By Adewale Sanyaolu
The year 2016 started with gloom, considering the high level of shattered dreams that characterised the better part of 2015, which eventually continued in the year under review.
The continuous decline in crude oil price in 2014, continued until 2016, hitting an all time low of $27, before gradually rising to its current price of $58.
The current oil price increase is not without sacrifices from some Organisation of Petroleum Exporting Countries (OPEC) member countries to ensure that prices regain momentum. Several meetings held ended in deadlock without the cartel reaching a consensus. But in November, members agreed to cut production, leading to a steady rise in oil prices.
In Nigeria, the low oil price has led to several cancellations of oil contracts, leading to massive job losses. The spate of attacks on oil and gas infrastructure continued unabated in 2016, with attacks on Nigerian National Petroleum Corporation (NNPC) assets costing the country a whopping N1.5 trillion, according to its Group Managing Director, Mr. Maikanti Baru.
Despite these uncertainties, the Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, has been able to woo investors from India, China and other parts of the world into the country’s oil and gas sector. Kachikwu was equally able to design a model that has seen the country exiting the controversial Joint Venture (JV) funding model. These investment commitments translate to about $86.2 billion.
Through the move, the Minister was able to secure $1.7 billion discount for the country on cash call arrears through an arrangement with International Oil Companies (IOCs).
A major success factor recorded in the oil and gas industry for the year is the ability of OPEC member countries to reduce production by 1.2 million barrels per day.
Iran returns to oil market
In January, Iran made a grand return to the oil market after almost OPEC oil production has jumped to its highest in recent history as Iran increased sales following the lifting of sanctions and its rivals, Saudi Arabia and Iraq, also boosted supply.
Rising output in the OPEC countries further aggravated the market share battle between top global producers. In the past year, this has flooded the market with new barrels, creating one of the worst oil gluts in history and helping send prices to a 12-year low.
The January supply figures contrast with statements from multiple OPEC officials and recent comments from non-OPEC Russia about the need to cooperate and possibly restrain supply to help oil prices to recover.
Iran provided the biggest increase in supply among the OPEC members, the survey found. Sources familiar with the matter say Iran is reluctant to restrain supply as it wants to recover market share and feels that the economic benefits of lifting sanctions offset the drop in oil prices.
Punitive measures imposed by the United Nations (UN) and European Union (EU), and some but not all US sanctions, were lifted on January 16 in return for steps by Iran to scale down its nuclear programme under an agreement it struck with world powers last year.
OPEC supply had risen in January to 32.60 million barrels per day (bpd) from a revised 32.31 million bpd in December, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.
Fuel scarcity crippled economy
If there is anything Nigerians won’t forget in a hurry in 2016, that would definitely be the acute shortage of petroleum products, which grounded the economy with commuters trekking long distances, while banks and telecommunications companies had to put customers on notice of early closure/poor network services due to the unavailability of petrol and diesel.
The scarcity was occasioned by the inability of major marketers to source forex through the official window, failure of government to clear outstanding subsidy claims, which had then accumulated to about N413 billion before it was paid, and delay in the release of fuel import allocation by the Petroleum Products Pricing Regulatory Agency (PPPRA).
When Daily Sun exclusively reported in December 2015 that the fuel scarcity would linger till February 2016, many dismissed the report as impossible. But true to the report, the scarcity lingered beyond February up till early May.
When Kachikwu gave April 7 deadline for fuel queues to disappear, Nigerians heaved a sigh of relief, believing that their sufferings ultimately have a terminal date. Little did they know that the assurances would not materialise.
Former Managing Director of Kaduna and Port Harcourt refineries, Mr. Anthony Ogedengbe, was one of the experts who believed that the scarcity may not be stopped totally with the measures put in place then. He had insisted that the queues would still return after a while, if the government did not put real measures in place to permanently nip the scarcity in the bud.
“The queues will come back if we continue the way we are doing things,” he said, adding that the “stakes in the refineries should be given to companies with competence and funds.”
Ogedengbe said this does not mean that the government will sell them out-rightly, “but competent companies, which will be in charge will make sure those facilities are not only profitable but also perform at maximum capacity for the benefit of Nigerians.”
New petrol pump price
On May 10, Nigerians got a shocker as the PPPRA announced a new pump price for petrol, saying that in a new pricing template which it reviewed, filling stations in the country are to sell at a maximum of N145 per litre.
The new pump price was N58.50 higher than the previous price of N86.50. PPPRA indicated that the sector was still under the government’s price modulation policy and not deregulated.
It also explained that there was no subsidy for importation of petrol, adding that the price will reflect extant market realities.
PPPRA also stated that henceforth, petrol marketers will be allowed to independently source for foreign exchange to import products into the country, and that retail stations owned by the NNPC are advised to sell at pump prices below N145 per litre.
Investment in oil and gas sector gets boost
The first quarter of 2016 began with talks on a $1.2 billion multi-year drilling financing package for 36 offshore/onshore oil wells under the NNPC/Chevron Nigeria Limited JV.
The package, which even though was announced in the last quarter of 2015, actually began to take shape between the NNPC and Chevron Joint Finance Team and the consortium of local and international lenders led by Standard Chartered Bank and the United Bank for Africa Plc. (UBA), the Memorandum of Understanding (MoU) was eventually signed in London early this year by Kachikwu.
The Minister equally negotiated a $15 billion investment with terms to be agreed, where the Indian government would make an upfront payment for crude purchase to Nigeria, to be repaid on the basis of firm Term Crude Contracts over some years and in consideration for Indian public sector companies collaborating in the refining sector as well as exploration and production activities on a government-to-government basis.
Following this negotiation, the two countries have agreed to work on an MoU to facilitate investments by India in the Nigerian oil and gas sector and specifically in areas such as Term Contract, participation of Indian companies in the refining sector, oil and gas marketing, upstream ventures, the development of gas infrastructure and in the training of oil and gas personnel in Nigeria. The MoU is expected to be firmed up in December 2016 during Petrotech-2016.
Not satisfied, Kachikwu equally got a pledge of $70 billion from Chinese private sector companies to the Nigerian economy during the Ministry of Petroleum roadshow in January.
He added that the $70 billion investment was different from the pledges made earlier when President Muhammadu Buhari visited China “which was an all African type front basis; this is completely separate.”
Kachikwu pointed out that the ministry’s investment target in China was initially to raise $40 billion, which was the total cost of the nation’s infrastructure gap for the oil industry. The China roadshow, however, raised pledges of over $70 billion for NNPC and government related potential investments and loans facility.
The minister added that it would be a great achievement if the country could realise at least 20 per cent of the pledges. Despite the $86.2 billion commitments into the country’s oil and gas sector by investors, Nigeria had yet to begin to feel the impact of such.
OPEC cut production by 1.2m bpd
Rising from its 171st meeting held at the OPEC headquarters in Vienna on November 30, 2016, the body reached a landmark deal that will effectively cut production by about 1.2 million bpd or about 4.5 per cent of current production, to 32.5 million bpd.
The agreement follows an earlier meeting held in September in Algeria where each member country reached a consensus on the need to cut production.
This was the first time since 2008 that OPEC would be accomplishing such a feat, which is expected to tackle the key challenge of low price of oil in the international market, which has affected the global economy with most OPEC countries, including Nigeria, feeling the impact.
Member countries at the meeting agreed on the deal where considerations of the cartel offered to Iran, Libya and Nigeria would mean that in 2017, total production might likely increase, even as other members seek to cut output in the first quarter of next year.
In the agreement where the countries are exempt from the production, Nigeria was accommodated due to some of the oil and gas facilities damaged by militant attacks in recent months.
ExxonMobil sacks 150 Nigerian workers
The year 2016 may have ended on a sad not for some oil workers, as ExxonMobil sacked about 150 of its Nigerian workers in what its management described as a regular evaluation of its operation as part of a disciplined management process.
ExxonMobil Manager, Media and Communications, Mr. Oge Udeagha, explained that ExxonMobil regularly evaluates its operations as part of a disciplined management process and continually strives to operate its business in as safe and efficient a manner as possible.
“We invest for the long term and are focused on maintaining a stable, well-developed workforce and are committed to treating our employees with respect and in accordance with applicable rules and regulations,” he said.
He said the exercise was a limited programme that will impact a relatively small fraction of employees, adding that special benefits specifically introduced for this purpose will be paid to affected employees consistent with existing labour agreements.
The company, he said, is also arranging special programmes to support the transition from the company for those affected, saying that ExxonMobil respects the rights of its workforce and will continue to engage with them to resolve the situation.