•FG vows reforms in weeks •Assures 65% limit take from offshore
The Federal Government has worked out a dividend paying formula for oil producing communities and is expected to make an annual payment of $1.1 billion to the communities, the special adviser to the president on petroleum matters, Emmanuel Egbogah, has informed.
This figure however differs from the earlier pronouncement by the Minister of petroleum resources, Diezani Alison-Madueke, who noted that an estimated annual dividend payment of $600 million was to be directly disbursed to communities hosting oil and gas producing facilities or directly impacted by the operations. It is however currently unclear how theses figures were arrived at.
Both government officials were speaking yesterday at the ongoing 2011 Nigerian oil and gas conference and exhibition in Abuja.
Egbogah said: “Since the onset of the amnesty programme which commenced in October 2009, Nigeria’s production has gradually been returning to the level seen in the early 2000s. This underscores the necessity to find a long lasting solution to security and militancy in the oil producing region through the government’s proposal of paying dividends to the impacted oil communities.
“This dividend, which had been quoted in the honourable minister’s speech as amounting to about $600 million a year, is not quite correct. Our own estimate is that it would be about 1.1 billion dollars a year to the host communities,” the presidential special adviser said.
The amnesty progranmme is being described by the government as ‘justified’, and is also credited with the increase in the nation’s oil production; from a pre-amnesty figure of one million barrels per day in 2008 to an average of 2.6 million barrels per day in 2010.
Nigerian National Petroleum Corporation’s (NNPC) Group executive director for exploration and production, Andrew Yakubu, representing the minister of petroleum resources, Diezani Alison-Madueke, said: “Direct payment of dividends to oil producing communities will be established to address the Niger Delta crisis and make the communities key stakeholders, with incentives to protect oil and gas facilities located in their areas.”
“It is our hope that all stakeholders and players in the industry will extend a hand of partnership in entrenching the transparent and efficient ways in which we now desire to do business, by leveraging on the laws of the land. This will no doubt ensure accountability in the management of investments across the value chain,” the minister added.
Egbogah also assured that the Federal Government would pass wide-ranging reforms of its mainstay oil and gas sector within weeks, admitting that delays were costing the government potential revenues as oil price climb over $100 a barrel.
The presidential adviser said the Petroleum Industry Bill (PIB), which will re-write Nigeria’s decades-old relationship with its foreign oil partners, would finally be passed after years of delay. He pledged competitive terms.
Similar promises have repeatedly been made by government officials, and some oil executives have said privately they are unconvinced the reforms would come ahead of the April presidential and parliamentary elections.
“We are assured in the next couple of weeks, well before the end of this administration, the bill will be passed into law,” Egbogah, special energy adviser to President Jonathan, said.
He said the terms of the bill, a document of several hundred sections which has been through numerous revisions, would make Nigeria’s deep offshore acreage — where most of its future production potential lies — attractive to investors.
“The terms for the deep offshore and other places are very, very competitive, and we have assured that our government take will not exceed 65 percent. It is much better than our closest competitor, Angola, and many other jurisdictions,” he said.
Andrew Fawthrop, country managing director at U.S. oil firm, Chevron, said he would reserve judgement for now. We need to see the whole bill and how the pieces fit together. This thing is like a water balloon; you reduce deepwater to 65 percent and that pushes it in, but what else pops out?” he wondered.
Allison-Madueke said oil prices were expected to remain robust in the medium term and that economic recovery had triggered fresh investment in the global upstream industry.
Both Brent and U.S. crude rallied to a 2½ year high on Tuesday on concerns that unrest in Libya could spread to other oil producers in the Middle East and North Africa.
But in a speech delivered on her behalf, the minister acknowledged Nigeria was losing out because of delays in passing the PIB. “A lot of investment decisions are currently on hold, while government is losing potential revenues that could have accrued to it due to proposed changes in deepwater fiscal terms and current high oil prices,” she said.
Oil industry executives have said billions of dollars of potential investment are on hold amid uncertainties surrounding the reforms, which could significantly alter the cost of operating in the country.
“Little can be achieved until the bill is passed and the industry has the clarity it needs,” Ian Craig, Royal Dutch Shell’s head of exploration and production for sub-Sahara Africa, told the conference.
But he added a note of optimism: “I believe we are a lot closer [than last year] to the bill being passed.”
The government hopes the PIB will tackle issues, including funding shortfalls at its joint ventures with foreign firms, insecurity in the Niger Delta, increasing local involvement in the industry and production of more gas for domestic power.
Critics say many of those issues could be resolved without legislation and that the bill has become unnecessarily complicated.
