How Oil-Rich Nigeria Failed To Profit From An Oil Boom

THE ECONOMIST

A worker at a makeshift production camp in Nigeria’s swamps processed crude oil at an illegal oil refinery site near the river Nun in Bayelsa.Credit...Akintunde Akinleye/Reuters

Price controls, spluttering production and oil theft are to blame

A surge in oil prices can do astonishing things. In Saudi Arabia a futuristic city is planned to rise from the desert, replete with an artificial moon made of drones. Angola’s long-beleaguered currency has suddenly become one of the strongest performers against the greenback. In the Middle East and Central Asia oil exporters are cock-a-hoop, since they may pocket $320bn more in oil revenues this year than previously forecast. Yet there is a conspicuous absentee from this merry petro-party. The net effect of the high oil price for the country that is usually Africa’s biggest oil producer is “nil or negative”, laments Zainab Ahmed, Nigeria’s minister of finance.

Africa’s most populous country, around 220m-strong, desperately needs the money an oil boom could bring. Some 40% of its people live on less than the equivalent of $1.90 a day. The government is struggling to service its debts. Social services are dire. The woeful economy has contributed to the violence that afflicts much of the country. In the first half of this year, nearly 6,000 people were killed by jihadists, kidnappers, bandits or the army.

Price controls are the biggest reason the boom is ruining the public purse. Elsewhere, as the price of crude rises, drivers pay more at the pump. Not in Nigeria. Petrol is about 175 naira ($0.42) a litre, among the world’s cheapest, yet the government has not raised the official price since December 2020. In January President Muhammadu Buhari reneged on his latest promise to reform the system, leaving the government to pay for the vast gap between Nigeria’s low fixed price and the global one. The state-owned Nigerian National Petroleum Corporation (nnpc) covers the fuel subsidy from its profits and sends what is left to the government. But in the first half of this year it sent nothing at all.

The prognosis is grim. The World Bank forecast in June that the government will spend 5.4 trn naira ($12.6bn) on fuel subsidies this year, more than three times what it coughed up last year. That is more than the increase in revenue the government will get from higher crude oil prices, reckons the World Bank (see chart 1). As a result Nigeria’s net oil revenues are likely to be about 40% lower than last year, despite the high global price. That squeezes everything else. In this year’s amended budget the government allocated more to the fuel subsidy than to education, health care and welfare combined.

Price-fixing has other ill effects. Because petrol is artificially cheap, Nigerians burn more of it. Consumption of petrol has risen from about 58m litres a day in 2021 to around 70m this year, according to the nnpc’s import figures. Some Nigerians, unsurprisingly, buy cheap subsidised petrol, smuggle it across the border and sell it at a huge mark-up in neighbouring countries. Such smuggling is most lucrative when global prices are high. Also, although Nigeria pumps crude oil, its refineries are so dysfunctional they have been closed down, so it imports almost all of its refined fuel. Rising domestic consumption thus weighs on the current account.

Another reason Nigeria’s public finances benefit so little from high oil prices is that production itself has slumped to 1.13m barrels per day, the lowest in more than 50 years (see chart 2), which is partly why the oil industry has also been a drag on headline economic growth. Output has been dipping slowly since 2005. This year it has dived. Angola’s output recently overtook Nigeria’s.


One reason for falling output is that the nnpc is so short of cash after paying for petrol subsidies that it struggles to cover production costs for pumping crude oil. Yet another is that a lot of oil is never counted as part of Nigeria’s output because it has been stolen.

Estimates vary, but the oil industry’s regulator says thieves are snaffling 108,000 barrels a day, about 7% of production. This cost the government $1bn in the first quarter of this year alone. Watchdogs estimate that between 5% and 20% of Nigeria’s oil is stolen. The Trans Niger pipeline, which can transport 180,000 barrels a day (about 16% of the country’s current production) suffers so much theft that its flow has been halted since June. Another big pipeline that carries 150,000 barrels a day has also been repeatedly attacked. Shell, a big oil firm, has declared force majeure since March on all its exports of Bonny light, a high-quality crude, permitting it not to meet its contractual obligations. Nigeria could produce another 700,000 barrels a day, but for theft and oil companies having to cut back production to avoid it, claims Mele Kyari, the nnpc’s head. The spate of vandalism at one point prompted the nnpc to shut down its entire network of pipelines, he said.

One way to steal is to overload legitimate shipments with more oil than is declared. Another is to break into pipelines and siphon oil off, then cook it up in bush refineries before selling. Five years ago the Stakeholder Democracy Network, a watchdog in the Niger delta, carried out a survey that found more than a hundred such refineries in just two of Nigeria’s nine oil-producing states. Lacking other ways to make a good living, hundreds of thousands of young people are involved in illegal refining, says Ledum Mitee, a local leader from Ogoniland, a region in the delta.

Plenty of stolen crude goes straight into the international market. Small boats glide along the delta’s canals, filling up from illegally tapped pipelines. They deliver it to offshore tankers or floating oil platforms. Sometimes the stolen crude is mixed with the legal variety, then sold to unknowing buyers. Much of it, however, is bought by traders who pretend not to know it is stolen, or do not care. “There’s a huge black market off the coast of west Africa,” says Alexander Sewell of the Stakeholder Democracy Network.

“This is being perpetrated by the big boys,” says Mr Mitee. Tapping into the pipes for large volumes, heated to keep the crude flowing, requires real expertise. It also requires complicity from some of the officials running the pipelines and from the security forces supposedly guarding them, says an observer who requests anonymity for safety.
A galaxy of thieves

Exactly who the big boys are is hotly disputed. Mr Kyari recently alleged that the army officers, government officials and even religious leaders are involved. The navy’s spokesmen claim that so large a scale of theft is implausible because—they argue perversely—their patrols would have spotted the boats and stopped them. The nnpc itself is “the north star in its [Nigeria’s] kleptocratic constellation”, says Matthew Page of Chatham House, a think-tank in London. This is “transnational organised crime run by a lot of violent people”, warns the anonymous observer.

Mr Buhari has promised a crackdown. The nnpc’s first move was to hire private security firms to protect the pipelines—a telling indictment of the army. But it is unlikely to solve the problem. Two of the firms are part-owned by a former warlord, Government Ekpemupolo, better known as Tompolo. He led a guerrilla campaign in the 2000s for the locals to control the delta’s oil, before agreeing to a deal whereby he would stop blowing up the pipelines in exchange for an amnesty—and for lucrative security contracts. That has fallen apart under Mr Buhari’s government, which in 2016 issued a warrant for his arrest. Yet Tompolo is now bizarrely both a government contractor and still on the wanted list of Nigeria’s anti-corruption agency, which says he has earned $105m through graft. (He denies wrongdoing.)

Ordinary Nigerians might at least console themselves that their petrol is still cheap. However, it sometimes runs out, as price-controlled goods often do. This year there have been three bouts of shortages. Exasperated motorists in long queues ruminating on the country’s corruption may be forgiven for uttering a popular Yoruba catchphrase: Japa, meaning emigrate.

READ ORIGINAL STORY HERE

EU Plans To Court Africa To Help Replace Russian Gas Imports

EU drafts action plan to cut energy dependence on Moscow

Europe to work with major producers and consumers of LNG

 

BY EWA KRUKOWSKI

The European Union will seek to step up cooperation with African countries to help replace imports of Russian natural gas and reduce dependence on Moscow by almost two-thirds this year.

Countries in Africa, in particular in the western part of the continent, such as Nigeria, Senegal, and Angola, offer largely untapped potential for liquified natural gas, according to a draft EU document seen by Bloomberg News. The communication on external energy engagement is set to be adopted by the European Commission later this month as part of a package to implement the bloc’s plan to cut energy reliance on Moscow.

The 27-nation bloc wants to shift away from its biggest supplier after President Vladimir Putin invaded Ukraine. Its draft energy strategy also seeks to prepare the region for imports of 10 million tons of renewable hydrogen by 2030 to help replace gas from Russia, in line with the ambitious EU Green Deal to walk away from fossil fuels and reach climate neutrality by mid-century.

The EU plan to increase LNG imports by 50 billion cubic meters and boost shipments of pipeline gas from countries other than Russia by 10 billion cubic meters requires setting relationships with traditional suppliers on a new basis and extending trade to new emerging suppliers, according to the document.

Key steps include fully implementing the agreement with the U.S. for the delivery of 15 billion cubic meters of additional LNG in 2022 and around 50 billion cubic meters annually until 2030. Another target is to sign a trilateral memorandum of understanding with Egypt and Israel to boost LNG supplies to Europe by summer this year.


The bloc also plans to support the doubling of the capacity of the Southern Gas Corridor, which brings gas from Azerbaijan, to 20 billion cubic meters per year. And while a working group with Canada has been set to look at increasing gas deliveries in the coming years, Japan and South Korea already redirected a number of LNG cargoes to Europe.

“Qatar stands ready to facilitate swaps with Asian countries,” the commission said in the draft strategy. “In terms of pipeline gas, Norway has already increased its deliveries to Europe and both Algeria and Azerbaijan have indicated their willingness to do so.”

The EU’s executive arm also said in the document that the bloc must work to ensure “open, flexible, liquid and well-functioning global LNG markets,” both with major producers, such as the U.S., Australia and Qatar, and consumers, including China, Japan and South Korea.

The increased purchases by Europe, coming amid growing global demand and already high LNG prices, will have an effect on global trade.

“The EU also needs to send consistent signals to the market to balance the short and medium term needs with longer term goals,” according to the document. “All this requires a much more coordinated gas policy to exploit the market and political weight of the union and developing a tool for a joint action.”

SOURCE: BLOOMBERG

Imo: Over 100 Youths Roasted; Culprit Declared Wanted; Govt Blames Rivers, Bayelsa Indigenes

Oil from a leaking pipeline burns in Goi-Bodo, a swamp area of the Niger Delta. Poverty in the region has made illegal crude refining an attractive business but with deadly consequences. Photograph: Reuters

BY CHARLES IGBO

OHAJI/EGBEMA LGA, IMO (THE SOURCE) - Hell has literally descended on Imo State. In one fell swoop, over 100 youths were burnt to death, thus reducing the Ohaji/Egbema Local Government Area of the State to one huge venue for wailing and cemetery.

The youths met their sudden death when an illegal refinery owned by one Okenze Onyewoke where they were working exploded, and burst into hellish flames.

The circumstances which triggered the explosion Friday is not known yet. But the owner of the illegal business who has disappeared into thin air has been declared wanted by the Imo State Government.


The illegal refinery, is located at the Abaeze forest in the Ohaji Egbema LGA. As at the time of this report, the whole area was littered by scores of charred bodies. They were unrecognizable.

Anguish and wailing have taken over the LGA, as hundreds of people thronged the scene looking for their relations.

The Imo State Commissioner for Petroleum Resources, Goodluck Opiah, who rushed to the scene was shocked at the number of fatalities. Lamenting the tragedy, Opiah, a native of the LGA, and a former Speaker of the Imo House of Assembly, said: “At the moment I can’t really confirm the number of the deceased because many family members have removed the corpses of so many others.”

Aside from the fatalities, Opiah lamented the other side effects of the explosion. Opiah: Apart from this calamity, the act has destroyed the aquatic life of the community. Our people, before now, are predominantly farmers and fishermen. Look around, you will find smoke coming from this illegal act. If this is not enough for anybody to stop, I think the community is heading for what I can’t describe.”


The Commissioner blamed Indigenes of neighboring Rivers and Bayelsa States for the deadly business.

He revealed: “Most of the people who are engaging in this act are from Rivers, Bayelsa and other neighboring States.”

He condoled with the people, on behalf of the Imo State Government, and advised Youths to engage in some other legal businesses than illegal ones.

Most of the youths, however, engage in it as a last resort because of the high unemployment rate in the country.

Explosion At Illegal Oil Refinery In Nigeria Kills Over 50

BY CHINEDU ASADU

ABUJA, NIGERIA (AP) — More than 50 people were killed and many injured when an explosion rocked an illegal oil refinery in southeastern Nigeria, state officials and police said Saturday.

The death toll may be more than 100, according to a report in the Lagos-based Punch newspaper. The fire was reported to have spread to nearby properties.

The fire broke out Friday night and quickly spread to two fuel storage areas at the illegal crude oil refinery, causing the complex to be “engulfed by fire which spread rapidly” within the area, said Declan Emelumba, the Imo State commissioner for information.

The immediate cause of the explosion and the extent of the deaths, injuries and damage were being investigated, Emelumba said.

Multiple videos posted on social media showed a gruesome scene, with people’s charred remains reduced to skeletons and cinders. The Associated Press was unable to independently verify them.

“A lot of people died. The people who died are all illegal operators,” said Michael Abattam, spokesman of the Imo State Police Command.

The Imo state government was looking for the owner of the refinery where the explosion occurred and declared him a wanted individual, an official said.

Illegal refineries are common in Nigeria, where shady business operators often avoid regulations and taxes by setting up refineries in remote areas, out of sight of authorities.

Nigeria is Africa’s largest producer of crude oil but it has very few official refineries and as a result most gasoline and other fuels are imported, creating an opening for the illegal refinery operators.

The practice is so widespread that is affecting crude oil production in the oil-rich Niger Delta region.

Who Owns The Oil? Okogie Asks

Archbishop Emeritus of Lagos Anthony Olubunmi Okogie. Image: Facebook

BY SAM EYOBOKA

LAGOS (VANGUARD) -- The fearless outspoken Catholic Archbishop Emeritus of Lagos, Anthony Cardinal Olubunmi Okogie has advanced the controversy involving the former President Olusegun Obasanjo and Ijaw Leader who is also PANDEF Leader, Chief Edwin Kiagbodo Clark together with some lawyers including Senior Advocate of Nigeria, Mike Ozekonme over the ownership of the Niger Delta Oil Wells.

According to the fiery preacher in a lengthy response on Friday: “The inquiry Sonny Okosun made four decades ago in his song “Papa’s Land”, remains a task. “We want to know who owns the land,” he sang. Today, we still need to ask ourselves that question: who owns the land?

“It has once again come to fore in former President Olusegun Obasanjo’s riposte to Chief Edwin Clark. The latter had criticized President Obasanjo of hatred towards the people of Niger Delta. The former denied in self-defence. But if he had stopped at self-defence, it would have been sufficient. He went beyond an apologia pro vita sua to declare that the oil in the Niger Delta belongs to Nigeria. His declaration has helped to formulate a new version of Okosun’s inquiry. The question now is not just: who owns the land? It is: who owns the oil?

The owners of the land own whatever is on the land or under the land. To deprive them of that right is to be patently unjust. Only a regime of imperialist intent would do such a thing. Unfortunately, this has been the Nigerian narrative from the advent of British imperialist colonialists until the current dispensation. The British came, conquered the land around the Niger and its peoples, declared amalgamation, and handed over to a state operated on imperialist logic. That logic is that the land and the peoples belong to the state.

Military rule exacerbated this vicious logic. By the time the coup plotters of July 29, 1966 saw the prospects for oil, the struggle for which was a major factor in the Nigeria-Biafra War of 1967-70, that class of coup plotters created their own Nigerian empire. Soldiers who ought to protect the land dispossessed rightful owners of their land. The principal target was the oil. And, to perpetuate that Nigerian empire of their making, they bequeathed before their first departure in 1979 an imperial constitution dressed in the robes of a federal constitution. That constitution, and its 1999 replica, reposed sovereignty in the state and not in the people, placed Niger-Delta oil under the control of the government at the centre by placing mineral resources on the exclusive legislative list. To ensure protection of the loot, the same constitution placed security of a land as vast and diverse as Nigeria on the exclusive legislative list.

When President Obasanjo made his recent declaration that the oil in the Niger Delta belongs to Nigeria, one cannot but recall that he, as military ruler and head of the remnant of the mutinous soldiers of July 29, 1966, presided over the final redaction of the constitution that places control of Nigeria’s oil under the control of the government at the centre—one hesitates to call it a federal government because what is obtained in this country today cannot be honestly described as federalism.

The inclusion of mineral resources on the exclusive legislative list in the 1979 and 1999 Constitutions effectively legitimizes the unjust deprivation to which the people of Nigeria have been subjected for decades. The declaration that Niger Delta oil belongs to Nigeria justifies the imperialist intent of the final redactors of the 1979 Constitution.

As we all know, the Niger Delta that produces the oil has turned out to be one of the poorest, if not the poorest region of Nigeria. Proceeds from the sale of Niger Delta oil have been used and is still being used to service the expensive but ineffective government that the twin constitutions have imposed on Nigerians. Proceeds from the sale of this same oil have been used to build bridges and highways in Lagos, and in Abuja where there are not rivers, while the Niger Delta, full of rivers and creeks has only a few bridges.

President Obasanjo’s declaration, as disturbing as it is, reminds us of an act of injustice that urgently needs to be redressed, and that is: Nigeria is not set up to benefit the regional, ethnic or religious community to which government functionaries belong; Nigeria is set up to benefit the elite from these communities. Whichever section of the elite gains access to corridors of power in Abuja or state capitals or local government areas gains access to Nigeria’s oil wealth. That is why our elections are muddy and bloody.

Contrary to President Obasanjo’s declaration, the oil in the Niger Delta does not belong to Nigeria. Neither does it belong to the state or local governments in that region. It belongs to the people of the region. Land belongs to the people, not to the government. The resources on the land, any land, not just the Niger Delta, belongs to the people and not to the government. Nigeria’s problems became greater when government decided to get into oil business. That is the major contributing factor to corruption, poverty and insecurity.

Given our historical and geographical inter-connectedness, our various ethnic communities will do business with each other with the resources we have on our land. The Niger Deltan needs onions and tomatoes to cook his Banga soup. The farmer in northern Nigeria who produces onions and tomatoes needs petroleum products to drive his tractors. Their respective needs compel them to start an economic union that must precede a political union. Unfortunately in Nigeria, we have been insisting on a political union without an economic union. So we end up making this country a land of monkey dey work baboon dey chop.

It is in our interest to form a political union where any Nigerian can settle and acquire property anywhere in Nigeria, do business and contribute to the common good. But the current imperialist constitution, predicated on President Obasanjo’s recent declaration, needs to undergo far-reaching amendments. Not to do so is to continue to provoke cries of marginalization. It is to allow the wounds of corruption, insecurity, and poverty to fester.

Saudis Allow Media To See Oil Facility Damaged By Attacks

In this photo opportunity during a trip organized by Saudi information ministry, workers fix the damage in the Aramco's Khurais oil field, Saudi Arabia, Friday, Sept. 20, 2019, after it was hit during Sept. 14 attack. Saudi officials brought journalists Friday to see the damage done in an attack the U.S. alleges Iran carried out. (AP Photo/Amr Nabil)

BY FAY ABUELGASIM, JON GAMBRELL

BUQAYQ, SAUDI ARABIA (AP) — The heart of Saudi Arabia’s oil industry remained wrapped in scaffolding Friday as workers sought to repair the charred innards and shrapnel-blasted arteries caused by drone-and-cruise-missile attacks that raised tensions between the U.S. and Iran.

Saudi officials brought journalists to the kingdom’s crucial Abqaiq oil processing facility, described by the state-run oil giant Saudi Aramco as “the largest crude oil stabilization plant in the world.” It was the first such trip for outsiders to see the damage done to its facilities that have been targeted in a summer-long campaign of attacks.

Saudi Arabia is seeking to build international consensus ahead of the U.N. General Assembly next week after the Sept. 14 attack that it claims was “unquestionably sponsored by Iran.” The U.S. has gone further, alleging Iran carried out the attack as part of a campaign seeking to roil the region as American sanctions on its oil industry prevent it from selling crude oil abroad as Tehran’s 2015 nuclear deal with world powers collapses.

Iran has denied involvement in the attack that was initially claimed by Yemen’s Iranian-backed Houthi rebels. Iranian Foreign Minister Mohammad Javad Zarif, now heading to New York for the high-level meetings at U.N. headquarters, has warned that any retaliatory strike on Iran by the U.S. or Saudi Arabia will result in “an all-out war.”

President Donald Trump, who withdrew the U.S. from the nuclear deal more than a year ago, said separately Friday that America “just sanctioned the Iranian national bank.” He did not elaborate.

In Abqaiq, an oil facility in the Arabian Peninsula’s sprawling Empty Quarter desert, journalists saw what previously only had been glimpsed in satellite photos released earlier by the U.S.

The attack punched holes in giant metal onion-shaped structures that help separate gas from crude oil. Separation towers there, which process crude oil, were scorched and damaged, with the top of one looking like a melted candle.

Officials said they put out about 10 large fires at the site less than seven hours after the attack. There were at least 18 direct hits on 11 of the spherical structures, five column stabilizers and two small processing facilities, they said.

Abqaiq processes sour crude oil into sweet crude, and it is transported to transshipment points on the Persian Gulf and the Red Sea or to refineries for local production. Estimates suggest it can process up to 7 million barrels of crude oil a day. By comparison, Saudi Arabia produced 9.65 million barrels of crude oil a day in July.

The plant has been targeted before by militants. Al-Qaida-claimed suicide bombers tried but failed to attack the oil complex in February 2006. However, the Sept. 14 attack reached deep inside a facility that analysts long warned was vulnerable, knocking out half of the kingdom’s oil production and spiking crude prices this week by a percentage unseen since the 1991 Gulf War.

Saudi Arabia also flew journalists to its Khurais oil field to see damage done to the oil field, which is believed to produce over 1 million barrels of crude oil a day. Officials there said 110 contractors evacuated the site after the attack, but there were no injuries. They said the oil field was back online within 24 hours of the attack.

An oil stabilization tower was damaged and other pipes had holes from the attack.

Repair crews swarmed both sites beneath large cranes, working through the heat. Saudi Arabia says it already has restored half of the cut production and hopes to have it fully online by the end of the month, although damage at several structures seen by journalists looked severe.

The trip comes as Saudi Arabia hopes to offer a sliver of Saudi Aramco in an initial public offering, a key component of Crown Prince Mohammed bin Salman’s development plans for the kingdom. Opening up the facilities slightly to journalists both bolsters Saudi Arabia’s push for international condemnation of the attack while offering at least a glimpse at the crown jewels ahead of the IPO.

While Yemen’s Houthi rebels claimed responsibility for the assault, analysts say the missiles used wouldn’t have enough range to reach the site from the impoverished nation. The missiles and drones used resembled Iranian-made weapons, although analysts say more study is needed to definitively link them to Iran.

A Saudi-led coalition has battled the Houthis in Yemen since March 2015, a conflict that has killed tens of thousands of people and sparked what the U.N. describes as the world’s worst humanitarian crisis.

The International Crisis Group warns that the Saudi attack could push the wider Persian Gulf into war, saying the risk of conflict is “arguably the highest it has been in years.”

“The Aramco strikes were no minor incident: They were perhaps the most significant attacks on Saudi Arabian infrastructure in modern history, and the result of a series of provocations and tit-for-tat exchanges that have been allowed to gather momentum for too long,” the group said. “At this point, a single misstep could set off a chain reaction.”

Underlining that Friday was Iranian Gen. Rahim Safavi, a senior adviser to Iranian Supreme Leader Ayatollah Ali Khamenei.

“If the Americans think of a conspiracy, the Iranian nation will respond to them from the Mediterranean Sea, Red Sea and Indian Ocean,” Safavi said, according to the state-run IRNA news agency.

Also on Friday, the tiny, oil-rich country of Kuwait said it would increase security at both its commercial and oil ports. Kuwait’s state-run KUNA news agency reported the decision, quoting Khaled al-Roudhan, the minister of commerce and industry.

___

Gambrell reported from Dubai, United Arab Emirates. Associated Press writer Amir Vahdat in Tehran, Iran, contributed.

Firm seeks $9 bln Nigerian Asset Seizure Over Unpaid Gas Project Arbitration

* Award involves aborted 2010 gas project in Calabar

* Initial $6.6 bln figure grew as interest accumulated

* Nigeria sought to claim state immunity

* $9 billion is 20% of foreign reserves, roughly 2% of GDP

BY LIBBY GEORGE

LONDON (REUTERS) - A firm incorporated in the British Virgin Islands will ask a British court on Friday for the right to seize up to $9 billion of Nigerian government assets - some 20% of the oil-rich nation’s foreign reserves - over an aborted gas project.

The case highlights a risk to Nigeria’s foreign assets, potentially clouding its appeal to some investors.

The request is part of a long-running saga over a 2010 deal in which the Nigerian government agreed to supply gas to a processing plant in Calabar on the country’s southeast coast that Process and Industrial Developments Ltd (P&ID) – a little-known firm founded by two Irish business men specifically for the project - would build and run.

When the deal went south, P&ID won a $6.6 billion award at arbitration, based on what it could have earned during the 20-year agreement. It now says the total owed has ballooned to $9 billon because of interest accrued since 2013 .

Nigeria has tried to nullify the award, saying it was not subject to international arbitration but British courts rejected the argument. P&ID is now asking the Commercial Court in London to convert the arbitration into a judgement, which would allow them to try to seize international assets.

A source close to President Muhammadu Buhari said they were fully aware of the matter and the government “is not sleeping”, adding they were optimistic the matter could be resolved in the courts. There are also proceedings pending at a U.S. District Court in Washington, D.C.

Buhari, who was inaugurated for a second term on May 29, has not yet appointed cabinet ministers, and officials contacted by Reuters said the lack of an attorney general or petroleum minister made it difficult for anyone to comment on the record.

“This is a problem that the Nigerians are not facing up to in any serious way,” said Andrew Stafford, Q.C. of Kobre & Kim LLP, which is representing P&ID.

Experts said it would be difficult for Nigeria to fully extricate itself.

“Under UK legislation, state immunity does not operate to protect a sovereign state where it has entered into an arbitration agreement,” said Simon Sloane, a partner with UK law firm Fieldfisher.

He added that going after state assets following arbitration had become a well-trodden path over the past 15 years and it would be difficult for Nigeria to avoid paying compensation.

While assets that are used for diplomatic purposes – such as the Nigerian High Commission building in central London – were off the table, commercial assets were up for grabs.

In 2008, a UK court ruled that proceeds of oil sales from Chad held in an international account intended to repay World Bank loans were fair game for seizure.

Experts also said that the involvement of hedge fund VR Group, which has a stake in P&ID, signalled that it is unlikely to let the issue drop.

“They could still come to a settlement,” Sloane said. “As it’s a consensual process the parties can agree to settle, and settle for significantly below the $9 billion figure.” (Additional reporting by Felix Onuah and Camillus Eboh in Abuja, editing by Alexis Akwagyiram and Kirsten Donovan)
Our Standards:The Thomson Reuters Trust Principles.

NIGERIA: Senate Queries Halliburton Over Lopsided Shareholding Structure

The Senate oversight team visits Halliburton. Image via NAN

ABUJA (NAN)--The Senate Committee on Local Content on Thursday queried lopsided shareholding structure in favour of foreign component in Halliburton Nigeria.

Chairman of the committee, Sen. Solomon Adeola, raised the concern during a tour to Halliburton Nigeria in Port Harcourt, as part of its two-day oversight visit to Bayelsa and Rivers.

Adeola queried reports that shareholding in Halliburton was 30 per cent for the Nigerian component and 70 per cent for Halliburton global.

He also deplored the fact that Halliburton Nigeria was not listed on the Nigeria Stock Exchange.

He requested the company to submit its payroll to ascertain disparity in remuneration for foreign and Nigerian workers.

Adeola also directed the company to “submit tax certificate, financial statement and other documents, to ascertain level of compliance with local content regulation.”

He asked that company to furnish the committee with its recruitment process as well as level of involvement of local communities in the company’s activities.

Responding, Deputy Managing Director of the company, Mr Okey Okoli, assured that all the documents requested would be made available to the committee.

He said the company was 97 per cent Nigerian, with 606 indigenous staff “and only three per cent foreign”, accounting for 22 expatriate workers.

Okoli added that the company was in strict compliance with tax remittance and the one per cent remittance to the Nigerian Content Development Management Board.

He disclosed that there was no disparity in the salaries and allowances paid to indigenous workers and foreigners, adding that Nigerians who worked in foreign offices were paid “hardship allowance” like foreigners were paid in Nigeria.

“We do not have shortfall in terms of compliance with one per cent remittance to NCDMB.

“Our shareholding structure is 70 per cent global and 30 per cent local.

“In terms of capacity-building, we noticed a challenge for local companies to train Nigerians abroad, so we opened a training centre in Akwa Ibom state,” he said.

Okoli,who is also Country Business Development Manager Nigeria, West Central and East Africa Area of the company, however, noted that the training was mainly in oil and gas.

Hopes Of A Mining Revival In Oil-Addicted Nigeria

A mineral exploration drilling team drills holes to identify the location and the quality of gold deposits at the Segilola Gold Project site in the village of Iperindo-Odo Ijesha, near the city of Ilesha, Osun State, Nigeria.

BY STEPHANIE FINDLAY

ILESHA, OSUN (AFP)--Locals have always known that a vast deposit of gold sits underneath the cocoa trees and towering thickets of bamboo in the tropical jungle of Osun state in southwest Nigeria.

The country’s focus on oil has meant the gold has been ignored for decades.

But the government is now looking to revive the moribund mining sector as it seeks to diversify revenues following the 2014 crash in global crude prices.

A few companies are already venturing into the sector, hoping to repeat the success of mining in nearby west African countries Ghana, Senegal and Sierra Leone.

On a humid morning, Segun Lawson, chief executive of gold mining firm Thor Explorations, leads a site visit of his proposed mine.

“No one has a clue about mining in Nigeria,” said Lawson, dressed in a white shirt, chinos and construction boots as he walked down a red dirt road swatting away tiny insects.

The Nigerian government mined the vein in the 1980s “but oil was so prolific they just left it”, he added, stopping at an abandoned 20m deep trench.

“The gold runs 210m deep,” the geologist said, rattling off statistics about the deposit to the group of investors. One British broker sounded impressed by the numbers. Lawson hopes to start production at Nigeria’s first large-scale gold mine in early 2020. “This is the low-hanging fruit. This is a small gold province that no-one has explored with modern technology,” he said.

Gold-mining has a long history in West Africa.

The region was home to the powerful Asante and Mali empires, who were a major source of bullion to the Mediterranean and Islamic worlds in medieval times. The trade took a back seat to slavery before being ramped up again in the late 1800s, when Europeans introduced industrial mining techniques. In the 2000s, a commodity “super-cycle” drove another boom, with technical advances helping to discover new sites and make mining more efficient. But this new technology has been slow to come to Nigeria.

Down the road from Lawson’s mine is a small gold market in the city of Ilesa, where artisanal miners sell alluvial gold extracted from the earth with backbreaking labour. People can only dig so deep.
“We’ve always had the gold but we haven’t had the people to mine it,” said traditional ruler Adeyeye Bamidele Adeniji at his house in Ilesa. “My mind is very clear, I want to start the work. My expectation for you people is to let us benefit,” he told Lawson and his team. Across Nigeria and West Africa, tens of thousands of people work in dangerous open pit mines, digging everything from gold and tin to sapphires.

“Their sheer numbers combined with the weak regulatory framework surrounding their work has alarmed many environmentalists in the region,” said Cassandra Mark-Thiesen, Africa researcher at the University of Basel.

“The use of child labour, accidental deaths among miners and the smuggling of winnings are other troubling aspects.”

But this is what most mining looks like in Nigeria, which has a sophisticated oil and gas industry at the expense of everything else. Africa’s largest economy depends on oil for 70% of its government revenue and almost all its foreign currency, despite being rich in iron, bitumen and gold. Since coming into power in 2015, President Muhammadu Buhari’s government has tried to wean the economy off crude.

Last year, the World Bank approved a $150mn credit to support growth in Nigeria’s mineral sector, which currently represents less than 1% of gross domestic product. Nigeria’s mining sector faces big problems, including lack of basic infrastructure to transport minerals and a dearth of geological data.
“You have to be long-term greedy to make it in Nigeria,” said Gabriel Olumide Odediran, head of investment at the Lagos-based Asset and Resource Management Company. “Trying to make money quickly won’t work here.”

Lawson, who had been eyeing the mine for years before buying it, hopes to lead the gold pack.
But he has to publish the definitive feasibility study before starting construction of the mine.
Then there’s an issue about equipment: Nigeria currently doesn’t even have the proper machinery in the country so Lawson will have to import crushers and mills from China. 

Yet the end is in sight.
“Developing the mine is quite surreal,” said Lawson. “We had no idea it would get this far.”

New Threat As USA, Others Set To Abandon Nigeria’s Oil

BY EDIRI EJOH

Oil Pipeline Image Via Vanguard

ABUJA (NIGERIAN VANGUARD) -- There are indications that the United States and other nations will soon abandon Nigeria’s oil, which may negatively affect the nation’s revenue generation.

According to the Energy Information Administration (EIA), the US may drastically reduce its import of crude oil from Nigeria by 2022, going by its projection of becoming a net energy exporter in four years.

In the newly released Annual Energy Outlook for 2018, EIA stated that the transition from net energy importer to net energy exporter will not take place until 2050 in some sensitivity cases. “The transition of the United States to a net energy exporter is fastest in the high oil price case, where higher crude oil prices lead to more oil and natural gas production and transition the United States into a net exporter by 2020.

 “In that case, higher crude oil prices also result in higher petroleum product prices and lower consumption of petroleum products, driving decreases in net petroleum imports. “In the High Oil and Gas Resource and Technology case, with more favourable assumptions for geology and technological developments, the United States becomes a net exporter in 2020, and net exports increase through the end of the projection period. 

“In cases with relatively low oil prices or less favourable assumptions for geology and technological developments, US net energy trade still decreases, but the United States remains a net energy importer through 2050.” 

Meanwhile, India, Nigeria’s largest importer of crude, which reduced its demand in 2017, started importing from the US. However, speaking on the implication of this development to the NigeriaN economy, Chairman of the Petroleum Technology Association of Nigeria, PETAN, Mr. Bank Anthony Okoroafor, stated that: “we should be looking for alternative buyers, build refineries/upgrade and maintain our existing refineries to focus on adding value to our crude oil which will also create more jobs and more revenue to the country. We can be supplying refined crude to the whole of Africa. 

“Also, we should change from been a net importer of crude oil to net exporter of refined petroleum products.” He stated that: “We import over 80% of products consumed. This is a shame. There is a big gap in the supply of refined products in Nigeria and West Africa region. This shows great potential for domestic refining of petroleum products. With oil price hovering between 60 to 70 dollars per barrel, we should focus on refining.

 “Our local refining capacity is 445,000 bpd but they have never operated above 15% capacity which is a real shame. We consume about 17 billion litres of PMS annually, 2.9 billion litres of AGO annually and 390 million litres of aviation fuel annually.” Commenting on downstream activities, he added that: “We must privatise the refineries, deregulate fully refined products and allow demand and supply to regulate price. Deregulation will be a key driver for growth within the refining sector. We really need bold and decisive reforms to attract investors. 

“Government should focus on providing enabling environment for business to prosper. If you want the refineries to work, you will require financial independence; people who will be able to take decisions, carry out their maintenance without seeking higher layers of approval.

 “This is the only way to be bullish. There is need to have KPIs for the Managing Directors of the refineries and let it be self-funding. It should be financially independent; in that way our refineries will be working. Let’s change from crude oil exporter to refined product exporter in 5 years time.”

Fuel Crisis Intensifies In Nigeria

BY WILLIAMS EKANEM

ABUJA, NIGERIA (OIL PRICE) -- Again, Nigeria’s government has failed its citizens, thanks to an acute shortage of fuel—despite the country’s status as the chief oil-producing country on the African continent.

Year in and year out, governments in power have woefully neglected to stem the reoccurring hard bite of fuel scarcity, especially during festive seasons—and this one is turning out to be one of the worst.

Over the years, a combination of well-known (and definitely not unforeseen) factors—ranging from inadequate supply to pipeline vandalism to unending issues with independent marketers—have floored whatsoever effort, if any, by the government to ensure adequate fuel supply, particularly during holidays.

Shortly before Christmas, Anietie Akpan, a Lagos-based entrepreneur whose business is suffering from pangs of the distressed economy, said that “the fuel crisis is getting worse; I bought from the black market the other day at 200 Nigerian naira per liter and can’t even get it at that price now,” echoing an expression of frustration that cuts through the entire nation.

For the 2017 end-of-year fuel crisis, economic watchers point to the gap in the volume of products between supply and demand and lack of government incisive action—even when they saw it coming, as in past years.

Oil industry analyst Bassey Udo points out that, “the primary reason for the current crisis is that the Nigerian National Petroleum Company (NNPC), is the only importer of petroleum products. It also gives preference to the major marketers—Mobil, Conoil, Total, Forte Oil—in its allocation, rather than independent marketers who have the largest number of retail outlets across the country, to better serve the people.”

Udo, the Business/Economy Editor of Premium Times, Nigeria’s leading online investigative publication, added that, “to assert their importance, members of the Independent Petroleum Marketers Association of Nigeria (IPMAN), threatened to go on strike from December 10, 2017 if government does not supply them products at the same ex-depot price of N137 per liter like major marketers, to enable them to sell at N145 per liter for profit margin.”

Findings show that government initially took the strike threat with levity, and by the time the government “acceded to their demand, it was on the same day the strike was billed to begin, during which panic buying and hoarding for the Christmas season were already in top gear,” Udo said.

None of the reoccurring causes of the perennial fuel scarcity takes anyone by surprise; rather, government functionaries are used to either ignoring the issues or reacting belatedly to them.

A case in point is how Nigeria’s Minister of Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, waited until early December (only a few days before the holiday rush) to roll out emergency plans—a typical firefighting approach that has failed to forestall the current petrol scarcity.

When announcing emergency plans, Kachikwu stated that fuel shortages “were occasioned by a gap in the volume of products available in the country,” caused by reluctance of oil marketers to import petrol. The petroleum minister attributed the shortfall to rising price of crude oil, which he indicated forced oil marketers to defer imports.

Oil marketers have often been the scapegoat for all fuel scarcity, with the government typically using them as the excuse for their continuous failures to get it right in the highest oil-producing country in Africa, currently put at 2.53 million barrels per day.

The oil marketers have been embroiled in a never-ending fight with the government in subsidizing cost of fuel per liter. With the government opting to subsidize the difference between the landing cost of imported petroleum product and retail price above N86 per liter, it means huge amounts must be paid as subsidies to petroleum products at filling stations.

Presently, the government is said to have inherited a backlog of over ?600 billion in subsidy bills due to marketers, and payment is an issue. This outstanding subsidy amount and the occurring bank interest in U.S. dollars is a source of disincentive for the oil marketers to import, especially the Independent Petroleum Marketers. This causes a supply drop, hence fuel shortages and the attendant crisis—more so when nobody knows the approximate quantity the country needs at any point in time.

A top industry executive disclosed to Financial Times in May 2015 that during the fuel crisis of that year, NNPC had only about two days of fuel in stock.

“How do you replenish the stock when nobody knows exactly what the country’s demand is?” said Udo. “From the NNPC through the Ministry of Petroleum Resources, and the Petroleum Products Pricing Regulatory Agency (PPPRA), no one can say categorically what the daily national fuel consumption figure is.”

According to Udo, the statistics for daily consumption are as varied as the purpose for which each agency is issuing them. When calculating subsidy claims for products, marketers, the NNPC and PPPRA put the figure at between 45 and 60 million liters against conservative industry figures of between 30 and 35 million liters.

But the intractable fuel scarcity, especially during holidays, goes far beyond supply and demand and the unending battle with marketers. There are also the activities of the larger-than-life trade unions in the industry, notably, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN).

In the December 2017 excruciating scarcity, the body was at the center of it all. Like with other crises, the union, citing what it called unfair labor practices by some oil companies and subsequent termination of appointment of its members by Neconde Energy Limited, called on the government to direct the company to recall sacked members or face workers strike action by December 18, 2017.

In the interim, PENGASSAN’s General Secretary Lumumba Okugbawa said, “PENGASSAN appeals to all Nigerians to show understanding and to use this window to stockpile adequate quantity of premium motor spirit (PMS) and other petroleum products that will last them during the festive period, as this strike will be indefinite.”

Predictably, there was an immediate reaction to the strike threat. Oil prices climbed more than one percent the next day, as traders covered shorts after sharp losses the previous day brought on by an unexpectedly large rise in U.S. stocks of refined fuels.

“Short covering in the market, together with the threat of a strike by Nigeria’s key oil union, provided some influence on oil prices in today’s session,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.

As if that’s not enough, besides the labor union muscle flexing, Nigeria’s oil sector is the epitome of not only corruption, but high-level inefficiency and mismanagement. It’s generally seen as a national cake, where those with access help themselves to whatever can be gotten hold of. Every government of the day makes sure their kindred is in charge of daily activities to ensure good hold on the largesse.

The outcome of this unfortunate scenario is the ever-present motion without movement, where nothing gets done, because every step is interpreted with tribal and economic sentiments. Take the very recent public power play between the petroleum minister and the NNPC chief executive officer, giving credence to the old rhetorical question: Is Nigeria’s oil wealth a curse or a blessing?

In their 2006 Journal of Research in National Development paper, “Crude Oil Resource: A Blessing or Curse to Nigeria,” writers S. Tamuno and J.M. Felix, address this issue, concluding with a call to the federal government to “put in place appropriate measures to stem further mismanagement and looting… of revenue from crude oil.” Unfortunately, more than a decade later, the end to the fuel crisis as we know it is not in sight anytime soon.

In Udo’s “13 Reasons Fuel Crisis Persists in Nigeria,” report in Premium Times, he blames inadequate supply, dysfunctional refineries, no new refineries, pipeline vandalism, fuel importation constraints, the drop in global oil prices, poor import planning schedules, corruption-diversion-smuggling, foreign exchange crisis, fuel crisis as good business time for some, payback by marketers, NNPC internal politics, and absence of deregulation.

But what about Nigerian President Muhammadu Buhari? Even as a former minister of petroleum, Buhari has done nothing significant to alleviate the horrible state of affairs. He only has about a year to go before his four-year tenure ends.

Announcing government ad-hoc plans to end the current fuel scarcity, Kachikwu hinted that the technical committee has been benchmarking costs and streamlining bidding firms, and will submit its report for presidential approval before end of 2017 and that “work aimed at bringing the four refineries operated by NNPC in Kaduna, Warri, and Port Harcourt back to their nameplate production capacities… would eventually start in January 2018,” said Solomon Elusoji and Chineme Okafor in a This Day article.

Ordinarily, this would have been good news, but as the administration approaches its end, it’s not much to cheer about—instead serving as yet another reminder of the system’s lax inefficiency, even for problems considered national emergencies.

By Williams Ekanem for Oilprice.com

How Buhari Plunged Nigeria Into Recession

BY OKOGBA EMMANUEL OGHENEROGBOME

VANGUARD NIGERIA, SEPTEMBER 26, 2016

President Muhammadu Buhari

NIGERIA (VANGUARD) -- ONE funny aspect of this “blame game” thing, is that you only see what has gone wrong in terms of “the other person” – the person you are pointing accusing fingers at. You hardly realise that as you point one finger at the other person, three of your other fingers are also accusing you, but they are usually hidden from your sight. In the Bible, Our Lord Jesus Christ warned us not to judge others, but to first of all remove the log in our eyes before complaining about the speck in the eyes of our neighbours (or opponents). We are in an economic recession. Two questions are pertinent: (a) how did we get there? And (b) how do we get out of it?

The All Progressives Congress, APC, Federal Government, in tackling question number one, blames “others”, but it does not see the roles it played in bringing the nation into this pass. This is what I am here to address; that we do not allow them to confuse us with their unrelenting propaganda, the vessel that brought them to power and which they are depending upon to run the affairs of a nation in a deep economic distress. Fortunately, the propaganda has lost its allure in the face of massive suffering, poverty, hunger, mass joblessness and soaring crime rates. Nobody wants to hear any more excuses, and this applies even to the apologists of the regime.

APC Federal Government spokespersons – Garba Shehu, Femi Adesina, Lai Mohammed, name them – have been blaming the nation’s woes on “16 years of Peoples Democratic Party, PDP, rot”. They said they did not expect the “depth” of the rot they met. Vice President Yemi Osinbajo files in, and blames PDP Federal Government’s failure to save for the rainy day, forgetting that the APC sponsored its governors to oppose Dr. Ngozi Okonjo-Iweala’s proposal for us to save when we had an unrivalled oil boom. They also opposed President Goodluck Jonathan’s plans to deregulate the downstream sector of the economy to free up funds to attack our infrastructural deficit. Jonathan, not being “a Pharaoh” (as he put it) weakly buckled to acts which the opposition deliberately deployed to ensure his downfall. Former President Olusegun Obasanjo had shrugged off criticisms and led Nigeria to exit the slavish debt trap of the Paris Club by engaging Okonjo-Iweala to lead the negotiations in which we paid $12 billion to escape from a $30 billion debt burden. Through acts of impunity, 

Obasanjo created the Excess Crude Account, ECA, and saved billions, which enabled Nigeria to survive the 2008 worldwide economic meltdown. President Umaru Yar’Adua played a statesman’s trump card through the Amnesty deal, which ended the militancy in the Niger Delta, thus creating a new impetus for us to enjoy more oil boom till the tail end of 2014. When Jonathan assumed office, he embarked on massive infrastructure upgrades nationwide, and this manifested in our airports, roads, rail, investment in power, education (especially tertiary) and of course, democratic reforms that made it possible for a powerful opposition to arise and sweep him from office. 

Of course, there was massive corruption during the PDP years, but tell me in which regime since our independence when there was no corruption, even this current Buhari regime? The only difference is that the “enemies” are being targeted, while “friends and acolytes” are being shielded. Of course, Nigeria’s economy grew in leaps and bounds under the PDP, but it was mostly oil-fed. We became the largest economy in Africa by Gross Domestic Product,GDP, but the proceeds went mostly to a few privileged and connected individuals. A little seeped into the middle class, but the mass of the people wallowed in poverty. 

This was probably why the 2015 election was called “a revolution of the poor”, but where has that revolution taken us? So, yes, the recession was caused by our failure to save for a rainy day, but it was a collective failure of the nation. Jonathan cannot escape the blame because as President, he should have stamped his foot down and done what was best for the country, rather than dance to the tune of every Tom and Harry just for him to be elected for a second term. We are in recession because we, as a nation, thought we were an “oil-rich” country. If you compare our best production capacities vis-à-vis our humongous population, and those of other Organisation of Oil Producing Countries, OPEC, and none-OPEC countries (such as Saudi Arabia, Kuwait, UAE, Norway, Venezuela, USA Angola and others), it is obvious we are actually an “oil-poor” country and should not have depended on our oil alone for national survival.

That mistake is a collective blame rooted in the mentality of the ruling class that took charge of Nigeria after the civil war. It goes beyond the PDP years; it is still evident in this Buhari administration. Yes, we are in recession because of the renewed militancy in the Niger Delta. But who caused it? Before Buhari came in, we had massive oil theft. But when he assumed office and came at governance as if on a vengeance mission, the militancy resumed. Buhari did not realise the harm he was inflicting on the psyche of the nation when he propounded his “97%/5%” formula, which went against the Federal Character principle in the constitution. 

He used it to divide the country along political party, religious, regional, ethnic and sectional lines, favouring his kinsmen and supporters while neglecting those who did not support him. Not only that, he mobilised the agencies of state security to go after his perceived opponents in a one-sided anti-corruption war which only emphasised the return of allegedly looted funds. He did not make it a holistic affair. Some individuals who felt the system was blindly and vengefully after them returned to militancy and plunged the economy deeper into recession. Security threats expanded, from Boko Haram alone in 2015 to new fronts (the Niger Delta Avengers, armed Fulani herdsmen, Indigenous People’s of Biafra/MASSOB protests, and the Shiites uprising in Kaduna). If Buhari had, on assuming office, called Nigerians together, told them to forget about the bruising transitional politicking and work together to rescue the nation from the imminent economic doom, there would be no other security challenge except Boko Haram. 

If he had dealt with the armed herdsmen to protect the people, formed an inclusive government based on constitutional provisions and brought in the best hands without looking at their political affiliations, religious backgrounds and ethno-regional roots, we would be fighting the economic problems as a united front. Buhari’s anti-corruption war is a well-received policy. Nobody can openly say anything to the contrary. Corruption is a major factor in Nigeria’s backwardness. But the anti-corruption war should have been an institutional one devoid of politics. It should not have been merely aimed at recovering stolen funds, and even that should have been extended to all who stole, not just PDP people and the president’s political opponents alone.

 Buhari de-marketed Nigeria and Nigerians in several world capitals by calling us crooks. Every Nigerian is a crook and not to be trusted, except of course, President Buhari, the man of integrity. The Treasury Single Account, TSA, policy, formulated by the Jonathan but left unimplemented to avoid harming the financial system, was put into effect by Buhari without consultation. Banks shrivelled and started retrenching massively. His statist policies and lack of direction for the economy created fear and uncertainties among the private sector players and investors. After waiting for a clearer picture in vain, many (like the foreign and local airlines) closed shop and left Nigeria. 

Unless Buhari starts seeing himself as the father of the nation rather than a sectional mujahid (“holy” warrior), he would never get it right. He must listen to the wise words of the Senators who are telling him to rejig himself and his government away from the blunders of the past sixteen months. If he does so, our journey out of the recession will be short.

Canadian Overseas Petroleum Ltd: Completion Of Acquisition n Nigeria

MARKET WIRED

SEPTEMBER 14, 2016

CALGARY, CANADA (MARKET WIRED) - Canadian Overseas Petroleum Limited ("COPL" or the "Company") (XOP: TSX-V) & (COPL: LSE), an international oil and gas exploration and development company focused on offshore West Africa, announces its 50% owned affiliate, Shoreline Canadian Overseas Petroleum Limited ("ShoreCan"), has completed the acquisition of 80% of the share capital of Essar Exploration and Production Limited (Nigeria) ("Essar Nigeria"). Essar Nigeria's sole asset is a 100% interest and operatorship of OPL 226 located 50km offshore in the central area of the Niger Delta.


Under the terms of the Production Sharing Contract ("PSC") governing OPL 226 (the "Block"), Essar Nigeria is required to seek Ministerial consent for the transaction. Application has been made and the parties to the transaction are awaiting its approval. Under the terms of the acquisition, ShoreCan will take over management and have a majority of Directors on the Board of the Essar Nigeria immediately.

An extension to the first phase of the PSC to December 31, 2017 was recently granted to Essar Nigeria. The remaining commitment on the first phase of the PSC is the drilling of one well. COPL's technical team has identified a drilling location, which will be an offset to an oil discovery made in 2001 by a previous Contract holder.

OPL 226 has an area of 1530 km² and is located approximately 50 km offshore the central delta region of Nigeria in water depths ranging from 40 to 180 meters. It offers oil appraisal and development opportunities having near term oil production potential and significant exploration upside. Historically, five wells have been drilled, with the first oil discovery on the Block made in 2001in the fifth well after earlier drilling intersected predominantly gas-bearing sands.

FULL ANNOUNCEMENT:

Calgary, Canada, September 14, 2016 - Canadian Overseas Petroleum Limited ("COPL" or the "Company") (XOP: TSX-V) & (COPL: LSE), an international oil and gas exploration and development company focused on offshore West Africa, announces its 50% owned affiliate, Shoreline Canadian Overseas Petroleum Limited ("ShoreCan"), has completed the acquisition of 80% of the share capital of Essar Exploration and Production Limited (Nigeria) ("Essar Nigeria"). Essar Nigeria's sole asset is a 100% interest and operatorship of OPL 226 located 50km offshore in the central area of the Niger Delta.

Under the terms of the Production Sharing Contract ("PSC") governing OPL 226 (the "Block"), Essar Nigeria is required to seek Ministerial consent for the transaction. Application has been made and the parties to the transaction are awaiting its approval. Under the terms of the acquisition, ShoreCan will take over management and have a majority of Directors on the Board of the Essar Nigeria immediately. 

An extension to the first phase of the PSC to December 31, 2017 was recently granted to Essar Nigeria. The remaining commitment on the first phase of the PSC is the drilling of one well. COPL's technical team has identified a drilling location, which will be an offset to an oil discovery made in 2001 by a previous Contract holder.

 OPL 226 has an area of 1530 km² and is located approximately 50 km offshore the central delta region of Nigeria in water depths ranging from 40 to 180 meters. It offers oil appraisal and development opportunities having near term oil production potential and significant exploration upside. Historically, five wells have been drilled, with the first oil discovery on the Block made in 2001in the fifth well after earlier drilling intersected predominantly gas-bearing sands.

 The Block is situated along a large growth fault-controlled structural complex, which the Company refers to as the "Noa Complex". Extensive seismic campaigns have been conducted on the block over the years with 1750 km of 2D seismic, and approximately 1300 km² of 3D seismic data acquired to date. ShoreCan in the last year has completed additional seismic processing to the most recent 568 km² 3D seismic survey acquired by Essar Nigeria in 2012. The advanced seismic processing techniques applied to this data set by ShoreCan were done to differentiate oil-bearing sands from gas and water bearing sands. 

These techniques were unavailable previously due to the poor quality and inappropriate parameters of the earlier seismic data sets. 

At the request of COPL, Netherland, Sewell & Associates, Inc. ("NSAI") has prepared an independent report (the "Report") in accordance with Canadian National Instrument 51-101 evaluating the Contingent and Prospective Resources attributed to OPL 226, as at 1 March 2016. In the Report, the Gross Unrisked Contingent Oil Resources recoverable for the primary Noa West oil discovery are estimated to be the following: Low Estimate (1C), 11.5 million Bbls; Best Estimate (2C), 16.1 million Bbls; and High Estimate (3C), 20.7 million Bbls. The Gross Unrisked Prospective Oil Resources recoverable for 15 additional undrilled areas on the Noa Complex in the Report are estimated to be the following: Low Estimate, 259 million Bbls; Best Estimate, 461 million Bbls; and High Estimate, 808 million Bbls. In addition to the oil resources identified, NSAI's Report has estimated significant volumes of Unrisked Prospective gas resources on the Block totaling on a Best Estimate basis over 1.7 TCF. 

Arthur Millholland, President & CEO, commented: "This is a great opportunity for our Company. It is a result of our efforts and of our partner in ShoreCan; the Nigeria based Shoreline Energy International. It allows the Company to leverage its inhouse technical expertise and expand its regional footprint to acquire a high quality oil appraisal and development asset offshore Nigeria. It will be an excellent complement to our current West African portfolio." 

About the Company: The Company is an international oil and gas exploration and development company focused in offshore West Africa. The Company holds a 17% working interest in Block LB-13, offshore Liberia, with ExxonMobil the operator holding an 83% working interest, where it expects to participate in the drilling of a deep-water exploration well in late 2016. The Company is also actively pursuing opportunities in Nigeria in partnership with Shoreline Energy as part of its strategy to generate stable cash flow from secure offshore assets. The Company and Shoreline, through their jointly held affiliated company, Shoreline Canadian Overseas Petroleum Development Corporation ("ShoreCan") are currently seeking Government of Nigeria approval for the acquisition of 80% of the share capital of Essar Exploration and Production Limited (Nigeria) which holds an attractive oil appraisal and development project in mid water offshore Nigeria.

 ShoreCan is building a portfolio of exploration and development assets in sub-Saharan Africa. To date, ShoreCan has taken a position in Nigeria, and Namibia. It continues to evaluate a variety of additional assets in Nigeria, and Equatorial Guinea. 

The Common Shares are listed under the symbol "XOP" on the TSXV and under the symbol "COPL" on the London Stock Exchange. 

A presentation can be found on the Company website : www.canoverseas.com. 

Also check out our Twitter feed: @COPLinvestor. For further information, please contact: Mr. Arthur Millholland, President & CEO Canadian Overseas Petroleum Limited Tel: + 1 (403) 262 5441 Cathy Hume CHF Investor Relations Tel: +1 (416) 868 1079 ext. 231 Email: cathy@chfir.com Harriet Jackson/Dominic Barretto Yellow Jersey PR Limited Tel: +44 (0) 75 4427 5882 Email: copl@yellowjerseypr.com Broker: London Stock Exchange Shore Capital Stockbrokers Limited Edward Mansfield Phone: T: +44 20 7468 7906 

This news release contains forward-looking statements. The use of any of the words "initial, "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "should", "forecast", "future", "continue", "may", "expect", and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including, but not limited to, the ability to raise the necessary funding for operations, delays or changes in plans with respect to exploration or development projects or capital expenditures. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements since the Company can give no assurance that they will prove to be correct since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties most of which are beyond the control of Canadian Overseas Petroleum Ltd. For example, the uncertainty of reserve estimates, the uncertainty of estimates and projections relating to production, cost overruns, health and safety issues, political and environmental risks, commodity price and exchange rate fluctuations, changes in legislation affecting the oil and gas industry could cause actual results to vary materially from those expressed or implied by the forward-looking information. Forward-looking statements contained in this news release are made as of the date hereof and Canadian Overseas Petroleum undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Nigerian In Recession With 'Record' Low Foreign Investment

AFP

AUGUST 31, 2016

ABUJA, NIGERIA (AFP) - Nigeria's economy nosedived into a recession official data revealed Wednesday with oil production hammered by militant attacks on pipelines and foreign investment at a "record" low.

Output in the three months to the end of June was -2.06 percent with the oil sector reporting a double-digit decline following a wave of attacks by rebels in the oil-producing south.

The slowdown was recorded across many sectors in a sign that Africa's largest economy is wrestling with deeper structural issues than just the low price of crude.

Foreign investors, wary of the Nigerian government's controversial currency peg, avoided putting money into the country leading to a "record" decline in capital importation, reported Nigeria's National Bureau of Statistics.

The $647.1 million worth of capital imported into Nigeria in the second quarter represented a "fall of 75.73 per cent" compared to 2015.

"This provisional figure would be the lowest level of capital imported into the economy on record, and would also represent the largest year on year decrease," said the statistics agency.

"There was considerable uncertainty surrounding future exchange rate policy which may have deterred investors," added the statistics agency.

Nigerian President Muhammadu Buhari's government finally devalued the naira in June after upholding the currency peg for months, yet experts say the negative impact of the controversial monetary policy will still be felt in months to come.

"It's really, really grim," John Ashbourne, Africa economist at research firm Capital Economics, told AFP.

"I think people underestimated the degree to which the oil sector would contract," said Ashbourne, speaking from London.

"Investors want to see some direction from Buhari, there is a sense that the policies they have implemented so far aren't working," Ashbourne said.

"Nigeria is very dependant on foreign investment to improve the infrastructure and get the economy back on track, we need investor confidence," he said, "people are staying away because they don't have any faith that things are turning around."

This year Nigeria's domestic product could contract by 1.8 per cent, according to the International Monetary Fund.

Anger In The Delta Keeps Oil Majors Quiet -- And Nigeria's Crude Offline

BY LIBBY GEORGE AND ULF LAESSING

REUTERS, SUNDAY, AUGUST 21, 2016

* Splinter militant groups a hurdle to ceasefire talks

* Non-violent local protests have also exacted a toll

* 'People giving up in short term' - oil industry source (Adds Niger Delta Avengers says ready for dialogue)


LONDON/LAGOS, AUG 21 (REUTERS) - Oil companies and even Nigerian officials are losing faith in a deal anytime soon with militants who have slashed the nation's oil output, casting doubt on a production recovery in what is typically Africa's largest oil exporter.

In the six months since the first major attack on Nigeria's oil - a sophisticated bombing of the subsea Forcados pipeline - dozens of attacks have pushed outages to more than 700,000 barrels per day (bpd), the highest in seven years.

Talk in the country has shifted from ceasefire optimism, and oil companies' assurances that repairs were underway, to hedged comments from the government and radio silence from oil majors.

On Sunday, the Niger Delta Avengers militants, which have claimed several major pipeline attacks, said in a statement they were ready to give dialogue a chance.

But highlighting the fracturing of militants into small groups, the previous day a group called Niger Delta Green Justice Mandate claimed an attack on a gas pipeline in the southern swamps lands.

Without a unified command and groups dominated by "generals" unable to fully control their own fighters, it is difficult for the government to identify the right people to talk to or enforce any ceasefire.

"People are giving up in the short term," one oil industry source told Reuters of a resumption in exports of key Nigerian grades such as Forcados or Qua Iboe, adding you "can't get anything" out of the majors, including Shell, Chevron , ExxonMobil or ENI, about when the oil might come back.

Shell declined to comment, while the other companies did not immediately responded to a request for comment.

In June, Nigerian government officials said privately it had a ceasefire with militants. But pessimism crept in, with even Oil Minister Emmanuel Ibe Kachikwu telling journalists this week "we are talking but (it) is not an easy thing," and "we need a ceasefire" - a contrast to the belief that a ceasefire was underway.

He has also said another challenge to brokering a ceasefire is that there were several militant groups to talk to.

DEEP-SEATED ISSUES

The problems reflect deep-seated issues in the Niger Delta, which produces the bulk of oil but whose local communities complain of pollution, a lack of opportunities and what they say is an insufficient share of petro dollars. These problems are compounded by an economic crisis and a government battle with Boko Haram militants in the north.

"This is likely the beginning," Elizabeth Donnelly, deputy head and research fellow of London think-tank Chatham House's Africa Programme said of the unrest, adding that "the resolution that will come will not come quickly."

The government this month resumed cash payments to militant groups that it stopped in February, just before the launch of the worst violence since the payments began under a 2009 amnesty. But attacks continued anyway.

The Delta Avengers claimed the bulk of them, announcing strikes on Twitter even before oil majors themselves knew their remote pipelines had been hit. Twitter shut the group's account, but sources said the Avengers have extensive knowledge of oil sites, and follow the media closely to track companies' actions.

"With the Avengers, you don't want to say 'we'll be back up next Wednesday', because then you'll get a bomb next Tuesday," one oil executive said. "They have to be careful."

But new groups, such as the self-styled Revolution Alliance, which claimed an attack on a Shell-owned oil line, loom, while non-violent local protests have also exacted a toll.

Collings Edema, a local youth leader of the Itsekiri group that has blocked access to Chevron's Escravos tank farm for almost two weeks, said "the oil companies have not shown any sign that they are ready to improve our lives".

Experts warned that as long as people are unhappy, militants and their targets could evolve in unpredictable ways.

"This is also about frustrations of younger people coming up in the Niger Delta and needs not having been addressed," Donnelly said. "This isn't just about militancy, though the political and economic context feeds it."

Adding to the division of the militant scene, the Movement for the Emancipation of the Niger Delta (MEND), another group which agreed to a ceasefire in 2009, denounced the Avengers due to its "criminal and treasonable activities".

"MEND reiterates its full support for the ongoing military presence in the Niger Delta," it said in a statement, referring to a recent military campaign to hunt down the Avengers. (Additional reporting by Anamesere Igboeroteonwu in Onitsha, editing by David Evans)

Nigeria Finds A National Crisis In Every Direction It Turns

BY DIONNE SEARCEY

NEW YORK TIMES

A man walked along the former jetty of Ugborodo, Nigeria. The water in the area is heavily polluted by oil. Jane Hahn/New York Times

UGBORODO, NIGERIA (NEW YORK TIMES) — Militants are roaming oil-soaked creeks in the south, blowing up pipelines and decimating the nation’s oil production. Islamist extremists have killed thousands in the north. Deadly land battles are shaking the nation’s center. And a decades-old separatist movement at the heart of a devastating civil war is brewing again.


On their own, any one of these would be a national emergency. But here in Nigeria. they are all happening at the same time, tearing at the country from almost every angle.


“Nigeria is the only country we have,” President Muhammadu Buhari implored in a recent speech. “We have to stay here and salvage it together.”


Mr. Buhari took office a year ago, promising to stamp out terrorism in the north and to rebuild the nation’s economy. But he has been knocked off course by a series of crises across the country, forcing him to toggle between emergencies.


Beyond low prices for the nation's oil, the source of more than 70 percent of the government’s revenue, Nigerian officials have been tormented by a new band of militants claiming to be on a quest to free the oil-producing south from oppression. They call themselves the Niger Delta Avengers.

Despite their name, which sounds as if it might be out of a comic book, the militants have roamed the waters of the south for six months, blowing up crude oil and gas pipelines and shattering years of relative peace in the region.


As a result, Nigeria’s oil production in the second quarter this year dropped 25 percent from the same period a year earlier — enough to contribute to a slight increase in global oil prices, according to an analysis by Facts Global Energy,  a consulting firm in London.

Partly because of the Avengers and their sabotage, Nigeria has fallen behind Angola as Africa’s top oil producer.


The attacks have been so costly that Mr. Buhari sent troops that had been fighting in the north against Boko Haram — the extremist group that has killed thousands and forced more than two million people to flee their homes — to battle the Avengers in the south instead.


Mr. Buhari then reconfigured those efforts after complaints that marauding soldiers had roughed up people and property while looking for militants in the south, creating even more resentment among the impoverished people who live there.


Militants have struck in the south in the past, kidnapping or killing oil workers and police officers to demand a greater share of the nation’s oil wealth. But the Avengers seem bent on crippling Nigeria’s economy while it is particularly fragile, striking at the core of Mr. Buhari’s plans for the nation.


The Avengers have sent oil, power and gas workers fleeing, torturing the multinational companies that burrow for oil underneath the waters. Fuel deliveries around the country have stalled, because almost everything that has to do with oil in Nigeria right now has been tangled up by the militants.


On the main highway in the southern port city of Warri recently, a long row of fuel tankers sat on the side of the road, idle. A bent-back windshield wiper served as a makeshift clothesline. A mini tube of toothpaste rested on the dashboard of one truck. The truckers were stranded, waiting to fill up.

They had been there a month.

“We are not asking for much, but to free the people of the Niger Delta from environmental pollution, slavery and oppression,” the Avengers wrote on their website, explaining their attacks. “We want a country that will turn the creeks of the Niger Delta to a tourism heaven, a country that will achieve its full potentials, a country that will make health care system accessible by everyone. With Niger Delta still under the country Nigeria we can’t make it possible.”


Mr. Buhari’s government has said it is open to negotiating with the group. But it is already stretched thin.


On the opposite side of the country, Boko Haram is still raging. Mr. Buhari has started a major offensive against the group that has made progress, but it has yet to stamp out the violence.


Another longtime battle is flaring in the middle of the country, between farmers and nomadic Fulani herdsmen looking for grazing pastures. Hundreds have been killed in battles as herdsmen roam into new territory to look for vegetation for their cattle. Officials have blamed climate change and the nation’s rapidly growing population for the scarcity of pastureland.


And with their demands for economic equality for the south, the Avengers have been trying to stoke the aspirations of separatists elsewhere in the nation.

More than four decades ago, at least one million people were killed during the Nigerian civil war, when separatists led an uprising that created an independent republic of Biafra in the southeast. It lasted three years, until 1970.


Now, a Biafran separatist movement is simmering again, with the police and protesters clashing regularly since October, when a prominent activist was arrested and jailed. Some have accused the Nigerian security forces of seeking out and killing protesters.


The Avengers are fanning the separatist sentiments, invoking the Biafran movement and calling for a “Brexit”-style referendum to split the nation along several fault lines.

The south has long been a reservoir of anger and resistance, a place where countless billions in oil revenue are extracted for the benefit of distant politicians and companies abroad. Yet drinking water and electricity can be scarce, and the swamps people live around are regularly polluted with Exxon Valdez-sive spills, casting an oily sheen on the creeks and coating the roots of dense mangroves in black goo.

Many people in the predominantly Christian south say they believe that Mr. Buhari, a Muslim from the north, is neglecting them for political or sectarian reasons, even though conditions were also grim under his predecessor, Goodluck Jonathan, a Christian southerner.


“You always say you fought for the unity of this country during the civil war,” the Avengers taunted Mr. Buhari on their website. “You haven’t been to the Niger Delta, how can you know what the people are facing.”


In his recent speech, Mr. Buhari recalled the horrors of the civil war, when he served in the military fighting Biafrans. “The president has a vision of one united Nigeria and is prepared to do everything to keep it as one,” he said.


This spring, Mr. Buhari announced that he would personally introduce a $1 billion cleanup program of the oil-polluted Niger Delta area. It was to be Mr. Buhari’s first visit to the region since taking office, but with the Avengers’ movement raging, the president abruptly canceled his trip. Residents of Delta State felt slighted.


“Years have passed with neglect, deprivation, environmental deprivation, poverty, no electricity, no roads, no hospital, no schools, but we are living in the country of Nigeria,” said Blessing Gbalibi, a fuel-truck driver raised in the creek communities. “Over there in Abuja,” he added, referring to the capital, “they are taking our resources.”


Yet many Niger Delta residents like Mr. Gbalibi oppose the Avengers because their acts of sabotage have degraded the already-poor quality of life in the region. Spills from explosions have further polluted farmland and fishing holes. Mr. Gbalibi and his fuel truck were among those stuck on the side of the highway for a month because the Avengers had disrupted fuel distribution.

About a decade ago, another band of militants, the Movement for the Emancipation of the Niger Delta, prowled the creeks, blowing up pipelines. The federal government reined it in by setting up an amnesty program that offers cash and job training, some of it overseas, for more than 30,000 militants and residents, according to Paul Boroh, a retired brigadier general and the special adviser to Mr. Buhari for the program.

But oil revenue finances the program, and the fall in oil prices prompted the president to consider ending the amnesty program at the end of last year. Mr. Boroh said he had lobbied to keep the plan for now, but to phase it out over the next two years.


The Avengers movement sprang up around the time the president was considering an end to the program, prompting many Niger Delta residents to wonder if the shadowy group is made of former militants hoping to keep up amnesty payments.


The amnesty program is far from universally loved in the creeks. Many residents say payments are routinely siphoned by corrupt community leaders. Others say the job training they received was virtually useless. Oil companies prefer to hire foreigners, they complain, or they hire locals only on a short-term basis — and then nothing.


The program sent Mike Gomero, a former militant, to learn the teachings of Mohandas K. Gandhi and the Rev. Martin Luther King Jr. at a two-week session in South Africa. He is no longer blowing up pipelines. But he still does not have a job.


“The amnesty program is not a solution,” said Williams Welemu, a former member of the Movement for the Emancipation of the Niger Delta. “It’s palliative.”


Communities like Ugborodo, so deep in the winding creeks that it is at least two hours from the mainland by speedboat, are dotted with homes that are little more than tiny zinc huts on islands that are sinking into the sea. They are filled with unemployed residents trained as geologists, pipe fitters and marine engineers.

One of them, Collins Bemigho, stood along a dirty swamp, orange flares from a giant Chevron terminal glowing in the distance behind him. He complained about a lack of indoor plumbing, of good health care or a secondary school, and then pointed to a thick pipe jutting from the water.


“If I wanted to bust a pipeline, I could do that right here,” Mr. Bemigho said. “We’re not rewarded for being well behaved.”


Follow Dionne Searcey on Twitter @dionnesearcey.

Continue reading t