Nigeria loses N7.6tr to faulty agreements with IOCs — Kachikwu


THE Minister of Petroleum Resources, Dr. Ibe Kachikwu, yesterday stated that Nigeria lost about $21 billion (N7.6 trillion) to International Oil Companies, IOCs, operating in the country due to non-implementation of the Production Sharing Contract, PSC, Act of 1993, otherwise known as the Deep Shore Act.

Consequently, the Federal Executive Council, FEC, at the weekly meeting presided over by the Vice President, Prof. Yemi Osinbajo, at the Council Chamber, approved an amendment of the Act, especially Section 15,   by the Ministries of Petroleum, and Justice for subsequent passage by the National Assembly.

This is as the Minister of Transportation, Rotimi Amaechi, said that award of contract for railway project in the South East was predicated on when the government will secure loans, noting that the zone would not be left behind in the rail projects Briefing State House correspondents after the FEC meeting, the Minister of State for Petroleum Resources stated:

“Once the price of crude oil exceeds $20 per barrel, the government will take steps to ensure that the premium element is then distributed at an agreed premium level for the nation so that we get more from our oil.

“But over the last 20 years, nothing really was done. From 1993 till now cumulatively, we have lost $21 billion because government did not act, we did not exercise it. In 2013, there was a notice to oil companies that we are going to do this but we didn’t go through in terms of going to Council to get approval.

“So, one of the things we have done in the last one year is that we have worked very hard to get that amendment because once we do, the net effect for us is close to $2 billion extra revenue for the Federation.”

On whether the problem could be immediately tackled or the monies recovered, Kachikwu said:  “I doubt it for the simple reason that the provisions of the Joint Operating Agreement, JOA, on Section 15 is that government would need to do something, which is what we have just done today. “If it is not done, then the oil companies are operating within the realms of what the law is. So that’s going to be difficult. But I love not to talk too much about that because I will be giving out what my strategies would be on national TV.

“Let me just say that however we do it, we would definitely try to see whether a possibility exists for some claw back advantages.”

The PSC of 1993 was in response to the funding problem faced by the old Joint Venture arrangement as well as the desire of the Nigerian government to open up the sector for more foreign participation. It governs the understanding between the Nigerian National Petroleum Corporation (NNPC) and all new participants in the new inland deep & ultra deep-water acreages, by which the contractor bears all costs of exploration and production without such cost being reimburseable if no find is made in the acreage.

It also provides that cost is recoverable with crude oil in the event of commercial find, with provisions mad7ue for tax oil, cost oil and profit oil after which the balance after deduction of Tax Oil and Cost Oil is to be shared between the NNPC and the contractor in an agreed proportion. Meanwhile, the FEC also approved the award of contract of over $2.7 billion to three consortium that will finish up the AKK (Abuja, Kaduna, Kano) gas pipeline, to ease movement of gas from the southern corridor to the North for power generation.

Kachikwu said:  “We currently have trapped power, trapped gas all in the southern corridors that is going nowhere because of lack infrastructure.

“So that has now been awarded. You remember that was partially done, this is a contract that has lasted over 13 years, so we got approval for that today and so that is going forward very nicely. “FEC also awarded a contract to a consortium for the Odidi pipeline from the Warri and the Southern marshlands which will move the additional gas we have been able to produce through the NDDC, about 364 million cubic meters of gas to be feed into the AKK pipeline.”

Concerning the prevailing petrol scarcity in parts of the country and the need for new refineries, Kachikwu said “I believe that the refineries can be fixed, we came up with a model to find private sector funding into these refineries and that’s being done.

“We expect that before the end of this year, we will at least get to the final contracting stage in terms of announcing those who are going to take this up. It takes about six months to do this and do it thoroughly but that requires raising close to $2billion from private sector participants to get this done.

“A lot is being done on refining that is because we have focused on it too so much to the point where I have put my credibility on the line and that’s fine and what have we said is that it is important that we stop importing petroleum products.

“There is just no justification for it, we done the following we have encouraged private sector, Dangote is working very hard, I have told the officials of Dangote that as opposed to the 2020 completion period they are looking at, they should assist us by trying to deliver this in 2019 period hopefully.

“For our own refineries, if we complete the procurement processes by the end of this year, they would begin their 12-18 months resuscitation or turn around maintenance (TAM).

“If they do that hopefully towards the end of 2019 we should have the three refineries being able to produce for the first time in decades within 425,000 barrels per day.

“Take the smaller modular refineries where close to nine are getting closer to the point of investment decision you see that holistically we are addressing the refining thing. If we do that we are looking at refining capability of less than a hundred thousand barrels in real terms. In fact, less than fifty thousand barrels in real terms to refining capability of 1.2million barrels per day.”

Also briefing journalists, the Minister of Transportation, Rotimi Amaechi said,   “FEC approves award of contract for the Ikorodu lighter terminal and the contractor is to carry out the rehabilitation qua wall and qua apron

“Another contract was approved to provide security at the water front and patrol boats for NPA “$500 million contract for rolling stocks, coaches, wagons, locomotives for the lagos Ibadan railway and Itekpe Warri railway.” Fielding question on the duration of the contract,   he said,

“We just awarded the contract today (yesterday) and you are talking about expectation. “All I can tell you is that they will be available on the completion of the construction of the rail tracks and we aiming to complete construction 2018 December. It is a big risk that I am taking by insisting it must be completed by 2018 December. I have said it to the public, the contract is actually for three years but we think they should complete it in 2018 December.

“Reason, in China,   they do a thousand kilometers per a year, so why can’t they do one hundred and eighty something kilometers in one year, six months or one year six months in Nigeria.  –  Vanguard



– Dec 14, 2017 @ 09:05 GMT



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