Home news Rising Oil Prices Worry FG, Says Nigeria Not Gaining from Soaring Rates

Rising Oil Prices Worry FG, Says Nigeria Not Gaining from Soaring Rates

•Sylva: Nigeria’s comfort zone is $70-$80

•Fuel scarcity: NNPC distributes 387.5m litres of petrol in one week

The federal government yesterday expressed concern over the rising international prices of crude oil, saying the increase is not good for the country.

The government bemoaned waning foreign investment in the oil and gas sector, and reiterated the need to float an African Energy Bank to curb the continent’s dependence on Europe, Asia and America for funding.

Also, Nigerian National Petroleum Company (NNPC) Limited yesterday released details of how it distributed a total of 387.59 million litres of petrol in the last one week to bridge the gap caused by the withdrawal of methanol-blended products in circulation.

This was as the House of Representatives Committee on Downstream investigating the importation of off-spec premium motor spirit (PMS) grilled other importers and suppliers of the product.

Speaking on the rising crude oil prices in an interview with Bloomberg Television, monitored by THISDAY, Minister of State for Petroleum Resources, Mr. Timipre Sylva, maintained that Nigeria’s comfort zone in terms of oil prices was between $70 and $80 per barrel.

Although Sylva did not particularly explain why higher oil prices were bad for Nigeria, he stated that at the moment, Nigeria was not gaining anything from the soaring prices.

On the back of rising tensions between Russia and Ukraine, Brent, Nigeria’s benchmark, on Tuesday hit $99.03, the highest in the last nine years, almost touching the much-talked-about $100.

Clearly, the country’s controversial fuel subsidy regime, which would gulp N3 trillion this year, coupled with its inability to ramp up production to meet the quota allocated by the Organisation of Petroleum Exporting Countries (OPEC) have combined to limit the gains from the oil price hike.

However, Sylva blamed the inability of Nigeria to activate the oil wells it shut down when OPEC instructed producing countries to cut production as well as the lack of investment in the upstream sector for the country’s inability to increase production. At the moment, Nigeria is losing at least 300,000 bpd to its capacity challenges.

The minister stated, “I’m hopeful the prices will move around, maybe $80, maybe $70. We are hoping it will come down to somewhere around $70 to $80, which will be sustainable for us to the end of the year.

“We are working hard on that (production increase). What happened to us was the fact that we had to cut back at the time, and, of course, in such a way you can’t really cut back mathematically.

“So, you want to cut back 100,000 barrels that you shut out, maybe we’ll shut down about 200,000 to 300,000 barrels. So at the end of the day, we over-complied because we just couldn’t achieve it mathematically.

“In trying to cut down, we cut down too much. And now to come back, it’s not been easy for us to get the wells back to production.”

The minister noted that a lot of additional investments would be needed to ramp up production, but lamented that foreign funding was drying out for the industry.

“It’s not very easy these days to get the investments in. We really are not able to meet up our quota now. But I believe that we’re working so very hard to ensure that, because we are not happy at all.

“I mean, with the kind of prices we are seeing. We are obviously not happy about it. So we would like to definitely be back on track by later this year. It’s not been very easy to get investments. A lot of people can’t get investments into the sector.”

On what was being done to change the dire investment situation, Sylva stated that Africa was now beginning to realise that it could not be completely dependent on foreign funding.

He said, “So we’re looking at how we can get our African energy bank set up. Also, we’re looking at how we can rally multilateral funding into financial institutions.

“We are talking to Afreximbank. We’re working with other African producers to try to rally some funding for our sector in Africa, because we cannot continue to depend on funding that’s not coming.”

The minister reiterated that the world could not abandon fossil fuels when it had not built capacity to harness the alternative, noting that the decision to withdraw funding was hurting the industry and the countries of the world.

He said, “This is what we’ve been saying all the time. I mean that we have not been investing in the oil and gas sector for too long. And we expected that this was going to happen at some point, because there will be a gap, because now that gap cannot be filled by renewables.

“And that is because you are not also investing that quickly into renewables, you’re not developing renewables that quickly. So now there is a gap. And in addition to this gap, you have all the geopolitical tension.

“We are saying they must move gradually towards renewables, I mean, because if they take out the investment so quickly from fossil fuels, they cannot develop renewables at that same rate. That is what we are saying.”

Sylva further said he was not aware of discussions with the United States for Nigeria to increase supply of gas to Europe on the back of the Russia and Ukraine tensions, explaining that if it has to happen, it would take time and investment. But he explained that in the medium term, the country intended to begin supply to the continent through Algeria and Morocco.

Sylva said, “We are actually having those kinds of conversations with Algeria, we are building a pipeline, the Trans Sahara gas pipeline that is going to take up our gas all the way down to Algeria to Europe.

“We are also planning a pipeline to take our gas to Morocco. So we are planning two pipelines, one to Algeria, to Europe through Algeria, and one to Europe through Morocco.

“So we’re actually planning to take our gas to Europe. But I don’t know of any plan now to take gas to Europe because of the political tensions with Russia.”

On the Trans Sahara line, he stated that Nigeria had just signed with Algeria and had already started construction from the Nigerian end of the 614 kilometres AKK Pipeline, to take the pipeline all the way to Algeria to the border.

For the Morocco pipeline, he noted that it was still at the level of studies, with reports being expected.

“There’s a lot of excess capacity, but it will take some time to build the infrastructure and, of course, the LNG, it will also take a while. So, there is no spare capacity that we can immediately off-take to Europe now.”

Sylva, who spoke on the current OPEC supplies, stated that there was no need to increase quota at this time beyond the already agreed 400,000 bpd, which the cartel embarked upon last year.

He stressed that he planned to visit the headquarters of Chevron, ExxonMobil, ENI and the rest of the multinationals operating in Nigeria to get their commitments on additional investments in Nigeria, especially with the advent of the Petroleum Industry Act (PIA), which has made investment more attractive.

Fuel Scarcity: NNPC Distributes 387.5m Litres of Petrol in One Week

The release of the document by NNPC coincided with the gradual easing of the long fuel queues, especially in Abuja, where traffic had been mostly grounded due to the closure of some roads by desperate motorists.

THISDAY observed that even the NNPC mega station along Olusegun Obasanjo Way, in Abuja, which had hitherto experienced intractable lines of vehicles before now, had lighter queues. At the Total filling station on Sultan Abubakar Way, in Wuse Zone 3, which for weeks did not have the product, motorists had also begun buying PMS.

Still in Abuja, retail outlets in the satellite towns, such as Bwari, Lugbe, Kubwa, Zuba, Kuje, and others, which hitherto witnessed product shortages, were seen dispensing petrol to motorists. The story was the same in some areas in Lagos and other major cities in the country.

NNPC said in a statement that the petrol bought by Nigerians through retail filling stations between February 14 and 20 represented an average daily distribution of 55.4 million litres. The weekly national evacuation report released showed that 80 per cent of all the petrol distribution took place at 20 high-loading depots, while 20 per cent took place at the others.

NNPC listed the top 20 high-loading depots used for distribution as Pinnacle-Lekki, which evacuated the highest volume of 70.8 million litres, and NIPCO, which distributed 22.6 million litres.

AITEO distributed 22.3 million litres; Swift, 16 million litres; 11 Plc, 15.9 million litres; Bovas Bulk, 15 million litres; and Frado 14.6 million litres.

Others were Keonamex, 13.7 million litres; MRS Ltd, 11.9 million litres; Rainoil 11.6 million litres; AYM Shafa, 11.2 million litres; TSL, 11.2 million litres; Rainoil Lagos, 11.2 million litres; and Matrix, 10 million litres.

Also on the list were Conoil Lagos, 9.7 million litres; AA Rano, 8.8 million litres; Bluefin, 8.4 million litres; HOGL, 8.2 million litres; Ibafon Calabar, 8 million litres; and Mainland, 7.5 million litres.

With the distribution of 385.59 million litres in one week, NNPC stated that scarcity of petrol was being arrested, with queues drastically reducing at filling stations in Abuja, Lagos, and other major cities.

According to the company, selling outlets that had been shut for over a week due to supply gap opened for operations since last Sunday.

The methanol-blended product, NNPC had earlier said, was imported into the country by four oil marketers through four cargoes under NNPC’s Direct-Sales-Direct-Purchase (DSDP) arrangement.

NNPC had last week promised that over 2.3 billion litres of the product would be delivered before the end of February 2022 to totally arrest the situation.

Group Executive Director, Downstream, of the national oil company, Mr. Adetunji Adeyemi, had further assured during a media briefing to announce the 2.3 billion litres expected cargoes, that Nigerians would heave a sigh of relief “in days.”

To lessen the pain and ensure that the long queues disappeared, Adeyemi stated that along with its partners, NNPC was embarking on a 24-hour service, noting that Nigerians can now buy the product round the clock at filling stations.

Furthermore, the executive director had announced that at the time, the country had over 1 billion litres of petrol in stock, adding that all the fuel in circulation in the country is now certified safe.

Many believe the bad fuel may have been fully withdrawn, as cargoes of clean petrol arrive the country daily to bridge the gap created by the withdrawal of the methanol-blended petrol.

NNPC further noted that a monitoring team had been set up with sister government agencies to ensure a seamless process, urging the security agencies to fully cooperate.

House Grills Other Suppliers, as Duke Oil, Oando Absolve Selves of Blame

The House of Representatives Committee on Downstream investigating the importation of off-spec petrol yesterday grilled other importers and suppliers of the off-spec fuel. The two oil companies, Duke Oil and Oando Plc, which were quizzed by the lawmakers, denied culpability in the importation of the bad fuel. Addressing the lawmakers, both companies said their product met the required Nigerian specification.

In his presentation, Managing Director of Duke Oil, Lawal Sade, said the product his company imported was certified okay both at the port of loading and the port of discharge by the relevant authorities. He said they were notified by NNPC a few hours after the discharge that the product had some particles, which made them to discontinue the process.

Sade said the company shared the pains Nigerians went through as a result of the discovery and quarantine of the methanol-blended PMS, adding that Duke Oil has already taken necessary steps to remedy the situation.

He told the House committee, “Mr Chairman, yes, there was a delivery of cargo by Duke Oil, like you have seen in the report, and that cargo met up with the Nigerian spec, as it is both at the loading and discharge ports. There was a confirmation by the regulator, which is the new Nigerian midstream, downstream authority, to discharge that cargo within the stipulated date.

“The cargo discharged and the vessel sailed. It was just after 24 hours of operation then, that Duke Oil was notified by the NNPC that there was a complaint from some of their customers that the cargo had some particles

“So, Mr. Chairman, with the notification from PPMC/NNPC, immediately, the management of Duke Oil authorised the NNPC not to evacuate the cargo any further and requested for a recertification. But it is important we reiterate the fact that the cargo has been certified by the midstream and then, there is a joint inspection before the discharge and the specification provided in the contract with NNPC meet up the Nigerian specification.”

He further said, “And then, some remedial actions were taken immediately, Mr. Chairman, to conclude the report and give an assurance to this House committee and, indeed, all Nigerians that Duke Oil, as a wholly owned subsidiary of the NNPC and commercially driven company, we are not just in business to make money, but also to guarantee the energy security of our great nation and we never compromise the quality of the product we supply to Nigeria and any other place we do business and we will always seek to maintain this positive position.”

On its part, Oando Plc representative, Afanga Afanga, also said their product met the Nigerian specification.

Afanga stated, “In line with our DSSP contract with the NNPC on January 16, 2022, we delivered 90MT worth of PMS on board the Vessel MT Elka Apollon. It is important to note that this PMS cargo that was supplied met and was in line with all the Nigerian and DSDP contractual specifications.

“This was confirmed by the mandatory tests that were conducted at the loading port in Europe and before discharge in Nigeria by independent NNPC quality inspectors and finally by agents of the Nigerian Midstream and Downstream Regulatory Authority. It is on this basis that the cargo was certified and accepted for discharge by NNPC.

“As clearly stated by NNPC last week, when they were before this committee, its current inspection protocol does not include testing for methanol content and, thus, was not detected by the NNPC quality inspectors.

“The most important thing at this juncture for us is to work with NNPC as we are committed to ensuring that what is brought into the country is well treated and the issues around the situation are alleviated for Nigerians.

“We have given assurances and we have also been able to show to be following the right protocol and there was nothing that was breached as being alleged.”

Responding, the chairman of the committee, Hon. Abdullahi Gaya, asked the companies to submit all relevant documents regarding their presentations, adding that they may be re-invited if necessary.

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