Indigenous firms are the worst-hit by myriads of challenges bedeviling the oil and gas industry. ADEOLA YUSUF reports on how many of them are running into bankruptcy
Aiteo, an indigenous oil firm, made the headlines penultimate week; basking in the euphoria of its new status as the biggest Nigerian- owned oil firm in terms of production, hitherto known by many as the petroleum product trading firm, it announced the production of the largest share of the 313,602 barrels per day output from indigenous companies.
The firm’s management cannot be blamed for flaunting its new status as the oil industry is battling with cash crunch and little or nothing was expected from the local firms who are the worse-hit by the crisis.
Aiteo is not alone, a few other firms put up sterling performances, even though they still ranked far below the 77,000 barrels per day production figure of Aiteo . The sad aspect is that tens of indigenous firms are faced with bankruptcy while their productions are near to nothing.
Investing in Nigeria’s future
On April 1, 2015, the media was awash with news that the ownership of OML 29 had been formally transferred from Shell Petroleum Development Company (SPDC) to Aiteo Group.
This information was dismissed by many industry watchers and stakeholders, considering that the divestment programme of the oil major, Shell Petroleum Development Company (SPDC), had not been without controversies and rumours of litigations.
On the other hand, IOCs, which have indelibly etched their names in gold and local investors who play big globally had not only shown keen interest in the divestment offer, they had submitted seemingly irresistible bids to corner it.
As such, Aiteo Group was not reckoned with by bookmakers. But a document by Aiteo revealed: “But with conviction in its impeccable track record of safe, reliable and environmentally conscious energy development and a clear vision for the future, Aiteo snapped up a 45per cent stake in one of Nigeria’s largest onshore oil blocks, in addition to the Nembe Creek Trunk Line, which marked a turning point in oil and gas business in Nigeria. Thus, Aiteo secured the potential to hold as much as 300 million cubic feet of gas and 2.2 billion barrels of oil.
“From when they first indicated interest in the lease, the owners and managers of Aiteo Group were unmistakable about their commitment and bold ambition to be a major part of the world’s energy solution.
The march towards that global vision was gradual, steady and without any publicity stunts. The leadership, management and staff of Aiteo rolled up their sleeves and went to work in silence.
The result of those quiet efforts came out resoundingly when, a few days ago, Aiteo Eastern Exploration and Production Company Limited (AEEPCo) announced a peak production of 90,000 barrels per day less than one year into the operatorship of the reputedly largest onshore oil bloc OML 29.
Agog with excitement hidden beneath journalistic curiosity, pressmen have lately turned the headquarters of the integrated energy company to a Mecca of some sort, as they besiege its officials to know how Aiteo has been able to break into the league of big players within such a short period.
This is no mean feat when considering that SPDC could barely produce 23,000bpd prior to the divestment.
“Top among Aiteo’s landmark achievements since its foray into the upstream sector is the production of 90,000bpd. In 2016, the company traded petroleum products worth over $11 billion.
Only recently, it announced a further $4 billion medium-term investment aimed at boosting both gas and oil output by, amongst other tactics, bolstering infrastructure asset.”
Aiteo, the document explained, has not only risen to be Nigeria’s largest indigenous oil producers with ownership and operation of petroleum storage facilities in Lagos and Port-Harcourt, including the Abonnema Storage Terminal with total capacity of over 110 million litres, the company also holds the second spot in petroleum products tankage in Nigeria.
It has also constructed a jetty to accommodate growing vessel traffic to the Port Harcourt Terminal, which accommodates up to 30,000 metric tons dead weight. Aiteo’s founder and Vice- Chairman, Benedict Peters, had said: “Aiteo was one of the companies sought after and issued permits to import petrol under the Federal Government’s Refined Products Exchange Agreement.
It was also among the indigenous companies awarded oil lifting contracts, valued at $40 billion in 2012/2013. The company also entered into a Management and Operation Agreement with Duke Oil to operate and manage its Crude and Product Exchange Agreement on behalf of NNPC and Pipelines Product Marketing Company (PPMC) from 2011 till 2014.
“Its trajectory to prominence is steeped in a culture of excellence marked by periods of varied fortune. The imperative to explore growing opportunities in the upstream sector of the petroleum industry birthed the Aiteo Group idea in 2008.”
Upbeat about a future that belongs to Aiteo, Peters has highlighted several existing and developing projects that would grow Aiteo’s asset production to over 150, 000 bpd and 200 million sft3/d. He said: “Our outlook is bright with three producing oil fields and viable crude exports via Bonny terminal.
We also have contingent resources to appraise and prospective ones to explore in the medium-tolong term, including full 3D coverage and 2P NNS reserves at 1.6 billion bbls. Put simply, we have a clear vision for the future with the experience and assets crucial to providing oil and gas consistently on a regional and global scale.”
These statements of assurance could not have come at a more auspicious time than now when the Ministry of Budget and Economic Planning in the Economic Recovery and Growth Plan (ERGP) 2017 -2020 just disclosed that government plans to reduce petroleum product imports by 60 per cent by 2018, as it looks forward to becoming a net exporter by 2020.
According to the report, the Federal Government’s intention with regard to the oil and gas sector “is to increase the production of crude oil and gas while adding value in the downstream petroleum sector.”
In a bid to boost local participation, the Federal Government encouraged the international oil companies (IOCs) to surrender their marginal fields for assignment to indigenous concession holders. A marginal field is defined as any relatively moderate field that has reserves booked and reported annually to the Department of Petroleum Resources (DPR) and has remained unproductive for a period of 10 years.
The programme has brought about the emergence of a new generation of smaller Nigerian producers, who have increased the share of production from local players to 10 per cent of the total oil output, data from the Nigerian National Petroleum Corporation (NNPC) showed.
Over 100 blocks are in the control of indigenous operators, who were awarded some 50 marginal blocks through discretionary allocations in the 1990s, another 24 through marginal fields bidding round in 2003, and 60 more blocks through conventional bidding rounds in 2005 and 2007.
Dubril Oil Company Limited, which was incorporated in 1987, is described as the first indigenous petroleum producing company in Nigeria. In 1991, the company drilled the first exploration well by a private indigenous company.
Other early entrants include Conoil Producing Limited (formerly Consolidated Oil Limited), founded in August 1984; Oriental Energy Resources (1990); Famfa Oil (1991); Nest Oil Plc (1991); Moni Pulo (1992), Niger Delta Exploration & Production Plc (1992); Amni International Petroleum Development Company (1993) and SAPETRO, which was formed in 1995.
Other indigenous firms are Oando Plc, Frontier Oil Limited, Seven Energy, Seplat Petroleum Development Plc, First Hydrocarbon Nigeria, Emerald Energy Resources, Energia Limited, Midwestern Oil & Gas, Neconde Energy Limited, Network Oil & Gas, Newcross Petroleum Limited, Orient Petroleum Resources and Sahara Group.
Most of these local players have, however, ran into troubled waters financially. Head, Energy Research, Ecobank Capital, Mr. Dolapo Oni, confirmed this by telephone in a chat with New Telegraph.
Most of them are not very liquid right now. He said : “They are having cash flow problems. Servicing their debts is a bit of an issue. A lot of banks are currently restructuring debts. Almost 100 per cent of the debts that are being restructured are owed by indigenous oil and gas companies.”
Chief Executive Officer, Frontier Oil Limited, Mr. Dada Thomas, described the impact of the oil price drop on indigenous firms as “grievous and grave.” He said: “The reason is that we don’t have the economics of scale that the larger national oil companies and international companies have.
Therefore, our unit cost of operation is far higher than theirs and you can understand that if you have a high unit cost of operation and yet your unit price of sale is dropping, you are in trouble.
Survival of the fittest
Current output breakdown showed that Aiteo, Eroton, NPDC, Oriental, Seplat produce 77,000 -90,000 barrels per day, bpd 54,000 bpd, 42,654 bpd, 24, 000bpd, and 21,881bpd respectively.
Newcross, Midwestern, Belemaoil, Amni, Conoil, Niger Delta, Walter Smith and Erin Energy produce 20,000 bpd, 13,000 bpd, 12,000 bpd, 11, 000 bpd, 9, 130 bpd, 7,000 bpd, 5, 837 bpd and 5,000 bpd.
Others – Energia, Moni Pulo, Prime Energy, Platform and Pillar Oil – also produce 4,500 bpd, 3,200 bpd, I,200 bpd, 1, 100 bpd and 1, 100 bpd respectively. Investigations showed that the companies have intensified efforts in developing their assets to produce more in future.
A tall dream
Indigenous companies in Nigeria have, however, concluded plans to increase oil production by 60 per cent at end 2018. This is expected to increase their collective output from the current 313,602 barrels per day (bpd) to 500,000 bpd in 2018.
This will also enable them to increase their contribution to the nation’s daily output from 10 per cent to 20 per cent, leaving 80 per cent to the IOCs that currently produce 90 per cent of Nigeria’s total output.
The Managing Director of Seplat Petroleum Development Company, Mr. Austin Avuru, had predicted that the indigenous companies will also produce about 1.5 billion Cubic Feet of gas daily in 2018.
Top among Aiteo’s landmark achievements since its foray into the upstream sector is the production of 90,000bpd. In 2016, the company traded petroleum products worth over $11 billion. Only recently, it announced a further $4 billion medium-term investment aimed at boosting both gas and oil output.
Scores of indigenous firms, which have gone under could increase their market share by diligently following the footsteps of the market leaders.
Nigeria’s fish deficit hits 2.2m tons
Despite smuggling and abuse of import quota restrictions, Nigeria is currently facing 2.1 million tons of fish deficit.
The Director of Federal Department of Fishery (FDF), Muazu Mohammed, said this in a chat with New Telegraph in Lagos.
He said that the country still depends on one million tons of fish annually as against the 3.2 million tons demand.
Statistically, the country’s total demand is estimated at 3.2 million tons, while it depends on 1.12 million tons of domestic production from aquaculture, artisanal and industrial fisheries.
The FDF boss added that 80 per cent of fish produced in the country are catfish, while other species account for only 20 per cent.
This newspaper gathered that the restrictions have not yielded any positive result because of abuse of quotas and large scale smuggling.
Fish farmers who spoke with this newspaper noted that some of the local farmers government was trying to protect were already out of the business due to lack of fund and other challenges.
Speaking on the development, President, Fish Processors Association of Nigeria (FPAS), Chief Wole Omole, blamed the deficit on government’s policies, which had created uncertainty in the fishery industry.
He said that some members of the association had been facing challenges of finance, debts and smuggling in the business because government had not done enough to protect their investments.
Already, Omole noted that many of the local fish farmers had closed down their fish farms since they have run into debts.
He said: “Let me say this to you, government is just paying leap service to farmers operating in the industry. Money does not get to real farmers who are willing to expand their fish ponds. Also, fish feeding is very expensive in the country. As I talk to you now, I have diverted from fishing business because the profit is not there and this has to do with the cost of feeding the fish.”
Omole explained that investors were finding it difficult to break even in the business even in the long run.
The FPAS president added that lack of political will by the Federal Government had stifled the growth and development of fishery in the country.
“Look at the importation of frozen chicken and turkey the Federal Government banned, but you still found them in the marketplace,” he noted.
According to him, importation of foreign fish, lack of capital, strong smuggling network and inadequate feeds had crippled the ambition of local farmers to meet national demand. This is why the country is facing such a huge deficit, he said.
Omole blamed government for allowing influx of fish imports into the country despite its import restriction quotas.
Echoing him, the President of Fishery Association of Nigeria (FAN), Rasaq Adefowoju, decried the high rate of smuggling and importation of fish to the country.
He said that without government assistance to local fish farmers, the current fish deficit would continue to widen.
Adefowoju also stressed the need for government to create an enabling environment for local fish farmers operating in the country.
The president added that only the solution was for government to provide a bailout fund or loan for the farmers from the Central Bank of Nigeria (CBN) to enable them embark on massive production at single digit or at six months moratorium.
Adefowoju said: “The problem with us in the association is finance. We have enough local fish farmers in the country that can produce fish but there is no financial assistance from the government.”
It would be recalled that since 2014, when the Federal Government introduced the import restriction, exporters from Norway have been finding it difficult to bring fish into the country due to lack of foreign into the country due to lack of foreign exchange to order for supply.
However, finding revealed that some fish are being smuggled through the neighbouring Cotonou Port to the country by fish merchants.
Last year, the Federal Government complained that about $700 million was spent on importation of fish into the country.
The Minister of Agriculture and Rural Development, Audu Ogbeh, lamented that it was no longer sustainable for government to continue to spend such huge amount of money on fish importation.
Consequently, he said that funds would be made available for research institutes to scale up research work into the local production of other fish species, aside the regular catfish and Tilapia.
The minister said: “We need to start looking inwards to see how Nigeria can produce some of these fishes both for local consumption and then importation. We will also encourage massive investment in artisanal fish production, to meet the protein needs of Nigerians, because it has been discovered that lack of protein in some women have made them to developed fibroid
Dangote: Businesses, residents lose N86bn daily to Apapa gridlock
Businesses and residents are losing N86 billion to Apapa-Wharf road gridlock daily, Africa’s richest man and President/CEO, Dangote Group, Alhaji Aliko Dangote, has said.
He stated this in Lagos while condemning the challenges posed by traffic jam and heavy presence of different types of taskforce, including the Customs, on the major route leading to the nation’s largest port.
Dangote, who was on an inspection tour of the on-going reconstruction of N4.3 billion Apapa-Wharf road by AG Dangote recently, stated that businesses and residents are losing 20 times the project’s cost daily.
By calculation, N86 billion is being lost by business owners and residents on daily basis.
He said: “People don’t really understand how much money businesses are losing because of the gridlock here; if you quantify it in billions, it is 20 times the cost of this project every single day.”
Consequently, he urged the Federal Government to move the taskforce, including Customs, away from the route to ease traffic.
The reconstruction of the road that leads to Apapa and Tin Can Island Ports is being undertaken by Dangote Group, Nigerian Flour Mill Limited and the Nigeria Port Authority (NPA), which are together committing N4.34 billion to the project.
Justifying the involvement of his company in sponsoring the project, Managing Director, Flour Mills Limited, Paul Gbadedo, lamented that it has been difficult for businesses and residents of Apapa.
Noting that the economy of Apapa is very huge, he said that businesses cannot see the traffic and road deteriorating without doing something.
He stated that 75 to 80 per cent of imports passed through the Apapa ports, noting that the road is strategic.
Dangote stressed that it did not make any commercial sense for Customs to mount check points outside the wharf after they might have checked and certified goods at the ports.
“If there should be any more checkpoints, they should be at the toll gates, not here where they are obstructing traffic flow,” he said.
Africa’s richest man said he was impressed with the progress and quality of work being done by AG Dangote, the contractor handling the reconstruction of the road.
He also lauded the palliative work going on on Apapa Oshodi Expressway and the Trailer Park being constructed by government off the expressway, pointing out that these were efforts being made to ensure that the access roads to the ports are decongested.
“My impression of this road has changed because AG Dangote is doing a great and excellent work here. You can see the quality of work being done. This is quite impressive. Even in Germany, you cannot see this kind of quality of road. This road can last at least two generations in which case you will be talking about over 60 years. It is so solid that it can take any weight and any traffic,” Dangote said.
“I can assure you that we will double our efforts to complete the project on schedule, that is, latest by the end of June,” he said.
Chief Executive, AG Dangote, Ajif Juma, stated that the company is facing a lot of challenges, citing traffic and gas pipeline as major ones.
“But now we are working hard to ensure we finish on schedule with some of our workers on night shift,” he said.
CBN to banks: Settle customers’ complaints within 2 weeks
Deposit Money Banks ( DMBs) and other financial Institutions have been directed by the Central Bank of Nigeria (CBN) to settle customers’ complaints on issues of overcharge, unauthorised deductions and other matters within two weeks.
CBN Head of Complaints management Division, Mr Tajudeen Ahmed, conveyed the Apex Bank’s directive in Abuja. He said the regulator would ensure that bank customers receive redress on issues of excess charges or unauthorised withdrawal.
Ahmed reiterated the CBN’s commitment to eradicating the culture of excess and arbitrary charges. According to him, the CBN has since issued a circular,which could be found on the its website showing all legitimate bank charges. He explained that any charge outside what is contained in the circular was not allowed and should not be charged.
“The Consumer Protection Department issued guidelines to banks dated August 16, 2011, directing all banks and other financial institutions to resolve all customer complaints within two weeks of receipt of that complaint,” he said. “Before the expiration of that complaint, the financial institution is expected to be engaging the customer on a continuous basis to update him or her on the status of the complaint. “If it is not resolved within the deadline given, then such a person is encouraged to draw the attention of Central Bank of Nigeria to find solution to that complaint.”
Ahmed enjoined customers with unresolved complaints to contact the CBN by writing to the Director Consumer Protection Department. He also advised disgruntled bank customers to visit any branch of the CBN closest to them to lay their complaints.
“The CBN continually engages the banks to find out if their conducts and practices are fair to their customers in order to stimulate people’s confidence in the banking system. “Non-adherence to that normally results to regulatory sanctions as the case may be,” he said.
Ahmed faulted banks for setting a limit on ATM withdrawals to get customers to make several withdrawals to cash large sums. “I have also observed and noted this. Don’t forget that at the beginning, it wasn’t like this. Over time, we started having this problem.
“One of the reasons is that the quantum of N500 denomination is much more than that of N1,000 denomination,” he said. “When we approached the banks about these problems, they said that the machines become easily faulty when it is set to dispense up to N30, 000 to N40, 000 units.
“However, CBN has directed that the machines that allow payment of up to N30,000 to N50,000 should be installed. “This is still ongoing. The Banking and Payment Department of the CBN is championing it.” In her remarks, Head, Consumer Protection Department, Mrs Hadija Kasim, admonished bank customers to imbibe cashless policy.
“Let’s not forget that ATM cards can also be used on Point of Sale (POS) terminals. We are encouraging people that unless it is absolutely necessary, they should reduce the carriage of cash. Cashless transactions are more convenient, safer and you will avoid the problem of overcharges,” she said. She advised bank consumers to use bank transfer channels for transactions in cases where sellers do not have POS.
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