- Kachikwu sees commodity steady at $60
Nigeria has ruled out $100 per barrel price for crude oil, its biggest revenue earner, in 2018, New Telegraph has learnt.
Minister of state for petroleum resources, Dr. Ibe Kachikwu, made the country’s official position known on the side-line of an event in Lagos.
He however sees oil steady at $60 per barrel.
Nigeria, which depends largely on proceeds from crude to service over 80 per cent of her budget, has her economy and foreign exchange earnings tied to the commodity.
Despite taking a charge at over $70 per barrel penultimate week, Kachikwu told this newspaper that oil will not hit $100 per barrel.
“The price is expected to keep hovering around $60 per barrel,” he said, maintaining that this official position was taken after due consideration of many variables that determine the price.
With hope of higher prices for oil dampened, Nigeria, Kachikwu said, is mulling a surge in oil royalties and taxes being paid into its covers from Production Sharing Contracts (PSCs).
The age when oil companies invest as much as $70 billion on PSC’s offshore oil exploration and production but gave zero royalty to government is winding up, Kachikwu said.
Stating that government is set to correct this business anomaly through adequate policy, the minister said that government had also set an eight years target to end multi-billion dollars repatriation on FPSO fabrication by IOCs.
Tasking other oil majors to improve on the 30 per cent local content feat achieved by Total on the $16 billion Egina investments, Kachikwu urged them to also improve on their contributions to the federation account through royalties and taxes.
“Nigeria will continue to pay a prolific economic returns model for any country in terms of value production and we are going to improve our speed, the terms and make sure oil companies get away with huge amount of rewards,” he said.
“We will make sure that the local content will continue to build the service. Those (IOCs) on Bonga, Zabazaba and others (projects) should begin to talk early to Simbi Wabote.”
Henceforth, IOCs, he continued, should start thinking of how to improve what goes into the federation account.
“As you look at your numbers in terms of how you wish to develop these fields, please spend a good amount of time in checking the bottom line and what goes to federation account. There is no need building a huge $70 billion facility and nothing goes to federation account like one field, which pays no single royalty to the Federal Government for one reason or the other. Such things won’t happen anymore.
“So, the terms will change and the basis at which we proceed will change.”
He said the investment is key, huge and President Muhammadu Buhari is very excited about it.
“When I told the president about the investment, he asked what is the contribution of the investment to the country’s account. The 200,000 barrels per day is about 10 per cent of our daily output and this is huge,” he said.
He however commended Total for taking such huge risk in $16 billion Egina project.
“I congratulate Total not just for this feat, but for the psychological boost and for everything put into this achievements. For companies like Total that invested when oil price were down, this is the time to hopefully reap from their investment,” he said.
Corroborating Kachikwu’s view, the Executive Secretary of NCDMB,Mr. Wabote, said that government had set a target of eight years to end repatriation of funds by IOCs on FPSO fabrication investments.
Basking in the euphoria of Egina’s achievement, Wabote declared that the 2026 target set to end repatriation of fund on FPSO would be achieved through in-country full integration of FPSO by that year.
Managing Director of Total said that his company went ahead with the project despite fall in prices of oil at the international market as a result of its belief in Nigeria and the local content development.
Managing Director of Lagos Deep Offshore Logistic Base, LADOL Free Zone, Dr. Amy Jadesimi, in a remark, urged indigenous investors in Nigeria’s oil and gas industry to invest in long term projects and collaborate with each other to achieve global standard.
“I will encourage indigenous companies to make long term investment, long term capacity development. I also encourage collaboration. We have to work together, we have to make sure that we grow the size of the market by holding hands, demanding that more work done here and doing that work at global standards,” she said.
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