field By Mike Oduniyi with agency report, 01.09.2006

China National Offshore Oil Company Limited (CNOOP), yesterday said it will pay $2.3 billion (N299 billion) in cash to acquire 45 per cent shares of South Atlantic Petroleum, owned by former Defence Minister, Gen. Theophilus Danjuma (rtd), in Akpo oil field located in OPL 246. The Chinese investors would be taking up the equity which was turned down last month by India’s ONGC, citing risk factor. CNOOC is China's biggest offshore oil producer, and its acquisition of interest in the Nigerian oil field would be China’s third big overseas takeover since August 2004 to meet increasing energy demand. CNOOC Chairman, Fu Chengyu, announced the decision during a conference call with investors. The company said the acquisition will be funded from CNOOC's internal resources, the Beijing-based company also said in a statement distributed by PR Newswire. The price per barrel of oil equivalent of about $4.60 is “on highly attractive terms when compared to other recent world-scale upstream transactions,'' CNOOC said. The Nigerian National Petroleum Corporation (NNPC), with 50 percent equity holding, is the concessionaire for the deepwater block, where South Atlantic




Petroleum holds 10 percent equity. Other partners in the block are Total, the operator with 24 percent interest and Brazil’s Petrobras. NNPC had conferred the contractor status on South Atlantic, implying that the local oil firm would have to source for the 50 percent of the total fund needed to develop the oil field, estimated to hold more than 700 million barrels of oil and condensates. South Atlantic Petroleum, last August, had opened negotiations in London with prospective bidders that will acquire 45 percent of the 50 percent NNPC equity and thus provide the funding. According to the Production Sharing Contract (PSC) agreement for the Akpo field, the NNPC will take 15 percent share in the profit earned from oil exports from the field while the contractor takes 35 percent share. India’s ONGC, which initially clinched the bid for the South Atlantic’s interest in Akpo field, later lost it after the Indian government declined to approve the company’s $2 billion (N260 billion) bid for the block. Although the Indian government linked the rejection to “high risk” factor, NNPC later said that the non approval was due to financial constraints, and its inability to commit further investment in Nigeria where the Indian state-run firm already had its hand full. China, which was expected to consume 6.63 million barrels a day of oil last year, imported an average of 2.38 million barrels a day in the first three quarters of 2005, or 36 percent of the total, according to December 2005 Oil Market Report by the International Energy Agency in Paris. The acquisition “will add to our production targets and is within our pricing range,'' Yang told reporters. “Before the Akpo field starts production in the first half of 2008, we'll have a very small dilution in earnings per share. But after that, it will be one of the factors boosting earnings.'' The Akpo oil field located in OPL 246, is said to hold 700 million barrels of crude oil reserves and gas reserves of about 2.5 trillion cubic feet. The field along with Shell’s Bonga, ExxonMobil’s Erha and Chevron’s Agbami oil fields, will contribute to the significant increase in Nigeria’s oil production capacity. Discovered in 2000, the Akpo field is scheduled to commence production in the last quarter of 2008 and is expected to quickly reach peak production of 225,000 barrels of oil per day (bpd) of which nearly 80 percent will be condensate. Last August, Total awarded a $1.08 billion contract to Technip of France and South Korea's Hyundai Heavy Industries to build the floating, production, storage and offloading (FPSO) vessel for the field, while Italian oilfield services giant Saipem got an $850 million contract covering the umbilical, riser and flowline (URF) package. The field development plan calls for 22 producing wells, 20 water injection wells




and two gas injection wells, tied back to a floating production, storage and offloading (FPSO) vessel with a storage capacity of 2 million barrels. Its condensate output will be exported via a buoy located 2 kilometers from the FPSO, while the gas will be piped 150 kilometers to the Amenam/Kpono platforms, from where it will be sent to the Bonny LNG plant.

Niger Delta: Obasanjo sets up C’ttee to Ensure Release of Oil Workers From Josephine Lohor in Abuja and Segun James in Warri, 01.17.2006

President Olusegun Obasanjo yesterday intervened for the release of oil workers who were recently abducted by militants in the Niger Delta by setting up a committee. This followed a high level meeting he had with senior government officials, security chiefs and the governors of Bayelsa, Delta, Rivers and Ondo States in the morning at the State House. The President had during the meeting held behind closed doors, appealed to those responsible for the kidnapping of the oil workers and the vandalisation of oil installations “not to do anything that might result in the loss of lives”. The attack on oil installations and workers in the Niger Delta has led to the rise in the price of crude oil in the international market, just as the affected oil company, Shell, has begun the evacuation of its staff from the flow stations which have been under attack by militants that have vowed to carry out more attacks. Although details of the composition of the committee set up yesterday by President Obasanjo were not made available, the Senior Special assistant to the President on Media Matters, Mrs. Oluremi Oyo, said the President has asked the committee to ensure the speedy release of all hostages being held by the militants. The Vice President, Atiku Abubakar, National security Adviser, Lt-General Aliyu Mohammed Gusau (rtd); Minister of Defence, Alhaji Rabiu Musa Kwankwaso; Minister of Police Affairs, Chief Boderick Bozimo; Minister of State for Defence,Dr, Rowland Oritsejafor and the Minister of State in the Ministry of Petroleum Resources, Dr. Edward Daokoru attended the meeting. Others are the Chief of Defence Staff, General Alexander Ogomudia; Chief of Naval Staff, Vice Admiral Ganiyu Adekeye; Chief of Air Staff, Air Marshal Jonah Wuyep and the Inspector-General of Police, Sunday Ehindero. Also in attendance are the Chief of Defence Intelligence, Major-General Halidu Giwa; Director-General of the State Security Services, Colonel Kayode Are; Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Enginner Funso Kupolokun and the Director-General of the Nigeria Security and Civil Defence Corp (NSCDC), Mr. Abolurin.




Meanwhile, men of the Nigerian security forces yesterday invaded Okerenkoko community in Gbaramatu Kingdom, Warri South West Local government area of Delta State following intelligence reports that the militants that launched the attack on Shell Petroleum Development Company (SPDC) facilities and the kidnap of the four expatriate staff of an oil servicing company may have taken off from the town. THISDAY gathered that since the towns of Okerenkoko and Oporoza in Gbaramatu Kingdom were the strong hold of the Ijaw resistance during the six years of Warri crisis, it was not unusual that the new attackers may have used the ‘experience’ of the Gbaramotu warriors to launch the attack on the EA platform and Benisede flow station. It would be recalled that militants from Gbaramatu held the nation to ransom when they blew up the Escravos/Warri pipeline which supply crude from the Escravos Export Terminal to the Warri and Kaduna Refineries and refused, for several months, to allow NNPC engineers to effect repairs on the line.

The effrontery of the youths held up the re–streaming of the Warri Refinery after the completion of the Turn Around Maintenance (TAM) on the plants for several months until they were prevailed upon by Governor James Ibori. THISDAY gathered that the storming of Okerekoko was led by one of the Task Group Commanders of the Joint Military Task Force (JTF) on the Niger Delta, Operation Restore Hope, as the Operation was considered a crucial one. The Commander of the JTF himself, Brig. Gen Elias Zamani, THISDAY gathered, yesterday left for Bayelsa State, where the four flow stations closed by Shell is located as part of the Operation to fortified the entire Niger Delta water ways. It would be recalled that some armed persons last week invaded the EA platform, a deep offshore facility belonging to Shell, kidnapping four expatriates after a shoot out with men of the Nigerian Navy attached to the facility. One week after, the four men are yet to be found and the fate of other persons wounded during the operation unknown. The next day, another attack was carried out on the Trans Ramos Pipeline at a point in Brass Creek, a situation which forced Shell to close down four oil Flow stations producing 106,000 barrel per day. Over the weekend, a bloody attack on one of flowstations, Benisede, left 14 Soldiers and 17 oil workers dead. Since the attack, the military has been on the hunt for the assailants, hence the offensive at Okerekoko. The recent attack is the first direct attack on the military since the Niger Delta crisis began 10 years ago.

NNPC Records 123 Cases of Vandalisation in Six Months




From Segun James in Warri, 01.08.2006

Nigerian National Petrole-um Corporation (NNPC), has recorded 123 cases of pipeline vandalisation in the Edo/Delta axis, between June and November 2005. Petroleum Products Marke-ting Company (PPMC)’s Warri Area Manager, Mr Yar’ Adua, said this, while addressing the newly inaugurated Delta State Committee on Petroluem Products Pipelines Security. Yar Adua told the the committee, headed by Secretary to the Delta State Government (SSG), Dr Emmanuel Uduaghan, that the country home of Governor James Ibori alone recorded 40 vandalisation cases within the same period. The committee, in an effort to stem the tide, said it has resolved that any tanker caught in the act would be set ablaze, to serve as deterrent to others and teach the truck owners lessons. Community Leaders also told the committee, that some security personnel connive with vandals in the act, which made the committee to order a close monitoring of the men of the Federal Task Force on NNPC pipelines. Besides, a sub-committee on public enlightenment, headed by the state’s Commissioner for Inter-ethnic Relations and Conflict Resolution, Mr Ovouzorie Macaulay, was set up to educate the people on the implication of tampering with pipelines and long-term environmental and health hazards inherent in the act. According to a member of the committee, Mr Omafume Amurun, various options were suggested as solution to the increasing problem. He said the committee members would soon embark on tour of communities where vandalisation had taken place, to hear from them, in its effort to find solution to the menace.

Odili, Niger Delta Stakeholders Parley on Way Forward From Chuks Okocha in Port Harcourt, 01.08.2006

Governor Peter Odili yesterday reiterated the commitment and determination of stakeholders, including all the State Governments in the Niger Delta region, to do everything humanly possible to reduce the level of violence associated with oil and gas production in the region. The governor made the remark, when the Minister of State for Petroleum Resources Dr Edmund Daukoru led stakeholders including the Group Managing Director of the NNPC Mr. Funsho Kukpolukun, the Chairman of NDDC, Ambassador Sam Edem and the Management of NDDC and other stakeholders in the Niger Delta Peace Process, on a courtesy visit at Government House, Port Harcourt. The governor, who observed that so much lip service had been paid to the problem




of the Niger Delta said it was now time for actions to bring about solutions to the issues at stake He observed that with the present Petroleum Minister Chief Edmund Daukoru, who understands the issues at stake, and is taking the right steps to bring about the desired results, he was optimistic that the process would, at the end of the day, see the Niger Delta people as sustainable financiers of the Federal Republic of Nigeria and as one of the most peaceful parts of the country. Dr Odili commended the Petroleum Minister, the NNPC and other parties involved in the process including Dr Judith Asuni, the Director of Academic Associate Peace Works, and assured her of the support and collaboration of the Rivers State Government in driving the process to a logical conclusion .“We have committed ourselves to the process, rest assured that you will get all the support you need from us in driving the process” Dr Odili said and thanked the Minister for showing appreciation to the support the Government has so far made to the process, adding that other State Governments would do the same when approached. Earlier, the Minister of State for Petroleum Resources, Dr Edmund Daukoru said they were in Government House to brief the Governor on the successes so far achieved in the Niger Delta Peace Process which was started by President Olusegun Obasanjo in April 16th 2005, and to present a blue print of what they intended to do in the region. Dr Daukoru said although the group was made up of representatives from the security forces, its strategy was to approach the issue of security indirectly by getting the youths productively engaged in activities that have multiplier effects on the people thereby bringing about peace and security in an indirect sort of way. He disclosed that stakeholders in the Niger Delta Peace Process which included NDDC, Agip, Shell, Chevron and the major Niger Delta States of Akwa Ibom, Rivers, Bayelsa, Delta and Edo have been meeting regularly on the issue, saying that the meetings have been very successful and rewarding. The Petroleum Minister thanked the Rivers State Governor for his robust contributions to the body, and for the opportunity of receiving them in the new Government House Complex, describing it as next to none in the country, and urged other states in the region to borrow an example from Governor Odili in the effective utilization of oil resources.

DPR Accuses Security Agencies of Pipelines Vandalisation From Segun James in Warri, 01.05.2006




The Department of Petroleum Resources (DPR) yesterday accused some law enforcement agencies in the country of complicity in the act of vandalisation of petroleum pipelines in the country. The Acting Operations Controller of DPR, Warri, Mr. Sleek Oshare made this accusation in Warri while briefing newsmen on the implications of vandalisation of petroleum pipelines to the people and the environment. According to him, law enforcement agents, most especially in Delta State have refused to arrest persons selling petroleum products along the highway in the state when the only authorised outlet for sales is the filing stations in the state. Oshare lamented that the act of vandalising pipelines is becoming more rampant, and the implication is that not only the environment is degraded but that the vehicles and lives of motorists and other equipment is endangered. According to him, in the case of vandalizing the pipelines, the product becomes contaminated or mixed with other products such as kerosine, diesel or even crude. The implication of these, he emphasized, is that the vehicles develop problems which ultimately lead to accidents. Oshare wondered why people should patronize these road side sellers when there is no scarcity of petroleum products in the country. He said it was because the vandals have buyers for their products that they continue in the nefarious act. He therefore urged law enforcement agents to arrest and prosecutes those selling products by the road side so as to serve as deterrent for others. Oshare was particularly alarmed at last week's vandalisation of the NNPC and Pan Ocean Oil Corporation Crude Line by unknown persons at Adeje and Oghara in Delta Sate. He said that besides the millions that is required to clean up the area, the PAN OCEAN oil Company and the Nigerian Petroleum Development Company (NPDC) lost production days and could not export a total of 40,000 barrel of oil per day for several days as repair works is taking place on the pipeline.

NNPC, JV Partners to Build 3,000 MW Power Plants From Donald Andoor in Abuja, 01.03.2006

Nigerian National Petroleum Corporation (NNPC), and its joint venture partners have budgeted $685.1 million for the building of 3,000MW capacity power plants this year. The plants are expected to be completed in 2007.




NNPC’s Group Managing Director, Engineer Funsho Kupolokun, with the Chief Executives of the joint partners who appeared before the House of Representatives Committee on Petroleum to defend this year's budget, said the power plants were being built to meet the national target power generation capacity of 10,000MW by 2007. He said the plants will be sited at Geregu, Papalanto, Omotoso and Alaoji, and would be utilised by the oil companies while the excess electricity generated would be sold to the public. Giving a breakdown of the budget totaling $1,606.5 million, Kupolokun said $541 million would be expended for the building of the Niger Delta IPP gas supply In addition, the sum of $355.4 million of the amount would be expended for gas spurlines to the power plants, while $19 million would go for the building of floating mega-stations in the riverline areas and $6 million for domestic supply of LPG. Kupolokun told the committee members, led by the Chairman, Honourable Cairo Ojougboh, that the budget was predicated on the attainment of national aspiration as defined for the oil and gas sector and the linkage industries, including the increase of JV contribution to the national reserve and production capacity.

He also said the budget was proposed with the view of meeting the envisaged national local content of 45 per cent by the end of this year.

FG Deploys Troops to Monitor Oil Pipelines From Segun James in Warri, 12.29.2005

The Federal Government yesterday ordered immediate deployment of troops from the Joint Military Task Force in the Niger Delta (JTF), code named Operation Restore Hope, to protect pipelines Right of Way (ROW), following Tuesday’s attack on a fuel pipeline in Adeje near Warri in Delta State. THISDAY checks revealed that four persons had been arrested by the Federal Task Force on NNPC pipelines the incident just as preliminary investigation suggested that the attackers might have used explosives to blow up the pipelines. It was gathered that the deployment of troops began yesterday afternoon, the first major deployment in land area since the Federal Government put the military on red alert two weeks ago. Sources informed yesterday that security operatives who swooped on the site soon after the fire was put out found evidence that some fire works were used to blow up the pipeline which was buried six feet underground. The arrested persons, whose identities were kept under wrap, according to information, were picked up near the scene of the blast.




The development, it was gathered, forced the management of the Petroleum Products Marketing Company (PPMC), a subsidiary of the NNPC, to meet local government officials and community leaders whose towns and villages border the pipelines Right of Way to discuss ways to prevent further damages, and attacks to the lines. The Group Managing Director of the NNPC, Engr. Funso Kupolokun, was scheduled to visit Warri yesterday to assess the situation. It is already feared that the Northern part of the country may experience fuel shortages as the affected pipeline conveys petroleum products from the Warri refinery to the North through PPMC pump stations in Benin and Lokoja. It would be recalled that a similar attack on the Escravos crude oil pipeline near Warri in 2003, led to the shut down of both the Warri and Kaduna refineries for more than two years, forcing the country to rely heavily on importation to meet its needs. The Federal Government was also forced to deploy more troops to the Niger Delta last week after militants attacked a Shell pipeline in Opobo Channel near Port Harcourt last Tuesday. The attack has presently shut in 15,000 barrels per day (bpd) of oil production. Shell said yesterday that while crude oil lifting was still going on at the Bonny Export Terminal, the force majeure placed on some cargoes because of the pipeline incident, was still in force. A fresh wave of attacks were launched on oil facilities in the Niger Delta as unidentified persons Tuesday attacked and set fire to a petroleum products pipeline that runs across the Adeje community, near Warri in Delta State. Huge balls of fire took over the horizon around the Adeje community following the explosion on the oil pipeline belonging to the PPMC, a subsidiary of NNPC. The pipeline conveys petroleum products from the Warri refinery to the Northern part of the country through PPMC pump stations in Benin and Lokoja. THISDAY reported yesterday that the fire had occurred at several points on the pipeline almost simultaneously which, according to PPMC officials, was an indication that the facility might have been sabotaged. Tuesday’s incident followed several other attacks on the same pipeline by vandals who used ocean-going barges and trailer tankers to siphon products, especially Premium Motor Spirit (Petrol) from the line.

Again, Militants Attack Oil Pipeline; Shell yet to resume crude exports in Bonny Terminal By Mike Oduniyi in Lagos and Segun James in Warri, 12.27.2005




A fresh wave of attack was yesterday launched on oil facilities in the Niger Delta as unidentified persons attacked and set fire to a petroleum products pipeline that runs across the Adeje community, near Warri in Delta State. Although it could not be ascertained if there were any casualties as at press time, the incident came even as Shell Petroleum Development Company (SPDC) said yesterday that the force majeure placed on crude lifting from the Bonny Export Terminal following an attack on its crude oil pipeline near Port Harcourt a week ago, remained in place. Huge balls of fire took over the horizon around the Adeje community following the explosion on the oil pipeline belonging to the Pipelines and Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC). The pipeline conveys petroleum products from the Warri refinery to the Northern part of the country through PPMC pump stations in Benin and Lokoja. THISDAY gathered that the fire, which was still raging, occurred at several points on the pipeline almost simultaneously which, according to PPMC officials, was an indication that the facility might have been sabotaged. Yesterday’s incident followed several other attacks on the same pipeline by vandals who use ocean-going barges and trailer tankers to siphon products, especially Premium Motor Spirit (Petrol) from the line. The latest attack, THISDAY gathered, may create fuel shortage in the North, as already bridging of products from the Port Harcourt refinery had been impacted by the attack on the Shell pipeline. Confirming the attack when contacted on phone, the Deputy Area Manager in Charge of Operation, Petroleum Products Mar-keting Company (PPMC), Warri, Mr. John Uwaseba said that his men were still battling with the fire as at 4p.m. yesterday. According to Uwaseba, one of the fire points has been put out but the others are still raging. THISDAY gathered that the fire crews from the PPMC, Shell Petroleum Development Company and the Warri Refinery, joined forces to combat the raging inferno. As at the time of writing this report, the area has been cordoned off by security operatives while the member of casualty if any could not be ascertained. Meanwhile, crude oil production deferment caused by an attack on a Shell pipeline near Port Harcourt last week, has dropped to just 15,000 barrels per day (bpd). A total of 180,000 bpd of oil production was shut in when militants attacked the pipeline in Opobo Channel last Tuesday. Shell said that the force majeure, or its inability to honour contract, which was declared on crude lifting from the Bonny Export Terminal following the attack, was still in place.




A Shell spokesman told THISDAY that the company had raised five teams to work in repairing the damaged pipeline and restoring crude production from the facility which flows crude to the Bonny Terminal. "Deferment is now 15,000 bpd. Five teams are working on repairs, relief, security and clean-up," said the Shell official, adding that the Nun River, Diebu and Kolo Creek oil fields had been re-opened. Suspected members of militia groups had blown up the pipeline, with eight people dead and several properties destroyed from the resultant fire from the explosion. The incident, which triggered rise in world oil prices, also affected crude oil supply to the Port Harcourt refinery as well as gas supply to the Nigerian Gas Company (NGC). The Federal Government, which has already been put on high alert over security in the Niger Delta, had constituted a Joint Investigation Team comprising representatives from the Department of Petroleum Resources (DPR), Shell Petr-oleum Development Company (SPDC) and Clean Nigeria Associates (CNA), to conduct a thorough probe into the incident. The government through the Minister of State for Petroleum Resources, Dr. Edmund Daukoru said it actually suspected the interference by a third party. Also, while Shell’s force majeure remained, Nigeriaís overall export commitment has not been affected as the country is still able to meet its total oil production including condensate of between 2.48 million bpd and 2.5 million bpd, said the minister. Also speaking yesterday, the Governor James Ibori of Delta State said that the only way soldiers now stationed in and around Warri would be withdrawn is if there was sufficient proof that total peace has indeed returned. Ibori who was speaking through his deputy, Chief Benjamin Elue, at the Warri Peace Concert held at the Warri City Stadium on Charismas Day, said that the deployment of troops of the Joint Military Task Force on Niger Delta, Operation Restore Hope, led by Brig. Gen. Elias Zamani has indeed helped not only in bringing peace to the embattled city, but hope for the people who bears the brunt of the unnecessary crisis. Ibori said that the Task Force could be asked to leave immediately and the situation left to the Police to handle as demanded by the people, “but we must assure the nation and ourselves that peace has returned and we intend to remain peaceful, democratic and stop the destruction of public property and disruption of our national wealth, so that we will not attract any Federal Force”. Ibori, therefore, urged the people to save the state and the region from further bloodshed and violence, saying that unless this was done, “we will justify the call for Zamani and his men to leave us alone, otherwise, we will run back to other




Nigerians that this peace gathering will be worthless”. Ibori was full of praise and gratitude to Gen. Zamani for the wonderful job he had done in ensuring peace in the State. Said he: “For the support of this external Forces, particularly the Operation Restore Hope led by Gen. Zamani, we want to give them a very big thank you for a job well done. We know you will eventually go, for in a democracy the army has no place in policing”.

Austria to Invest $5bn in Nigeria’s Energy Sector; NNPC/Mobil JV secures $600m bank credit facility From Onyebuchi Ezigbo and Kingsley Nwezeh in Abuja, 12.21.2005

The Government of the Federal Republic of Austria has proposed an investment package totaling about $5 billion from its private investors to assist in the development of the Nigerian energy sector. The Nigerian National Petroleum Corporation (NNPC) and its Joint Venture partner, Mobil Oil Producing Nigeria (MBN), yesterday struck a deal with a consortium of eight Nigerian banks for a $600 million non-recourse project financing to fund three out of the 22 undeveloped satellite oil fields within the JV concession area. The Austrian government was reported to have announced during a meeting with Nigerian trade mission in Vienna last week that it had constituted a task force comprising government and private sector officials to undertake an investment tour of Nigeria February 2006 to explore opportunities for investment in the energy sector. Speaking to newsmen in Abuja over the outcome of the visit by the presidential delegation to Austria, the leader of the group and Special Adviser to President on Energy, Prof. Anthony Adegbulugbe, said the Austrian economic team would involve the country's top energy companies, engineering firms and investment bankers. He quoted the Special Adviser to the Austrian Prime Minister on Capital Market and Special Project, Dr. Richard Schenz as having applauded Nigeria's privatisation policy and other economic reforms, saying the measures have the capacity of pooling investments to the country. Schenz, however, tasked the Federal Government on the removal of bureaucratic bottlenecks that discourages investors. Commenting on the efforts by FG to develop the energy sector, Adegbulugbe said study estimates show that about $36bn investment will be required if we are to meet the country's electricity supply needs in the next 10 years. He said President Olusegun Obasanjo has introduced a number of initiatives aimed at encouraging foreign and domestic private investors in the energy sectors. These include the on-going privatisation of refineries, the gas to power projects, the




unbundling of the Power Holding Company of Nigeria (PHCN), and provision of incentives for private investment in Independent Power Projects (IPP). The Adviser who is also heading a new multi-sectoral Energy Access Committee recently set up by the President to fast-track development in the power sector, said Nigeria would require at least close to 26MW. "This will require a lot of investment, most of which would go to the setting up of gas-power plants. The infrastructure that would support these gas power plants has been estimated to cost in the region of $36 billion", he said. Adegbulugbe said that it is the thinking of the President that allowing government to foot this huge investment alone is not healthy and feasible unless private investors are attracted to drive the sector. He said his office, alongside other participating ministries in the committee, have been pursuing programmes aimed at establishing a proper framework that would rid the energy sector of all obstacles hindering effective development. He said a target date for the realisation the objective of the committee has set for the last quarter of 2006. Meanwhile, Nigeria Nati-onal Petroleum Corpor-ation (NNPC) and its Joint Venture partner, Mobil Oil Producing Nigeria (MBN) yesterday struck a deal with a consortium of eight Nigerian banks for a $600 million non-recourse project financing to fund three out of the 22 undeveloped satellite oil fields within the JV concession area. The banks involved in the deal include, IBTC, Standard Chartered Bank, United Bank for Africa (UBA), Union Bank, Guaranty Trust Bank, Zenith, Access Bank and First Bank while Credit Suisse First of Boston (CSFB), is to act as financial advisor to the transaction. A reliable source told THISDAY that the agreement was in response to Federal Government's directive to NNPC to seek ways of developing alternative funding for its JV oil exploration projects. "Today's presentation provides an overview of the Satellite Oil Field Project Finance Programme (SOFP), which CSFB and NNPC-MPN joint finance team developed, and demonstrates that NNPC-Mobil JV can successfully put in place a project finance programme in today's financial markets", said the source. It said the agreement has a future flexibility should the partner chooses to fund additional non-recourse project for the remaining 19 undeveloped satellite oil fields. Following the growing demands for greater funding and investments into crude oil exploration and production activities in the country and Federal Government's reluctance to free more scarce resources for that purpose, authorities came up with a strategy to fashion out means of financing oil projects from sources other than




federation account. If the alternative financing initiative successfully takes off, it would be the first project finance programme ever structured under the JV to jointly execute Upstream hydrocarbon developments in Nigeria. However the ceremony scheduled to cement the financial agreement by the parties were inconclusive due to non-arrival of some of the officials of NNPC and representatives of some of the banks who could not catch a flight to Abuja. In a related development, Chairman of the Nigerian Electricity Regulatory Comm-ission (NERC), Dr Ransome Owa also said yesterday that 18 companies are expected to operate the power sector when the Power Holding Company of Nigeria (PCHN), wounds up early next year. He told newsmen in Abuja that 6 companies would be in charge of power generation under one power transmission entity while 11 companies would see to power distribution. "Every utility company has three distinctive models. There is generation, transmission and distribution. These are the three components of the power utility sector. The reform process raised it to 18 companies, six generation companies, one transmission entity and 11 distribution companies. They will not be reporting to any headquarters anymore, NEPA or PCHN will cease to exist early next year and the sector will be run by independent companies”, he said. He noted that "they will still enjoy some protection for the transmission entity as competition will be most pronounced in generation. By law and by the technology, every Nigerian is an independent power producer as they are producing their own power with their generators". Continuing, he said "those who want to become independent power producers can build their own power plants anywhere they want but they will have equal access to the grid. Operators would be known as system operators. They cannot discriminate, their prices must be transparent. It is like driving on a highway, at the toll plaza, you have tolls A, B and C. Our job is to set those tariffs for all classes of customers. And so once they produce the power, it is put into the grid and transferred to those 11 distribution companies and they take the power direct to your homes" The NERC boss noted that the aforementioned measures were designed to instil efficiency and effectiveness in the sector just as he hinted that the companies are expected to evolve pre-paid metering systems or pay as you go in their billing system. He said the commission's job entailed adequate production, transportation and delivery of electricity at affordable prices while maintaining that "until the sector succeeds, the commission does not succeed. The way I look at the main job is to work together to keep the light on. Once we succeed in keeping the light on both the sector and the commission would have been deemed a success". He noted




however, that building a power plant was capital intensive and could take three years to complete and realise results. "The Power Holding Company has been trying to improve the situation but with the commission being in place, we will ensure that overtime, the transparency issue would be solved. Our job is to come out with clear market rules for each participant, generators, distributors and transmission companies. If somebody wants to build a power plant in this country, we will tell him here are the rules", he said.

Abuja Power Transmission Project Gulps N14.7bn From Onyebuchi Ezigbo in Abuja, 12.20.2005

Minister for Power and Steel, Senator Liyel Imoke, yesterday said the sum of N14.78 billion was spent to acquire an ultra-modern electricity transmiter, meant to improve power supply to the Federal Capital Territory (FCT). The project encompasses a 330KV double Circuit Transmission Line located at Katemkpe Hills, at the outskirts of Abuja, which is drawn from the Shirorro Hydro Dam and the 132/33KV electricity sub-station built in the Central Area of the city. Speaking while commissioning the sub-station, Imoke said the project was embarked upon five years ago, as a result of the highly inadequate power supply in the c. According to him, the low level of power supply has forced huge electricity users like Nigerian National Petroleum Corporation (NNPC) and NICON Hotels, to source for alternative means of power generation to run their businesses. He said with the coming into stream of the facility, most of the huge energy users can now be connected to the national grid. "This project is very significant, because it is going to meet growing demands for electricity in Abuja,” Imoke said, adding that the Federal Government was not unmindful of the fact that the rate of growth of Abuja today, is far more than that of other major cities in the country and is planning for additional capacity for the city.

"By January, next year, government hopes to start a new 330KV power transmission line that would connect the Ajaokuta where there is an on-going power generation project at Geregu, Kogi State, through Lokoja to Gwagwalada with accompanying sub-stations to be situated at Lokoja and Gwagwalada", he said. The project is expected to create necessary loop for power supply into Abuja. The minister expressed hope that the envisionedproject along other power projects currently being executed across the country would be completed by 2007. Earlier, while welcoming the Minister to the event, Power Holding Company of Nigeria (PHCN) Managing Director, Engr. Joseph Makoju, said the completion of the




sub-station which was handled by Energo Nigeria Limited, was part of the great transformation taking place within the country's power sector. He said government has expended billions of Naira on projects in the power sector, a greater percentage of which has been spent on fixing transmission lines for effective power evacuation.

BPE Cancels Bids for PH Refinery; Says investors fail qualification test By Mike Oduniyi, 12.19.2005

Privatisation of the Port Harcourt refinery has again suffered another setback after the Bureau of Public Enterprises (BPE) cancelled the bids submitted by four consortia for the acquisition of a controlling stake in the nation’s biggest refinery. The BPE in a statement released yesterday said that the consortia namely, Chrome /Chinese Petroleum Corpora-tion/Essar Oil Consortium; the Oando/Shell Group; Transn-ational Corporation (Transcorp) and Refinee Petroplus Consortium, did not attain the minimum qualifying mark of 60 points to qualify for the opening of their Financial Bids. The companies have, however, been granted the right to re-submit fresh bids for the refinery while BPE said it had communicated a new deadline for submission to the companies. According to the BPE statement signed by its Head, Public Communications, Mr. Chigbo Anichebe, evaluation of the bids from the companies placed greater emphasis on the presence, within a technically qualified consortium, of a competent refinery owner/operator with experience in refineries of similar complexity as Port Harcourt refinery. The criteria used included: • Experience of the technical operator in the ownership, operation and management of a crude oil refining plant, which carried 30 points; •Quality and credibility of the bidder’s Post Acquisition Plan (“PAP”) for Port Harcourt Refinery, which carried 40 points; •Demonstrated financial capacity to finance up to $200 million of capital expenditure by PHRC within the next three years, 20 points and; •Adequate measures for addressing labour and other social considerations, 10 points. “Regrettably, none of the bidding consortia attained the minimum qualifying mark of 60 points to qualify for the opening of their Financial Bids. “From the outcome of the evaluation exercise, each Consortium’s technical submission was seriously deficient in certain key areas. We will be communicating in writing with each Consortium, the key areas in which their submissions were deficient, which may help them should they elect to submit a new bid by the new




deadline. “Given that the technical submissions did not attain the minimum qualifying technical score, bidders have been advised to collect their un-opened Financial Bid envelopes and Bid Bonds from BPE,” the privatisation agency added. Although the BPE did not give the new deadline for submission of the fresh bids, it has however, altered the agency’s set time table to have the Port Harcourt Refining Company (PHRC) privatised by December 21, 2005. This would be the second time tenders for the company, which houses two refineries, the Old Port Harcourt refinery with 60,000 barrels per day (bpd) capacity and the 150,000 bpd New Port Harcourt refinery, would be thrown out after similar bids from interested investors were cancelled in December 2003. Apart from the Port Harcourt refineries, the Federal Government also plans to privatise the 110,000 bpd Kaduna refinery, leaving only the 125,000 bpd Warri refinery for the Nigerian National Petroleum Corporation (NNPC) to manage. The PRHC according to BPE data, has an authorised Share capital of N5 million, divided into 5 million Ordinary shares of N1 each. Only one of the two refineries in the company is currently in operation, following the closure of the Old refinery while plant capacity utilisation presently stood at 60 percent.

13 Vandals Killed in Pipeline Explosion From Segun James in Warri, 12.18.2005

Thirteen pipeline vandals were yesterday killed in two separate incidents in Delta and Edo states. THISDAY gathered that the vandals met their waterloo at a point near Ologbo,10 kilometres from Jesse the community where over 1000 persons met their death seven years ago. The vandals who had succeeded in breaking into the pipeline and were at the point of siphoning fuel when the line went up in flames killing at least six persons. In another incident along the same line which belongs to the Pipelines and Product Marketing Company, a subsidiary of the NNPC, seven vandals were killed while attempting to break through the lines along the Ethiope River crossing in Sapele. The men were said to have died from the inhalation of associated gas which sophocated the man to death. Speaking to THISDAY on the phone yesterday, the Chairman of the Special Task Force On Pipelines Vandalization for Delta, Edo and Kogi states, Mr. Isiaka Pachiko, a superintendent of police who confirmed the incidents lamented the resurgence of vandalization activities in the area.




NNPC, Chevron to Build 30,000 BPD Refinery; House queries Kupolokun over JV operations From Donald Andoor and Onyebuchi Ezigbo in Abuja, 12.15.2005

The Nigerian National Petroleum Corporation (NNPC), yesterday said it had concluded plans to build a new refinery, in joint venture partnership with US oil major Chevron, which will have the capacity to process 30,000 barrels per day (bpd) of crude oil. The House of Representa-tives has, however, subpoenaed the Group Managing Director of the corporation, Engr. Funsho Kupolokun, to appear before it to explain the outstanding claims of $3.6 billion against Shell Petroleum Development Company (SPDC), and $1.56 billion standing against the other Joint Venture partners. Speaking at the graduation ceremony of the Course 035 of NNPC’s Chief Officers' Management Development Programme in Abuja, Kupolokun disclosed that contract for the construction of the plant, which wouldbe sited in Escravos area in the Niger Delta, would soon be awarded. He said production from the refinery was to be skewed towards more diesel and fuel oil volumes, adding that the corporation planned to use the venture as a launch pad for its engagement into "the business of legal and licensed bunkering". Commenting on the state of the existing refineries, the GMD affirmed that all the four refineries were performing at above 75 percent output and were meeting the requirements of the nation. While explaining the recent acute shortage of petroleum products that hit some states, the NNPC boss said the country had more than a month's product reserve, adding that the scarcity was due to a one-day sympathy strike by tanker drivers over the loss of two of their members during the recent MASSOB protest. Kupolokun said government hoped to adopt a price modulator to ensure the sustenance of steady supply of products in the country next year. He added that details of this mechanism would be worked out between the Petroleum Product Pricing Regulatory Agency (PPPRA) and other stakeholders. As part of the efforts to make products available in various parts of the country, the NNPC boss said three more filling stations had been added to its fleet, located in Owerri, Bauchi and Uyo. The venture into retail business is said to have yielded the corporation over N900m between January and September 2005. Giving a progress report on government's strategy to monetise the nation's abundant gas resources, Kupolokun said construction work on the West African Gas Pipeline Project had been progressing rapidly while the report of the feasibility study on the Trans-Saharan Gas Pipeline have been submitted to sponsors of the




project. On the transfer of operatorship of some oil fields to the NNPC exploration subsidiary, Nigerian Petroleum Develo-pment Company (NPDC), the Kupolokun disclosed that company was on the verge of acquiring three oil fields namely, Yorla South, Aroh and Ogharefe, which were taken over from Chevron Texaco in August by the corporation. Meanwhile, the Chairman of the House Committee on Petroleum Resources, Hon. Cairo Ojougboh, has told newsmen in Abuja that the NNPC GMD has been subpoenaed following his refusal to appear before the committee to explain alleged loss of about $0 million daily by the country due to lack of proper monitoring and standardised sales measurement for the sale of LFPO and condensate. The committee also said yesterday that the GMD was summoned for his refusal to obey a government directive that NNPC/SPDC/ELF/NOAC Joint Venture account from 1991-1996 be audited in three months. “Astonishingly, the presidential order was disrespected by the NNPC and her SPDC collaborator by continuously frustrating the efforts of the independent auditor appointed for the assignment, such that there was no report after five years,” he said. According to Ojougboh, “The committee was inundated with reports that some of the patriotic officers of the NNPC who made efforts to recover the monies were either unceremoniously retired or redeployed. “Another method adopted by the NNPC to defraud the Federal Government is the sale of LFPO and condensate. “The Committee has severally invited the GMD to explain the modalities for the sale of the products but has refused to offer any explanation.” He stressed that the issue of continuous over-bloating of Joint Venture cash calls had also denied the nation of her much desired revenue that could have been used for meaningful development stating that “this will be definitely addressed in the year 2006 budget.” He said that the JDZ problem had continue to be a major embarrassment both to the people of Nigeria and the international exploration companies that have participated in the bid rounds.

Indian Firm Offers $2bn for Oil Block By Mike Oduniyi, 12.07.2005

India's Oil and Natural Gas Corporation (ONGC), has offered to pay $2 billion (N260 billion) to acquire the 45 percent shares of South Atlantic Petroleum, owned by former defence minister, Gen. Theophilus Danjuma (rtd), in Akpo deep offshore oil




field, as investors from the Asian country press ahead for an in-road into the Nigerian petroleum sector. The ONGC said yesterday that it won the bid for the acquisition of South Atlantic Petroleum’s stake in the Akpo field, which the Nigerian indigenous company put up for sale last October. The Indian firm said it was now awaiting approval for the transfer of the shares from the Ministry of Petroleum Resources. The Akpo oil field located in Oil Mining Lease (OML) 130, is said to hold 700 million barrels of crude oil reserves and gas reserves of about 2.5 trillion cubic feet. The field along with Shell’s Bonga, ExxonMobil’s Erha and Chevron’s Agbami oil fields, will contribute to the significant increase in Nigeria’s oil production capacity. South Atlantic Petrol had opened negotiations in London with prospective bidders, which included China National Petroleum Corporation (CNPC). ONGC however, said it won the bids and that it was expecting “a decision shortly." The equity in the Akpo field it added, will be managed by its overseas arm, Videsh, which already owns 25 percent in two Nigerian deepwater oil blocks, OPLs 321 and 323. ONGC's Indian fields are said to be on the decline, and it is searching the globe for oil and gas to supply India's booming economy. The Indian state-run oil firm, in partnership with another Indian investors Mittal Energy, last month signed a memorandum of understanding (MOU) with the Federal Government for the allocation of Nigerian oil blocks in return for an investment of about $6 billion in the construction of a coal-fired independent power project (IPP), a 1,000-km railway that will run from Port Harcourt to Kano, export-based oil refinery of 120,000 bpd capacity and large-scale agricultural development in Nigeria. Officials of South Atlantic Petroleum however, insisted yesterday that what the company is trading off is not its stake in the oil block, but the sale of the anticipated oil output from the huge field. A senior official of the company although confirmed interest shown by the ONGC, he however, added that the consultants appointed by the South Atlantic were still analysing the bids from about two or three firms that showed interest. “Our consultants are still weighing and analyzing the bids to determine the successful bid,” said the official adding, “what they are bidding for is the anticipated production from the Akpo field.”

Discovered in 2000, the Akpo field is scheduled to commence production in the last quarter of 2008 and is expected to quickly reach peak production of 225,000 barrels of oil per day (bpd) of which nearly 80 percent will be condensate. Last August, Total awarded a $1.08 billion contract to Technip of France and South Korea's Hyundai Heavy Industries to build the floating, production, storage and




offloading (FPSO) vessel for the field, while Italian oilfield services giant Saipem got an $850 million contract covering the umbilical, riser and flowline (URF) package. The field development plan calls for 22 producing wells, 20 water injection wells and two gas injection wells, tied back to a floating production, storage and offloading (FPSO) vessel with a storage capacity of 2 million barrels. Its condensate output will be exported via a buoy located 2 kilometers from the FPSO, while the gas will be piped 150 kilometers to the Amenam/Kpono platforms, from where it will be sent to the Bonny LNG plant. Other stakeholders in the field are French firm Total, which holds 24 percent interest, the Nigerian National Petroleum Corporation (NNPC), 50 percent equity and Brazil’s Petrobras.

Audit Report of Oil Firms Ready Jan. ‘06 By Mike Oduniyi, 12.02.2005

The Federal Government said yesterday that the result of the ongoing audit of oil and gas companies operating in the country would be made public by the first quarter of 2006. Minister for Solid Minerals Development, Mrs. Obiageli Ezekwesili who made this known yesterday, said that the audit became necessary given that many Nigerians had little knowledge of the operations of the industry, and thus left it open to skepticism and apathy. Ezekwesili, in her address at the opening of the South-West Roadshow of the Nigerian Extractive Industries Transparency Initiative (NEITI), in Lagos, said audit of the oil firms was not intended to witch hunt, “but to instill accountability and transparency in the operations of the industry.” The exercise would be focused on three levels namely, process, financial and physical audits, she said, adding that an international audit firm, the Hart Group, which was selected through a thorough international tender process had been contracted to do the work. “The audit involves looking at the relevant books of relevant government agencies that have a role in collecting the sector’s revenue in the form of royalty, taxes etc, as well as the Central Bank where monies are deposited in government’s accounts,” said the minister. “The audit will critically review and challenge, where appropriate, the annual accounts and tax filings of the oil companies. The same auditors would be in a position to prepare a credible annual statement, on both a disaggregated and aggregated basis, of all revenues received by the government,” she added. For the financial audit, the National Stakeholders Working Group of NEITI would




engage in regular publishing of the payment and revenue data and the statements prepared by the independent auditors would be regularly and automatically published and disaggregated on the basis of the Federation Accounts allocation to the respective levels of government and the Niger Delta Development Commission (NDDC). On the other hand, the process audit would refer to the process through which the affairs of the sector are handled and whether such process provides an adequate basis for protecting the interest of government. The Physical audit will undertake a comprehensive report of the amount of crude oil lifted, produced, exported or lost. The minister stated that the audit process would provide standard templates that would form the basis for a framework for future reporting. She also said that the idea of the audit was initiated by the NSWG in line with its objective to embark on aggressive sensitisation, knowledge sharing and perception re-engineering of the whole economic system. The NEITI initiative has brought to fore a lot of discrepancies in revenues accruable to government from the oil sector in terms of taxes, levies, royalties and sundry payment, to which over $300million was recovered from the oil producing joint venture companies in default of existing agreements. Oil companies operating in the country, particularly the multinational joint venture partners namely Shell, ExxonMobil, Chevron, Agip and Elf Petroleum, have lately come under sharp criticism for their refusal to disclose income and expenditures from their Nigerian operation. This is inspite of the fact the oil firms, which account for more than 90 percent of Nigeria’s crude oil production, had expressed backing for Nigeria’s signing on to the EITI. Reiterating the need for transparency in oil and gas operations, the Acting Executive Secretary, NEITI, Dr. Bright Okogwu, noted that at an average cost of between $6 and $8 per barrel under the current $55 per barrel benchmark, there was a lot of money accruable to all stakeholders in the industry. He stated that the objective of the audit should not be misconstrued, as every operator, including the Nigerian National Petroleum Corporation (NNPC), would be made to account for the equity crude it receives on behalf of government. The Roadshow, organised by the National Stakeholder Working Group (NSWG) of Nigeria Extractive Industry Transparency Initiative (NEITI), is expected to prepare Nigerians for the audit report of the oil industry, the first part of which is expected later this month.

CBN, NNPC, NPA Shrouded in Secrecy – EFCC From Kunle Aderinokun in Abuja, 11.29.2005




The Economic and Financial Crimes Com-mission (EFCC) has said that operations of the Nigerian National Petroleum Corporation (NNPC), Nigerian Ports Authority (NPA), and the Central Bank of Nigeria (CBN), are "shrouded in secrecy." Speaking yesterday in Abuja at a training workshop for procurement officers of federal ministries and parastatals, EFCC Chairman, Mallam Nuhu Ribadu, declared that the government agencies raked in a lot of surpluses but did not reflect such in their budget. He however, assured Nigerians that the Fiscal Responsibility Bill, when passed into law, would take care of such unwholesome acts. According to him, "Fiscal Responsibility Bill when passed will become one of the best legislation that we ever had. Many of us don't know the budget of CBN, NNPC and NPA. These agencies generate a lot of surpluses, yet we do not know their budget. All their operations are shrouded in secrecy." Ribadu who was represented by the Executive Secretary, EFCC, Mr. Emmanuel Akomaiye, noted that "if there is lack of transparency in our fiscal regimes, then there will be corruption. If a budget is less than transparent, it impacts negatively on our fiscal regime. This is what we have experienced in the country over the years. We have to make our budget process more transparent and open." He expressed the need for fiscal discipline at the three tiers of government namely, the federal, state and local governments lamenting that, "it is because we put bad people in government that we have corruption." Good governance, he stated, should be instilled at all the three tiers of government. According to him, "if there is good governance, there will be service delivery. One of the biggest problems we have today is bad governance.We have to build institutions that will imbibe good governance and transparency." Akomaiye also said there was the need for an electoral reforms. We need to reform the process of choosing our leaders. EFCC is determined to ensure that such people with shady characters and lack of transparency will not be allowed to get into public offices. The way they are put in public offices is the way they will behave in office," he said. The executive secretary who submitted that there could be "no improvement in public service if we remain in our old ways of doing things," called for service reforms that is based on efficiency, transparency and service delivery. He, however, pointed out that, "anti-corruption, which is one of the critical components of the National Economic Empowerment and Development Strategy (NEEDS), has not been fully addressed at the state and local government levels."

Local Content Boost for Agbami FPSO By Mike Oduniyi, 11.21.2005




About 6,400 tons representing about 17 percent of the total tonnage of the topsides for the Floating, Production Storage and Offloading (FPSO) vessel of Agbami deepwater oil field, will be handled by Nigerian contractors, as US oil major Chevron Nigeria Limited has promised a significant Nigerian content in the overall development programme for the field. The revelation of Chevron’s overall local content plant for the $4 billion oil field, came on the heels of protest by indigenous companies over awards of sub-contracts for the field development projects to foreign companies. The projects included the one to Norway’s Kongsberg to perform a Cargo Off-loading Dynamic Simulation Study for the Agbami, and another $9 million contract to Minox Technology also of Norway, for the provision of water treatment equipment for the Agbami FPSO. “We are currently attaining, or ahead, of the Nigerian Content scope contractually agreed to for the Agbami Project,” Chevron said. “We are setting new Nigerian Content records in almost every category – engineering, fabrication, procurement and training. We have facts and figures to demonstrate our progress. Of course, going forward, we continue to look for opportunities to do even better, and these will be reflected in the next projects. Following the uproar that trailed foreign domination in earlier deepwater projects, the Federal Government had indeed designated the Agbami field as a test case for its objective of raising the local content in the oil sector. Over all, the government wants at least 45 percent Nigerian input in the project. Responding to claims of threat to this objective, Chevron said: “Every effort has been made to ensure significant participation of Nigerian firms at the different stages of development of the various deepwater fields, beginning with the giant Agbami project.” “For example, the Nigerian content of the Agbami FPSO Topsides contracts is in the region of 6400 tons – a significant increase in FPSO Topsides over previous deepwater FPSO projects by other operators. Similarly, Chevron has prescribed the Nigerian content for the Agbami FPSO Topside engineering and services at 300,000 man-hours compared with previous deepwater projects that recorded between 40,000-50,000 man-hours in country.” With respect to the latest contracts awarded, Chevron said these were awarded by the main contractor for FPSO, Daewoo. “That contract was awarded by DSME, and actually Minox is a proprietary patented technology only available through their company so no Nigerian Company can supply it. This job was included in the Engineering, Procurement, Construction and Installation (EPCI) scope awarded to DSME. The contractors (DSME) are empowered under the EPCI, to select their subcontractors. This is normal: every EPCI contractor has to rely on hundreds of sub




contractors to perform discrete & specialized portions of the work.” Furthermore, it said that steps were taken in advance to ensure that the EPCI contractors provide adequate opportunity for qualified Nigerian companies. “We utilized and enforced two key tools in the Agbami FPSO EPCI contract namely: carved out work to be mandatorily performed in Nigeria as well as developed and included an approved list of Nigerian vendors and specialists (with the requisite capabilities) in the tender document that the contractor had to use in procuring services. Kongsberg had announced that its contract was to establish an off loading and export dynamic simulator model based upon the current marine and offloading system specification. The model will be used to for evaluate the offloading and export system design. “Kongsberg is pleased by this order from Chevron and the Agbami project, since this project has been a focus area for Kongsberg since last years,” said the company’s Sales & Marketing Manager Kaare Sunnarvik. France's Technip had earlier secured an $800 million contract to supply the umbilicals, riser and flowlines (URF) for Agbami project. The contract covers installation of manifolds and the design, manufacture and installation of flexible flowlines, risers and umbilicals. Technip's engineering centre in Paris will be in charge of the overall management of the project and will also carry out the engineering and design of the flowlines and associated risers. However, logistics and pre-commissioning services will be sub-contracted to companies in Nigeria with Nigerian engineers, who will receive training in offshore deep-water construction technology and flexible flowline termination. Agbami Field, located in 1500 meters water depth, is about 112 km offshore Nigeria. It is spread across two blocks, OMLs 127 and 128. Construction of the Agbami FPSO vessel actually commenced two weeks ago the cutting of its hull. The FPSO, which is a 300-meter vessel, will have processing capability for 250,000 b/d oil, 450 MMcf/d gas and storage of 2.15 million barrels. Topsides will weigh 38,000 tonnes. The field will be developed via 38 subsea production, gas injection and water injection wells. Agbami is due on stream in 2008. Chevron's partners in the project include Petrobras, Statoil and the Nigerian National Petroleum Corporation (NNPC). An official of the Nigerian Content Division (NCD) of the NNPC told THISDAY that the local content aspect of the Agbami project was being monitored closely. The NCD is intervening in all ITTs since July 2005 to ensure that all scope that can be executed in Nigeria is reserved for indigenous companies,” the official said.

Foreign Investors Express Concern over Security By Mike Oduniyi, 11.21.2005




Foreign investors who have committed huge funds into the country’s oil and gas sector have expressed concern over the growing fears of insecurity in the country and its implication on their investments. THISDAY gathered that about 24 top flight financial analysts, representing the world’s major investors from countries including the United States, Britain, France, Belgium and Switzerland, were in the country last week and held talks with the Federal Government. The analysts represented major investment companies who are big lenders to many Nigerian mega oil and gas projects, namely Merrill Lynch, Societe Generale, Bank of America Securities, Credit Suisse First Boston, Morgan Stanley, UBS Investments, Goldman Sachs, J.P. Morgan and Management, and Lehman Brothers. An official close to the meetings, held with President Olusegun Obasanjo and other senior government officials Thursday in Abuja, disclosed that the investors expressed deep concerns bordering on the safety of their investments already committed into oil and gas projects including the Liquefied Natural Gas (LNG), the Natural Gas Liquids (NGL), the Amenam/Kpono offshore oil field development and the Akpo deep offshore project. “The investors principally came to evaluate what has been happening to their investments, if they are safe, and also to get the needed assurance to see if they will put more money in future projects in Nigeria. They needed assurance of a stable polity”. “For instance, they have been following the Nigerian government’s pronouncements on full commercialisation of the country’s huge gas resources and also raising oil reserves to 40 billion barrels by 2010. They said that they are worried about the crises in the Niger Delta,” the official added.

Credit Suisse First Boston (CSFB), for instance, signed an agreement with the Nigerian NNPC/ExxonMobil joint venture last year, to lead a consortium of Nigerian banks in raising about $1 billion for the second phase of the Oso Natural Gas Liquids (NGL). Most of the investors are also on standby to provide funding for the NLNG trains 7 and 8, the Amenam/Kpono gas gathering project, as well as the Usan deepwater project. A statement from French oil firm, Total, weekend said that it played host to the investors who also visited the Amenam/Kpono oil field, which is contributing 125,000 barrels per day to Nigeria’s total oil production, and the Nigerian Liquefied Natural Gas (NLNG) plant at Bonny, Rivers State. “The financial analysts had gone to see President Obasanjo in the company of Total’s Chief Financial Officer, Robert Castaigne; President, Exploration and




Production Christophe de Margerie; Senior Vice President Africa, Exploration and Production in Africa, Jean Privey; Managing Director of Elf Petroleum Nigeria Limited, Jacques Marraud des Grottes and other top company executives,” the statement reads. The Total statement quoted Obasanjo as saying that his administration was committed to the enthronement of transparency and accountability in the oil and gas industry, as part of its anti-corruption campaign. Obasanjo also said his government had pursued the policy of monetisation of gas instead of flaring it, expanded the country’s oil and gas reserves and increased production capacity. The statement said further that the Minister of State for Petroleum, Dr. Edmund Daukoru who also hosted the investors also assured on the government’s preparedness to provide security in the Niger Delta. He said that the Federal Government has adopted strategies to expand the playing field and encourage more investors in the oil sector. Meanwhile, Daukoru, in another statement weekend stated that the Federal Government was not about to review the memorandum of understanding it entered into with the China National Petroleum Company (CNPCO) and Korea National Oil Company (KNOC). The Nigerian government had come under pressure from oil majors over the grant of preferential rights to CNPCO and KNOC in the recent awards of oil blocks. The two Asian firms had pledged to undertake downstream projects in Nigeria. “We wish to state for the records, that at an early stage in this process, some of the majors had offered consultancy services only, which Government found inadequate to address the necessity for a fully committed core investor.” “We would also like to make it clear, that should there be a review of this strategic understanding with the Chinese and Korean Oil Companies, all interested parties would be made aware of such an outcome in line with Government’s commitment to openness and transparency in all its activities in the oil and gas sector,” it added.

Nigeria Targets $4bn Annually from Gas Exports; NLNG Train 4 goes on stream By Mike Oduniyi, 11.15.2005

Nigeria’s quest to generate yearly revenue of $4 billion from natural gas exports has received a major boost, following the commencement of production from the fourth train of the Bonny LNG Plant, in Rivers State. The Nigeria LNG Limited (NLNG) said the start-up of the production line, which is the first leg of the company’s $2.1 billion (N273 billion) expansion programme, represents a major step towards raising the country’s earnings from gas exports to over $4 billion per annum.




THISDAY gathered that the new unit, whose construction was handled by the controversial TSKJ Conso-rtium, began production over the weekend and it is expected to raise output of liquefied natural gas (LNG) from the plant by 4.1 million tones per year as well as production of cooking gas by 500,000 metric tones. “After several testing, the LNG Train 4 began production and went on stream last Friday,” a senior NLNG official told THISDAY. The official added that the fifth train, which is also being constructed at the same time, will go on stream next January. The entire output from the two trains have been sold to Shell Western LNG, Total, Ibedrola (Spain), Endesa and Transgas on long term contracts. The Federal Government is executing the LNG project in partnership with Shell, Total and Agip and already, the joint venture partners have sunk over $7 billion on the project. Five international and six local banks participated in providing funding for the project. The international banks are BNP Paribas, Citigroup, Credit Lyonnais, MCC and West LB while the local banks are Citibank Nigeria, First Bank of Nigeria, FSB International Bank, Guaranty Trust Bank, Union Bank of Nigeria and United Bank for Africa. The international facilities comprise four international commercial bank loans supported by Export Credit Agency (ECA) guarantees or insurances totalling $620 million with an eight year maturity period (that is, the ECA facilities). These were also accompanied by an international bank loan of $180 million with a 6 year maturity, creating a 77.5:22.5 ratio between ECA outstandings to international facilities outstandings. The ECAs involved in this financing are US EXIM, ECGD, SACE and Gerling NCM (formerly NCM). NLNG also raised $460 million, which was arranged by ABN AMRO Bank, Credit Lyonnais, Fortis, ING Bank, HVB, Verein und West Bank and West LB, for the construction of four vessels to ship the product from the plant. The LNG project is considered one of the most important economic projects being carried out by the Federal Government. The project is said to be a vital part of the Federal Government's diversification programme and is expected to generate revenues and foreign exchange for the nation. Nigeria is aims to corner about 14 percent of the global gas market by 2009 with a supply of about 30 million tones per year of LNG into the world market by then. “Last year we shipped 170 cargoes, while this year alone we have shipped 600 cargoes. When train 6 comes on stream in 2007, NLNG will be earning some $4 billion annually from gas exports,” the official said.




According to NLNG Managing Director, Mr. Chris Haynes, the company’s projections is to contribute 20 percent to Nigeria’s Gross Domestic Product (GDP) by 2007, by the time a sixth train is completed. According to Haynes, the NLNG has a part to play in the 2008 target for the elimination of gas flaring which is associated with the production of oil, adding that Nigeria is blessed with massive reserve of associated and non-associated gas estimated in excess of 160 trillion cubic feet. "For more than three decades NLNG has become Nigeria’s trailblazer in gas exportation,” he added. The Federal Government through the Nigerian National Petroleum Corporation (NNPC) holds 49 percent equity in NLNG, Shell Petroleum 25.6 percent, Agip 10.4 percent and Total 15 percent.

Firms Challenged on Quality of PTI Graduates Graduates From Segun James in Warri, 11.13.2005

The Principal of the Petroleum Training Institute (PTI), Warri Dr. Raymond Akpojivi has challenged oil producing companies and service contractors to “prove” it if the graduates of the institute are not well trained or competent enough to work in the nation’s oil industry. Dr. Akpojivi gave the challenge in a paper he presented to the 2nd bi-annual Workshop of Training Manager of Oil/Gas and Allied Companies held at the Chevron Recreation Center. According to him, the PTI, besides being the only Institution specifically dedicated to the oil industry, is the best equipped school to meet the training needs of the industry in the country. Akpojivi stressed that in order to identify and meet the training needs of the companies in the industry; the PTI has emphasized the importance of constant information flow between the industry and the Institute. He stressed that it was in this regard that the Institute has specific department to meet these needs; such as divers, welders and underwater technologists. Services and educational need which is only provides by the PTI in the country for the upstream sector of the industry . Akpojivi also said that the Institute is trying to meet with the aspiration of government as regard Local Content in the oil and Gas sector, hence it has repositioned itself to play a leading role in the development of local content. “The Institute’s Foundry fabricates machine parts. The Institute recently mounted an off-shore First Aid course for the Nigerian Petroleum Development Company (NPDC), a subsidiary of the NNPC and also, a helicopter under water emergency




training programme is being designed in collaboration with some foreign partners” Akpojivi disclosed. He therefore asked the training manager to take advantages of the special abilities of the institutes and its students by ensuring that they are employed for the benefit of the companies and the nation. Also speaking, the Managing Director of Chevron Nigeria Limited (CNL), Mr. Jay Pryor reinforced the importance of a partnership between the PTI and the Training Manager of the Oil/Gas and Allied Industry.

Pryor who was represented by Dr. Kassim Momodu said that the “challenging cost of energy globally has underscored the vital role training management need to pay in providing the competent human energy needed by various organization for competitive and sustainable growth. He therefore urged the PTI and the Training manager to work out strategies to ensure the sustenance of the energy industry in the national economy.

External Reserves Hit $29.5bn From Kunle Aderinokun in Abuja, 11.01.2005

The Central Bank of Nigeria (CBN) yesterday said the nation's external reserves hit an all time high of $29.5 billion by October 28. The figure far exceeded the target of $9.57 billion projected under the National Economic Empowerment Development Strategy (NEEDS). Addressing newsmen in Abuja on the key macro-economic development and communique number 44 of the Monetary Policy Commitee (MPC), CBN Governor Charles Soludo said about N100 billion, being funds belonging to the Nigeria National Petroleum Corporation (NNPC) has so far been withdrawn from commercial banks, threatening to deal with bank chiefs that file fake returns to the apex bank. THISDAY had exclusively reported on Monday (October 31)that the CBN ordered banks to transfer all NNPC funds in their custody to its vault before the close of work that same day. Soludo said the increase in the external reserves has incre-ased the bank's capacity to supply required foreign exchange to the market. "Principally because as I mentioned in my briefing, our target actually under the NEEDS programme is about $9.7 billion for the end of this year, we were expecting a total level of reserve of about $9.7 this year and probably next year no more than probably about $12 billion or thereabout, that was the target. That, under whatever scenario you look at it, we are going to be way, way above that, even with the debt




relief. Even with our revised estimate or target of reserve for next year, even if you put it at $20 billion, we will still be well above that, so our capacity to supply the required foreign exchange to the market in the medium term is quite high," he said. He noted that the Monetary Policy Committee which met on October 25, had reviewed the development in the major prices in the economy including inflation, interest rates and exchange rates. The results, he said, were mixed grill. According to him, while interest rates have crashed to an all time level in over a decade and credit to the private sector has grown at unprecedented annual levels of about 39 percent (higher than the target of 30 percent under NEEDS)- thereby spurring rapid growth of the non-oil sector, the inflationary pressures have been worrisome. The broad money supply (M2), he said, has grown at about 22 percent at the end of September (as against the target 15 percent for end period 2005). According to him, the rise in M2 also reflected the increase in aggregate credit (net) to the domestic economy as well as the rise in net foreign assets- through the monetization of the 2004 excess crude earnings and increased benchmark oil price for fiscal 2005. The foreign exchange market remained stable, and the Naira has appreciated against all major currencies in all markets. He said at the DAS market, the Naira/dollar rate has appreciated to about N129.55 (down from N132.85 at the beginning of 2005), and the inter-bank rate has also appreciated to about N132 (down from N137). The Naira, he added, has also appreciated against the Pound Sterling and the Euro in both the official and parallel markets. He said the MPC was worried about the relatively high premium between the DAS exchange rate and the parallel market exchange rate of the Naira to the US dollar. This, he said, was caused ostensibly by the fact the CBN has become more effective in controlling the round-tripping, thereby curtailing forex supply to the market. He added that faced with increased demand in the parallel market (due to incomplete liberalization of the current and capital accounts), the Naira/dollar exchange rate in the parallel market has not appreciated as much as the official markets. Soludo also said the MPC expressed concern about the inflationary pressures as reflected in the figures for July and August. "The sharp spike in inflation rates for July and August (measured on a year-on-year basis) to 26 and 28 percent respectively posed a concern to the MPC. A decomposition of the inflation numbers by the National Bureau of Statistics (NBS) shows that inflationary pressures in recent months are driven essentially by rising food prices.




“Food price inflation (year-on-year basis) jumped from 18 per cent in June to 35.6 per cent in July and 36.1 per cent in August (according to the NBS figures). On the contrary, the non-food (or core) inflation declined from 16.2 per cent in June to 10.76 per cent in July and 13 per cent in August (measured on year-on-year basis). Indeed, the 12 month moving average inflation of the non-food prices stood at 7.1 per cent in July and 7.5 per cent in August. “Overall, the non-food or core inflation has remained stable, while the food price inflation has been volatile and increasing. Under the current methodology for measuring the consumer price index (CPI), food accounts for about 63 percent of the weight. But food prices depend largely on good harvest of agricultural output especially food. Since the technology of our food production is still largely dependent on the clemency of weather conditions, good weather is a key variable in understanding the overall inflationary condition in any given period," he said He said food prices have been rising this year despite the observed bumper harvest, attributing the rise to "the new initiative to export cassava which has reduced domestic supply; and the draught in the neighbouring Niger Republic that has increased the export of staple food products from Nigeria. Increases in the pump price of petrol, gas and kerosene which have raised inflationary pressures in most countries of the world have also impacted on the domestic price level." The CBN governor warned all bank chief executives against giving false reports of the remittance of their daily revenues and that any of them caught would be suspended for three months in the first instance. According to him, "we resolved to move all NNPC deposits with the commercial banks to the Central Bank of Nigeria and sterilize much of it with effect from October 31, 2005. All banks that collect revenues on behalf of the NNPC are expected to remit all such funds to the CBN within 48 hours of the collection. Failure to remit such funds will attract a penal interest charge of MRR plus 5. Any MD of a bank who misreports NNPC deposits with it or falsifies any returns to the CBN will be suspended for three months in the first instance." "We took very seriously the issue of lying about numbers or misreporting or falsification of numbers and we are making it very clear that this is the time that we are going to pay serious tolerance on all of these. If we get any such misreporting, or falsification of numbers, I think it’s been in the books for a while, but if any MD wants to make himself a scapegoat for it, we will just suspend the person for three months in the first instance and he can go from there, because we can't condone a banking system where the bank could systematically want to falsify numbers or lie to the central bank about their figures. This is very serious and we are going to start up with the NNPC funds with the various banks, if they fail to do so. Any NNPC money that remains with any bank, any one-day extra, we charge




them the MRR plus five as interest on such funds," he said. Soludo however said the Central Bank has asked NNPC to designate six banks that will hold monies for its daily operations. The governor said each of the banks would manage between N500 million and N1 billion and that at any point in time, there would not be more than six banks holding NNPC funds for their day “to-day minor operations." "They(banks) are going to hand them over to us, we have asked NNPC to designate about six banks, that will hold some small reserves for their day to day minor operations and each of these banks could hold between N500 million to N1 billion maximum. But there would be no more than six of such banks so that at any point in time there should be maximum of between N3 to N6 billion of NNPC funds with the commercial banks and that is to take care of their day-to-day minor operations, but the big ticket items, they have to come through us, we will actually issue them with our cheque book. The whole era of people going to systematically want to corner NNPC funds, you also know that the NNPC funds to the commercial banks has hovered well over N60 billion at any point in time," he said On why the CBN decided to move NNPC funds out of banks, the CBN governor said that, "if there are banks whose only source of existence was a life support from NNPC, I think it is only right that you remove the live support now and find which ones are actually breathing normally and which ones are not. I'm sure you agree that, this might be an opportuned time, when you have banks that are surviving because there is NNPC money, you don't want such banks to really be part of the new system we are actually talking about. If the life support goes and they can't breathe normally, they should better find their support, somebody to take them over and become proper banks. The new banks that we want to emerge are banks that functions as banks that get into intermediation, that are not depending on public sector funds as a live wire. Those will be the banks that will be sustainable over a period of time and we should appreciate, we are building a new house, a new house with new pillars, and we don't want to take the old rods, and pour concrete on them as the pillars for the new one, no you don't want that. "And I think that is very important to note, any bank that has consolidated very well today, I don't know of anyone that feels seriously threatened by the withdrawal of public sector funds, indeed most of the banks that depended on public sector funds for more than 90 per cent of their total deposit you will know that those banks were not really doing banking. All their banking started and ended in Abuja and the state capitals and these banks, good news is that almost all of them are now being absorbed by other banks in the consolidation exercise. So it is not a desirable thing to end by leaving people that depend on this kind of life support, because it will not




be sustainable, sooner or later the life support will go and we don't want them to collapse afterwards”, he said.

Firm Stakes $450bn on ExxonMobil By Mike Oduniyi with agency report, 10.31.2005

The financial and petro-leum sectors were jolted yesterday following reported moves by a New Zealand firm to acquire US oil major ExxonMobil for $450 billion. Officials of ExxonMobil both here in Nigeria as well as at its Corporate Headquarters in Texas, USA, have however, described the proposal as a huge joke. Auckland-based King Win Laurel Limited (KWL) said in a press statement that it intends to offer a combination of $35 and 283.50 yuan (or $35.10) per share in cash for ExxonMobil. KWL said the press release “is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any shares.” The firm had previously been behind at least two unsuccessful takeover proposals for major companies. Reports also said King Win had already filed papers with the US Securities and Exchange Commission (SEC) for the offer to buy ExxonMobil. The company said the offer was subject to financing. “The take over bid must be a fluke,” said a senior official of Mobil Producing Nigeria. “It is not possible because the company (ExxonMobil) is doing fine now, so we do not see any need for that,” the official added. "We can't speculate on or respond to market rumours," an ExxonMobil spokesman also told Reuters. King Win said it was incorporated in New Zealand on October 21, 2005 for the sole purpose of buying Exxon. "It's difficult to measure this offer as little is known about how the bidder would finance the transaction," said an analyst. "While our initial feeling is to ignore the offer, it is academically possible that the bidder could receive funding, making this offer real." Last year, King Win Laurel International launched an unsolicited offer to acquire Australian telephone giant Telstra, for $60 billion. Shares in ExxonMobil opened yesterday at $56.94 on the New York Stock Exchange. A successful take over of ExxonMobil will indeed create ripples in the Nigerian oil industry. The merger in 1999, between Exxon and Mobil, led to rationalization of many Nigerian workers in Mobil Producing Nigeria Unlimited, Nigeria’s second biggest oil producer. Although the two companies said the merger was to help their ability to be an




effective global competitor in a volatile world economy and in an industry that is more and more competitive, it also created problems for the Nigerian National Petroleum Corporation (NNPC), the senior partner in the joint venture with Mobil Producing and the Department of Petroleum Resources (DPR) as the parties contested management of the joint venture assets following the merger. Apart from Mobil Producing Nigeria, other ExxonMobil subsidiaries in the country are Esso Exploration and Production Company and Mobil Oil Nigeria Plc. Exxon Mobil at the weekend reported that it earned $8.3 billion in the third quarter of this year, compared to the $2.07 billion earned in 2004. The company said it invested $4.4 billion on capital and exploration projects during the period, bringing the year-to-date spending to $12.4 billion, an increase of $1.7 billion over the 2004 figure.

Oil Majors Demand $40bn to Meet Production Target; FG gives condition for more funding By Mike Oduniyi, 10.18.2005

Nigeria’s joint venture oil partners yesterday said meeting the Federal Government’s target of raising crude oil production and reserves to 4.0 million barrels per day (bpd) and 40 billion barrels respectively, by 2010, would require a total investment of $40 billion (N5.2 trillion). The Federal Government, however, said a review in the current level of funding of the joint ventures as well as the fiscal terms, would not be effected until the multinational companies begin publication of their expenditure and earnings in compliance with the Extractive Industry Transparency Initiative (EITI) procedure. As part of the National Oil and Gas Objectives, the present administration in 2000 set the target of achieving 40 billion barrels of oil reserves from the then 25 billion barrels, raise oil production to 4.0 million bpd from 2.0 million bpd and planned to lave as revenue equal income from crude oil exports. Outlining the financial implications of achieving these targets in Lagos, Chairman of the Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry, Mr. John Chaplin, said that to grow oil production capacity, the industry will need to develop about five billion barrels of crude between now and 2010. Chaplin, in a position paper titled “Factors Impacting Resource Additions: An Operator’s Perspective” at a Pre-Conference Workshop of the Nigerian Association of Petroleum Explorationists (NAPE), said that the industry will also need to develop additional 3.0 billion barrels in existing field if the country must maintain its current oil output of 2.4 million bpd. At an average development cost of $5 per barrel, the industry will require “about $40 billion from now until 2010.” According to him, the target is realizable given the fact that the country still has




undiscovered potential of about 62 billion barrels of oil equivalent (crude and gas). This is made up 25 billion barrels of oil equivalent in the onshore and 37 billion barrels of untapped reserves in the offshore region. “This suggests that we will need to increase the spending rate significantly to meet production goals and then maintain these at higher levels than now if we wish to sustain production,” said Chaplin, who is also the Managing Director of Mobil Producing Nigeria Unlimted. “The oil companies have shown a willingness to meet their share of funding. The challenge comes in the government being able to balance priorities to meet their share,” he added. Apart from providing the necessary funding, the oil majors namely Shell, ExxonMobil, Chevron, Agip, Elf and Pan Ocean are demanding better fiscal terms, which they said, would give them necessary incentives to take bigger risks in finding more oil. Chaplin said finding more oil comes with higher risk as operators will be going into deeper horizons which posed both technical and economic challenges. “A government has a clear duty to optimize its economic return on its mineral resources, however, it also needs to ensure the fiscal regime is not a hurdle to that goal…fiscal terms need to be commensurate with both risks and cost of developments to provide the appropriate stimulus to reserve addition,” he stated. Nigeria holds an average 57 percent shares in the joint venture, which account for more than 90 percent of the country’s 2.4 million bpd production. Chaplin said that increased spending by both parties in the past led to discovery of over 90 billion barrels of oil equivalent since exploration began in the country in 1930s, with 7 billion barrels discovered in the last 10 years alone. Oil exports account for 90 percent of Nigeria’s foreign exchange earnings. The country has earned $ 9.3 billion in excess income from oil as at August this year due to high oil prices, which are now being utilized to build power plants. However, the Federal Government said that on going review in the fiscal terms for operators as well as funding for oil projects woul take into cognizance, the companies’ readiness to comply with the EITI rules. The government’s position was espoused yesterday by the Director, Department of Petroleum Resources (DPR), Mr. Tony Chukwueke, and the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Engineer Funsho Kupolokun. According to Chukwueke, the Federal Government is redefining its aspiration to go in line with revenue generation. The government, he added, was taking very seriously the non disclosure of the expenditure and earnings by the oil companies. “Government must know what the companies pay and earn. It is not fair to the




industry where the Federal Inland Revenue, the Ministry of Finance, the Central Bank of Nigeria, the NNPC, and the DPR all having different figures on the same issue because the industry don’t say how much they pay.”

“I was shocked the find in one instance, a joint venture firm posting drilling cost for onshore well for $24 per barrel. I never knew such cost could be incurred. Something must be done about this cost issue because every dollar invested in operation, Nigeria accounts for 98 cents.If we did not manage this cost issue very well it is going to drive everything we are discussing out of the window,” said Chukwueke. Kupolokun, said that the time has come for the industry to evolve a mechanism for limiting technical cost even for the deep offshore, based on global industry benchmark. The NNPC GMD pointed out that there is a limit to the amount of resources that the government can commit to the oil industry on account of competing national needs. He noted that the joint venture partners had cashed in on the decline in funding on the part of the Nigerian government to skew operation in favour of production, “while compromising on exploration activities.” “This limited allocation to new exploration programmes within the conventional terrain has, over the years, impacted the rapid development of new reserves,” said Kupolokun. To address this issue, he said that some innovative measures would need to be adopted by government to encourage operators to maximally increase their exploration programmes. The Nigerian Extractive Industry Transparency Initiative (NEITI) which is currently auditing the oil industry he added, is also expected to come up with recommendation on how to curtail cost in oil exploration in a new memorandum of understanding (MOU) for the Production Sharing Contract (PSC) agreement.

Major Re-organisation in DPR, NNPC By Mike Oduniyi, 10.14.2005

Major re-organisation was yesterday effected in Department of Petroleum Resources (DPR) and Nigerian National Petroleum Corporation (NNPC) as the Federal Government began the implementation of long-awaited reforms in the nation’s petroleum industry. In a major move towards making DPR an autonomous body with full regulatory powers over the petroleum industry, the designation of the head of the department has been restructured to have the status of Director-General from Director.




Five new directorates to be headed by directors were created out of the existing eight divisional structures. These include Upstream, Downstream, Corporate Services, Technical Services and Gas Development directorates. In NNPC, three Managing Directors and two Group General Managers of key business units were re-deployed as the corporation began the second phase of the implementation of its transformation project tagged: “Project PACE.” Managing Director of Nigerian Petroleum Development Company (NPDC), Mr. George Osahon, was moved to National Petroleum Investment Man-agement Services (NAPIMS) as Group General Manager (GGM). NAPIMS is NNPC subsidiary responsible for monitoring the Federal Government’s investments in both joint venture oil operations and activities under the production sharing contract (PSC) agreements. Former NAPIMS GGM, Mr. Phillip Chukwu, was appointed the Managing Director of National Engineering and Technological Company (NETCO). Also, Mr. Smart Fadayomi, Group General Manager, LNG in the office of NNPC Group Managing Director was appointed the new Managing Director of NPDC, the oil exploration arm of NNPC. Senior NNPC officials yesterday said NAPIMS and NPDC are central to the transformation objective of the corporation, hence the critical need for changes. Under the transformation project, NAPIMS for instance, will oversee the newly introduced Petroleum Market Place for the award of oil and gas contracts along with joint venture partners, while NNPC is aiming to grow crude oil production by NPDC from the current level of 30,000 barrels per day (bpd) to 150,000 bpd by 2007. Presidency sources told THISDAY last night that government has begun phased implementation of the recommendations of the Oil and Gas Implementation Committee (OGIC).

The committee headed by the Minister of State for Petroleum Resources Dr. Edmund Daukoru, was set up to handle reforms in the oil and gas sector. “The OGIC is principally meant to create new structures in the oil and gas sector working in conjunction with the Bureau of Public Enterprises (BPE). The Committee has recommended new name for the NNPC, creation of a new DPR, Ministry of Petroleum Resources, Research and Marketing,” said a source. The source further added that the re-organisation already effected in the DPR represented the first phase of the implementation of the OGIC report. “The first step is to restructure the DPR and align its performance to match that of the Oil industry it is supervising, empower the staff and establish a string of digital platform for its




operations.” The OGIC report is expected to be given legislative backing through a Bill being considered by the National Assembly. Senate Deputy President Ibrahim Mantu, had told newsmen recently that the Federal Government is looking forward to having a DPR fully capable of regulating the oil industry in similar way the National Communications Commission (NCC) has performed in the telecoms sector. Mantu decried the present set up where the DPR operates like an appendage of the NNPC. ”We are now in the process of re-organising the entire oil industry. DPR will actually do what perhaps NNPC is doing now,” he said. “For instance, the law establishing the Nigerian Communications Commission (NCC) created a level playing ground between Nigerian Telecommunications Limited (NITEL) and all other players in the sector. If we have a similar environment in the petroleum sector, the situation will be different,” Mantu added.

FG Shelves Deadline on Local Crude Refining; Anyaoku laments fuel importation By Mike Oduniyi in Lagos and Chuks Okocha in Port Harcourt, 10.10.2005

The Federal Government may have bowed to pressure from multinational oil companies to shelve plans for an increased domestic refining of crude oil, as the earlier 2006 deadline to commence the refining of 50 percent of the crude produced locally has now been revised. But former Commonwealth Secretary General, Chief Emeka Anyaoku, has lamented Nigeria's continued importation of fuel, saying that it is not dignifying that a top oil producing country like Nigeria is the greatest importer of refined products. Speaking to journalists at the weekend, Minister of State for Petroleum Resources, Dr. Edmund Daukoru, said although the policy of refining half of Nigeria's oil production in the country remained, next year's deadline was not realistic as there is no infrastructure on ground to back it up. The minister said while the directive was issued last year, the Federal Government has come to terms that it would take a minimum of three years for a refinery of world class to come up. The existing four refineries, he added, would not be able to meet the capacity required for local crude refining. "We have not really concretized plans to give effect to the aspiration to refine 50 percent of domestic production. It is a bit of short time, we have to be very realistic," said Daukoru. "We really need to review the date, but the policy itself is very definite. If we say that we want to refine half of production by 2007, physically it is not possible. Our local




refineries, if they were to be working to full capacity that would go a long way. Even if you start building refinery today, if it is going to be world class refinery, it is going to be three years," he added. Implementation of the directive would have meant local refining of 1.25 million barrels per day (bpd) of Nigeria's total crude output of 2.5 million bpd. This would have yielded at least 1.9 billion litres of fuel per day. The oil majors who are responsible for producing more than 90 percent of this output have kicked against the policy. Their opposition as espoused under the aegis of the Oil Producers Trade Section (OPTS) of the Lagos Chambers of Commerce and Industry (LCCI), was however, not due to time factor but hinged on the unfavourable operating environment in the downstream sector. According to OPTS chairman, Mr. John Chaplin, the nation’s downstream petroleum sector was not fully deregulated enough to permit investment in local refining. The government had issued the order late last year, first to boost local supply of petroleum products and second, to accommodate the expected rise in the country’s oil production capacity that will hit some 3.5 million barrels per day (bpd) by the end of first quarter 2006. The Nigerian National Petroleum Corporation (NNPC), which owns an average 57 percent equity in the crude, has also gone ahead to draft agreement relating to the refining of the crude produced locally. Daukoru, however, said that the review of the deadline was not necessarily to dance to the demand of the oil majors. He said that national interest remained paramount in all the decisions of the Federal Government. According to him, it was in the light of this that the government is deliberately encouraging other investors who are ready to invest in the country's downstream sector. "Majors have never been involved in anything other than producing oil and gas," Daukoru said. "But if a partner comes and wants to be involved in development of Nigeria infrastructure, I'm bound to listen to them,. "We must have a two-track policy to encourage others than the majors alone, because their (oil majors') role in the world is shrinking. We must also encourage other people, independent, local entrepreneurs, to form alliances that can also step into the breach," he added. Meanwhile in Port Harcourt Anyaoku said at the weekend that the continued reliance on importation for Nigeria's fuel needs was not doing the country's image any good. The former Commonwealth scribe, addressing the inauguration of the board of Orient Refinery, of which he is chairman, said that the plant was being set up to "review that lost image of Nigeria”, adding that he would bring his experience to




bear to ensure the success of the refinery. He said that it is not dignifying that Nigeria, a crude oil producer, is importing fuel for domestic consumption. Anyaoku therefore explained that the coming on board of Orient Refinery is aimed at correcting the wrong impression. Rivers State Governor Peter Odili said his government is pursuing similar the initiative as Orient. Odili said his government intends to develop the two refinery licenses that have been granted the state during his tour of duty, saying the two refineries and Orient would all be competing. He hinted that the competition would be healthily explaining that the Rivers State government would even invest in Orient Refinery. Managing Director of Orient Petroleum, Chief Nnaemeka Nwawka, said that with the emergence of private refineries the cost of fuel per liter would drop drastically. “The whole idea of Orient is having an indigenous oil company, which is taking our God-given resources and making added value products out of it. The mode of exploitation of oil and gas in Nigeria is always exported. You carry crude oil, send it out, somebody refines it and then adds profit and send your own product back to you at a very high price and we say we want to break that model. “We want to take the crude oil in this country and add value to it and give it back to our people because the greatest beneficiary of Orient is the common people in Nigeria. I tell you that when our dreams are realised, there will be a drop of at least N10 per liter in the prices of petrol and diesel and others because we are going to remove the cost of carrying crude oil from Nigeria to Europe.” He explained that what obtains currently in the international scene provides a good platform for Nigeria to assert itself in the oil market by having refineries like the Orient. According to him, “ if you go to Europe for instance, you have high labour cost over there and where they are paying people about $600,000 for their Chief executive, they are paying people here in naira – N40,000 and they are very happy. When you pay somebody N100,000 he is happy but that is only $1,000, you know, so the cost of labour there is very high and if you remove that cost of labour, remove the cost of transportation to Europe and the cost of transportation back to Nigeria, you can knock off at least N10.00 per liter. In-fact that is the greatest contribution which Orient wants to make to Nigeria. To make price of fuel more affordable to the common people in the country”, he added.

Oil Firms Blamed for N/Delta Crisis From Segun James in Warri, 10.05.2005




The Secretary to the Delta State Government (SSG), Dr. Emmanuel Uduaghan has identified the non-implementation of agreements reached between oil companies and their host communities as being responsible for the hostilities between the two parties. Uduaghan who said this in Warri at the occasion of the official signing ceremony of the Global Memorandum of Under-standing (GMOU) between the nation’s second largest oil company, Chevron Nigeria Limited (CNL) and the Ijaw clans of Gbaramatu and Egbama. Uduaghan regretted that before now, Memorandum of Understanding (MOU) signed by oil companies and communities are done without the government being taken along in the process. According to him, it was only when there is a breakdown and hostilities between both parties that government is brought in. He said that this will no longer be so as the government now insists that it be carried along in the entire process leading to the signing so that when problems arises in the future, it will be in a position to apportion blames and mediate. He disclosed that it was in realization of this that the state government sets up a department in the ministry of justice to monitor the implementation of such MOUs. Uduaghan gave assurance to both the company and the people that government would do all in its powers to protect their interests. Speaking earlier, the Managing Director of Chevron, Mr. Jay Pryor who was represented by the company’s General Manager, Public and Government Affairs, Mr. Femi Odumabo said that with the new GMoU signed with the Gbaramatu- Egbema Central Development Council, development activities would now be directly headed by the people themselves and not the company. Said he: “the GMoU, which replaces precious agreements and MOUs, is an important component of the newly announced community engagement strategies by the NNPC/CNL Joint venture, it embodies Chevron’s new direction in community engagement and sustainable development in Nigeria, defines the relationship between the company and communities in its area of operation and outlines the stakeholders commitment to participatory partnership, transparency and accountability, building community capacity for sustainable development , and conflicted resolution though due process and the rule of law.

Oil Sector Gets N8.6 Trillion 3-Year Investment Plan; FG targets 10,000 new jobs From Mike Oduniyi in Johannesburg, South Africa, 09.27.2005

Nigeria yesterday laun-ched an aggressive investment drive for the petroleum sector, where it planned to spend $67.1 billion (N8.6 trillion) on oil and gas projects between now and 2008.




The Federal Government said the investment plan carries the potential of creating over 10,000 new jobs in the sector. Unfolding the government’s three-year investment strategy for the nation’s oil sector at the ongoing 18th World Petroleum Congress (WPC) in Johannesburg, South Africa, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Engineer Funsho Kupolokun, said oil exploration and production would gulp a total $34.4 billion while $32.7 billion would be spent on gas production, supply and distribution. A further breakdown of the investment plan in Kupolokun’s presentation which attracted widespread commendation for its depth and graphical illustrations, showed that engineering design for oil and gas projects will gulp $500 million per year over the next three years, fabrication in the upstream sector ($8 billion), and procurement of materials ($25 billion). According to the NNPC GMD, the objectives of the investment plan include maximizing oil and gas sector value to the national economy, improving the Nigerian capacity and content in the sector, growing the nation’s oil reserves and production capacity to 40 billion barrels and 4.5 million barrels per day (bpd), respectively, creating as much revenue from gas as oil within this decade, and transforming the nation’s energy sector from just an oil industry to an integrated oil and gas industry. At present, Nigeria’s oil output is 2.4 million bpd while reserves totalled 35 billion barrels. A significant increase in Nigeria’s oil production capacity, according to Kupolokun, is key for global energy stability, adding that the steady growth in the country’s oil reserves and production capacity, is an indication of Nigeria’s prospectivity. He said the gas sector was also evolving rapidly, with the demand for the commodity projected to record the fastest growth in the world from present 1.5 billion cubic feet per day to 25 billion cubic feet in 2025. The government is keen to having the energy initiative contributed to doubling the GDP over the next 10 years, he said. “A lot of the spending will be in the upstream, some in the downstream, some in the gas sector,” said Kupolokun, adding however, that a greater percentage of the funding for the projects would come from the private sector. He said that Nigeria offers attractive opportunity for investment to fill refined products gap both at the domestic level, (totaling some 300,000 bpd) as well as in the West African sub-region and other markets totaling another 300,000 bpd. “We put in a number of initiatives to provide enabling environment for these opportunities. The fiscal system is simple, straight forward, progressive and creates a level playing field.




“There is stability of agreements. Even during the military years, agreements were stable in Nigeria. Now under the current dispensation they can only be better,” he said. The NNPC, he added, has already begun a massive multi-faceted transformation to enable it respond more effectively to the challenges associated with the expected growth in oil industry. Speaking to newsmen shortly after Kupolokun’s presentation, Deputy Senate President Ibrahim Mantu said the Federal Government was already planning a major restructuring of the nation’s oil sector, with the aim of creating a strong and virile regulatory agency to back the investment drive. Mantu said the National Assembly was prepared to provide legislative backing to every policy initiated in this regard. “We have never really had any problem in giving them legislative backing because nobody will invest in an environment where he is not sure of law protecting his investment,” said Mantu. The proposed regulatory body for the oil sector, he added, would take the form of the Nigerian Communications Commission (NCC), which had helped in revolutionalising the communications sector by creating a level playing field for public and private sector operators.

NNPC Woos Staff over Refineries Sale 09.21.2005

Nigerian National Petroleum Corporation (NNPC) yesterday urged its workforce to support the planned privatisation of the nation's four refineries as it would lead to more efficient performance by the plants. NNPC Group Executive Director, Refining and Petrochemicals, Abubakar Lawal Yar'adua, said the privatisation of the refineries would also make the nation the hub of petroleum activities in West African sub-region. Yar'adua said the Warri, Port Harcourt and Kaduna refineries are currently produce about 16 million litres of fuel daily, lower than the nation's consumption rate put at 30 million litres daily. “Privatisation is the priority of government in the interest of the petroleum industry in particular and the nation at large,” he said. "The less government is involved in the running the refineries, the better for the industry as well as the economy,” he added. According to him, global refiners are willing and ready to invest in Nigeria, but the "atmosphere must to be right," adding that all what investors needed was a level playing field to come and set up refineries in the country.




That is being achieved with the liberalisation of the downstream sector fully on course. He said the three refineries are producing at about 70 per cent installed capacity and could reach 80 per cent before the end of the year. He attributed the feats to repairs on the Fluid Catalytic Cracking units . (FCCU) as well as the tubor generators in all the refineries. "I am optimistic that with the current level of production at the refineries, pump price and volume of import will soon reduce significantly,'' he said. He said in order to sustain and improve on the production level, Turn Arround Maintenance (TAM) must to be carried out as at when due and spare parts must also be readily available. The Federal Government had in 2002 awarded 18 licenses to private entrepreneurs to establish refineries in the country. NNPC Group Managing Director, Engr. Funso Kupolokun had said last weekend that three private refineries should come on stream between now and 2010.

Kupolokun: Crude Oil Theft Declines By 70% From Mike Oduniyi in Johannesburg, South Africa, 09.28.2005

Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Engr. Funsho Kupolokun, yesterday said the volume of crude oil theft in the country has declined to 30,000 barrels per day (bpd) from 100,000 bpd recorded last year. Kupolokun said the 70 per cent reduction in the volume of oil theft through illegal bunkering was the result of the concerted efforts by the Federal Government and its Joint Venture Partners to radically improve the socio-economic environment of the Niger Delta region. NNPC chief executive made this known while briefing the international oil communities on the experiences and strategies employed in Nigeria for a sustainable relationship with oil producing communities at the ongoing 18th World Petroleum Congress (WPC) in Johannesburg, South Africa. According to him, Nigerian government and the oil producing companies have developed a vision for the sustainable development of the Niger Delta, which aimed at creating “safe, healthy, thriving and self-reliant communities capable of sustaining their development and where oil and gas companies are valued stakeholders.” To achieve this objective, the Federal Government, he said, among others measures established the Ministry of Environment, created Niger Delta Development Commission (NDDC), raised the derivation fund to 13 per cent, began publishing oil accounts as well as monthly allocation to the different states to




entrench accountability. Government, he noted, has also embarked on massive infrastructural development in the Niger Delta (roads, jetties, water supply) and economic interventions by World Bank, United States Agency for International Development (USAID), United Nations Development Programme, International Fund for Agricultural Development (IFAD) and Department of International Development (DFID). Kupolokun said NNPC and the oil joint venture partners have taken steps to improve the environmental, social and economic situation in the region by ensuring strict regulatory standards and compliance, prompt rehabilitation of oil spilled impacted areas, gas flare out and above all, changing their investment strategy from community assistance to sustainable community development. “As a result of what we are doing in the industry, as a result of the constructive engagement of the Federal Government, as a result of the introduction of the Joint Task Force (JTF), production shut-in, what we called deferment, have reduced drastically. “Oil theft has reduced from some 100,000 bpd since a year ago to 30,000 bpd. That is significant improvement. So, we are happy with the result we are getting and the communities are responding to the efforts of government and NNPC and its joint venture partners,” he said. He added that the volume of oil spill recorded as a result of vandalisation of pipeline slumped to about 3,000 bpd this year from around 9,000 bpd last year. Kupolokun noted that the oil industry has defined corporate social responsibility to mean a continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and the society at large. Oil theft in the region hit an all time high of 200,000 bpd in 2003. Coupled with vandalisation of both crude and fuel pipelines and forceful closure of oil production facilities by militants demanding fair share of the oil wealth, Nigeria then lost about $1 billion in revenue. “What that means is that in the past what we had was community assistance, in which case you go to the community and you say that you need this, take it. It is like you are giving him pittance. “Then we moved away to community development. Again you say the community needs school, so you go and put school there. What we have not done is to engage the communities. But now, in the last three four years, we have shifted the focus to sustainable community development, where we go to the communities, we sit down with them and find out what are there needs. “If we do anything, the community has to own it, they see it as theirs, they believe in it. So I will be the first to agree that we made mistakes in the past,” he added.




Warri Refinery ‘ll Not Be Privatised – Daukoru By Segun James in Warri, 09.26.2005

Minister of Petroleum Resources, Dr. Edmund Daukoru has said the Port Harcourt and Kaduna Refineries were the ones to be privatised now. This was in government’s effort to ensure better management of the down stream sector of the oil industry while the Warri Refinery would continue to be run by the Nigerian National Petroleum Corporation (NNPC). Doukoru stated this at the weekend when he paid an unscheduled visit to Warri to see the extent of an alleged attack on oil installations by supporters of Ijaw warlord, Mujahid Asari – Dokubo. The minister who was received at the Warri Airport in Osubi, by commander of the Joint Military Task Force on Niger Delta (Operation Restore Hope) Brig. General Elias Zamani, said the government was experimenting with the idea of the NNPC running one refinery while the others would be privatised. According to him, the outcome of this experiment would determined the future policy of the federal government on the NNPC and the oil industry. Daukoru who confirmed that one flow station producing about 17,000 barrels of oil per day was overrun by Asari-Dokubo’s supporters, said men of Operation Restore Hope had driven the boys out with little or no damage to the flowstation. He said the Port Harcourt refinery would be privatised before year end while talk with a Chinese company was at an advanced stage on the privatisation of the Kaduna refinery. Daukoru said he was in Warri to deliver the gratitude of President Olusegun Obasanjo to Zamani and his men for the effective way they had handled the situation, said the action of the boys was uncalled for. Responding, Zamani assured the minister of the readiness of his men to ensure security and continuous flow of oil in the region. Zamani said the continued loyalty of his troops to the federal government was unalloyed.

August 25, 2005 Thursday Rajab 19, 1426 Nigeria eyes $5bn FDI a year

JOHANNESBURG, Aug 24: Nigeria hopes to more than double foreign direct investment to $5 billion a year thanks to investor friendly policies and a concerted government effort to court foreign business executives, an official said on Wednesday.




Mustafa Bello, head of the Nigerian Investment Promotion Commission, told Reuters a crop of tax incentives plus a new presidential committee that woos foreign CEOs would boost investment in Africa’s most populous nation. “As we improve policies we are attracting more investment,” Bello said on the sidelines of a Nigeria-South African investment conference in Johannesburg. “We should be able to do $5 billion a year, and after we open up the GSM (mobile phone) market further that will help us fast-track (investment).” Nigeria attracted about $2 billion in foreign direct investment last year, with most going to its key oil sector, and delegates at the conference said this must improve to help boost economic growth and tackle poverty. Despite oil wealth as an Opec-member, Nigeria is one of the world’s poorest countries on a per capita basis because of its huge population and its image as a corrupt nation, which means it receives less aid than other sub-Saharan African countries. Opening up the telecoms market — by part-privatizing the national phone carrier and allowing more companies to run mobile phone networks — will bring in more foreign cash, Bello said. Egyptian telecoms company Orascom, which has bid for a majority stake in Nigeria’s national phone carrier Nitel, was interested in further investment after a five-year exclusivity window for existing mobile operators ends next year. South African mobile operator MTN has notched up stellar growth in Nigeria, where mobile phone ownership is still comparatively low, and rival Vodacom and Britain’s Virgin are poised to take a majority stake in the country’s third-biggest operator VMobile. Nigeria also wants to beef up investment in its banking, solid minerals industry, agriculture, manufacturing, energy and tourism industries and had reinstated a package of incentives designed to boost its non-oil export sector. A clutch of South African companies are already making inroads into Nigeria,




attracted by largely untapped markets for telecoms, retail and entertainment.—Reuters

Ambassador John Campbell Speech; At TheMeeting of; Nigerian-American

Chamber of Commerce; March 31, 2005 ; Lagos

• Chairman and directors of the Nigerian-American Chamber of Commerce • Distinguished business leaders and investors • Ladies and gentlemen • All protocols observed.

I am delighted to be here today to speak on a topic of great concern to all of us: Factors that prevent Nigeria and the United States from achieving their full potential in their economic relationship.

Trade and investment are not merely economic vehicles driving corporations to make bigger and bigger profits.

At their foundation, they are also vehicles for virtue.

As President Bush has noted, "The case for trade is not just monetary, but moral. Economic freedom creates habits of liberty. And habits of liberty create expectations of democracy."

So, ladies and gentlemen, we should all do what we can to promote economic prosperity in Nigeria so that democracy can be strengthened.

The immediate benefits are obvious and, more importantly, enduring.

Let us consider the economic relationship that ties Nigeria and the United States together.

Nigeria is the largest source of imports from Africa to the United States, and the second largest export market on the continent for the United States.

US imports from Nigeria totaled $16.3 billion in 2004, virtually all of it crude oil. At the same time, US imports from South Africa totaled $5.9 billion in 2004, a little more than a third of our imports from Nigeria.




US exports to South Africa totaled $3.0 billion, twice our exports to Nigeria ($1.5 billion)

Turning to investments, the value, at historical cost, of the stock of US foreign direct investment in Nigeria was $2.1 billion in 2003.

In 2002, the value was $1.8 billion.

But almost all US foreign direct investment in Nigeria is in the oil and gas industry.

In comparison, US foreign direct investment in South Africa totaled $3.9 billion in 2003, almost 50 percent more than in Nigeria.

This is the background to three key points that I want to share with you today, all of which focus on how to encourage American investment beyond the energy sector and increase trade between our two countries.

These points involve challenges that I encourage everyone here to address.

Implicit in what I have been saying is a goal that the US government is pursuing in cooperation with Nigeria:

We want US private investment to rise to such a level that it serves as a catalyst for Nigeria's internal development, both economically and politically, as well as a way to help Nigeria on its path towards becoming more fully engaged in the global economy.

My first cautionary point, however, is that US firms will invest in Nigeria only if the physical security of their personnel and property is assured.

Violence in the oil region and in other parts of the country is an important disincentive to US trade and investment.

This fact implies that government-all levels of government-must do more to assure physical and financial security.

Some of the violence is associated with international criminal activity, including

• Oil bunkering • Money laundering • The illicit weapons trade and




• Advance fee fraud or 4-1-9

Increasingly, 4-1-9 is a problem for the bilateral relationship between Nigeria and the United States.

Some people, including government officials, dismiss the corrosive effects of 4-1-9 by saying that the victims know the business proposals are suspect and that, consequently, the victims are suffering because of their own greed.

But 4-1-9 scams prey on innocent people, people who are convinced that they are conducting legitimate business with legitimate Nigerian companies.

The Commercial Section of the US Mission, here in Lagos, receives as many as twenty inquiries daily from US companies seeking information on what they believe to be legitimate business opportunities from Nigeria.

One-half of these turn out to be 4-1-9 scams.

The US Mission's Commercial Section in Nigeria has a unit devoted solely to investigating the credentials of local firms.

The problem is that serious.

In the mid-1990s, the London Metropolitan Police estimated that Nigerian criminals sent out three thousand 4-1-9 solicitations per week, one-half of them to persons in the United Kingdom and the United States.

With the development of email, it is easy to imagine that the number of 4-1-9 solicitations has increased many times over.

We are pleased to see that the Economic and Financial Crimes Commission is making progress on prosecuting 4-1-9 criminals.

Every effort helps, but much more needs to be done.

Eradicating 4-1-9 scams is particularly important because American firms will only reluctantly deal with legitimate Nigerian companies until the fraudulent ones are put out of business.

Their reluctance should surprise no one because when the weeds take over the garden, the flowers cannot grow.




My second point today is an expression of hope and expectation.

I hope that US firms will respond positively as Nigeria develops reliable and robust institutions of good governance and the rule of law.

And I can assure you that the US Government will continue its support of Nigeria in this effort.

Reliable and robust public and private institutions are the best guarantee of the sanctity of contracts and of the other instruments that are essential to foreign investors.

Such institutions are indispensable.

Such institutions are a prerequisite for the sustained development that is needed to enhance the US-Nigeria trade and investment partnership.

In their absence, debilitating factors such as

• Inadequate enforcement of contracts • Inapproprirate regulations • Corruption • Crime and • Faulty infrastructure

can add as much as 25 percent to a company's cost of production.

With respect to Nigeria, this unseen and unintended burden may run even higher and, in the end, it benefits no one.

My third point is that US firms will invest in Nigeria if the microeconomic and macroeconomic fundamentals are right.

These fundamentals condition the trade and investment climate in the most basic way. This point is important because returns on trade and investment rise and fall in inverse proportion to the costs of doing business.




For example, manufacturing costs are high in Nigeria compared to those in many other developing countries.

Improvements in the infrastructure, especially as it relates to energy and transportation, would lower manufacturing costs in Nigeria. Good roads and reliable electricity are essential.

Improvements in the infrastructure would also make Nigeria's industries and other businesses more competitive.

Getting prices right, whether

• Interest rates • The exchange rate or • Labor costs

will enhance Nigeria's competitiveness abroad and help preserve market share at home for domestic firms.

Prices come closest to being right when markets operate unfettered.

Of course, this calls for government attention to the first two key points mentioned above: 1) Ensuring security of persons and property and 2) Nurturing reliable and robust institutions of good governance and the rule of law.

One additional factor that discourages foreign investment is Nigeria's trade bans.

Although their intent is ostensibly to protect infant industries:

• They create uncertainty. • They distort market prices. • And they encourage inefficiency by preventing wider competition than would

otherwise be the case.

Historically, import substitution strategies in the developing world do not work.

Instead, countries should exploit areas in which they enjoy a comparative advantage.




Many reports conclude that getting micro- and macroeconomic fundamentals right is the way to attract trade and investment.

The government of Nigeria's economic team understands this, a fact reflected in Nigeria's national economic empowerment and development strategy or "NEEDS."

My government supports this strategy and the numerous other reforms being instituted by this country's government.

In particular, I draw your attention to reforms that promote transparency and which hasten an end to corruption.

On that subject, I am pleased to note that the investment environment has improved because of the actions of President Obasanjo's economic team.

The Nigerian Federal Government has introduced greater transparency into its budgetary process.

It is encouraging the states to do likewise.

Furthermore, major government contracts are now reviewed by the due process office.

This promotes the best value for money and it gives foreign investors the opportunity to compete on a level playing field.

President Obasanjo has proposed legislation to make due process a permanent feature of government procurement.

In addition, Nigeria's oil revenue above a benchmark price is saved in a special account, which guards the country against the former boom and bust cycle in government expenditures.

Ladies and gentlemen, I have made three points.

1. US firms will expand their investment in Nigeria if the environment ensures personal, physical and financial security.

2. US firms will respond positively as Nigeria develops reliable and robust institutions of good governance and the rule of law.




3. US firms will be encouraged to invest in Nigeria if microeconomic and macroeconomic fundamentals are right.

Please join me in taking advantage of this occasion to consider how together we can respond to these three points.

They do pose challenges, certainly.

However, enhancing the US-Nigeria economic partnership is a goal manifestly in the best interests of our two countries.

If we move on this common front together, our success is guaranteed.

Thank you.

Nigeria and Foreign Direct Investments (FDI) (Posted 30th April, 2002) Tell your friends about this page! Email it to them.

Globally, economists tend to favour the free flow of capital across national borders because it allows capital to seek out the highest rate of return. Nigeria is reputed to be buoyantly blessed with enormous mineral and human resources but believed to be a high-risk market for investment. Also, decades of bad governance have almost crippled the national economy with corruption and misappropriation of funds becoming the norm rather than the exception. What is the way out of this delirium economic state? Many analysts and experts alike have given a thumbs up for Foreign Direct Investment (FDI) as a veritable booster to kick-start the Nigerian economy. With the enthronement of democratic governance in 1999, the government has taken a number of steps to woo foreign investors into Nigeria. It is thus necessary to assess the in-flow of FDI finance and its impact on the Nigerian economy.

Benefits of Foreign Direct Investment (FDI)

Foreign Direct Investment is not only a transfer of ownership from domestic to foreign residents but also a mechanism that makes it possible for foreign investors to exercise management and control over host country firms - that is, it is a corporate governance mechanism. Nigeria has one of the highest rates of investment returns in the emerging markets, presently estimated to be 30 percent. What are the advantages of FDI to a host country economy? According to Feldstein (2000), first, international flows of capital reduce the risk faced by owners of capital




by allowing them to diversify their lending and investment. Second, the global integration of capital markets can contribute to the spread of best practices in corporate governance, accounting rules, and legal traditions. Third, the global mobility of capital limits the ability of governments to pursue bad policies. Four, FDI allows for the transfer of technology - particularly in the form of new varieties of capital inputs - that cannot be achieved through financial investments or trade in goods and services. FDI can also promote competition in the domestic input market. Five, recipients of FDI often gain employee training in the course of operating the new businesses, which contributes to human development in the host country. Lastly, profits generated by FDI contribute to corporate tax revenues in the host country.

FDI In-flow in Nigeria

Positive developments have occurred in Nigeria since May 29, 1999 when democracy replaced the spate of military governments. This has resulted in a number of spirited moves to attract investors - local and foreign - into the country. The President, Olusegun Obasanjo in a bid to achieve this end embarked on a globe trotting mission that saw him interacting with other fellow Presidents and the business community of different countries. With a more relaxed taxing system, incentives and the creation of Nigerian Investment Promotion Commission (NIPC), the country was set to lure private sector finance. As a first step the Government took a bold move to privatise all the ailing public enterprises, Decree No. 25 of July 1996 backs this scheme. The Government set up the Bureau of Public Enterprise (BPE) to oversee this crucial venture and the National Council on Privatization (NCP) headed by the Vice-President to formulate pragmatic policies in this area.

This privatisation drive led to the recent 51 per cent botched share sale of Nigerian Telecommunication Limited (NITEL) to Investors International Limited (IIL) for the sum of USD $1.317 billion. However, IIL was only able to come up with 10 per cent of this payment and as penalty for default lost this initial payment. A number of other enterprises have been earmarked for the same process in a bid for government to divest its investment in public service sector. Perhaps the most successful of the Governments bid to attract FDI finance is the license granted for Global System for Mobile Communication (GSM) to three GSM Service Providers - ECONET WIRELESS, MTN and NITEL - at a handsome sum of USD $285 million each. This has really boosted the tele-density of the country and their impact are felt in the employment market, in terms of massive job creation. There have been countless FDI in-roads into the country, which cut across all sectors - oil and gas




industry, capital market, agriculture, solid minerals, information and communication technology - of the economy.

The statistics below shows FDI activities in Nigeria since up till 2000.

FDI INFLOWS, BY HOST REGION AND ECONOMY, 1989-2000 (MILLION OF DOLLARS) Host Region/ economy

1989-1994 1995 1996 1997 1998 1999 2000

(annual average) NIGERIA 1231 1079 1593 1539 1051 1005 1000(a) source: UNCTAD, FDI/TNC database (a) estimates FDI OUTFLOWS, BY HOME REGION AND ECONOMY, 1989-2000 (MILLIONS OF DOLLAR) Host Region/ economy

1989-1994 1995 1996 1997 1998 1999 2000(annual average)

NIGERIA 538 104 42 58 107 92 86(a)

source: UNCTAD, FDI/TNC database

FDI INWARD STOCK, BY HOST REGION AND ECONOMY (MILLION OF DOLLARS) Host Region/ economy

1980 1985 1990 1995 1999 2000




NIGERIA (h) 2405 4417 8072 14065 19254 20254 source: UNCTAD, FDI/TNC database (h)estimated by accumulating flows since1970 (MILLION OF DOLLARS) Host Region/ 1980 1985 1990 1995 1999 2000economy NIGERIA (v) 5 5193 9653 10957 11256 11341 source: UNCTAD, FDI/TNC database

INWARD AND OUTWARD FDI STOCKS AS A PERCENTAGE OF GROSS

DOMESTIC PRODUCT, BY REGION AND ECONOMY, 1980-1999 (PERCENTAGE) 1980 1985 1990 1995 1999 NIGERIA inward 2.6 5.5 28.3 50 44.5 outward 6.4 33.9 39 26 source: UNCTAD, FDI/TNC database




THE INWARD FDI INDEX, BY HOST ECONOMY, 1988-1990 AND 1998-2000

FDI INFLOW SHARE OVER

ECONOMY GDP SHARE(a)

EMPLOYMENT SHARE(b)

EXPORTS© RATIO

NIGERIA 1988-1990 3.7 0.4 1.5 1.9 1998-2000 0.8 0.1 0.6 0.5 source: UNCTAD, FDI/TNC database (a) the ratio of the economy's share of world FDI inflows to the economy's share of world GDP (b) the ratio of the economy's share of world FDI inflows to the economy's share of world employment (c) the ratio of the economy's share of world FDI inflows to the economy's share of world export

Conclusion

One striking feature of FDI flows is that their share in total inflows is higher in riskier countries, with risk measured either by countries' credit ratings for sovereign (government) debt or by other indicators of country risk. There is also some evidence that its share is higher in countries where the quality of institutions is lower. Presently, Nigeria is enjoying reasonable level of foreign investment, but caution must be the watchword because the domestic investment undertaken by FDI establishments is heavily leveraged owing to borrowing in the domestic credit market. As a result, the fraction of domestic investment actually financed by foreign savings through FDI flows may not be as a large as it seems (because foreign investors can repatriate funds borrowed in the domestic market), and the size of




the gains from FDI may be reduced by the domestic borrowing done by foreign-owned firms.

It is important that the Government concentrate on providing the basic infrastructures to support the local organised private sector (OPS) that are ready to invest domestic funds into the economy. The response to private initiatives by the Government is quite commendable, but there is need for more favourable policies targeting specifically the locals as opposed to the foreigners. The recent creation of the Bank of Industry and the Small and Medium Industries Equity Investment Scheme (SMIEIS) is a pointer to better things to come in the future.

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Petroleum Sector Study in Nigeria

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