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The Federal Government is to engage new contractors to upgrade and maintain Nigeria's three refineries at the cost of $1.6billion, after it failed to secure the services of the original contractors that built the refineries to execute the jobs.

The federal government had previously set a 24-month target to engage the original contractors for the complete Turnaround Maintenance (TAM) of the refineries, which have a capacity to process 445,000barrels of crude oil per day.

The refineries include the Port Harcourt Refining Company, with an installed capacity of 210,000 barrels of crude oil per day; Kaduna Refining and Petrochemicals Company, with a production capacity of 110,000 barrels per day and Warri Refining and Petrochemicals Company, with an installed capacity of 125,000 barrels per day.

Following the directives from the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke, the immediate past Group Managing Director of the NNPC, Mr. Austen Oniwon, had begun negotiations with JGC/Tecnimont Consortium, the original contractors that built the Port Harcourt Refinery, for the rehabilitation of the refinery.

The rehabilitation of the Port Harcourt Refinery was scheduled to be followed by Kaduna and Warri, respectively.

However, following the failure of the government to secure the services of the original contractors, NOGintelligence gathered that other reputable contractors recommended by the original contractors have been engaged for the maintenance and upgrade of the Port Harcourt Refinery.

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke told a Senate Committee recently that the contract for the project would soon be signed.

She attributed the failure of the earlier Turn-Around Maintenance and upgrade of the refineries to the negative travel advisory given by the Japanese authorities to JGC, the original builders of the Port Harcourt Refinery which stopped them from coming for the upgrade and maintenance of the refinery.

"With that hurdle surmounted, we have put in place a new plan complete with new schedules and timelines to bring the refineries back to life and get them to run at higher capacity. The maintenance and upgrade work will start with the Port Harcourt Refinery which has stayed the longest period without turn-around maintenance," she said.

The minister said rehabilitation and upgrade work would move from the Port Harcourt Refinery to the Kaduna and Warri Refineries in that order until the last one "comes on stream by the beginning of the last quarter of 2014".

She confirmed the cost of the maintenance and upgrade of the three refineries as $1.6billion.

If successful, the turnaround of the refineries would help the federal government save a large chunk of the huge funds spent on payment of subsidy on imported petroleum products.

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Paucity of funds has stalled eight mega gas infrastructure projects initiated by the Nigerian National Petroleum Corporation (NNPC) to deliver gas to some of the newly-completed gas-fired power stations across Nigeria.

Some of the power stations include those located in Geregu in Kogi State; Olorunsogo in Ogun State; Omotosho in Ondo State and Sapele in Delta State.

In a recent presentation made by the Group Managing Director of NNPC, Mr. Andy Yakubu to the Senate Committee on Power, it was disclosed that the NNPC made a budget request proposal of $1.05billion in 2012 to facilitate the construction of some gas infrastructure.

However, the National Assembly appropriated only $490million, which was less than 50 per cent of the requested funding.

"Due to a funding shortfall, an additional eight projects remain unfunded. These will be the focus for 2013 budget,'' Yakubu said, without disclosing the affected projects.

Yakubu however said despite the paucity of funds, the NNPC implemented nine key gas infrastructure projects through 2011/2012. One of the key projects is the Escravos Lagos Pipelines (ELPS) designed to supply gas to some of the power stations owned by the National Integrated Power Project (NIPP) and the Power Holding Company of Nigeria (PHCN).

"Very significant progress was made with these projects leading to gas deliverability improvement to Geregu, Olorunsogo, Omotosho and Sapele power plants. In total, an addition of about 250million standard cubic feet per day (mmscf/d) of gas has been enabled towards improved power generation over the period as a result of infrastructure development," he said.

Yakubu said that as part of a creative strategy to accelerate the projects that suffered under-funding, a Public Private Partnership (PPP) was being developed to augment funding from the Federal Government.

Despite the apparent poor budgetary performance, the Chairman of the Senate Committee on Gas, Senator Nkechi Nwaogu told journalists that the 2012 budget of the NNPC had been reasonably complied with and implemented.

"We saw the documentation. What I saw today and what we saw as a Committee, we are encouraged, we are impressed and we are delighted," she said.

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Falling natural gas prices at the global market due to the discovery of Shale gas around the world has threatened the implementation of three Liquefied Natural Gas (LNG) projects in Nigeria.

NOGintelligence gathered that shareholders in three major LNG projects in Nigeria have failed to reach Final Investment Decision (FID) on the projects, which have been in the drawing board for several years because of a drop in gas prices at the international market.

The projects include the Brass LNG in Brass Island of Bayelsa State; Olokola LNG sited between Ogun and Ondo States and the Train 7 of the Nigeria LNG at Bonny Island of Rivers State.

The Brass LNG has consumed a pre-FID expenditure of $1billion, demonstrating the faith of the various investors in the project but the FID for the two-train, 10 million metric tonnes per year (mmt/y) project is yet to be signed.

NOGintelligence gathered that the shareholders are concerned that the investment may no longer guarantee adequate returns on investment as Shale gas has become a game changer in the global energy dynamics.

Market results indicate that with the discovery of Shale gas in some countries, the Henry Hub reference price of gas has dropped to less than $3 per million British Thermal Unit (mbtu), from $7 within one year.

A source familiar with the LNG projects confirmed that when the projects were initiated several years ago, the price of gas was over $15mbtu before the current drop.

The Nigerian National Petroleum Corporation (NNPC) holds 30 per cent equity in the Brass LNG project, while Nigeria's Bayelsa State government has 10 per cent, with LNG Japan and Itochu Corporation, controlling four per cent and three per cent, respectively.

A joint venture between Nigerian indigenous company Sahara and France-based Sempra Energy holds two per cent.

American oil group, ConocoPhillips, French firm,Total and Italian company Eni also hold 17 per cent stake. Total acquired Chevron's stake after the American oil major pulled out of the project at the height of militancy in the Niger Delta in 2006.  The project is further threatened by the indications by one of the project's promoters, ConocoPhillips, that it will sell its Nigerian assets.

Chairman of the Board Brass LNG Ltd, Dr. Jackson Gaius-Obaseki, however has said that the planned divestment by ConocoPhillips would not affect the project, insisting that the FID will be taken within the first quarter of 2013.  

The addition of Train 7 to the current six-train NLNG plant in Bonny Island has also been on the drawing board for several years.

During a recent visit to the plant, a former Nigerian Military Head of State, retired General Yakubu Gowon said Train Seven would provide 10,000 construction jobs and also attract over $8 billion in Foreign Direct Investment (FDI).

 "It is seven years since activities leading up to Train Seven started in September 2005, five years since sales and purchase agreements were executed with five international buyers, and five years since pre-FID construction activities started in April 2007, with $300 million spent so far on such activities as soil preparation, preloads, and geotechnical investigations on Bonny Island. We can no longer afford to delay or dither," he said.

NNPC owns 49percent of the shares in Nigeria LNG Limited; Shell Gas B.V (SGBV) owns 25.6per cent; Total LNG Nigeria Limited 15per cent; with Eni controlling 10.4per cent stake.

Olokola LNG (OKLNG) project was initiated in 2005 with NNPC as the major shareholder with 46.75 percent shareholding. Shell and Chevron have 19.5 percent apiece, while BG Group, which has withdrawn, had 14.25 percent.

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The price of OPEC basket of twelve crudes stood at $110.94 on Wednesday compared with $109.46 the previous day, continuing its upward trend from the previous Wednesday when it stood at $107.08. After dipping slightly last week Thursday, it started the upward the trend which continued till Wednesday according to OPEC sources.

Introduced on 16 June 2005,  the new OPEC Reference Basket is currently made up of the following: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Iran Heavy (Islamic Republic of Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela). 

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The Shell Petroleum Development Company of Nigeria (SPDC)-operated Joint venture has commenced the repair of the 28-inch Bomu-Bonny Trunkline in Rivers State, after it was shut due to a pipeline fire caused by vandals.

Shell shut down the pipeline, deferring 150,000 barrels of crude oil per day, after discovering a fire on the pipeline in the early morning hours of September 30, 2012.

A Shell Nigeria's spokesman confirmed that repairs had commenced after a Joint Investigation Visit (JIV) to the site but declined to disclose the cost of the repairs.

"We commenced fixing the pipeline after the joint inspection team concluded their assignment. The JIV was conducted by officials of the company and the regulatory agencies; representatives of the community as well as local and state government officials," he said.

A burning vessel, believed to be involved in the theft of crude oil from the line, was sighted near the incident site, close to Okololunch community in Bonny Local Government Area of Rivers State, which is under the company's Eastern Niger Delta operation.

Shell Nigeria's Corporate Media Relations Manager, Mr. Tony Okonedo, had confirmed immediately after the incident that production of 150,000 barrels of oil per day was affected in the shut-down of the pipeline, which conveys crude oil to Bonny Export Terminal for shipment.

Shell's Vice President for Health, Safety, Environment and Corporate Affairs in Sub-Saharan Africa, Mr. Tony Attah said helicopter overfly showed the vessel engulfed in raging flames and thick smoke.

"This incident clearly demonstrates the scale of the oil theft problem which, alongside the hundreds of illegal refineries in the Delta, is having such a profound effect on the people, communities and the environment. Until these activities are brought to a halt there will be no improvement in the environmental situation," he said.

Attah further stated that the oil company was mobilising to fight the fire, investigate the cause and carry out repairs.

He noted that the Bomu - Bonny trunkline was part of the Trans Niger Pipeline, which itself had been repeatedly targeted by crude oil thieves. According to the company, last year, sabotage and crude oil theft were also the cause of 11,806 barrels spilled from SPDC facilities in 118 incidents.  This meant an average of one spill every three days, accounting for 77per cent of the total spilled volume during the period.   

Shell has consistently maintained that the great majority of spills in the Niger Delta are the result of third party interference, mainly sabotage, theft of equipment or leaks caused by crude oil thieves drilling into pipelines or opening up wellheads to steal oil.

The company said that on average, such third party interference had accounted for 74per cent of all oil spill incidents and 73per cent of all oil volume spilled from its facilities between 2007 and 2011.

It however noted that the rest of the volume was caused by operational failures, such as equipment failure and human error, adding that any spill is a serious concern to the company.

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Oil traders are being warned to beware of buying Nigerian crude from fraudulent sources following the uncovering of a fake Crude Oil Export Permit for the export of 24 million barrels of crude oil with a market value of $1.68 billion. The permit was supposedly issued to the Nigerian National Petroleum Corporation (NNPC) for the export of 24 million barrels of crude oil worth $1.68 billion belonging to the Corporation.  

The security features and the signatures on the documents, including that of the Minister of Trade and Investment, Mr Olusegun Aganga, were allegedly forged. Breaking the story, the Daily Trust, quoted an unnamed official at Customs Office, as saying: "we cannot ascertain whether products have been exported or not using the fake permit".

The process for exporting crude oil and petroleum products was streamlined earlier in the year to stem oil theft. The new process for the Crude Oil Export Permit came into effect three months ago. Under this process only certain stated categories of companies are eligible to obtain a crude oil export permit from the Federal Ministry of Trade and Investment.

Under the new process, only the following categories of companies are eligible to apply for the export of crude oil and gas. They are:

• National Petroleum Corporation (NNPC)
• International Oil Companies (IOCs)
• Pipelines and Products Marketing Company (PPMC)
• Indigenous Oil Producing Companies
• Major Oil and Gas Marketing Companies (MOMAN)
• Independent Petroleum Marketing Companies, IPMAN
• Depot and Petroleum Products Marketers Association (DAPPMA) who already have licences from the Department of Petroleum Resources (DPR) for storage facilities.

The new permit will also allow the approved companies to export liquefied natural gas (LNG), liquefied petroleum gas (LPG), condensate, refined products, lubricants and greases.

The permits are valid only for one quarter and will be issued after an application for an Export Clearance Permit. The application for the permit is made on the company's letter headed paper; duly completed application form E001, attached with a copy of certificate of incorporation of the applying company; the company's article and memorandum of association. In addition, the applicant company has to submit its current production, storage or sales license issued by DPR; current weights and measures department certificate of conformity; original bank reference with committed and explicit statements and three years tax clearance certificate.  

Applicants for oil and gas export clearance permits are also to complete Form DV001 on the previous export permit along with copies of relevant invoices and shipping documents such as bills of laden, photocopy of approved Form 'M', Clean Certificate of Inspection (CCI) issued by a government appointed pre-shipment inspection agent, clearance or export duty payment from Nigeria Customs and Excise, detail cargo information. The last permit granted has to be surrendered before a new one is issued.  

When the new guidelines were revealed in February, the Permanent Secretary, Ministry of Trade and Investment, Mr Dauda Kigbu, said at the time: "The new process is expected to usher in faster, better and more transparent method in the issuance of these permits to deserving exporters".

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President Goodluck Jonathan has presented President his federal budget for 2013 to a sitting of the two chambers of the National Assembly. The N4.92 trillion budget for Africa's largest oil producer relies on a production of 2.53 million barrels of oil daily - up from 2.48 this year. The oil is benchmarked at $75 per barrel - up from $72 this year. The President predicts a rise in GDP by 6.5% next year and he expects to bring the fiscal deficit down to 2.17 of GDP %.

The budget will now be debated by the National Assembly. Initial reports suggest that the legislators are unhappy with the benchmarking of the nation's crude at $75, suggesting the benchmark should be revised upwards to $80 per barrel. This has implications for the Excess Crude Account (ECA). Any income realised over and above the benchmark price goes into the ECA. The lawmakers are unhappy to have so much going to the ECA and that is why they want the benchmark price raised.

Reacting to the call to increase the benchmark, the President said: "This threat of oil price volatility remains constant and forces us to rely on a prudent methodology when calculating the benchmark price." He added: "These are uncertain times in the world economy. We've taken necessary steps to mitigate possible negative effects."

The Finance Minister, Ngozi Okonjo-Iweala, also rejected the call to increase the benchmark, saying that the benchmark of $75 will safeguard stability. She added: "The benchmark that we used is based on an econometric model." She also insisted: You cannot just pick the number from anywhere."

The President also announced that that the government will issue a $1 billion Eurobond next year to finance a gas pipeline for domestic use.

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