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NIPP to add 4800 MW of power by 1Q 2010 —Lanre Babalola

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IL INDUSTRY REFORMS:

‘The devil is in the detail'

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—Ajumogobia

A Vanguard Monthly Review Of The Energy Industry AUGUST, 2009

VOL 004

Carnage at Atlas Cove

AMNESTY: Anatomy UPDATES Brass LNG considers two consortia for development Brass LNG is preparing to divide the short-listed contenders for the offshore work on its multi-billion dollar complex in Nigeria into two consortia.

The ConocoPhillips-led project is holding meetings at the end of this month to finalise the shortlist, with firms including Acergy, Dynamic, Fluor, Heerema, Nigerian Westminster Dredging and Marine, Saipem, Technip and Van Oord expected to be there. Those short-listed from this group will then be asked to divide into two consortia CONTINUES ON PAGE 4

of an ill-conceived initiative Oil production drops to 1.46mb/d 2009 budget in jeopardy

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Contents 4

COVER

6

OIL

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AMNESTY: Anatomy of an ill-conceived initiative

Concerns, knocks trail OGIC bill FOCUS IL INDUSTRY REFORMS: 'The devil is in the detail'

18

LABOUR

'Oil & gas industry, 50% of Nigeria's problems' —Esele

20 INSURANCE

WAICA chief proposes regional consortium for WAGP, others

21 POWER

NIPP to add 4800 MW of power by 1Q 2010 —Lanre Babalola

29 COMMUNITY DEVELOPMENT N-DELTA: Yar'Adua is confused

Sweet Crude is a publication of Vanguard Media Limited

THE TEAM EDITOR

Hector IGBIKIOWUBO heckie4real@yahoo.com

CORRESPONDENTS Victor AHIUMA-YOUNG Ifeanyi UGWUADU Godwin ORITSE Yemie ADEOYE Ebele ORAKPO Jimitota ONOYUME Samuel OYANDOGHA GROUP BUSINESS EDITOR Omoh GABRIEL

Editor South-South Emma AMAIZE

DESIGN/PAGE LAYOUT Francis AYO Johnbull OMOREBEE Jide BABATUNDE

Printed and Published by Vanguard Media Limited. Vanguard Avenue, Kirikiri Canal, P.M.B. 1007, Apapa.

Enquiries Call: 08051100256 Internet:

www.vanguardngr.com All correspondence: P.M.B 1007, Apapa, Lagos.

I

f the carnage visited upon oil and gas industry facilities both upstream, midstream and downstream following the Federal government's offer of amnesty to militants in the Niger Delta is anything to go by, it would appea r 'an ill conceived initiative'. Worst still, ra ther than calm frayed nerves and give stakeholde rs a sense of belonging, the oil and gas indu stry reform bill before the national assem bly continues to attract concerns and knocks ov er claims of not being carried along. However, all stakeholders agree with the general princ iple behind the reforms. In an exclusive interview, Mr. Odein Ajumogo bia, Nigeria's minister of state for petroleum resources tries to explain the principle behind the reforms, noting that 'the devil is in the detail’. In another exclusive interview, Dr. La nre Babalola, Nigeria's minister of power assure s that additional 4800 megawatts of electricity will be generated by December, 2009 to feed a cou ntry blighted by the fallouts of epileptic power supp ly. Characteristically, labour related issues were not left out of this month's coverage. Comrade Pe ter Esele, president of the Trade Union Cong ress identified the oil and gas industry as constitut ing 50 per cent of the country's problems, while a lso supporting the oil and gas industry bill. We have also provided ample coverage of insurance and community related issues, wh ile introducing a cartoon strip titled: ‘from the creeks’ for your reading pleasure. Howeve r, owing to constraints which we are tackling, we have left out freight and gas coverage in this edition. Editor


Shell in Nigeria

Improving lives in the Niger Delta


Cover Story AMNESTY: Anatomy of an ill-conceived initiative 4

Band of Militants CONTINUED FROM PAGE 1

Hector IGBIKIOWUBO

I

NDICATIONS are that the amnesty granted Niger Delta militants who have successfully shut-in 1.32 million barrels per day of Nigeria's crude oil production may fail to achieve the objective for which it was designed if major acts of sabotage against oil and gas facilities recorded since the announcement was made by President Umaru Yar'Adua is anything to go by. Sweet crude investigations have also revealed that Nigeria's crude oil production may have dropped to

an all time low, registering an average 1.46 million barrels per day in the month of July. It was also gathered that following the steep decline in oil production, the 2009 budget originally predicated on 2.2 million barrels production per day at an average $45 per barrel may be in jeopardy. Hopes of the amnesty offered militants in the Niger Delta checking the wanton attacks on oil and gas pipelines seems to be fading by the day, with seven such attacks already recorded since the announcement was made by President Umaru Yar'Adua. A few days after the amnesty offer was made; Movement for the

CONTINUES FROM PAGE 1

UPDATES in order to bid, with invitations to tender for the work expected to be sent out before the end of the quarter.

Trio ready for Chevron Nigeria platform update

A

trio of contenders that submitted technical bids for the Escravos Gas Project 3B platform development are waiting to hear from operator Chevron whether they have been short-

Emancipation of the Niger Delta (MEND) launched an attack on a Shell facility. In a tacit admission of the development, the company said it had shut some production as a precautionary measure while it investigated reports of attacks on two well clusters in its Estuary Field in the western Niger Delta, which feeds into its Forcados oil e x p o r t t e r m i n a l . "Hurricane Piper Alpha has struck at the Shell Forcados platform in Delta state today [Monday] ... at about 3.30am" the Movement for the Emancipation of the Niger Delta (Mend) said in a statement emailed to media. Thereafter, it's been one attack

listed to submit commercial tenders. A c e rg y, A d a m a c a n d D y n a m i c Industries/Grinaker are understood to be the final three hoping to make the grade. A total of seven offshore production platforms need to be modified for the project. They range in water depths from 16ft-125ft (5m-38m). The work surrounds the rerouting of associated gas from the production platforms' existing flaring systems to a gas gathering pipeline network. In total, 172 tonnes of structural modifications need to be made to the platforms along with 462

Twice, the group struck Shell's Cawthorne Channel undermining crude oil supplies to the Bonny loading terminal in Rivers state

tonnes of piping modifications.

Equator Exploration to finalise financing

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NDICATIONS are that Equator Exploration is finalising new financing which will keep creditors at bay and ensure it can keep its stakes in deepwater blocks off Nigeria and in the joint development zone between Sao Tome & Principe. Equator now owes more than US $ 100m in debt but said that it is "...in the process of finalising a complex financing which will, when completed, extend the maturity of debt and provide some

after another with Shell, Agip and Chevron at the receiving end of these attacks Twice, the group struck Shell's Cawthorne Channel undermining crude oil supplies to the Bonny loading terminal in Rivers state. MEND also claimed it blew up Chevron's Okan manifold in the southern Delta state early last month, hours after it attacked an oil well head operated by Shell. “The strategic Okan manifold, which controls about 80% of Chevron Nigeria Limited offshore crude oil to its BOP crude loading platform, was blown up at about 2045 hours on Sunday," MEND CONTINUES ON PAGE 5

interim funding to ward off immediate pressure from creditors. It is intended that the arrangement will also provide an opportunity for additional funding in the future."

Mart Resources mixed reserves message

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AKEOVER target and Nigerian marginal field specialist Man Resources has revealed mixed news from restated reserves figures. Following the completion of the UMU-5 well at the Umusadege field, Chapman Petroleum Engineering increase gross total proved reserves from 1.9m bbl of oil to 4.8m bbl Gross total.


Cover Story

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Carnage at Atlas Cove

AMNESTY: Anatomy of an ill-conceived initiative CONTINUED FROM PAGE 4

said in another emailed statement. A company staff who did not want his name in print confirmed the attack, noting that it was not possible for the company to continue to operate under the current circumstances. “We can only operate in an atmosphere where the lives of our personnel are not under constant threat. We do hope that government would be able to restore an atmosphere conducive for business to thrive.” Chevron, Shell and Italian energy company Agip have shut around 273,000 barrels per day of oil production in Nigeria since MEND launched its latest string of attacks in May, Amnesty: Government had announced Friday 26th June, 2009 the amnesty for militants in the Niger Delta will take effect from August 6, 2009. “We have the 60 days period of grace from August 6, 2009 for all those who are willing to embrace the amnesty to surrender their weapons and renounce militancy,” Interior Minister Major-General Godwin Abbey disclosed. “Between now and 6th of August, discussions are continuing with the leadership of the militants,” Abbey, who heads the government amnesty panel, added, clarifying the grace period for the offer to be Yar'Adua had said on Thursday that an amnesty would cease to be

effective from October 4, 2006 and advised the rebels who have been attacking oil firms and personnel in the region in the past three and a half years to take advantage of the offer. The minister said the government would not pay cash for any arms surrendered by the militants. Since the amnesty offer was announced, most commentators, stakeholders and opinion molders in the region have taken government to task over the way and manner it was conceived, noting that the offer failed to address the circumstances that led to militancy in the first place. Wo r s t s t i l l , s i n c e t h e announcement was made, no reputable militant has taken up the offer for fear of government insincerity. In Bayelsa, Rivers and Delta states, there have been allegations of overzealous security men changing the charges preferred against some militants in custody just to ensure they do not benefit from the offer. There have also been allegations of extra-judicial killings preferred against security agents. Multinational support lacking: To further underscore the ill conceived nature of the amnesty package, while on a visit to the UK, Chief Ufot Ekaette, the minister of the Ministry of Niger Delta was quoted as saying government have budgeted millions of dollars for the

OPEC crude oil production based on secondary sources , 1,000 b/d 2008 3Q08 4Q08 1Q09 2Q09 Apr 09 May09 Jun 09 Jun/May Algeria Angola Ecuador

1,390 1,401 1,362 1,871 1,845 1,870 503 503 501 3,892 3,917 3,831 Iran Iraq 2,338 2,329 2,336 Kuwait 2,554 2,600 2,500 Libya 1,715 1,683 1,697 1,947 1,955 1,931 Nigeria 840 859 810 Qatar Saudi Arabia 9,113 9,460 8,760 UAE 2,557 2,603 2,431 Venezuela 2,346 2,339 2,299 Total OPEC 31,066 31,495 30,328 OPEC excl. Iraq 28,728 29,166 27,993 amnesty programme in the Niger Delta, but have not received any financial support from foreign oil companies. Indications are that owing to dwindling federal revenue, falling oil prices and production, the government may not be able to pay for the programme on its own. "Right now, they (oil companies) have not been contributing," Ufot Ekaette disclosed to Reuters.

"We want to talk to all the stakeholders because whatever happens will affect them and they should be making contributions towards restoring peace to the area," he said. However, when contacted, a Shell spokesman said the government has yet to formally approach the company for financial

1,266 1,700 482 3,683 2,328 2,276 1,577 1,815 762 7,964 2,268 2,202 28,322 25,995

1,258 1,259 1,745 1,693 479 479 3,727 3,713 2,400 2,354 2,236 2,236 1,558 1,554 1,753 1,723 769 767 7,948 7,905 2,240 2,238 2,212 2,214 28,327 28,136 25,927 25,782

support. "We are not aware of any such request. The amnesty programme is a matter between the Nigerian federal government and the militants," the spokesman said. Chevron and Agip declined immediate comment. It is anticipated that the amnesty package could cost as much as N50 billion to implement including disarming, educating and rehabilitating about 20,000 militants and criminals. On the increased spate of attacks after the amnesty offer was made by the President, Ekaette said he was still expecting the amnesty to be a success. O i l p ro d u c t i o n d ro p s t o 1.46mb/d: Although available OPEC figures

1,258 1,745 478 3,721 2,432 2,238 1,560 1,790 765 7,958 2,243 2,215 28,402 25,970

1,258 0.0 1,796 50.3 481 3.0 3,747 25.8 2,414 -17.4 2,234 -4.2 1,561 0.8 1,746 -44.3 777 12.2 7,981 23.3 2,241 -2.2 2,207 -8.5 28,441 38.9 26,027 56.3

for June indicates that crude oil production averaged 1.746 mb/d in June, down from an average 1.790 mb/d in May, Sweet crude independent checks indicates that owing to the wanton attacks by militants current crude oil output may have dropped abysmally low, averaging 1.46 mb/d. OPEC crude oil production averaged 28.44 mb/d in June, a minor increase of 39 tb/d over the previous month, according to secondary sources. Not including Iraq, OPEC output averaged 26.03 mb/d for a gain of 56 tb/d. The increase came mainly from Angola, Iran and Saudi Arabia, while crude production from Nigeria declined. OPEC crude production in the second quarter averaged 28.33 mb/d.


Oil

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Concerns, knocks trail OGIC bill

Fisty-cuff

Yemie ADEOYE

T

HE proposed Oil and Gas Industry Committee (OGIC) reform bill submitted by the federal government to the National Assembly has come under intense criticism from different stakeholders.. The criticism flowed from stakeholders including multinational oil companies, host communities, oil and gas experts, lawyers and consultants, petroleum marketing companies as well as the oil services sub sector who gathered at the senate wing of the National Assembly Hearing Room 1 in Abuja recently. The public hearing on the bill which was called by the Senate joint committee on Petroleum Upstream, Downstream, and Gas provided the stakeholders a seeming final opportunity for those who felt concerned to seek amendments by submitting their own memoranda . Major multinational companies operating in the upstream sub-sector of the oil industry expressed serious concerns over what they termed a multiple taxation system which may hinder direct foreign investment, as well as further investments by operating oil companies in the country. Coming under the auspices of the Oil Producers Trade Section

OPTS) The oil operators submitted that they have as part of their plans the intention of investing about US$95 billion in the country over the next five years, a development which may be hampered by the bill if it is passed without tax considerations. Basil Omiyi, Chairman, Shell companies in Nigeria and also Chairman of the OPTS in his submission to the committee stated specifically that the industry plans to invest over $80 billion dollars in oil projects for the coming five years while investments in gas powered plants in the country would consume another $15 billion dollars within the same period. Meanwhile, workers in the oil sector, especially upstream are beginning to question the mode of the proposed Integrated Joint Ventures (IJV) which would come as a fallout of the synergy between the Nigerian National Petroleum Corporation (NNPC) and the multinationals. Some are of the opinion that the bill does not clearly address the issue of workers and how the staff structure of the new IJV would be determined. While others are of the opinion that there is no way merging of NNPC and the oil companies would not affect the staff base of the companies as the new IJV’s would have a 60-40 ratio as it is in the JV’s or a 50-50 arrangement which would see a merger of staff. This raises the question: what happens to the remaining staff who may not get a place in the new IJV, if such a position may have been taken by the worker from NNPC? This is the area that the workers

Meanwhile, workers in the oil sector, especially upstream are beginning to question the mode of the new Integrated Joint Ventures (IJV) which would come as a fallout of the synergy between the Nigerian National Petroleum Corporation (NNPC) and the multinationals. Some are of the opinion that the bill does not clearly address the issue of workers and how the staff structure of the new IJV would be set

are most concerned about and they have been raising issues in the media for government to address. They are mostly concerned about their fate post PIB. The host communities too are not left out as they stormed the National Assembly hearing Hall 1, venue of the public hearing on the controversial bill in their hundreds representing different

communities of the oil rich Nigerdelta region. Their main concern was revenue sharing formula as well as community development of their areas by the government and the oil operators. They also want to know how the new bill would translate to better life for their offsprings in terms of scholarship programs and employment opportunities for the citizens of the oil rich region. The Rivers state Government, which plays host to a number of oil activities was also ably represented by its Commissioner for Lands and environment, Mr. Ezekiel Amadi who opined that the bill as proposed requires extreme and delicate review of the submissions. He insisted that the Nigerian National petroleum Company Limited which is a fallout of the reform can not be allowed to operate as stipulated in bill. According to him the bill stipulates that all the oil and gas reserves in a company’s current portfolio shall form the basis for the number of shares to be held by each party in the incorporated entity. “In the case of NNPC Limited, it would be all the oil and gas reserves belonging to this Nation, and the implication of having all our oil and gas assets domiciled in a limited Liability Company implies that the Board of Directors of such a company would be free to deal with assets as it deems fit. Hence it could borrow from the local and international capital market as well as banks and other finance houses using our National assets as a collateral. It could purchase whatever it

wishes to, from anywhere in the world using our only national asset. It could also pledge our entire national asset for important and even unimportant programmes and projects. It could trade in our assets and even get involved in various risky and speculative transactions and ventures. since it could sue and be sued, then it follows that anytime the company is in court the whole nation would be on edge because the custodian of our national asset is in court.” The commissioner however went further to explain that in view of all he has talked about it is only natural that if the bill is passed as it is, the Chairman of NNPC’s board of Directors would be more powerful than the President of Nigeria. In view of this he stated that River state request includes that the right of individuals and institutions of the state to own shares in NNPC should be enshrined in the law on the basis of equity participation using possessor rights of the land dwellers or host communities of the petroleum producing region. “The bill should thus provide for a 25 percent revenue sharing formula for the producing states and communities on a carry and free holding basis in a ratio of 10 percent to the states and 15 percent to the producing communities.” he enthused.


Oil

7

NNPC Towers

A

BUJA -THE Chairman of ExxonMobil, Mr. Rex Tillerson, has given his support for the proposed Petroleum Industry Bill currently in the National Assembly, even as he pointed that there was need to have further discussions and negotiations on “a number of issues in the reform bill.” Tillerman, who gave his backing to the bill when members of the American multinational paid a visit to the Group Managing Director of the Nigeria National Petroleum Corporation, Dr. Mohammed Sanusi Barkindo, said necessary conditions must be put in place for Nigeria to attract the right kind of investments as well as create a vibrant oil and gas industry. He said, “We recognize that the

ExxonMobil backs oil industry reforms country has aspirations and the President's leadership wants to set a new course and we welcome the opportunity for dialogues and discussions on how to shape the PIB to

Oscarline ONWUEMENYI ensure that the vision is realised and if the conditions are put in place. “Then and only then will Nigeria

Nigeria loses $47 bn due to Shell's shut-in N

igeria has lost about 7 trillion naira (47 billion U.S dollars) as a result of the shut-in of the Shell Petroleum Development Company (SDPC) output since 2006 in the country, the Lagos based Compass newspaper reported Wednesday. Mutiu Sunmonu, Managing Director of the Royal-Dutch oil giant in Nigeria, disclosed this in Abuja on Tuesday at the Senate hearing on the proposed Petroleum Industry Bill (PIB). Sunmonu told the Senate that SPDC onshore oil joint venture in Nigeria is producing at less than 30 percent of capacity due to the unrest in the Niger Delta and funding problems. The country wants to drastically overhaul its oil sector with legislation to restructure the Nigerian National Petroleum Corporation (NNPC) into a profitdriven firm like those in Brazil, Malaysia and Saudi Arabia. He insisted that the business regime

being proposed would make "future capital investment in deepwater" projects uneconomic. Speaking at the forum, Basil Omiyi, chairman of the Oil Producers Trade Section which represents foreign oil firms, said the industry needed more time to present economic analysis and lay out its case. "The aggregate impact of multiple taxes, high royalties and loss of incentives under the Petroleum Industry Bill as currently proposed will have a significant negative impact," he said. In his own submission, Mark Ward, Managing Director of ExxonMobil in Nigeria, said the bill, in its current form, would mean all new planned (upstream) projects would be uneconomical, adding that Exxon plans to invest 60 billion dollars in Nigeria over several years. Also, Andrew Fawthrop of Chevron, who was also at the hearing, said deep-water oil fields, would fail

under the proposed new oil industry legislation. He said the proposed new terms in the bill would give the government a bigger share of a smaller pie, adding that Chevron is investing 3 billion dollars a year in existing and new projects in Nigeria. The proposed law aimed at sweeping reforms of Nigeria's oil sector is almost halfway through the legislative stages of approval but some of its provisions are sending jitters among giant oil operators. The petroleum industry bill, which had gone through its second reading and debate in the Senate, is intended to overhaul the regulatory and operational systems of the industry, Nigeria's lifeline. It plans to transform the existing joint ventures between the transnational oil firms and the NNPC, and turn NNPC into an autonomous and internationally-profitable entity.

continue to attract investment dollars and opportunities in Nigeria are financeable from commercial banks and lending institutions the world over.” He added, “We want to participate actively in the discussions and discussing with you what elements are crucial to success, what elements need reform and need to be revised so that obstacles are not put in the way of success.” Tillerson said his company has a great deal of experience elsewhere in the world and in similar joint ventures, adding that they have been very successful in achieving all that has been described in the presentation. According to him, however, there are multiple versions of the bill in the House and Senate, which may lead to confusion, adding that there were a number of issues in the bill which require further discussions and engagement. “We want to be engaged and those elements which are positive and workable and those elements which we think will make it difficult to attract investment dollars regardless on whether they are from ExxonMobil or some other investment or a bank,” he said. He said at the end of the day, the conditions must be created to allow the joint ventures to be finance-able and they will stand on their own, capitalized to attract investment.

The issue, he added, was “how can we ensure that the proper conditions are there so that the joint ventures can be successful.” In his response, the Group Managing Director of the Nigeria National Petroleum Corporation, Dr. Mohammed Sanusi Barkindo, said government and industry were working round the clock from a multi dimensional approach to ensure that these issues are addressed in a comprehensive manner in the interest of the country. He said, “Without restoring normalcy in the operating area, it will be very challenging to meet our targets in crude oil production, or product supply or production of gas for power. “This is a number one priority for government also for the industry, and NNPC has been working with our partners including ExxonMobil to minimize the impact of this unfortunate incident. Barkindo, however, denied that there were multiple versions to the bill, stressing that only one bill was sent by President Umaru Yar'Adua to the National Assembly. He said, “We do not have multiple versions of the bill. The bill submitted by Mr. President is the only bill before parliament. All stakeholders are invited to make input. Some inputs have been made by NNPC and other agencies that are directly involved in hydro carbons or finance side. “This issue has to be discussed in a bilateral manner. At the end of the day, every nation is trying to protect its national interest. We are working with all these parties to make sure that the bill is passed as quickly as possible.” Barkindo noted that the bill would in a significant way address the lack of transparency in the industry that has continued to affect the perception of the country as a whole over the years. He said, “Because it is seeking to bring to the open all transactions in the industry in the most transparent manner by abolishing all clauses all the existing legislations.


Commentary On The PETROLEUM INDUSTRY BILL 2009


Commentary on the Petroleum Industry Bill 2009 Commentary on the Nigeria Petroleum Industry Bill July 2009 The Nigeria Petroleum Industry Bill or called in short "PIB" is a remarkable document. It is a single bill that contains all the legal requirements that will apply to the entire petroleum industry in Nigeria. Usually matters such as petroleum administration, royalties, and taxes, bidding procedures, environmental obligations, employment, business opportunities and technical requirements are put in a variety of different laws and regulations. Only highly paid lawyers can find their way through such a legal jungle. Such a complex set of laws make it difficult to understand for investors what they can do and what they have to pay. Managers have problems to understand how to comply with local content and environmental regulations. Administration of the laws is more difficult than it needs to be. Finally, the lack of transparency makes it difficult for any citizen to know whether investors, managers and administrators comply with the law and work in the interest of the nation. The PIB combines 16 different Nigerian petroleum laws in a single transparent and coherent document. This is the first time that such a large scale consolidation has happened anywhere in the world. It is a complete and thorough clean up of the existing Nigerian petroleum laws. However, the PIB represents far more than a consolidation of existing laws. The PIB establishes a new framework for good governance of the petroleum industry, with increased petroleum revenues for Nigeria and new opportunities for Nigerians to participate at every level in the new developments and increased levels of activity in general.

Good Governance How does the PIB enhance good governance? The first and most important step is to remove confidentiality. Confidentiality encourages corruption. The best way to fight corruption is to open up all procedures, all documents, all contracts, all payments and all data related to the petroleum industry. Every Nigerian should have the right to know what is going on. The PIB removes confidentiality on a scale not seen in the world before. With the passage of the PIB, Nigeria will move from being one of the most opaque petroleum nations in Africa, to one of the most open and transparent in the world. The texts of all licenses, leases and contracts and any of the changes to such documents will no longer be confidential. Everyone will be able to read what the Nigerian government has agreed to with any company on publicly available websites. No more secret deals. Any payments made to the government of Nigeria by individual companies must be reported and made public. Every Nigerian has the right to know what petroleum companies are paying and to which government

accounts the amounts are being paid. Approved budgets of incorporated joint ventures and production snaring contracts will be public information as well as production and lifting data. All petroleum geological, geophysical, technical and well data will be accessible for all interested persons in a national data base. Investors who want to invest in Nigeria will have access to all data. Universities that want to study the petroleum geology of Nigeria will have access to every piece of information. All production statistics will be available.

The second step is to create transparency. The PIB will result in a significant increase in transparency. This transparency reflects best international practice. Everyone involved in the petroleum industry will have the same rights and obligations. From now on, petroleum prospecting licenses and petroleum mining leases can only be granted by the Minister through a truly competitive bid process. Such process will be open and accessible to all qualified companies. Under the PIB, there will be no possibility to award oil blocks to persons or companies that do not follow due process or do not have necessary capabilities or qualifications. In this way Nigerians will be assured that petroleum is only produced by companies that are qualified to do so and that offer the best terms and conditions to Nigeria. Every company involved in the upstream petroleum industry will be subject to the same system of rents, royalties and taxes. Terms will be different for onshore, offshore and inland areas and for small producers or large producers. However, every company in the same conditions will be treated equally. This means it will not be possible under the PIB to treat certain companies more favorably than others. Also, all companies will have fair access under equal conditions to pipelines and other regulated installations (open access rules will apply). All decisions of the Minister and the petroleum administration will be based on equal rules applicable to all. Discretionary decisions are reduced to the minimum and apply only where there is no other option.

Streamline and Strengthen the Petroleum Administration Nigerians can only fully benefit from their petroleum resources, if there is a sound petroleum administration. This administration needs to be streamlined and strengthened. Processes have to become simple and clear. Overlapping and conflicting administrative responsibilities have to be removed. This is being achieved in the PIB through the creation of three separate and clearly defined entities:


Commentary on the Petroleum Industry Bill 2009 The Nigerian Petroleum Inspectorate (Inspectorate) -responsible for all matters related to the "upstream", which includes oil and gas petroleum exploration and production The National Midstream Regulatory Agency (Agency) responsible for all matters related to the "midstream", which includes pipeline transportation, storage, refining and liquefied natural gas and gas processing facilities, and The Petroleum Products Regulatory Authority (Authority) responsible for all matters related to the "downstream", which includes petroleum product and natural gas distribution to final consumers. This means there will no longer be overlapping and conflicting responsibilities, as is the case today. The three entities will be coordinated by the National Petroleum Directorate (Directorate), under the control of the Minister. Other institutions provided for in the PIB are the Nigerian Petroleum Research Centre, the National Frontier Exploration Service, Petroleum Equalization Fund and the Petroleum Technology Development Fund. The activities of all these institutions will push the Nigerian oil & gas industry in the forefront of modern developments. There will be only one stop shop for the entire approval process of each project. All that is required for a new project is to get a single approval from the responsible regulatory entity. These requirements are that each project: Has to comply with all modern technical standards, Is a sound commercial proposition and in case of alternative options, represents the best option for Nigeria, Includes a Nigerian content plan that ensures maximization of Nigerian employment and business opportunities, a Meets all environmental standards, including an approved environmental impact assessment and management plan. Does not involve excessive costs (which could result in lower tax revenues to government or higher prices to consumers) and Has to meet all health and safety standards, In order to facilitate the collection of government revenues and monitoring of other information, such as Nigerian content, all upstream companies are required to establish an electronic information system, with security key access for all persons that are authorized by government to inspect and audit. This means that administrators no longer have to go through stacks of papers to identify possible evasion of taxes or royalties or non fulfillment of Nigerian content requirements. Auditing becomes a much simpler process based on the best available electronic data base management.

Government revenues from petroleum

(oil & gas) The PIB represents the largest overhaul of the government petroleum revenue system in the last four decades. S This overhaul has several key objectives among which are: S To simplify the collection of government revenues, S To cream off windfall profits in case of high oil prices S To collect more revenues from large profitable fields in the deep offshore waters, S To create a level playing field for existing and new players especially with respect to gas related opportunities S To remove incentives such as cost recovery of gas S investments from oil income and to improve government share of economic rent from gas investments and; S To create Nigerian employment and business opportunities, by encouraging investment by Nigerian and foreign investors in small oil and gas fields.

Simplification of government revenues and collecting windfall profits The simplest government revenues to collect are royalties. Royalties are a percentage of the production. For instance, if an oil royalty is 20%, the government has the right to take 20% of the oil production. This is easy to do and easy to supervise. It does not require audits of costs and profits. It does not require elaborate cost control and budget benchmarking and verification. Therefore the possibility for loss of government revenues through inadequate administration or corruption is much less. Royalties are a transparent source of government income. Everyone can calculate and verify on the back of an envelope how much royalties should be collected from each oil and gas field each month. Therefore, the main emphasis of the new government petroleum revenue system is on royalties. The royalty percentages are designed in such a way that they automatically adjust to the economic circumstances. This is done with two sliding scales. One scale relates to the daily production of the oil and/or gas field. Another scale relates to the oil and/or gas price. Also royalties vary in four different geographical areas: onshore, shallow offshore, deep offshore and inland basins. This means that a small onshore oil field producing only 5,000 barrels per day for an oil price of US $ 70 per barrel will pay a royalty of only 5%. On the other hand a large deep offshore oil field could pay royalty of up to 50% under certain production and price conditions. This means that Nigeria will always receive its fair share of royalties.


Commentary on the Petroleum Industry Bill 2009 If oil or gas prices go up unexpectedly as happened in 2008, Nigeria will reap an instant benefit from such high oil prices, because royalties are levied every month. A significant part of the price windfall will go to Nigeria. Another important simplification is the tax reform. Today, there are two different important taxes in the petroleum industry: S Petroleum Prof its Tax for the upstream, and S Corporate Income Tax for the midstream and downstream. The separate administration of the two taxes creates ample opportunities for "double dipping". This means the deduction of the same costs for Petroleum Profits Tax and Corporate Income Tax. This is not favorable for Nigeria and it does not create a level playing field between producers and investors in midstream operations such as gas processing. Therefore, the new tax framework is simple: every company is required to pay corporate income tax. No exceptions. No more double dipping. The Petroleum Profits Tax is therefore split in two: the Nigerian Hydrocarbon Tax and the Corporate Income Tax . The Nigerian Hydrocarbon Tax is not deductible for the Corporate Income Tax purposes, and is therefore a true resource tax. This in turn, permits the Nigerian Hydrocarbon Tax to be simplified. Many costs that are difficult to audit, such as headquarter costs or interest on loans are no longer deductible from this Nigerian Hydrocarbon Tax. Overly generous incentives that stimulate wasteful expenditures have been removed. This makes this tax much easier to collect and audit.

Higher revenues from deep offshore oil production Until 1993 Nigeria relied primarily on joint ventures as its main way of dealing with the oil companies. However, there were problems in funding the Nigerian government share of these joint venture arrangements (JV Cash Calls). Therefore, Nigeria decided to opt for production sharing contracts for the deep water blocks in 1993. Under production sharing contracts, the foreign investor contributes all the funds and shares the oil production with NNPC. So there are no funding problems under production sharing agreements. Unfortunately, the production sharing contracts that were concluded in 1993 were rather bad deals for Nigeria from an international perspective. The royalties were 0% for water depth beyond 1000 metres. The incentives included a generous tax credit that wiped out much of the tax to be collected. The shares of profit oil to the Nigerian government were low compared to most other nations. In total, Nigeria collects much less for government under these contracts than other petroleum exporting nations. By the year 2000 the contracts were improved somewhat, but remained unattractive to government relative to other areas in the world.

The problem is that production from deep water production sharing contracts is now a large share of the total production and this share is expected to increase. This means relative to other nations, the revenues for Nigeria on a per barrel basis will become less and less. This is an unacceptable situation for Nigeria. Therefore, the PIB includes the much higher royalties, already discussed above, for deep water operations. Also the deep water operations will now be subject to the new tax framework. All deep water operations have to pay Corporate Income Tax and in addition the Nigerian Hydrocarbon Tax. The tax credits and allowances are removed. The PIB also contains minimum provisions for production sharing contracts. In this way Nigeria will be assured that new production sharing contracts will be favorable for the country. At the same time, the PIB creates a strong framework for renegotiations of the existing unfavorable contracts. This will ensure a fair share to Nigeria. The share is now comparable to other important oil exporting nations.

Encouragement of small field development The best way to encourage a significant increase in Nigerian petroleum industry employment and business opportunities is to strongly promote the development of small oil and gas fields. This is also the best way to encourage Nigerian owned companies to become investors in the petroleum industry. It used to be that seven major multinational oil companies (the seven sisters) ruled the petroleum industry. This is no longer the case. Small and medium sized companies from many nations from all continents now participate in the international petroleum industry. Nigerian owned private companies should be given the best opportunity to join them. This can be done by creating attractive investment opportunities in small Nigerian oil fields. The current fiscal system has essentially the same Petroleum Profits Tax on large and on small fields. A high tax rate is applied to all fields. This creates a situation where the development of small onshore or shallow water oil and gas fields is less attractive for investors in Nigeria than almost anywhere in the world. This is a major obstacle to the development of profitable Nigerian owned petroleum companies. The PIB offers generous tax allowances under the Nigerian Hydrocarbon Tax for small fields. This means low royalties and low taxes for such fields. This will give Nigerian owned private oil companies the same opportunities that were given to small companies from the US, Canada, the UK, Norway, Pakistan, Australia or Argentina. These nations allowed their private national oil companies to grow and prosper by offering profitable oil and gas opportunities in their home countries. The favorable conditions for small field development will also encourage a variety of small and medium sized


Commentary on the Petroleum Industry Bill 2009 international companies to invest in Nigeria and thereby create a new wave of Nigerian petroleum industry employment and business opportunities. However, favorable fiscal conditions are not enough. Nigerian and new foreign investors must also have access to new contract areas. This is not the case today.

Increase activity through modern acreage management One of the main bottlenecks to increased activity in Nigeria is lack of access to new contract areas. The petroleum prospective part of Nigeria is covered with existing contracts. These contracts were granted without implementing a modern acreage management. As a result there is not much "open acreage" for new contracts for new investor to bid on. The normal international practice is that once a petroleum prospecting license has been granted, the company has a limited time period to carry out the prospecting and exploration activities in such area; for instance 10 years. At the end of this period only the specific areas that cover oil and gas fields can be converted into petroleum mining leases. The rest of the original license area has to be returned to government. This means that typically, the government gets 50% to 90% of the acreage of the petroleum prospecting license back. This acreage can then be offered as new contract areas for new investors. In many countries it is the practice to return part of the acreage (Oil blocks), for instance 50%, after the initial phase in the petroleum prospecting license. This means after only three to five years, new blocks can be made available for subsequent bid rounds. . This creates constant acreage turn over with new opportunities. The relinquishment provisions also encourage the oil companies to explore the areas actively; otherwise they may end up giving acreage back that could contain an important oil or gas field. The PIB implements this modern practice for new prospecting licenses. However, the problem is that these general international practices have not been implemented in Nigeria up to today. As a result, in Nigeria petroleum companies are "sitting on" acreage on existing joint ventures and production sharing contracts and there is no access to acreage for new investors. This stifles the petroleum investment activity. The PIB provides for the fact that petroleum companies will have to give acreage back from existing petroleum prospecting licenses and petroleum mining leases. Existing companies can keep all areas that are in production or will be developed in the near future. However, the acreage that companies will not be using in the near future will have to be returned to Nigeria. This may free up as much as 30% of the prospective petroleum area of Nigeria for new investors. Petroleum companies will also have to give up areas

that are currently being operated by marginal field operators. The Directorate will issue these areas directly back to these marginal field operators. This will allow these Nigerian companies to get their own acreage and become masters over their own fields. At the same time this means that these marginal field operators will be able to benefit from the favorable royalty and tax provisions for small fields. This should be a strong incentive for these to grow into efficient Nigerian owned petroleum companies.

A new role for NNPC The PIB will change the role of NNPC. Today, NNPC is a company with the character of a government department. All its revenues flow to the government of Nigeria and some of its activities are funded by the government. This is not an efficient way to run an oil company. S A well run Oil Company has to have a profitable corporate form of organization and be selffinancing. Successful National Oil Companies have the following key attributes: S They operate across the different segments of the industry with well defined growth paths. S They are commercially focused and profit driven S They have financial authority and accountability structures S They are technology focused S They have strong operational performance S They have independent governance structures through a professional Board The PIB transforms NNPC into such an oil company, called the Nigerian National Petroleum Company Limited or in short, the National Oil Company. NNPC is currently 100% owned by the government of Nigeria. The new National Oil Company will still be owned 100% by the government of Nigeria. However, the National Oil Company has now been given the tools to transform itself into a viable company. Rather than the government contributing its budget, the company now has to self-finance its projects from the profits it creates The National Oil Company will pay to government the same royalties and taxes, as any other oil company. In addition, the National Oil Company will pay dividends. This means the National Oil Company is now structured to become a source of wealth to Nigerians, not a cost centre in which government contributions could disappear. Cash can only flow from the National Oil Company to the government, not the other way round. The National Oil Company will be challenged to restructure itself to meet this new solely commercial role.

Incorporated Joint Ventures (IJVs) There is an enormous shortage of funds to contribute effectively to the new oil and gas field developments in shallow and deep water. This is now bottlenecking the


Commentary on the Petroleum Industry Bill 2009 development of these fields and harming a fast development. In order to assist the National Oil Company in the financing of new projects, the PIB creates a new joint venture structure, called incorporated joint ventures. The National Oil Company and the foreign companies will now join into a single company of which they will be shareholders. The number of shares will reflect the current interest in the joint ventures. In other words if NNPC currently holds 60% of a joint venture, it will hold 60% of the shares in the incorporated joint ventures. The new incorporated joint ventures will pay for new projects from their cash flow and through borrowing. This will therefore solve the current financial bottleneck of Cash Call funding and promote a faster development and expansion of oil and gas fields.

Nigerian content The PIB national content provisions are among the best and most comprehensive in the world. No project can be approved without a comprehensive Nigerian Content Plan. The Nigerian Content Plan includes obligations on the part of the investor with respect to: S The purchase of local goods and services S Procurement guidelines in order to assist local companies S Employment of Nigerian citizens S Training and Education, S Research and Development, and S Regular reporting and verification of the Nigerian Content Plan. The purchase of local goods and services will receive significant support under the PIB, because the PIB will make only 80% of foreign costs deductible for Nigerian Hydrocarbon Tax purposes. The more petroleum companies buy locally, the less Hydrocarbon Tax they will pay, since local purchases can be deducted 100%. This will be a very strong incentive to buy locally. Other important provisions in the PIB relate to procurement. Procurement of goods and services has to be sized in a manner that it matches local capabilities in terms of timing, financing and manpower. All tenders have to be announced in local newspapers. This will permit local businesses to participate. There will be minimum employment requirements for Nigerian citizens. Local construction will require 95% Nigerian citizens. During the operation of any project there will be a minimum requirement of 80% employment for Nigerian citizens and a minimum of 75% of all management and supervisory functions. Proponents of any project shall commit to extensive training programs for its own personnel, and also for the new administrative institutions and the tax authorities. The training shall include support for Colleges and Universities in Nigeria and scholarships for Nigerian

citizens. Commitments need to also be made to local research and development. What is very important is that the Nigerian Content Plan is not just a plan. It must be implemented in all its aspects. Therefore, ongoing reporting and monitoring procedures are included in the PIB.

Host Community & Social Responsibility/ Environment As part of the requirement for corporate social responsibility, the PIB provides for effective engagement and participation of host communities in the economic spin-offs from oil and gas activities in their vicinity. For instance, any petroleum prospecting license and mining lease contains social responsibility provisions. Such provisions, includes but not limited to repairs and maintenance of local roads; contribution to or payments for community water and power; contribution to or payment for local schools, hospitals and community centers as well as employment of local Nigerian citizens. Others include assistance with the creation, development, and support to small scale local enterprises, as well as training and education programs with the sole idea of increasing local job opportunities in the petroleum operations. With respect to the environment, the PIB provides for strict compliance with all environmental, health & safety laws, regulations, guidelines or directives as may be issued by the Ministry of Environment, the Minister of Petroleum or the regulatory institutions. The PIB has also made extensive provisions for remediation, environmental quality management, stiffer gas flaring penalties and strict abandonment, decommissioning and disposal provisions.

Support for the Gas Master Plan One of the very important resources for Nigeria's future is natural gas. The size of the gas resources is enormous. Yet, local consumption is minimal compared to the potential. Large volumes of gas are still being flared. Many new power plants have no access to natural gas. Few local gas based industries have been created. The economy of Nigeria is under-performing as a result of lack of access to natural gas and electricity. This situation is disastrous for Nigeria and totally unacceptable. This situation must be changed. The PIB, therefore, incorporates in a forceful manner the earlier measures that the government already took with respect to the domestic gas supply obligation in order to underpin the Gas Master Plan. The PIB provides for a strong regulatory framework through the new powers of the "midstream" Agency to systematically introduce gas on a large scale in the Nigerian economy. The gas pipelines connect the upstream gas producers with the downstream gas consumers. Therefore, a


Commentary on the Petroleum Industry Bill 2009 strong midstream legal framework is essential to construct this infrastructure. In order to provide maximum support for new gas production aimed at the domestic markets, royalties are low and the Nigerian Hydrocarbon Tax provides for a special gas allowance to incentivize new production. No Hydrocarbon Tax will be applicable in this way to gas production as long as producers supply the domestic market at low prices. The creation of new gas processing plants and gas pipelines is supported through favorable tax holidays under the Corporate Income Tax. All these provisions form a coherent and attractive framework for new and additional investment to create the midstream infrastructure required.

Conclusion The proposed PIB is a remarkable bill that provides a strong basis for a renewal of the Nigerian petroleum industry based on international best practices. It includes a fair system of royalties and taxes on the basis of an open, transparent and efficient administration. The PIB provides the framework for increased development of Nigerian owned petroleum companies. New Nigerian employment and business opportunities in the petroleum industry will be created as a result of a new wave of development of small oil and gas fields. It provides the underpinning for connecting Nigerian consumers and power plants to the extensive cheap gas resources. In general, the PIB will provide for increased growth in the petroleum industry, with more benefits for Nigerians.

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Questions Questions & Answers Answers

In order to promote understanding of the Petroleum Industry Bill now before the National Assembly, this synopsis of Frequently Asked Questions(FAQ) on the reforms and their answers are provided to guide the general understanding of the Bill, its overall objectives and the benefits that would be derivable for the industry, investors and Nigeria in general. Question: What is the PIB? Answer: PIB stands for the Petroleum Industry Bill. It came into being following the attempt by the present administration to undertake a reform process of the oil and gas industry in order to improve on the general efficiency of the sector. Question: Is the PIB as a new legislation necessary? Answer: Yes it is. The reform process of the oil and gas industry would require a holistic approach. This in effect means that the existing laws governing the administration of the industry in the country would have to be repealed or reviewed. The present Petroleum Legislation and especially the fiscal regimes are no longer in tune with the current realities of Nigeria and

international best practices in the oil and gas industry. Question: What are the major changes to the existing Petroleum Laws? Answer: The changes to the existing laws are specific as well as diverse in many instances. For example, the laws seek to create a much more transparent administrative system where all interested parties could assess information and indicate interests on a given venture / projects in the oil and gas industry. It attempts to amend aspects of the Petroleum Profit Tax Administration (PPTA), which treats information relating to the chargeable profits of companies as confidential and secret. The new laws also clearly state procedures for bidding processes and retention of licenses and leases which were hitherto, not the case in the old laws. It also simplifies collection of petroleum revenues by emphasizing on rents and royalties and less on taxes. promoted to enhance the operation and management of the downstream assets under a deregulated regime. Question: Does the PIB address gas flaring and ensure local utilization of our gas resources? Answer: The provision of the new Bill provides adequate incentives to promote domestic gas utilization in Nigeria. This is consistent with the National Gas Master Plan. Article 282,335,404-410 of the Gas Master Plan highlighted the significance of encouraging the use of gas in domestic markets as well as ending gas flaring. Question: There are too many institutions under the new law. How will the proposed bodies avoid duplicating roles and functions? Answer: As specialized bodies and institutions with distinct roles and responsibilities, duplications of functions are highly unlikely. The separation of the oil and gas value chain into Upstream, Midstream and Downstream, with clear demarcation of boundaries among the segments ensures that the institutions function properly without any recourse to over lapping responsibilities. The number of institutions being created is linked to the oil and gas value chain. Indeed, most of the institutions are already in existence, namely the Inspectorate, the Authority, Question: How will the new law encourage Nigerian entrepreneurs to fully participate in the oil and gas sector? Answer: The PIB will encourage the development of small fields with significant low tax incentives having a bottom level of 5% royalty scale, based on daily oil production. This provision is a deliberate effort to encourage Nigerian entrepreneurs to partake in the oil and gas sector business. In addition, the local content provision has been incorporated into the new law which would require all projects and procurements to have Nigerian content elements in them. By this, all purchase


Commentary on the Petroleum Industry Bill 2009 of local goods and services in the oil industry will receive a significant boost, given that the new PIB make only 80 percent of foreign costs deductible for Nigerian Hydrocarbon Tax purposes. The deregulation of the downstream sector coming alongside the reform is also expected to stimulate economic activities in the country as new areas of local entrepreneurship skills will be the Fund, the Frontier Service and the Centre. In technical terms, therefore, only two new institutions are being created. The "Agency" and "Directorate" all of which have clearly defined roles. Question: How would the institutions to be funded? Answer: In order to ensure prudent management of resources and accountability, the institutions' running cost will be tied specifically to the sectors that they regulate and will not unduly put burden on Government finances. For example, the "Authority ", would derive their funding from fees and levies on Petroleum Products and Gas sales. Question: The PIB seeks to decentralize the functions of the NNPC; would this not affect the ability of Government to control the industry? Answer: No. The policy and regulatory roles of the NNPC is to be excised and transferred into three regulatory entities for effectiveness and efficiency. Therefore, government will still have strong oversight and control of the oil and gas industry. Question: Would NNPC be privatized with the reform? Answer: NNPC would not be privatized. It will be fully commercialized. The reform will rather see the present NNPC transit from being a statutory Corporation into a Limited Liability Company under the Companies and Allied Matter Act. It will function as a purely commercial business entity but wholly owned by Government. It would have freedom to enter into commercial ventures within and outside of Nigeria and pay taxes on its profit to the Government. Question: Would the DPR be given autonomy to operate if it is under the Ministry of Petroleum? Answer: The PIB, provides for the current Directorate of Petroleum Resources to be transformed into the National Petroleum Inspectorate (NPI), which is an autonomous regulatory body empowered with financial and operational independence to regulate the activities in the upstream petroleum sector. Question: Are there provisions made to collate Gas from the Major Oil Companies presently under their possession for use in the Nigerian local Market? Answer: The new laws request each oil and gas producing company in Nigeria to supply a certain proportion of gas for use in the domestic market under the domestic gas supply obligation to be issued by the

Minister of Petroleum Resources. Question: Is the former downstream gas bill integrated into the Petroleum Industry Bill? Answer: Yes. All the provisions in the previous downstream gas bill have been incorporated in the PIB. The Gas sector will be regulated by the three regulators: Agency, Inspectorate, and Authority. Question: How does the PIB address possible environmental degradation as a result of oil and gas exploration activities in the host communities? Answer: Under the Corporate Social Responsibility section of the Bill, an elaborate presentation on the roles and responsibilities of companies and what constitutes their corporate social responsibilities to their host communities recommends stiff penalties for any act of environmental pollution by companies. In addition it also spelt out provision for effective engagement and participation of host communities in the economic spinoffs arising from oil and gas activities in their vicinity. Companies are required to present a well articulated sustainable community development plan consistent with the PIB guidelines for effective sustainable engagement program. Question: How will employment opportunities be created for Nigerian youths as a result of the new petroleum bill? Answer: The reform process of the oil and gas industry is more or less about creating opportunities for Nigerians. The various institutions to be created would seek to engage Nigerians of all works of lives to be involve throughout the entire value chain of the oil and gas industry. Moreover, the bill compelled Oil and Gas Companies to employ host community members in their employments and contract awards, especially on community related development projects. Question: How will the PIB directly impact on the host communities of the oil and gas industries in Nigeria? Answer: The bill mandates oil and gas companies operating in Nigeria to be guided strictly by the PIB Local Infrastructural Development and Maintenance Guidelines. It also stipulates for a Mandatory Consultation with host communities in the development of infrastructure and all related development initiative under SCR to be undertaken by a company operating in an area. The bill mandates that all Oil and Gas companies must ensure support for educational and skill acquisition training programs for indigenes of the host communities. The sole aim is essential to create a highly skilled manpower as well as provide the unskilled persons with skills that would provide employment for them, especially, in the operational segments of the oil and gas industry.


F

Focus Now if there is any specific area where there is clear ambiguity, where the meaning is unclear, then we will address those, but nothing specific has been pointed out

IL INDUSTRY REFORMS:

'The devil is in the detail' - Ajumogobia

M

R. Odein Ajumogobia (SAN), Nigeria's articulate, soft spoken, Harvard trained Minister of State for Petroleum Resources needs little introduction. Recently, the ministry of petroleum resources organised a stakeholders' consultative forum on the Petroleum Industry Bill before the national assemble. Afterwards, he spoke with Hector Igbikiowubo, Editor of Sweet Crude on the Petroleum Industry Bill before the national assembly, touching on concerns by the international oil companies regarding the sanctity of existing contracts and federal government's amnesty for militants in the troubled Niger Delta.

Excerpts: Sir yesterday, the ministry of petroleum resources organised a consultative forum where stakeholders exchanged positions on the petroleum industry bill. Interestingly, even though some stakeholders had earlier stated they weren't being carried along, it would appear the forum marks a turning point especially, with all stakeholders suddenly expressing

support for the bill. What do you think accounts for this sudden turn around? I think there was a bit of hysteria over the bill initially and that is largely because people are generally resistant to change, especially fundamental change. The new petroleum industry bill is really transformational changetransforming the industry. For example let me talk about something quite fundamental; we've always talked about the upstream and the downstream. The midstream has been ignored in terms of transportation, transmission of fuel and gas. Now we have a new agency that is going to be created to deal with that. But more importantly, the thing the minister talked about in his keynote address that was so fundamental is acreage management where huge acreage have been given to companies but they have not exploited it for about 40 years. So other people who are ready and able to participate in the industry, both local and foreign, we don't have any acreage to give them. Yet, there are companies sitting on huge acreage. These are fundamental issues and touching on some of those issues is what has created the hysteria. But I think what we saw yesterday was an alignment with the reality that the legal and regulatory framework which governs the industry needs to be reformed for the industry to grow. Naturally there are going to be concerns from the sectoral perspective, you heard the NARTO (National Association of Road Transport Owners) representative talking about with holding tax, that is his' grief. The IOCs didn't express any specific concerns but they may have some concerns about what are the implications, what does it mean in terms of the time line that has been given to them to relinquish unused acreage. But like the saying goes, 'the devil is in the detail'. But the law by its nature doesn't always deal with all the details. Some of these details are commercial issues which would be

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discussed and agreed upon even after the bill has been passed. While speaking on behalf of the I O C s , M r. F a w t h r o p , t h e Managing Director of Chevron Nigeria Limited had pointed out that there are issues that were not clear that there is the need to clarify these issues before the bill is codified. Have these IOCs raised any aspect of the ongoing reform that is of concern to them? Not specifically, the whole concept of interpretation of statute is a whole subject in legal training. Every time you write something down, it is susceptible to interpretation, depending on your perspective. A good law, and I think the PIB (Petroleum Industry Bill), is clear when you put it in the context of the subject and part of the interpretation is interpreting the words in their context. I think it is going to be difficult for anyone to say you must draft a law that is not capable of interpretation, it goes with legislation interpreted in the context of the subject and that is why laws will always have a purpose for which the law was made. Now if there is any specific area where there is clear ambiguity, where the meaning is unclear, then we will address those, but nothing specific has been pointed out. We hope that before the public hearing before the national assembly, they would draw up a memorandum. That is what we expect for example, 'section 253 of the bill is not clear because is clear when you refer to minister of petroleum resources or whoever', something like that. If there was that sort of ambiguity, then of course we shall look at it. I spoke with Ali Moshiri, Vice President of Chevron Corporation in Houston, TX, USA on the sidelines of the last Offshore Technology Conference (OTC) and he raised issues concerning the 1993 PSC (Production Sharing Contract) and he was a little concerned about government plans to renegotiate it under the guise of the ongoing reforms. Even Ann Pickard, the Vice President of Shell E&P, Africa had raised concerns about the sanctity of existing contracts. Can you please respond to these concerns? The 1993 PSCs had been an issue for a while and we were in the process of actually renegotiating them anyway and that by itself shouldn't be an issue. I think the real issue is with the broad concerns about the change in fiscal regime. I think that is what they are talking about. For example, under the 1993 PSC, it is zero royalty and the cost recovery mechanism makes it unattractive revenue wise for the government. For a long time, because the ratio of JVs o PSCs was in favour of the JVs, government revenue was not so relatively affected. But today, more of our production is offshore and there is concern about our take. And when compared to global best practices, in terms of what other oil producing countries get, it is only practical that CONTINUES ON PAGE 18


Focus

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value, as we have offered them a lot of opportunities to continue to operate and we believe that we will continue to work together in our mutual interest. What we will not do is let our partners draft the law that is going to govern them, for us. I think there is obviously a tension between government take and reasonable rate of return on investment. I think that is the issue. So when you hear the hysteria about the fiscal terms that is what it boils down to. But when all is set and done what do we take home, having invested this much? And there is a point where investments no longer make sense. We believe that the fiscal terms that are in the PIB are reasonable and fair having regard to what happens in other parts of the world, they say not. I think that is the only issue that I can see and I think some further dialogue is appropriate considering that they are our partners, we have great regard for them and they have added a lot of value to Nigeria and continue to do so and we thought it only right to listen to them. That was what this consultative forum was all about. It is not even the first; there was a previous meeting, not with the ministry but with the OGIC (Oil and Gas Industry Committee) during which they expressed some of their concerns. But at the end of the day, the decision rest with the national assembly ultimately.

IL INDUSTRY REFORMS:

'The devil is in the detail’ -Ajumogobia

A concern about an earlier provision was expressed yesterday and it had to do with the unbundling of the NNPC. Now we hear talk of rather consolidating the corporation. Would you like to address that? I think there is no conflict in that. The reform in NNPC started with the

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we should sit down with our partners and review the situation, that's essentially what this is about. Is there provision in the 1993 PSC agreement for such review? Of course every agreement has provision for such review and especially when the issues involved are of such a fundamental nature. I don't think there has ever been any question about the review. What you would hear them say is that they need to know what the new fiscal terms would be. Because it is difficult to plan unless you know what the fiscal terms are. And I think yesterday we touched base on a few of these. In fact that was the first formal interactive process by which specific issues can be raised. It is interesting to note sir that since the ongoing reform exercise gathered momentum, practically all ongoing projects in the industry has stalled. How much longer do you think the industry can take this wait and see approach especially in view of our current economic realities? I alluded to that in my brief remark yesterday. I talked about transition and this is a process that takes you from one regime to another. There are existing contracts, there are contracts in the making and there are proposed contracts. Basically people are concerned about how the new regime is going to affect them how is it going to affect what I have already, how is it going to affect what is in

Oil rig transition, that is, the new thing that I am proposing. There is a tendency for people to 'wait and see', I think that is natural. But it is not going to be for much longer. We are hoping that the bill would be passed very shortly and once that is done, it would be clear to

every one. That is the point that Dr. Lukman made which I think is very important. This is a law of Nigeria, for Nigeria and our partners who have been with us for the last 50 years in the case of Shell, have shown mutual respect and given us a lot of

I think that is the only issue that I can see and I think some further dialogue is appropriate considering that they are our partners, we have great regard for them and they have added a lot of value to Nigeria and continue to do so and we thought it only right to listen to them

breaking up of the corporation into eleven business units and as part of the strategy to make NNPC more commercial. What we are talking about today is NNPC Limited, an integrated oil and gas company that embraces all this business units, to give them a certain level of autonomy to run the business. I think that they are not mutually exclusive. The idea is not to break up the company, it is to consolidate the business units but give them autonomy to be able to operate efficiently. A particular case in point is that of the refineries which until now have had to come to the NNPC board for approvals of all sorts. They can't compete with the private refineries and that is where the managing directors should be able to take decisions regarding whatever the needs are. I think that is the whole idea, such that the business units are adequately funded and given the empowerment to run and make a return to the holding company which should be able to make the dividend returns to the federal government. It is a completely different structure from what we have now where the NNPC takes money from the federal government budget and next year it goes back again for allocation. This time around, once it's been capitalized and that is after the passage of the bill, it will sink or swim as other firms do based on its own action. I notice that clear roles for governors haven't been defined in the implementation of the amnesty package by the federal government. What is your take on this? I think that the amnesty package is a good thing, especially when you look at it within the context of the origins of this conflict. Amnesty is basically a pardon for people who might otherwise have been prosecuted. And what the President is saying is that nobody who has been involved in this would be prosecuted, would be taken as if they've committed any crime. I know that there has been a lot of rhetoric in the newspapers about this 'you can't give amnesty to a person who have not been convicted'. The language in the constitution is broader than conviction. I think the language of the constitution is that if you have been confirmed as having committed an offence, then you might be granted an amnesty. I think the principle of it is to say let by-gone be by-gone. These are young Nigerian who have found themselves in a conflict situation, have done things which may have against the law, and the state is not going to look into those things. The state is going to give a blanket reprieve to those people as a platform for us to sit down and resolve issues in a peaceful and productive way. I think it is a good thing. By its nature, it involves all stakeholders and the governors are critical stakeholders in that process. The local government chairmen, traditional rulers all have a role to play and these roles would be clearly defined as time goes on.


Labour 'Oil & gas industry, 50% of Nigeria's P problems' -Esele

RESIDENT of the Trade Union Congress (TUC) and member of the presidential committee on deregulation of Nigeria's downstream petroleum sector, Comrade Peter Esele speaks on the problems bedevilling the sector, the essence of govt's reform measures and whether labour can ever present a united position. He spoke with Oscarline Chimaobi of Sweet Crude. Excerpts: You are a member of the P re s i d e n t i a l C o m m i t t e e o n Deregulation of the downstream sector. What has been the major challenge of pushing such a policy in our environment? The first thing the committee decided to look at is the wanton inefficiency in the system; in the structures, be it legal or regulatory. For instance, we found out that between N8 and N11 on the price of each litre of fuel was as a result of inefficiency in the pricing system. The task was now how to go ahead and block such a system that breeds corrupt practices in the industry. Another thing, I was also a member of another committee that had to look at pricing of petroleum products where we found out that petroleum marketers got N9.7 billion while NNPC got N29.1 billion for socalled pipeline maintenance; we are yet to see such maintenance anywhere. When you put such cases in context, you will find that there is a lot of wastage in the industry, and such must be tackled if the nation must have an efficient, viable and just oil and gas economy. I don’t like the idea of tying deregulation only to the increase in the pump price of petroleum products; what about the pipelines that are deregulated? The idea is to have open access, which means that a separate entity would be responsible for the pipeline and anybody can use the facility at a certain charge. I think deregulation is composite; it cannot stand alone. Therefore, if the government must deregulate, it must look at certain infrastructure including transportation, security, and the workability of the refineries.. There is also the issue of allowing the NNPC to go ahead and play it is role besides a technical partner that is bringing the expertise. That is why it’s very important that the Petroleum Industry Bill currently in the National Assembly is quickly passed because that would certainly help in moving the industry forward. A lot of Nigerians do not understand the whole issue of deregulation. Many view it only as government’s withdrawal of subsidy, which has led to some of the most sentimental arguments on the subject. How does the committee hope to correct this situation? I think that is because the institutions behind the policy are weak. And I must add that it is very unfortunate, because from 1999 to this period,

Comrade Peter ESELE during which we’ve had a PDP government, if they had an agenda, one would have expected that the government would provide an alternative choice to the policy. For instance, if government over the years had created an efficient rail network in major cities like Lagos, Kano, Abuja, Port Harcourt and Enugu , and people feel that they could leave their cars behind and use the trains that are even cheaper, we won’t be bothered about the supposed increase in the price of fuel. It doesn’t take much for a forwardlooking government to get some of these things on the ground. Particularly, for a city like Lagos which consumes more than half of the total petroleum products imported into this country, providing healthy alternatives for using cars would greatly ease the pain of the

proposed deregulation, as it would take care of more than 30 percent of transportation problems in the city. Beyond that, it would also raise the level of governance. I sincerely believe that if our leaders had provided such alternatives in the past ten years, nobody would be quarrelling with deregulation today. So if government had been proactive we would not be in the logjam that we are in today. I know that this is coming because of the communiqué that was issued last week by oil workers, which has led everyone to think that oil workers are beginning to tilt towards deregulation. That has created a little bit of anxiety. But the first thing people must consider is that these oil workers are losing their jobs, which has raised serious concerns for the leaders of NUPENG and

And I must add that it is very unfortunate, because from 1999 to this period, during which we’ve had a PDP government, if they had an agenda, one would have expected that the government would provide an alternative choice to the policy

PENGASSAN. For more than seven years, there have been serious effort at creating jobs in the downstream industry; the only investment in the sector is by marketers who build tanks and jetties to import petroleum products thereby creating jobs for European and American economies. Because our government and marketers are busy exporting jobs to Western industries, they add value to these countries while our refineries suffer.. Because of our size and population, I think we should have twenty or more refineries in the country, also because of our role in the West African sub-region. Nothing stops Nigeria from dominating the West African market. Another concern for the oil workers is that very soon, in less than three years, Ghana will start production. When they start production, their downstream would actually kick-off and, naturally, Nigeria would be their target. What now happens is that there is a tendency for Ghana to be the hub of oil and gas in the subregion, and Nigeria would also be importing from them. That would be disastrous and shameful. But the likelihood is staring us in the face: oil majors are leaving Nigeria for Ghana because it has the infrastructure, the policy framework and an enabling law, backed by a conducive environment and security of investments, so it only a matter of

18

time. The only thing we presently have in Nigeria is our population, and they would take advantage of that. The oil workers are simply looking at the bigger picture; they are asking what would happen to their jobs in the nearest future? It is truly disturbing. I think it is only wise as a nation that we begin to look beyond the petty issues and start asking questions like: Where would Nigeria be in the next 10, 15 years, in the scheme of things? I am an optimist, and believe that it is our destiny to lead Africa, and if because of poor leadership we are in the mess that we are. Given the scenario you painted above, do you think that Nigeria should move faster with the policy of deregulation? The issue is not whether we should move faster or not; the key worry should be having a potent legal instrument and a policy framework, which are lacking at the moment. There is also the issue of capacity. When these are lacking, no matter how good your policy and planning are, they will fail. Now look at this scenario: a marketer imports petroleum products in January and doesn’t get paid until September, and such a marketer is not worried even though he borrowed money from the bank. That tells you that something is fishy in that deal. In spite of the exorbitant rate of interest in Nigerian banks, this person still keeps importing and is not bothered, that tells you that he is making a killing from the system. And I dare say, this is going on even at the topmost government offices, since we know that these marketers are among the top contributors to the PDP’s coffers. Otherwise, what business can a person be doing in an economy like ours that is in dire straits, that he can donate N500 million to a party? If you look at the industry, we are in a Catch-22 situation: things are just getting worse; the three refineries we can muster have virtually collapsed, even though millions of dollars have been wasted on turn-around maintenance. Also, you find government saying that they have spent over $680 billion as subsidy for the sector; the last time, over a $100 billion could not be accounted for with regards to who got what, where and when, and for what transaction. There is a whole gamut of problems in the industry simply because the downstream is not up to spec. All over the world, it is taken for granted that if the downstream is the catalyst for development. Most of the activities in the country’s upstream revolve around importation which only puts money in the pockets of the exporting countries. We are not enjoying the added value, through exporting crude and importing petroleum and chemicals used in industries. It makes it look like our leaders are not thinking, and it is truly disturbing.


Labour

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Dr. Mohammed Barkindo (left) and Igwe Alex Nwokedi during thje pulic hearing on the PIB

Labour lauds Senate over Petroleum industry bill Victor AHIUMA YOUNG

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RADE Union Congress of Nigeria (TUC), has expressed happiness over the progress of the Petroleum Industry Bill in the senate, saying that with the

second reading of the Bill there is hope that Petroleum Industry Bill and the passage Gas Flaring Prohibition Act would be passed before the end of 2009. TUC in a statement jointly signed by the President General and

Secretary General, Comrade Peter Esele and Chief John Kolawole, respectively, said the body strongly believed that these bills would definitely change the way business in the oil and gas sector which is the number one revenue earner for the

country was run. According to the statement: “The passage of the Gas prohibition Act and the successful second reading of the Petroleum Industry Bill is commendable as they are coming at a period when the entire National Assembly is under intense public bashing over what they perceives as underperformance, shows that our law makers are waking up to their primary responsibility which off_course is to make good laws for the country. We reckon that when the petroleum industry bill is finally passed into law, it will among others remove the country from the shackles of International Oil Company (IOC) that has constantly harassed and undermined our systems. It will also help in the specialization of the Nigerian National Petroleum Corporation (NNPC) as it will

remove the organization from the present status of “jack of all trades” and “master of none”, to a more serious business entity capable of challenging other oil majors the world over.” ”The congress also sees an NNPC that will with the passage of the bill become a financially independent organization that can stand on its own without having to rush cap_in_hand to the Federation Account Committee to beg for funds as it can raise funds for its operations from both the domestic and international markets. TUC also foresees a new national oil company that will emerge out of this process as having the boldness to enter into partnership agreement with key players in the private sector through significant equity holdings, and also take care of some legal and institutional framework that would allow NNPC to continuously use the multiple instruments of policy making, regulations and different strategies of commercial operations to create an industry that would conform at all times to global best practices in all relevant parameters.” The statement added: “Though, we see a snare to the entire process if the House of Representatives do not toe the line of senate. We therefore urge members of the House of Reps to without further delay commence deliberations on the bill, as the bill is essential to the survival of the nation’s oil and gas industry. The passing of the gas flaring act, which outlaws gas flaring by January 2010, has finally put to an end the senseless wastage of our national resources for decades, and which successive governments and national assemblies have closed eyes to probably due to the overbearing influence of oil companies operating in the country. Or how could a system close its eyes to hazards on its citizens in the name of gas flaring’” ”We therefore state that this law is overdue and commend the senate for their boldness and for resisting overtures from the enemies of our people to once more truncate their desire. TUC therefore demands that members of the House of Representatives and the presidency do justice to this injustice and save our oil bearing communities from total catastrophe attendant with oil production.”

Casualisation, contract staffing is slavery in oil industry–Labour

T

HE two workers bodies in the nation’s Petroleum industry have described the practice of Casualisation, contract and service staffing of Nigerians in the Petroleum industry as modern day slavery and called on government to enact an appropriate labour law that will provide succor for this category of Nigerians to enable them have access to basic terms and conditions of employment. Under the umbrella of the National Union of petroleum and Natural Gas Workers (NUPENG) and its Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), counterpart, lamented this group workers are subjected to inhuman discriminations and are exposed to

unnecessary risks without minimum safety nest while working in the industry. At a separate interviews, the Deputy General of NUPENG, Comrade Aberare Isaac and the Acting General Secretary of PENGASSAN, Comrade Lumumba Okugbawa, warned that the penchant and obsession by managements of companies for this kind of unfair labour practices, would soon throw the industry into unimaginable industrial unrest. According to the NUPENG’ Deputy General Secretary, the union had reached several communiques and understanding with management of oil companies over the matter but all to n avail. He lamented that all Multi-national and indigenous oil companies

operating in the nation’s petroleum sector are involved in the unfair practices, using traditional rulers, politicians and youth leaders to perpetrate the act. According to him, this category of workers are denied access to medical, transport, pension, hazard and other allowances despite the fact they do basically the same jobs and are exposed to similar risks like the confirmed staff. Comrade Isaac, noted that when the management of these companies discovered that leaders of NUPENG fought and were able to put a form of condition of service for some of the casual and contract staff for them to get the minimum standard of benefits, the management resorted to employing them as service contract. He decried the attitude of these

This category of workers are denied access to medical, transport, pension, hazard and other allowances despite the fact they do basically the same jobs and are exposed to similar risks like the confirmed staff

companies in circumventing the labour laws and other decent standard, stressing that while the union remains determined to ensure that the workers irrespective of tagged name, get the minimum standard condition and benefits, the government should rise up to the defending the defenseless workers in the sector. On his part, given the PENGASSAN’s experience, its Acting General Secretary, said: “In the 1990s, PENGASSAN took a bold step to start organizing the contract staff in Shell Petroleum Development Company (SPDC) and other Exploration and Production Companies like Mobil Producing Elf Nigerian Agip, etc.


Insurance

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WAICA chief proposes regional consortium for WAGP, others Ifeanyi UGWUADU

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est African Insurance C o m p a n i e s ’ Association (WAICA) chief executive, Mr Willie Coker has proposed a sub-regional consortium insurance for large multinational projects like the West African Gas Pipeline Project in the West African sub-region. Coker, the Gambian CEO of the Association said such move will help deepen economic integration in the sub-region and keep more foreign exchange within West Africa. “One of the briefs of my office is to have a situation where such large multinational projects can be insured by a consortium of insurers from within the region. That enhances integration!”, he stated

In an exclusive interview with Vanguard, Coker disclosed that the group is working more vigorously to enhance the economic interests of the sub-region through collaboration with companies operating in West Africa. He believed not one insurance company from any of the countries in West Africa can do it alone “But then one insurance company from one country cannot actualise it. However, an institution like WAICA can bring these various companies across the sub-region to provide a cover for such project. When this takes place, then the reinsurance aspect of it will go to WAICA Re and then it would benefit”, he explained. In addition, he reasoned that since WAICA Re, a multinational reinsurance in the making, will be owned by insurance companies, the

Gas pipeline gains of reinsuring with it will flow back to them and thus boost their income base. Coker observed that with increasing discovery of oil along the coats of the West Africa, in addition to existing oil countries, the sub-regional insurers should better position themselves to take advantage of insurance

opportunities from the activities of exploration and distribution. Furthermore, he noted that the discovery of oil deposits in many parts of West Africa will fuel growth and raise opportunities for insurance for regional players if they are well organised. “I think we need to be inward looking more now than before.

Consortium of insurers insure SFDP-Phase 1 for $8.14m …As Nigeria gets 48%, 52 % goes offshore

Patience SAGHANA

A

consortium of nine insurance companies has underwritten the Construction All Risk & Liability Insurance of the phase 1 of Satellite Field Development Project (SFDP)Phase 1 for $8,145,740.00 (about N1.19 billion) Construction All Risks Insurance is an insurance policy that has been specially designed to protect the interests of Principals/Civil Contractors against damage or destruction to Projects undertaken by them, where the value of the civil work involved is more than 50% of the total project value. Mobil Producing Nigeria Unlimited (MPN) had on behalf of Nigerian National Petroleum Corporation/MPN Joint Venture invited interested companies to prequalify to provide Procurement and Fabrication (PF) services for the first

phase of the Satellite Field Development Project (SFDP) This phase includes a total of three platforms in Abang, Oyot and Itut fields located in OML-70 and OML-67 in 50 to 70 feet of water depth with the potential to expand to two and three additional platforms. Leading the consortium is Sovereign Trust Insurance Plc with 12 percent, Leadway Assurance and Royal Exchange Assurance with 7.2 percent respectively; Lasaco Insurance with 5.7 percent; Niger Insurance gets 4.8 per cent share; Linkage Assurance has 3.84 per cent while Regency Alliance Insurance, Standard Alliance Insurance and Cornerstone Insurance got 2.4 per cent each. Nigerian insurance industry insured 48 per cent as 52 percent was placed offshore through Paris Re and brokered by both foreign and local insurance intermediaries namely- Lockton and Femi Johnson & Co with Expanded

C a p a c i t y Ve h i c l e ( E C V ) o f $15,413,389 million at 25 per cent escalation and $25,000,000.00 million third-party liability (TPL) Main contractors of the SFDP-Phase 1 are Niger Dock and Dorman Long Engineering. Gross premium Construction and All Risks & Liability Insurance is $8,145,740 with net premium of $6,109,305 for a period of three years January 1, 2009 to October 31, 2011 Mr. Henry Okolo, Vice Chairman and Chief Executive of Dorman Long commended Federal Government's initiative of fast-tracking the local content policy in the oil and gas industry at the commissioning of the company's post-weld heat treatment. Okolo opined that the initiative was long over due and that it would have contributed to the economy of the country in no small measure if the local content policy had been pursued with vigour in the previous 15 years.

He stated that by establishing the Nigerian content in the upstream sector, fabrication jobs done in Nigeria would create at least 10,000 jobs for welders and fitters directly, adding that the country spends US$8 billion yearly on average. Okolo explained that structural steel fabrication was the easiest side of fabrication: “easier than pressure vessels or process equipment”. Whilst noting that 90 per cent of structural works in the oil and gas industry, particularly in the NLNG plant, are done outside the country, he affirmed that there were no valid reason why all structural steel works, regardless of the protection steel coating, could not be done in the c o u n t r y. H e s u g g e s t e d t h a t engineering procurement and construction (EPC) contractors should identify their local content partners in the country before NNPC enters into any contractual agreement with them.

Chevron and Shell together own over 50 percent of WAPCo, the project operator. Both the World Bank and its private insurance arm backed the project with guarantees, and the European Investment Bank provided a €75 million loan. In 2004, the World Bank and its private sector insurance arm, the Multilateral Investment Guarantee Agency (MIGA), together provided risk insurance totalling $125 million for WAGP, which is financed by a consortium of private companies led by Chevron. The West Africa Gas Pipeline (WAGP) project involves the construction of a 680 kilometer transport system designed to carry natural gas from Nigeria to markets in Benin, Togo and Ghana. Project sponsors have claimed that the pipeline will improve the environment and promote regional development, but local civil society groups are concerned that promised benefits will not be realized. Completion of pipeline construction is expected in early 2007, having been delayed by instability in the Niger Delta region where the gas is to be extracted, a scenario predicted by local groups even while the project was under preparation. The project was subject of a c l a i m t o t h e Wo r l d B a n k Inspection Panel by affected communities in Nigeria, who have cited the inadequacy of the project’s environmental impact assessment and public consultations, and the failure to demonstrate how the project will reduce gas flaring in Nigeria or bring benefits to local communities.


Power

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NIPP to add 4800 MW of power by 1Q 2010 -Minister

D

r. Lanre Babalola is the gentleman saddled with the responsibility of turning around the seemingly jinxed Nigerian power sector which in the face of huge investments has refused to show results and provide electricity to Nigerians. As the Minister presiding over this very sensitive sector, which we gather is giving the President sleepless nights, one can only assume that the Minister also does not sleep. After about a month of hot chase, the Sweet Crude team of Yemie Adeoye & Luka Binniyat finally got the nod to engage the Honourable Minister in this exclusive interview. The meeting place was his office in Abuja and although the meeting was slated for 11a.m we were unable to have this chat until about 7:30 p.m as he kept dashing in and out of office on short notice either from the electricity union or other agencies under his watch, while he kept apologising to our team for keeping us waiting for that long. finally we got around his tight schedule and sat down to have this much awaited chat, and it is a must read because even with all the criticisms against the much talked about 6000 Megawatts, (of which he is the Apostle) the Minister was still very emphatic about its success even as he also urged Nigerians to join hands with the government to make the project a reality. Excerpts: Honorable Minister Sir, we want to thank you for opting to speak with Sweet Crude, Nigeria's first Energy pull out. There have been so much furore over the proposed 6000 Megawatts (Mw) of power by December 2009. Sir can you tell Nigerians in your own words how you intend to realize this almost impossible dream at the set time?First of all, there is a question I've never heard anyone asked and that is why 6000 Megawatts and not 5000. The estimation by the operators in the industry is that our current demands, not for the whole nation but people that actually consume electricity which is roughly about 60 percent of the total population would be substantially met with about 4000 to 5000 MW. That demand in definition is actually one of suppressed demands and also a lot of unmet demand. So if you have a

Dr. Lanre BABALOLA

country of 140 million people and only six percent are connected to the grid then that means that you need supplying power for over 70 million people. Even of the 70 million people you're supplying power to, you're still not supplying enough power to meet all their needs. So starting from this point, what do you supply to those that are connected? I think that's where you'll understand where this figure of 6000Mw plus the demand. We have a total of over 8000Mw nameplate installed capacity in Nigeria, if we look at all the power stations across the country and you add every single unit and sum all the Megawatts together, its in excess of 8000Mw. A very good number of those units are in various states of disrepair, so in terms of what you can actually run to generate electricity at any given day which is refereed to as available capacity, that is, around 4500Mw. So at any given point in time if you don't have any constraint on fuel supply, or hydro resources, it simply means that we should be in a position to generate 4500Mw of power. That is when you'll now start to understand that the target of 6000Mw is not outlandish. Basically when you talk about power generation, first of all, you ask, how much machines do we have available to do that before I start looking at the other inputs required like fuel, or even

We have a total of over 8000Mw nameplate installed capacity in Nigeria, if we look at all the power stations across the country and you add every single unit and sum all the Megawatts together, its in excess of 8000Mw

skilled manpower to operate the plants. Thus the target that we have in front of us is to be in a position to generate, transmit and distribute 6000Mw by December 2009. So, all our effort today is to ensure that we'll be in a position to deliver just that. We're not saying that 6000 MW is what Nigeria needs, we're just saying that out current demands based on these constraints that we've outlined would at about 60 percent of the population being connected and the real expectation being that starting from 6000 MW we should still be able to substantially address the needs of the people who were connected, the next target of 10,000 MW by 2011 would now bring more people into the system. So that is how the 6000Mw target came about. Now in terms of what we're doing to exceed it, I mentioned the 8000MW installed capacity, and 12500 available capacity. So we've actually embarked upon a number of very aggressive and realistic rehabilitation exercise. Most of the thermal power plants have been rehabilitated, not all of them would come out good. Even the rehabilitation and repairs of some of these thermal units is going to take time. Egbin for instance is one unit with about 3,120 MW. Unit 6 particularly in Egbin with about 320 MW is not expected until next year, because the amount of time it takes to manufacture a new

rotor which is the problem there. The same thing with Sapele we're expecting an additional 200 MW out of Sapele, and there is still Afam where we are also expecting some units as well. unfortunately we had a fire incident in Jebba where we lost two units, though we believe that both would actually be completed by the end of this year, so this program that we've embarked upon which we believe would give us at least about 800Mw additional capacity adding to 4500 MW. We also have Independent Power Plants (IPPs) that are also under construction and we have Shell, we have Ibom power, we have Geometric in Aba, so all of these we're adding together to give us an additional 400MW or thereabout so by the time you look at all these you should be very confident that in terms of bringing the capacity on stream to be able to generate 6000Mw. We would be in a position to deliver that. But that is not the end of the picture, I mentioned the issue of gas, the water management etc. The second leg of the power supply issue is our ability to evacuate the power and distribute it. Currently the transmission network has capacity to evacuate and reel over 4500 MW of power. So actually we've been talking to CONTINUED ON PAGE 23


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Power

23

Thermal Power station

POWER SUPPLY:

Egbin down to 230 Mw Yemie ADEOYE

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NSPITE of the federal government’s proposed 6000 Megawatts (Mw) of electricity by December 2009,there are indications that Egbin Power station, the largest gas fired station in the country is currently producing about 230 Megawatts of electricity even with an installed capacity of 1320 Mw. Speaking recently during an inspection tour of the thermal plant, Minister of Power, Dr. Lanre Babalola stated that though the situation is lamentable but all hope is not lost as the plant’s current capacity can give Nigerians up to 1,100 Mw of electricity only if it has abundant gas supply to operate. A tour round the plant reveals that unit 1 of the plant which has an installed capacity of 220Mw like the other units is currently producing only 63Mw, while Unit 2 is currently doing 55 Mw. Unit 3 is currently not generating anything while units 4 and 5 are producing 58 and 54 Mw of

electricity respectively, with unit 5 also on shutdown. Reacting to questions from newsmen the Minister stated that one of the units with a capacity to generate 220 Mw is currently undergoing refurbishment in Japan and is expected back shortly. The situation has however reduced the current capacity of the plant to 1,100 and he assured that with the availability of gas the plant would give Nigerians that exact amount of electricity. According to him the power situation in the country would soon improve as the Hydro power plants in the country would soon receive a

boost when the rains become more intense as it is not yet its peak period. “We have three main hydro plants in the country, Kainji, Jebba and Shiroro. Between the three of them, the total available capacity we expected by the end of the year is just a thousand mega watts. At this point in time, you expect the hydro power plants to be relaxing, not over working as the way we are using

them now. The reason why I said we are using the hydro a little bit more is to compensate for the reduction in fuel supply. Normally, you want the water to fill the dams to complement the power stations. So the hydro should actually be stable as it is coming on to support the thermal plants. But watching the situation in the reduction of gas supply to the

thermal plant, we result to shift between the water which is much faster and also it totally early for the hydro, despite of that it is raining now in the country, and it is cool in the country, this is not the peak period for the hydro that is still much later in the year, around September to October when it actually peaked in terms of water intake into the dams. We are actually keeping our eyes on that as well but with a bit concern as we need to be patient for the dams to fill up in order to work optimally.” Also speaking the Chief Executive Officer (CEO) of the plant Mr. Jonathan Ogbonna stated that work is currently on to ensure the construction of more plants towards the achievement of 6000Mw of electricity, but that the major problem confronting the Egbin thermal station is the shortage

in gas supply. “We have no available gas to power the units, so one unit is out and we have available 1,100mw with the five units that are available. And towards the achievement of 6,000 Mw, Egbin has around a system of 1,050 Mw, which is already on the ground. But at the moment we are generating around 200 Mega watts because of the gas situation. We are running one unit from LPFO, while One or two of the units have been processed for the integration of LPFO into the system. The federal government is doing a lot to make sure that we have gas by December and we are very sure that we will be able to meet our own capacity towards attaining the 6,000mw target. That is exactly our target here.” he enthused.

NIPP to add 4800 MW of power by 1Q 2010 -Minister CONTINUED FROM PAGE 21 the Transmission Company of Nigeria (TCN) and they're very confident that the network we have today can conveniently reel about 4000 to 4500 MW, but again we're not stooping there until we have the 6000 MW, a lot of efforts and resources have been committed to this sector by government to add additional capacity to what we have. We're also looking at strengthening some of the lines, as well as rehabilitation of all these equipments. So in a nutshell after all I've said so far, that's how this 6000Mw is going to come together. Basically optimizing what we already have and rehabilitating as that is the easiest way we can improve capacity. it takes a lot of time to do it and a very long time to achieve this. The National Integrated Power Project (NIPP) has been investigated and submissions made. There has also being other fallouts from the investigation. What is the position of the NIPP today? Is it still in existence?

NIPP is going very well. In total the NIPP would add an additional 4800 MW when completed. It's a very big program in terms of scope, in terms of logistics, as well as funding. It's a very big program. We would start seeing the fruits of NIPP which is an investment of both the federal and state government by next year. In fact by first quarter of next year you'll start seeing the result. By first quarter of next year you'll start seeing the result. In particular we're looking at Sapele, Papalanto, Alaoji and by first quarter we'll start seeing the result. And we believe that by that time we should see nothing less than four units coming on stream and is probably like 400 plus MW. NIPP also has a lot of transmission and distribution components. Its not just building power plants, they also have to move the power from point of production to point of consumption. So the project is still on course, although we did lose a bit of time due to funding and other challenges. Again I must apologize for the amount of time it's taken. So much has been said about the power sector, in fact we gathered that

M r. P r e s i d e n t i s h i g h l y uncomfortable and said at a time that he can't sleep due to the situation, and this is inspite of all the last administration seemingly did in the sector. Sir, can you tell Nigerians where you think the last administration got it wrong? I'm not so sure that looking at what went wrong and who did what wrong is the right way to look at this issue. You can not have to want to undertake a program of such magnitude and not have issues and challenges. So let's move forward and move away from apportioning blame. Nigerians are not interested in trading blames. We for certain are also not interested in blame trading. My Minister of state and I as we are rather concerned with giving the much sought after electricity to Nigerians. The problem however is not just for the two of us alone, it's a problem for the whole country, and we all have a role to play in this. We see ourselves as being entrusted with such a big responsibility and we don't shy away from that at all. We have to look at what the challenges are. As I said earlier a project of this enormity can not be

without challenges. From funding issues, logistics, planning, if you look at the whole energy value chain, It is very easy for us to talk about generating capacities. You start from gas, coal, or hydro, whatever fuel is your primary source of energy and then you have to convert that into electricity and you have to evacuate that power. What must have gone wrong with all the commissioned power stations by the previous administration. As power supply seem to be at an all time low? There is actually nothing wrong with those plants. They've been completed. The challenge at Papalanto, Omotosho and Geregu which were the three plants commissioned in the last few years especially Papalanto and Omotosho is mostly Gas. The gas supply to those two plants is a temporary arrangements and also on one side you have the federal arrangement in place and on the second side you have to consolidate with the inadequacy of gas supply funds so that is the reason why those plants are not working to optimal capacity.


Knowledge is power Do you know that with a proven 187 trillion cubic feet of gas reserves th Nigeria is the 7 largest gas producer in the world? Do you know that Nigeria has about 600 trillion unproven cubic feet of gas reserves begging to be explored? Do you know that the United States is the only country in the world that restricts the use of its own energy resources while transferring trillions of dollars of wealth to other countries in order to import energy? Do you know that Petroleum fossil fuels are burned in internal combustion engines to provide power for ships, automobiles, aircraft engines, lawn mowers, chainsaws, and other machines. Different boiling points allow the hydrocarbons to be separated by distillation? Do you know that oil can be used in a variety of ways because it contains hydrocarbons of varying molecular masses, forms and lengths such as paraffins, aromatics, naphthenes ?


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Committee, led by Mr. Ledum Mitee, which was submitted , December, 2008 months ago has been left in the cooler for about seven months; and when the government was talking to leaders in the cities and not the actual combatants in the creeks. Governor Emmanuel Uduaghan of Delta State came to the continuous rescue of AVM Ararile, as he map read the discussion from the risky dimension of rejection of the amnesty proclamation to forbearance and positive reception of the purpose of President Yar’Adua. He said it was clear that injustice begat the Niger_Delta struggle but the armed youths have to accept amnesty as a starting point for the Federal Government to begin to address the injustices. The governor asserted that as far as the purposes of the struggle are concerned, he, himself, is also a militant, as he is in government to fight for political and social changes in the life of his people. His point of departure is that it does not have to be with guns the way “our brothers are doing it in the creeks”. According to him, something led to the struggle, no youth just got up and started to carry arms and “we (government) have to deal with what led to it”. Governor Uduaghan knew that the people were really angry about the amnesty arrangement, as

President Umaru YARADUA

NIGER DELTA:

Yar'Adua is confused

The real trouble ahead if amnesty fails Emma AMAIZE WHEN the Air_Vice Marshal (AVM) Lucky Ararile -led Implementation Committee on Disarmament, Demobilization and Reintegration of the Presidential Panel on Amnesty, shepherded by the Defence Minister, Major –General Godwin Abbe (retd.) toured the Niger_Delta region shortly after Presidential Umaru Yar’Adua proclaimed amnesty on June 25 for militants, it was perceptible from what transpired at the various stakeholders’ meetings at Akwa-Ibom , Rivers and Delta states that the working group has not , fittingly streamlined its objectives (disarming of militants, et al ) and how to go about it. Apparently, it was as if the members of the sub-committee were rushed into embarking on the tour to create the feeling that the Federal Government was seriously committed to the amnesty programme and doing everything to ensure that it succeeded. In Delta state, where AVM Ararile who, incidentally is from the state and his team got a measured quantity of the people’s feelings, the national chairman of the Human Rights Defenders Organization of Nigeria (HURDON), Sir Casely Omon_Irabor told the team that the people did not request for amnesty in the first instance, and it was wrong for President Yar’Adua to send armed men to civilians to discuss amnesty, as if they were a conquered people. Facilitator of the Niger-Delta Democratic Union (NDU), Barrister Akpo Mudiaga Odje was more concerned that there was no legal

imprimatur for the amnesty Yar’Adua proclaimed, and stressed the need for Mr. President to get the National Assembly to enact a law backing the amnesty. Though, some persons commended the Federal Government for the strength behind the amnesty, AVM Ararile, the chief messenger of the day was put under fire by the stakeholders who questioned government’s sincerity on the amnesty deal when there was no concrete programme on ground for its implementation; when the Joint Task Force (JTF) on the Niger-Delta was as at then, still occupying Gbaramatu kingdom and nothing was being done about the return of the thousands of persons, displaced from their homes because of the now suspended Cordon and Search operation; when the report of t h e N i g e r - D e l t a Te c h n i c a l

Former Federal Commissioner for Information, Chief Edwin Clark said the governors were right in their action because the federal government could not really be said to be interested in peace in the Niger-Delta if at the same time, it was engaging in things that were antithetical to the same amnesty and peace process in the region

the whole thing appeared to be like putting the cart before the horse, but, he pleaded all the same, that they should accept it as he papered over the fundamental issues raised by the stakeholders, such as the lackadaisical attitude of the federal government towards the all_important Mitee report and lack of a well_laid development

programme for the region. The governor put up the defence that the Mitee report was being studied by the President and hopefully, the recommendations would come to the Federal Executive Council (FEC) for the white paper, but, it was obvious that it was merely to calm down frayed nerves because six months is more than enough for a government that claims that Niger_Delta is one of its priorities to come up with its position on the report of such a sensitive committee. Calabash waiting to explode The threat by the South-South governors on Thursday, July 23, to pull out of the amnesty programme some few weeks after the visit of the Implementation Committee to their states based on absence of a concrete post_amnesty programme, anti_South_South disposition of the Minister of Petroleum Resources, Dr. Rilwanu Lukman, movement of the Federal University of Petroleum Resources from Warri to Kaduna and the proposed Petroleum Industry Bill that stripped the oil_producing communities of royalties and other entitlements showed that they felt anger of the people but were only “cooperating” with the federal government to see whether the right steps would be done. Former Federal Commissioner for Information, Chief Edwin Clark said the governors were right in their action because the federal government could not really be said to be interested in peace in the Niger_Delta if at the same time, it was engaging in things that were antithetical to the same amnesty and peace process in the region. For the first time, the Movement for the Emancipation of the Niger_Delta (MEND), which has not seen anything good in t h e governors since they came on board, sounded elated and the people of the region are happy with their governors. The oil city of Warri was rocked by protest by students of Delta state origin less than three days after the policy reversal of the federal government on the Petroleum Training Institute (PTI), known as the Federal University of Petroleum before the sledge hammer and the fire is likely to spread with time. There is anger in the land, as the Niger_Delta People Volunteer Force (NDPVF) cum People Salvation Front (PSF), led by Alhaji Mujaheeden Dokubo Asari called on the five PDP governors of the region to begin the process of decamping from the party and join the progressive forces for the liberation of the region from the Northern oligarchy. Words and actions of Mr. President On July 20 when he visited Bayelsa state, President Yar’Adua said of Niger-Delta: “The Niger-Delta is very high on the agenda of this administration; this is why weare strongly committed to prompt payment of all statutory allocations due to the region and the continued CONTINUES ON PAGE 30


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CONTINUES FROM PAGE 29

support to interventionist agencies like the NDDC. This is also why we created the Ministry of Niger Delta to coordinate our holistic approach to the transformation of the region”. He added: “But all these will come to naught without peace, without trust, without cooperation of all stakeholders and without security of lives and property for the people and foreign investors. Let me, therefore, use this opportunity to state categorically that our amnesty offer to militants is not a ruse, it is for real”. “To those who genuinely took up arms to draw attention to the sad situation in this region, I say to you, we have heard you and we are ready to work with you to move NigerDelta forward in the interest of its long-suffering people. But to those hiding under the cover of legitimate protest to feather private nests, those merchants of violence, I say to you, change your ways, the people of Niger-Delta have seen through your antics and will soon expose you”, he said. From the above words, Mr. President seemed to have spoken from his heart, as he captured the essence of the Niger-Delta struggle, separated the criminals from the freedom fighters, and underlined the fact that development is the key to transformation of the region and the necessity of peace for the execution of any package by the government. That is where the problem actually lies. Between the inner quiet thoughts of Mr. President on the Niger-Delta and members of his kitchen cabinet, peopled mainly by tribal advice_givers, there usually emerge, in most cases, an evil coloration of the original thought, no mater how well intentioned. But, if as it is already known, the buck stops at the President’s table, why should the Northern counsellors he chose to surround himself with be blamed for the “nothernization” of virtually all

the federal government policies? Why should a President who says Niger Delta is one of his seven_point agenda not have a clear_cut development programme for the region more than two years after he assumed office? If he has, the people are not aware, because the Ministry of Niger Delta is a child of circumstance that has no bearing with his programmes for the region. It arose out of the region’s rejection, last year, of a summit on the region, which was to be headed by a Northerner, and adequate funds have not been provided for its operations since it was set up without the approval of the National Assembly. The government made a U-turn and set up the Ledum Mitee Niger Delta Technical Committee, but, did not wait for it to sit before it set up the Ministry of Niger_Delta, and since the committee, rushed its assignment and submitted its report in December, last year, Yar’ Adua did not see any sense of urgency in issuing a white paper and implementing same. Rather, in mimicry, some aspects of the recommendations have been put into operation in a curious way. The release of Henry Okah was recommended by the committee, which spelt out a disarmament programme and how it would work. The committee also suggested a development programme for the government and the time-table for each phase. Though, not entirely a perfect document, many see the report as a starting point for President Yar’Adua, but, what has happened for the past seven months, is that some people are looking into the report while a secret agenda is being foisted on the people of the NigerDelta. Even a primary school student now knows that one of the major problems between oil companies and host communities was that the interest of the oil_producing communities were not catered for in the enabling laws. The oil companies know this and that

To those who genuinely took up arms to draw attention to the sad situation in this region, I say to you, we have heard you and we are ready to work with you to move Niger-Delta forward in the interest of its long-suffering people. But to those hiding under the cover of legitimate protest to feather private nests, those merchants of violence, I say to you, change your ways, the people of Niger-Delta have seen through your antics and will soon expose you

is why they are signing Global Memorandum of Understanding with the communities, so, why should a Petroleum Industry Bill be proposed by the federal government, stripping the host communities of royalties and other privileges. Who is advising Mr. President and why is he listening to such odious advice in the 20th century? What is the rationale for moving a Federal University of Petroleum Resources, Effurun, Warri in Delta State that had been approved more than two years since he took office by his predecessor, former President Olusegun Obasanjo and which is already functional from its present location to Kaduna despite the hue and cry that greeted the initial whisperings to that effect. There is no two way about it, the reversal of the upgrade of the Petroleum Training

Institute, Warri and the upgrade of the College of Petroleum, Kaduna by the same government raises a poser, as to its intention. Does Yar’Adua or some people in the region actually want peace in the region? Was the amnesty proclaimed at the time it was done because the government saw that in spite of the Cordon and Search operation mounted by the Joint Task Force (JTF) on the Niger_Delta, the militants still went ahead to blow up more oil facilities and the only way to stop them from totally crushing the economy was to grant amnesty to them? If not so, why is there no definite post-amnesty programme? Is it the N65, 000 or so that those who come for training and rehabilitation would be paid for three months that will bring development to the region? Beyond the talks of non-existing training centres for the ex-militants for trades, which the government did not discuss with them to know their preference, the amnesty, contrary to the President’s reassurance appears like a subterfuge. Amnesty Committee/Militants deadlock So far, there is a deadlock between the Presidential Committee on Amnesty and the militants on the way forward. It is true that some perceived militants in the region have accepted amnesty but the terms are not clear, making them to suspend the surrender of the their arms, which is the practical demonstration of their acceptance. In one of the meetings in PortHarcourt, the representatives of some of the militant leaders told the committee that it was impossible for the militants to surrender the weapons, which was bought with millions of naira just like that to the government. “They did not embark on the struggle for nothing, the arms were not bought on the grounds that if the government granted them amnesty, they would surrender the arms freely to the government and there is no plan of surrender in the first instance. So, if government now says it has recognized the point of the freedom

Armed Militants in the Niger Delta

fighters, which is all about development, should it ask somebody who spent between N50 million and N100 million to purchase arms to surrender them for free? “Who told them that N65,000 for three months mean anything to youths who joined the struggle for a purpose, what happens after the three months, If the N65,000 is for feeding and transport allowance, do they know how much the boys in the militant camp receive per month? , of the representatives told Vanguard. The government team did not accept the suggestion that any amount would be paid for the surrendered arms and the discussion on disarmament ended without any agreement. The Movement for the Emancipation of the Niger_Delta, as an entity, has since ruled out the Presidential Committee on Amnesty, because it did not in the first instance accept the amnesty offer by Yar’Adua. AVM Ararile said in Warri that the committee would visit the creeks to meet with the real militants but it is not certain if that has been done several weeks after he made the statement. The real threat Forty_eight hours after the South_South governors’ threat, President Umaru Yar’Adua

So far, there is a deadlock between the Presidential Committee on Amnesty and the militants on the way forward. It is true that some perceived militants in the region have accepted amnesty but the terms are not clear, making them to suspend the surrender of the their arms, which is the practical demonstration of their acceptance

through his spokesman, Olusegun Adeniyi said he has “tremendous respect for the people of the region, identifies with the challenges in the region and is desirous of bringing development once peace is attained” adding, “There is serious misunderstanding about some of the issues raised but the president is very concerned and has been talking with the Niger Delta governors individually and I am aware a meeting had already been scheduled with them even before the latest development. It will be unwise to push aside the threat of the governors but that is not the real threat in the potent threat in the region at the moment. The real problem is that a new set of militants, seven times dangerous than the ones the nation has seen are getting ready to take over from where the present set stops if the Federal Government failed to get it right after the 60 day period of ceasefire declared by MEND to facilitate “progressive dialogue” with government .


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The

Question

NDDC funded shoreline protection PORT HARCOURT: An excavated garden delights Kaiama T Y Samuel OYADONGHA

enagoa - For the people of the ancient riverine settlement of Kaiama, home town of late Ijaw freedom fighter, Major Isaac Adaka Boro, in the Kolokuma Opokuma local government area of Bayelsa State, the ongoing multi billion naira shore protection work sponsored by the Niger Delta Development Commission (NDDC) is the best thing to have happen to their community. Although the federal government interventionist agency had last year connected the rustic settlement to the national power grid at a time the natives had almost given up hope of ever being hooked after several years of failed promises. The joy of the natives of this historic riverine settlement which came into global attention after the famous Kaiama declaration by the Ijaw youths knows no bounds at moment due to the ongoing shoreline protection work in the community. Some couple of years ago the rural settlement, situated on the bank of the Nun River which incidentally is the headquarters of Kolokuma-Opokuma local government area of Bayelsa State was on the brink of being swept away by the river before the intervention of the commission which has transformed the community waterfront into a tourist destination. Ironically, the Nun River which the natives depend on for their livelihood has become the bane of the community - gradually washing away its landmass. Apart from the natives having to contend with the devastating consequences of the rivers’ rampage, they were also at the mercy of perennial flooding, an albatross to most communities in the delta. No fewer than one hundred houses and a large portion of the community have been lost over the years as a result of the twin problems of erosion and flooding. However succour came the way of the traumatised natives when the NDDC in line with its mandate to hasten social and economic growth and upgrade life and living standard in a region awash with black gold, saw the need to save the community from imminent extinction. Consequently, contract for the Kaiama shoreline protection was awarded to a local firm Dredging Atlantic which mobilized to site in 2008. But the job was delayed due to what a source blamed on technical hitches. The development it was learnt prompted the firm to dispatch some of its personnel to Holland to study the configuration of the dredger.

The joy of the natives of this historic riverine settlement which came into global attention after the famous Kaiama declaration by the Ijaw youths knows no bounds at moment due to the ongoing shoreline protection work in the community

The initial setback suffered by the firm however aroused the curiosity of the natives prompting many to doubt the competence of the firm handling the project. Many of the indigenes especially the youths who are in a hurry to see development in their community dismissed the project as another white elephant project that would go the way of others in the past such as the proposed new Boro Town which never came to fruition in spite of the huge resources sunk into it by the old Rivers State government during the administration late Chief Melford Okilo. This skepticism has since evaporated given the progress of work so far recorded with the result that the relationship between the natives and the dredging firm has been cordial. Already, over 88,000 square metres of the shoreline protection had been covered when Sweet Crude visited Kaiama at the weekend with the entire southern stretch of the community shoreline now wearing a new look as against the initial treacherous steep gradient. A senior staff of the firm who spoke anonymously told Sweet Crude that work would be completed on time due to the cooperation of the people and the NDDC which is committed to the speedy completion of the project. He noted with happiness that unlike other communities in the region where the youths are in the habit of harassing and extorting money from construction

firms handling development projects in their domain, Kaiama youths have been exceptional in their conduct as they viewed the project as their own, one that needs to be protected. “They see the project as their own and have been coming around daily to monitor the progress of work thereby boosting the morale of staff,” said the staff. Some of the natives who spoke with Sweet Crude were also impressed with the pace of work stressing that at the rate the job was going, it would be delivered on schedule. They expressed gratitude to the federal government and the NDDC for coming to the rescue of their community which they said was almost being swallowed by the river. “We are grateful to the federal government and the NDDC for executing this laudable project in our community. You need to know the constant fear we were subjected to in the past. Several buildings have been lost due to the river action and other structures such as the St. Marks Anglican Church would have been washed away in no distant time considering the speed at which our land is being swallowed by this awesome force of nature,” a native who gave his name as Olotu Ebiowei said, pointing towards some row of buildings lying precariously close to the river when coming from the Odi end which is yet to be sand filled. “Kaiama community lacks words in expressing our gratitude to the NDDC for saving our ancestral land from extinction. We thank President Umaru Yar’Adua for his commitment to the development of the Niger Delta,” said another indigene, Tonbra. “As it is now, we can go to bed with our eyes closed unlike in the past when nobody could predict when three, four, five buildings could be swallowed by landslide caused by the force of the surging river. “We should count ourselves lucky to have gotten somebody like Timi Alaibe, the former Managing Director of the NDDC who showed untiring effort by way of constant supervision. He was so committed to the project that we shall always remember him. Though we lost our farmland to the shore protection project, we believe that the transformation we are seeing here is worth the sacrifice. At the completion of the project, we can confidently look forward to a flood and erosion free Kaiama having one of the most captivating waterfront in a state where several communities are on the throes of being washed away by coastal erosion,” said one Pa Amara, a native of the community.

he first title I conceived for this piece was ‘Amaechi, the Excavator’ and it was inspired by the destruction and excavation of offices, homes and roads for the restoration of the garden city status of Port Harcourt, the capital city of Rivers State and the unofficial headquarters of the Niger Delta. I had a rethink because it came out negative and sounded to me like professional criticism. Governor Amaechi clearly has good intentions for his state but good intentions can midwife bad projects and can also produce bad results in as much the same way as bad intentions. This is the lesson of history. But besides the teachings of history, it is dangerous to trust a ruler whose rulership is traceable more to a court of law than the will of the people. I mean this to come out as a fact the people of Rivers State have to live with, not necessarily as a ‘yabis’ of the Governor. Another reason for which we must pay attention to the unfolding agenda of the Governor is that he has been ‘blessed’ with a docile House of Assembly whose members are more concerned with politicking than the pursuit of their constitutional functions. He is, in this regard, as fortunate as his predecessor, Governor Peter Odili. Now the excavations: Governor Amaechi has excavated most of the artery roads that connect the suburbs to the major roads. The people are told he was advised to do so by a committee he put together soon after he was sworn into office. They are reported to have given two reasons for their advice: solving the impossible traffic situation and beautifying the city. The inordinately few professionals on the committee we have spoken to, say that the Governor disregarded the core of the advice he was given. What we know now is that Governor Amaechi has destroyed more than four hundred offices and homes to actualise his beautification plan. We have no sympathy with office and home owners who breached the rules of government but we are outraged by the destruction of valuable property to actualise a beautification agenda more so because the goals could have been achieved by other methods. We are also outraged by the destruction of public facilities like the former General Hospital on Hospital Road, returned to the state government by the University of Port Harcourt which had used the facility temporarily for its teaching hospital requirements. Promising the people a mega hospital he has shelved now for soil content reasons, Governor Amaechi had the facility destroyed. The soil tests should have preceded the destruction. For his mistake, if it truly was a mistake, the people of Rivers State, have been denied the use of a medical facility that was conceived and constructed with pains years before the Governor was born. Like the General Hospital, the Rivers State Government has excavated roads like the Oginigba /Trans Amadi Road, the Mgbuoba/NTA/Choba Road, the Rumuomasi/Rumuobiakani/Old Aba Road, Rumuola/Rumuokwuta link road, all functioning before the

excavation exercise. The Government has however failed to repair roads in need, roads like the Ada George/Rumuepirikom Road, Stadium Road, Abuloma Road; uncompleted projects that were inherited are also casualties of this Government as they have remained uncompleted. Another feature this Government should win awards for is its slowness in completing projects. From the time this Government was sworn in it has not completed one road project it started. Of course, excluded from this are roads that were patched up by the road rehabilitation committee that Governor Amaechi put together soon after his swearing in. All the roads under re-construction have been perpetually abandoned. The wide and deep gullies created by the e x c a v a t i o n s o n t h e Shell/Rumuobiakani/Old Aba Road have been left unattended, except for mosquito lavae, for more than four months. Enter the human casualties. Men and women whose properties have been sacrificed for Gov. Amaechi’s beautification project have died of hypertension and cardiac attacks, bringing into question the final intentions of this Government. Homes and offices have been destroyed on roads the Governor has no intention of widening. Most importantly however, not much has been achieved by way of beautification for all our trouble. The traffic situations are getting worse and the former garden city looks more like a rubble city than anything else. Traffic situations are caused more by the concentration of housing projects and public facilities than by the narrowness of roads. In old Lisbon, most of the inner city roads are onelane roads. Instead of destroying ancient architectural masterpieces, the Portuguese Government simply opened up new cities, Cascais, Carcavelos and Estoril all around and beside the old city, relocating key ministries and facilities that attracted citizens to the old city. Governor Amaechi should have stayed with his Greater Port Harcourt project and should pursue it with more haste and wisdom than he has applied to other projects. It is simply immoral to first render people homeless and out of business before conceiving ideas to resettle them into homes and shops. That brings me to the contentious Port Harcourt waterfronts question. The Government proposes to destroy the waterfronts dwellings where the Ijaw people of Rivers State and their cousins from other states prefer to live. The official reasons proffered by Government do not, in my humble opinion, suffice to render about 1 million people homeless. If Government had had the sense to build alternative dwellings, the people would feel less hostile about the plan. If Government destroys their homes first before thinking up alternatives it would have disqualified itself from being a viable Government as the primary responsibility of Government is to provide safety and security for its people.


Vanguard SweetCrude Demo  

Sweet Crude Demo