Nigeria - Output from Crude Oil Expected to Hit 2.68 mb/ day

Nigeria will in a matter of weeks record a major increase in her crude oil production from the current 2.5 million barrels per day (bpd) to 2.68 million bpd, Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, has said.

In her presentation Tuesday on the state of Nigeria’s oil and gas production at the 2012 edition of the Nigeria Oil and Gas (NOG-12) conference in Abuja, Mrs. Alison-Madueke said since President Goodluck Jonathan assumed office, the oil and gas sector had witnessed a renewed wave of activity and performance levels, which had placed the industry on the renewed part of growth and sustainable development.

Nigeria’s crude oil and condensate production, she said, averaged 2.39 million barrels per day in 2011 and was consistently maintained above the budgeted level, which was 2.3m bpd.

She noted that the current production of 2.5m bpd would soon increase by 180,000 bpd as soon as the Total-operated Usan deepwater field commences operation in about a few weeks from now.

“A major enhancement of the deepwater oil production was achieved as a result of the arrival of the Floating Production Storage Offshore (FPSO) vessel for Total’s Usan deepwater oil field into the Nigerian waters. On completion of the subsea wells and other facilities in a few weeks, oil production will increase by about 180,000bpd,” she said.

Alison-Madueke further stated that in 2011, gas production rose by more than 70 per cent to an average of 4 billion standard cubic feet per day, adding that the industry supplied more domestic gas than was consumed by the power and industrial sectors.
She noted that the production by the Nigeria Liquefied Natural Gas (NLNG) peaked at 21.2 million metric tonnes in 2011, as the amnesty programme allowed oil and gas operation to go unhindered.

She also disclosed that ongoing exploration effort in the Chad sedimentary basin had been intensified.
On the status of the Petroleum Industry Bill (PIB), Alison-Madueke said: “A new draft of the PIB, a bill to reform the country's oil and gas industry would be submitted to the president within the next six weeks for consideration and onward transfer to the National Assembly.”

According to her, the special committee set up recently to rework the draft of the PIB would soon submit its report, which would be passed on to President Jonathan for onward submission to the National Assembly.

But Shell Africa’s Executive Vice-President, Mr. Ian Craig, stated that the greatest challenge facing the country’s oil industry is the massive organised oil theft business and the criminality and corruption, which it fosters.

In a presentation at the conference, Craig acknowledged that onshore, the amnesty programme had had a major impact as security had improved, but pointed out that his company’s production was still below pre-militancy levels.

He noted that crude theft and its associated criminality “drive away talent, both Nigerian and international, increases cost, reduces revenue to both investors and the government and results in major environmental impacts”.

“The volume of oil, which is stolen is difficult to estimate, but is probably in the region of 150,000 barrels per day. By way of illustration, in December last year, a spill was reported on the Nembe Creek Trunkline caused by two foiled bunkering connections. Repairs took a month, with a total production deferment of over 4 million barrels,” he said.

Meanwhile, the Federal Government will today renew oil leases of Mobil Producing Nigeria Unlimited (MPNU), a subsidiary of United States oil giant, ExxonMobil, which were initially renewed in November 2009 but later invalidated in March 2011.

The initial validation of the leases – Oil Mining Leases (OMLs) 67, 68 and 70 – with a combined output of 580,000 barrels of crude oil per day, was cancelled because of what the Ministry of Petroleum called the addendum used for the renewal, which showed that they had been executed in the first instance on March 11, 1971 and not December 1, 1968.

A local newspaper reported that in response to the invalidation of the renewal of the oil leases, ExxonMobil wrote to the Ministry of Petroleum Resources seeking a clarification as well as a review of the decision to nullify their renewal.

Alison-Madueke had, in a letter on March 4, 2011, informed the oil multinational that the leases remained valid till March 10, 2011, and as such “were not subject to renewal” on November 25, 2009, when the former Minister of State for Petroleum, Mr. Odein Ajumogobia, executed the contract for their renewal.

In the letter, she advised the company that should the Federal Government give consideration to renewing the leases, the effective date would be March 11, 2011.

But speaking yesterday on the sidelines of the NOG-12 conference in Abuja, Alison-Madueke stated that she would sign the revalidation of the leases today, after successfully reviewing the initial renewal.

She noted that the initial renewal done in 2009 was reviewed to ensure that it was done within all the right parameters.
“That exercise took a little while but has been concluded and has been done in the best way possible. I think both sides are quite satisfied with it. Therefore, I am now ready and prepared to go ahead and sign and I will sign tomorrow (today). Immediately after that, others will follow,” she said.

Following the initial cancellation, Mobil’s Chairman/ Managing Director in Nigeria, Mr. Mark R. Ward, had written a strongly worded letter to the minister, drawing her attention to some salient facts pertaining to the leases.
In the letter dated March 25, 2011, which THISDAY had published, Ward told the minister that her position on the leases was “untenable”.

Ward noted that the fundamental basis of his company’s investments and those of other foreign investors was reliance on the Federal Government’s agelong commitment to sustain a transparent process, respect in the rule of law, uphold the sanctity of contracts validly entered into by and with officers including the president.

He warned that the action of the government negated that premise and called into question the “fundamental basis of past and continued investment,” adding that if this is sustained, it “would create a default of over $4 billion at international and Nigerian banking institutions that have provided financing for NNPC and MPNU in connection with joint venture operations relating to the OMLs”.

“It is inconsistent with the principle of sanctity of contract (which Nigerian courts have consistently upheld) and indeed common practice for parties to a Deed to agree on a commencement date which differs from the date of execution of the Deed. In the present case, a good reason existed for the parties’ decision to fix 1 December 1968 as the commence date for the Deeds.

Government’s position that the ‘leases were made retroactive to commence in 1968 to take advantage of the transition provisions of the Petroleum Act (1969), which enabled MPNU to retain the duration of 40 years in the leases as opposed to the duration of 20 years as provided for in the Petroleum Act’ has no factual basis. However, even assuming that had been the case, such fact would not entitle the government to unilaterally amend the terms of the Deeds by altering the agreed upon commencement dates,” part of the letter reads.
Ward urged the minister to “review the current decision” conveyed in her letter.