New finds and significant field developments were reported in 2012.

President Jonathan Goodluck declared Anambra State the nation's 10th oil producing State after oil production operations began on OPLs 915 and 916 in the State in September. The licensee of the two oil prospecting licences is Orient Petroleum Resources set up by the Anambra State government in a public private partnership.

London Stock Exchange listed Afren's success story continued when the company announced the commencement of production from their Okoro Field Extension, some 9 months after the initial discovery in the new field extension.

Canadan-listed Oando Energy Resources Incorporated (OER) also had some good news apart from winning its big acquisition. The company announced the commencement of drilling of Ebendo-5 well.  

Not long after, in October, Oando Energy Resources (OER) reported that they had brought in a production of 2,000 barrels of oil per day (bopd) in the Ebendo-4 well in the Ebendo Field, located in Oil Mining Lease (OML) 56 onshore Nigeria.

Oando said that the production would yield it 855 bopd in the field in which it owns a 42.75 per cent non-operating interest, giving OER a current production of approximately 5,000 barrels of oil per day (including the additional production from Ebendo Field).   That figure will be significantly ramped up once the ConocoPhillips acquisition finalises.

First Hydrocarbon Nigeria Limited (FHN) raised the reserve potentials of the Ogini and Isoko oil fields in Nigeria following the completion of an independent assessment of the reserve and contingent resource potential of the fields in OML 26, which it acquired from the SPDC joint venture in December 2011.    

Niger Delta Petroleum Resources (NDPR), a wholly owned subsidiary of Niger Delta Exploration and Production Plc (NDEP) reported that it was preparing to deliver first gas from its Ogbele field into the Nigeria Liquefied Natural Gas (NLNG) plant in Bonny Island of Rivers State.  

Camac Energy also had something to say about its operations, announcing that it is expecting to ramp up production from its current level of 9,700 barrels per day to 15,000 barrels per day by the end of the first quarter of next year.

The Nigerian National Petroleum Corporation (NNPC) said it was determined to grow the nation's proven crude oil reserves from its current level of 37 billion barrels to 40 billion barrels by the year 2020. The Corporation said it intended to achieve this by increasing production from the current figure of 2.4 million barrels per day (bpd) to a record 4 million bpd by 2020. Nigeria's crude oil production now averages 2.4 million barrels daily after recording an all time high of 2.7million bpd late July.

However, without substantial new investment in the industry, this is unlikely to be achieved. Mark Ward, Managing director of Mobil Producing Nigeria has spoken of a likely 43 per cent decline in production by the year 2025 if new investment in the industry is not forthcoming. He said planned investment of $39 billion and $23 billion respectively in the Production Sharing Contracts and Joint Ventures had stalled pending the passing of the PIB. NNPC has not said how it intends to fund its quest to increase its crude oil reserves, something that is a major concern for its Joint Venture partners.

Although the company has managed to reach a production capacity of 130,000 barrels a day by re-entry into previously abandoned assets and facilities, this will not have any impact on reserves.

Deep offshore exploration, which is needed to significantly ramp up reserves, remains relatively rare. Recently, the Managing Director of the Chevron Nigeria Limited, Mr. Andrew Fawthrop, said at a conference that less than 20 wells have been drilled at water depths greater than 7,000feet in Nigeria. Without significant offshore exploration NNPC's ambitions may remain just that.

The much-touted marginal fields licensing round, which had been scheduled to take place this year did not happen. Speculation had been rife all year about the announcement being imminent, and as recently as October, the Minister reiterated her determination to hold the bid round before the end of the year.  It had been largely expected to take place earlier this year but the fuel subsidy probe seemed to take the focus off the bid round and it appears to have been shelved till things simmered down.  

Expectations have now shifted to early next year after the Minister confirmed so in Vienna in December. This will be the first competitive bid round in about 5 years. There are some 215 delineated oil blocks that are yet to be allocated to oil companies in Nigeria. It is expected that a number of these will form part of the marginal field licensing round.

One stumbling block in the path of the licensing round is the Petroleum Industry Bill (PIB), which had still not been passed into law by the end of the year. Some say it is unlikely to take place before the PIB is passed and that even if it does take place before, it is unlikely that investors will begin the development of their blocks until the PIB passes into law. The success of the licensing round, it seems, hinges on the PIB being passed soon.

Not very much seemed to come of the efforts to boost oil exploration in northern Nigeria and the focus remains very much on the Delta. NNPC said during the year that it was working to increase exploration in the Chad Basins and in September, Vice President, Namadi Sambo, said that a team of consultants hired by the federal government to explore the possibility of exploring for oil in the north had identified 3350 square metres, which have been recommended for further investigation.

Later in the year, NNPC acquired 3,550 square kilometres of 3-D seismic for the intensification of exploration activities in the Chad Basin. The Corporation expects to find oil in commercial quantities in the Chad Basin because of the success of the neighbouring countries of Chad, Niger and Sudan, which have similar structural settings to the Chad Basin.

Insecurity in the north has however hampered NNPC's efforts and the Corporation has said that it will concentrate on the interpretation of the data whilst waiting for the security situation to settle.

In spite of the government's much-lauded "Gas to Power" initiative, oil production companies complain that the use of associated natural gas is hampered by poor infrastructure, harsh fiscal regimes and unfavourable pricing, resulting in the flaring of 65 per cent of gas that is produced.

The Federal Government had issued several deadlines to oil companies in the past to end gas flaring in the nation's oil sector. The latest deadline was 2012, but there are already indications that this may be shifted further again.

The Task Force headed by former Minister of Finance, Dr Kalu Idika Kalu had as its goal, recommendations for achieving self-sufficiency in petroleum products in the shortest time possible.  

The Task Force found that although Nigeria had the largest production capacity in Africa, at 445,000 barrels per day between the three traditional refineries, the country had an average utilization of just 18% of that, making them the worst performing of Africa's 42 refineries. This compares unfavourably with Egypt's 81% and South Africa's 85% for the period from 2006-9.  

The Task Force found that the reasons for the dismal performance included a culture of neglect in the maintenance of the refineries, the poor business model, supply chain, organizational and operational issues.  

The Task Force recommended urgent and far-reaching measures to turn the situation around. At the top of the list was a recommendation that the government should privatize the traditional refineries, divesting at least 51% of its interest in the refineries.  

After failing to engage the original contractors to complete Turnaround Maintenance (TAM) of the three refineries at Port Harcourt, Kaduna and Warri, the government announced that it was intending to engage new contractors at the cost of $1.6 billion to execute the jobs starting with Port Harcourt and moving to Kaduna and then Warri.

In another development, the Managing Directors for the Port Harcourt Refining Company (PHRC) and Warri Refining and Petrochemical Company (WRPC) were sacked early in November. This was largely seen as a reaction to the failure to secure the original contractors for the TAM.

Nigeria's ambitious gas plans were yet to translate into reality by the end of the year due to lack of funds. 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 including those located in Geregu in Kogi State; Olorunsogo in Ogun State; Omotosho in Ondo State and Sapele in Delta State were stalled as a result.

NNPC disclosed that while it made a budget request proposal of $1.05billion in 2012 to facilitate the construction of some gas infrastructure, the National Assembly appropriated only $490million, which was less than 50 per cent of the requested funding. As a result the projects remained unfunded.

However, it is not all bad news as nine key gas infrastructure projects through 2011/2012 were delivered in spite of the funding issue. 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 enabling gas deliverability improvement to Geregu, Olorunsogo, Omotosho and Sapele power plants.

Falling natural gas prices in the global market due to the discovery of shale gas around the world continued to threaten the implementation of three Liquefied Natural Gas (LNG) projects in Nigeria. Shareholders in three major LNG projects in Nigeria had failed to reach Final Investment Decision (FID) on the projects, which have been on the drawing board for several years because of a drop in gas prices at the international market. The projects are 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 alone has consumed a pre-FID expenditure of $1billion.

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. When the projects were initiated several years ago, the price of gas was over $15mbtu before the current drop.

The OPEC daily basket price began the year strong. At the World Economic Forum on Africa in Addis Ababa early in the year, the Minister of Petroleum, Diezani Alison-Madueke said the oil price "will remain as it is for the next few months." That statement turned out to be prophetic as oil remained at over $110 only dropping below $110 on May 8, the first time since January where it had remained for more than four months.  

Since then, the basket price has been struggling to get to achieve that level and reaching $108.03 on the 27th of December. Some analysts are predicting that it will plateau at around $100 this year and is unlikely to reach the levels of early 2012.

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).

Crude oil theft, mostly through pipeline vandalisation, was the biggest issue for producers of oil. This led to a steep rise in oil spill incidents, accounting for more than 75 per cent of oil spills, according to Shell. The managing director of Shell Petroleum Development Company (SPDC), Mutiu Sunmonu, said: "This is a "a serious attack on the state - the people, the economy, and the environment." 

The government was forced to take decisive action when in May the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke set up a task force as part of the strategy to deal with the rising incidence of crude oil theft. The decision to set up the joint task force was taken at a round table meeting involving the service chiefs (Army, Defence, Navy, Air) and the CEO's of international oil companies. 

According to the Federal Government, about 180,000 barrels of oil, equivalent to about $7billion dollars, per annum is lost to oil theft.  The International Energy Agency, in its latest Oil Market Report released in November, confirmed that the Nigerian government is losing an estimated $7 billion every year due to oil theft, illegal refining and high costs. According to the report, most of the oil is lost to pipeline damage from sabotage. Nigeria's output fell this year to the lowest it has been in two and half years after production fell to 1.95 million barrels per day (bpd) at one stage. Even with the drop in production, Nigeria remains Africa's largest producer, just marginally ahead of Angola.

The task force made some gains shutting down many illegal refinery operations over the rest of the year.  

Imports of Nigerian crude from the US declined considerably early in the year on the back of rising US output. Drilling in shale-rock formations has led to significant increases in US crude production. Local production in the country, which is the world's largest consumer of oil, rose to 6.24 million barrels a day in May, the highest production it has recorded since 1999. At the same time, its import of Nigerian crude fell to 352,000 barrels a day in February, a third of the amount it purchased the same time the previous year.  

As a result of the rise in US output, Nigeria had to look to other markets and Asian refineries are rushing to fill the vacuum. By May, Asian imports of Nigerian crude had risen to an 11-month high, averaging about 513,333 barrels a day. Indian state-run Bharat Petroleum Corp (BCPL) is to buy 10,000 barrels per day of Nigerian crude oil from Chevron in a term deal that will run till 31st of March 2013.

NNPC extended the deadline for oil lifting contract applications from April 5 to May 11 to enable foreign traders comply with the Nigerian Content Act. Applicants were required to detail a "Nigerian Content execution strategy", setting out their commitments to subcontracting in some selected areas of the economy including the shipping of the cargo. They were required to show a credible strategy to grow Nigerian equity in tankers nominated to lift allocated Nigerian crude to 25 per cent by 2014 and 90 per cent by 2017.

The results were announced early in July and the surprise for many was that almost half of the $60 billion worth of oil contracts went to Nigerian companies as the country moved to boost local content in oil trading. Analysts were however surprised by the ease with which the Nigerian companies were able to meet the strict guidelines set for this year's applications, including a $600m annual turnover. Large oil traders such as Vitol, Glencore and Trafigura saw their allocations cut whilst some like Unipec (China's Sinopec Corporation's trading arm) and Indian Oil Corporation who saw their allocations increased.

Nigeria normally allocates about 75% of its daily production for sale through term contracts that last for a year. About 580 million barrels of oil a day are sold be sold through term contracts while the rest of its oil is sold through the IOC production sharing partners.

Nigerian crude exports also fell to 1.81 million barrels per day (bpd), an 11-month low, as the provisional loading programme for September was released. This was due in part to the Qua Iboe and Forcados force majeure. However, production was been boosted by the new Usan grade, which came onstream in February.

Recovery was quick as October figures indicated a turnaround in export numbers from the 11-month low helped by significant increases in Qua Iboe and Bonny Light productions.

In October, Nigeria's crude oil exports again suffered a major set-back as Royal Dutch Shell declared force majeure on exports of the Bonny and Forcados grades of crude oil due to pipeline damage caused by oil thieves and flooding. The force majeure declaration on Bonny Light was lifted early in November while the one on Forcados was lifted at the end of November.

In November, crude oil export suffered a further setback as Mobil Producing Nigeria (MPN), a subsidiary of the United States oil giant, ExxonMobil Corporation, declared force majeure on Qua Iboe crude oil exports. Mobil said it could no longer meet its contractual and legal obligations to crude oil buyers due to the November 9, 2012 oil spill in Qua Iboe oil field. The force majeure was lifted mid-December following the completion of the cleanup of the oil spill in Ibeno area of Akwa Ibom State.

In late November, SPDC lifted the force majeure declaration, which had been in force on gas supply. The force majeure declaration was put in place after the Bomu-Bonny pipeline fire disrupted supplies.

Total declared force majeure in mid-October on gas supplies to Nigeria LNG's liquefaction plant, with flooding still posing problems, saying it had stopped oil and gas production on its onshore block 58, which was losing 90,000 bpd of oil equivalent., The force majeure declaration was lifted at the end of November and normal production resumed.

The fuel scarcity experienced around the country from about the middle of the year, lasted till the end of the year. This round of fuel scarcity had its roots in the post fuel subsidy probe fall-out. Depot and Petroleum Products Marketers Association of Nigeria (DAPPMA) shut down their operations in August after repeated threats. They claimed that following the fuel subsidy probe, the government had failed to pay fuel subsidy claims to marketers and that their members were incurring high bank charges and were now hugely indebted to banks as a result.

The Minister of Finance, Ngozi Okonjo-Iweala, denied the claims saying that only those marketers who had been unable to verify their claims were yet to be paid. The shut-down of supplies by fuel marketers to fuel depots hit Abuja hard as fuel queues grew in the capital city. The effects soon started to spread.

By early September, the Independent Petroleum Marketers Association of Nigeria (IPMAN) said their members were experiencing difficulties in supply because of delayed payments, which had impacted their ability to import products. As a result, petrol stations across the country began rationing petrol and fuel queues are grew.  

The situation was exacerbated by the vandalisation of the System 2B pipeline in Arepo, which normally supplies products to the Western part of Nigeria. As a result, the marketers had to ration the fuel supply to depots within that part of the country, which had a knock-on effect on the rest of the country. 

The pipeline, which normally carries 10 million litres of fuel a day remained unrepaired until late in October cutting off the distribution channel to about five depots. During the repairs, two NNPC workers were killed. The Corporation refused to repair it until the safety of the workers could be guaranteed.

NNPC then said it had discovered that a number of vehicles transporting petroleum motor spirit (petrol) were diverted before the vehicles arrived at their destinations.  

By the end of November there appeared to be no end in sight to the current fuel crisis with all sides trading blame and the prospect of the fuel crisis disrupting travel during the Christmas peak travel period loomed large. NNPC blamed the fuel shortage on marketers claiming that the Corporation was releasing enough fuel from the refineries but that the marketers were diverting the fuel supply in order to create a shortage to hike pump prices.

Meanwhile the marketers blamed the problem on the government saying that they were unable to import sufficient products because of outstanding subsidy payments. As a result, they said, they were unable to service current loans, making it impossible to get new loans for new imports.   The marketers also accused private depots of hiking the loading prices, which in turn created higher prices at the fuel pump.

The fuel shortage continued till the end of the year and it is difficult to see a complete end to fuel queues until the security issues with the pipelines are resolved. NNPC announced at the end of the year that it suffered 774 breaks in its pipelines between Ilorin and Lagos in just the second half of the year.

In that period they also recorded 181 break points between Atlas Cove and Mosimi depot, 421 rupture points between Mosimi and Ibadan, 50 vandalized points between Mosimi and122 break points between Ibadan and Ilorin."  As a result of the incessant attacks on the pipelines, it became necessary to move up to 70 per cent of the nation's products by truck. This requires massive fleets of up to 1,212 trucks loads out of the depots every day. In any country, this would be a most inefficient way to deliver petroleum products, but in a country the size of Nigeria, it is unsustainable. Group General Manager of NNPC, Mr Yakubu, said: "No industry can survive under this kind of arrangement."    

The new draft Petroleum Industry Bill was finally submitted to the National Assembly for debate this year after a chequered history. The Bill is intended to harmonise and consolidate about 16 existing laws governing the oil and gas industry, some of which go as far back as 40 years. Investment in the industry ground to a halt while the industry awaited the passage of the Bill into law.  The non-passage of the Bill created an atmosphere of confusion and uncertainty in the oil and gas sector, leading to the loss of billions of dollars in potential revenue for the country. Passing of the PIB is expected to unlock billions of Naira worth of investment into the industry.

The process accelerated after the various committees and task forces set up by the Petroleum Minister, Diezani Alison-Madueke, to review the draft Bill concluded their reviews following extensive consultations with stakeholder groups in the oil and gas sector. The Draft swiftly made its way back to the Presidency.

President Jonathan's determination to see the PIB through to legislation continued unabated as it sailed through the Federal Executive Council (FEC) early in July, after barely two weeks.

The bill was submitted to the National Assembly with speculation rife that it was likely to be passed into law by the end of the year. Unfortunately, that prediction did not come to pass as the Bill remains in the National Assembly mired in criticism.

In November, when the House of Representatives finally began debating the Bill, which has been described by the House majority leader Mulikat Adeola-Akande as "one of the most important bills we will ever consider." It was immediately clear that there were provisions in the Bill that would make it difficult. Among these were:

• The wide range of powers given to any sitting Minister of Petroleum Resources over a wide range of issues including choosing the chair of most of the new regulatory agencies that will be created under the Bill.
• The wide level of discretion accorded the sitting President over petroleum issues, the biggest bone of contention being the discretionary award of licences.
• The unbundling of the Nigerian National Petroleum Corporation (NNPC)
• The Petroleum Host Community Fund, which gives host communities a 10% share of the oil producing companies' net profit.

The Bill remained stuck in the National Assembly till the end of the year.

Oil producers who include the IOCs have been speaking with a strong voice and their complaints have been heard in the right quarters. Even at this late stage in the process, the Minister of Petroleum Resources, Alison-Madueke has said the government is still open to discussions with oil companies. The IOCs have been agitating for better fiscal terms, warning that if the government goes forward with the current provisions of the PIB, billions of dollars worth of investment will be withheld from the industry.

It is largely expected that the Bill will be passed into law early this year, but probably not without changing many of the provisions if different industry stakeholders are to be satisfied. IOCs, indigenous producers, host communities - all have something they are dissatisfied with. The PIB has to be passed but it will only unlock the investment that is being withheld if it can be made more "user-friendly". This is not a case of "any Bill will do," but rather, "only the right Bill will do".

The Nigerian Content programme in the oil and gas industry scored highly with the announcement that it has attracted Foreign Direct Investments (FDI) worth over $500million since the Nigerian Content Development and Monitoring Board (NCDMB) began its implementation 30 months ago. This feat was achieved mainly in the manufacturing of equipment components of the industry.  

The initiative also created over 1000 skilled jobs in Nigeria. The programme mandates original equipment manufacturers to partner with local representatives to set up facilities to manufacture or assemble equipment components in Nigeria. The initiative will also ensure the retention of the industry expenditure within the Nigerian economy on critical industry equipment such as valves, pumps, electrical and instrumentation products.

Other local content highlights were the inauguration of the vessel, the Akpevweoghene, Africa's largest offshore pipe-laying barge, owned by an indigenous company, FENOG Nigeria Limited in May.   Seawolf Oil Services Ltd, a Nigerian offshore drilling company, won a contract with ExxonMobil Corporation for the supply of a rig valued at N22 billion ($140 million). In September, Cameron Offshore Systems Nigeria announced that it had completed its first Christmas Tree for use by Total at Usan field offshore. This is the first made-in-Nigeria Subsea Christmas Tree and was largely seen as a testament to the drive to boost local content in the oil and gas manufacturing process. The frames for the Subsea Christmas Tree were made in Nigeria as well as many of the critical elements in the fabrication of the Tree.  

In December, four Nigerian indigenous companies - Laser Engineering and Consultancy Nigeria Ltd; Ankorpointe Nig. Ltd., Integrated Data Services Ltd, (a subsidiary of the Nigerian National Petroleum Corporation (NNPC)) and Nubian Nig. Ltd - clinched the Shell Petroleum Development Company of Nigeria Limited (SPDC)'s Maturation Studies Services (MSS) contracts, in an initiative to help indigenous firms build their capacity in this key aspect of the oil and gas industry.

Shell companies in Nigeria also received the award for "Most Local Content Friendly International Oil Company" at the 10th anniversary and awards ceremony of the Nigerian Chamber of Shipping held in Lagos.  

There is looming crisis between the Senate on one hand and ExxonMobil, Federal Ministry of Environment and the National Oil Spill Detection and Response Agency (NOSDRA) on the other hand over the two recent oil spill incidents, involving the facilities of Mobil Producing Nigeria (MPN), a subsidiary of ExxonMobil.

Indications to this effect emerged recently as the Chairman of the Senate Committee on Environment and Ecology, Senator Bukola Saraki, has directed the Ministry of Environment, NOSDARA and Mobil to immediately furnish his committee with up-to-date information on the two recent oil spill incidents that occurred in Ibeno and Idoho areas of Akwa Ibom State.

The committee chairman noted with displeasure in a terse statement that within the last one month, there had been reports of two oil spills within the proximity of Mobil Producing Nigeria and yet no official report was made to his committee.

Saraki said the frequency of the occurrence was a cause for concern.

He said the Senate was also worried over the frequency of the spills and what he called the lackadaisical attitude of NOSDRA, Ministry of Environment and Mobil. According to him, the three organisations were not providing necessary information to assist the Senate committee in carrying out its oversight function.

Saraki noted that the wanton degradation of the environment by oil companies necessitated the urgency to pass the NOSDRA Amendment Act 2006, which is currently in the final stages of becoming law.

 "It is only proper to update the law that will encourage all responsible parties to take extra care in reducing oil spills in Nigeria to the barest minimum," he said.

Saraki stated that NOSDRA should immediately furnish his committee with information on the aforementioned spill areas including but not limited to the following:   

"The initial report on the incidents and responses made so far to clean-up and contain the spill, preliminary findings as to the cause of the spills and the volume and preliminary findings as to the responsible party; findings as to the action of the responsible party to re-mediate the environment, preliminary findings as to action plan to caution the impact on the areas specifically affected and preliminary findings as to the impact on the livelihood of the communities so impacted."

The Nigerian Extractive Industries Transparency Initiative (NEITI) published its oil and gas industry audit report for 2009-11, discovering a potential revenue loss of over $9.8 billion. The audit was conducted in line with the requirements for meeting the standards of the global movement, the Extractive Industries Transparency Initiative.

According to the Chair of NEITI Board, Ledum Mitee, NEITI now intends to ensure that taxes, royalties, dividends, penalties, levies and other payments due to the Government are paid.

In January the country erupted with protests after the popular fuel subsidy programme keeping the price of petrol at the pumps artificially low were removed. The subsidy was partially re-instated but it came to light that the process was riddled with corruption and mismanagement.

An ad-hoc panel of the House of Representatives investigated the fuel subsidy payments system and discovered $6.8 billion was lost between 2009-2011.

Nigerian legislator Farouk Lawan took the lead in exposing the scams and fraudulent transactions that enabled some corrupt marketers to amass untold wealth. Unfortunately, his credibility was called into question after one of the country's leading oil marketers, Femi Otedola, accused the legislator of demanding and accepting a bribe of $3 million to remove Otedola's Zenon oil from the list of those under suspicion. Lawan denied the allegation, saying that he was given $500,000 by Otedola but that he disclosed the cash to Parliament and left it there.

The damage was already done and the President convened a new 15-member Technical Committee on Fuel Subsidy Payments, led by Aigboje Aig-Imoukhuede, to look into the allegations and verify and reconcile the findings. The Committee was to:  

• To further verify and reconcile all claims made in the report of the Technical Committee on Fuel Subsidy Payments;
• To properly identify all cases of overpayment and/or irregular payment;
• To accurately identify all likely fraudulent cases for criminal investigation and
• To review any other pertinent issues that may arise from its work and make appropriate recommendations.

The President said he would take immediate action "on all identified cases of fraud."

The Technical Committee released its report in July, indicting 88 firms on various grounds, including for allegedly collecting subsidies without auditors' signature; collecting subsidies without evidence of bill of lading documents; subsidies paid without evidence of bank sales and collecting payments for transactions disclaimed by banks. Although some oil marketing companies were unhappy with the report, describing it as "careless and hasty," it has generally stood up to scrutiny. In keeping with the President's determination to see offenders brought to book, EFCC soon began their investigations and prosecutions had already begun by the end of the year.

Another report that shook the country up was the Petroleum Revenue Special Task force (PRSTF) commissioned by the Honourable Minister of Petroleum Resources on the 28th of February 2012, in the aftermath of the fuel subsidy protests, to probe the oil and gas industry.  The draft report of the Special Task Force, which was led by Mallam Nuhu Ribadu, was widely leaked whilst still with the Minister of Petroleum.

In view of the leaks, the President called for the Special Task Force to finalise and submit its report. The Special Task Force submitted its report to the President in full view of the nation, on the 2nd of November. The presentation was mired in controversy when one of the Committee members, Mr Steve Oronsaye, announced that he disagreed with the findings and contended that the process for the preparation of the report was flawed. The report was, nevertheless accepted by the President.

The findings of the Special Task Force alleged that a total of $183 million (about N28.73billion) in signature bonuses paid by oil companies to the Federal Government was missing. Other concerns highlighted in the report, included: no single point of accountability for the Government's share of crude oil production; traders getting crude oil supplies when they were not on the approved master list; the practice of selling crude to traders rather than refineries; price at which feedstock gas is sold to NLNG is too generous; inability to independently track and measure volumes of gas produced and flared; and no single point of accountability for the income and expenditure streams of upstream petroleum operations.

NNPC came in for particular criticism including in respect of certain practices such as: direct deduction of subsidy payments from the amount due to the Federation Account; discrepancy in the pricing of domestic crude; exchange rates used to remit payments to the Federation Account; and utilisation of domestic crude allocation. NNPC and NLNG have since issued robust rejoinders to address the areas in which they were criticised by the report.

President Goodluck Jonathan presented President his federal budget for 2013 in October to a sitting of the two chambers of the National Assembly. The N4.92 trillion budget for Africa's largest oil producer relied on a production of 2.53 million barrels of oil daily - up from 2.48 this year. The oil was benchmarked at $75 per barrel - up from $72 this year.

The benchmark is the oil price on which the budget is based and if the market price ends up higher, the excess will accrue to the Excess Crude Account and disbursed from there for specified projects. The Minister of Finance, Ngozi Okonjo Iwealla had been keen to fix the benchmark at $72 but the Governors lobbied the President to raise it to $75.  The Governors have more to gain with a higher benchmark as less accrues to the Excess Crude Account and therefore more to the States if oil prices are higher than the benchmark.

The legislators were unhappy with the benchmarking of the nation's crude at $75, arguing for it to be revised upwards to $80 per barrel. Any income realised over and above the benchmark price goes into the ECA and the lawmakers were unhappy to have so much going to the ECA.

The Medium Term Expenditure Framework (MTEF) and Fiscal Strategy paper contained in the budget, was finally passed by the National Assembly towards the end of the year and the two houses of the National Assembly agreed to adopt a bench mark of $79.

The Nigerian oil and gas industry was thrown into mourning following the death of Dr. Levi Ajuonuma, the Group General Manager (Public Affairs) of NNPC, in the Dana Air crash on the 3rd of June. The plane crashed on its approach into Lagos on Sunday, killing all 153 people on board. Mr Tony Okenedo of Shell Petroleum Development Company captured the mood of the industry thus: "It is difficult to say a word at this period. The death of Ajuonuma and that of all the victims is indeed a monumental loss."

News about the $1 billion deal involving Shell, the Federal Government and Malabu Oil and Gas Limited had been circulating in the press earlier in the year. However it was when documents which were filed in a US Supreme Court case revealed the involvement of Dan Etete, former Nigerian Petroleum Minister in the deal and that the Nigerian press interest in the transaction peaked. It emerged that Etete had been paid more than $1 billion through his company, Malabu Oil and Gas, in the deal. This prompted the House of Representatives to pass a resolution sponsored by Rep. Robinson Uwak, swiftly followed by Senate, to set up an ad-hoc committee.  

The background to the transaction was that Malabu was allocated OPL 245 in April, 1998 and in accordance with the terms of the grant, it appointed Shell as its technical partner. The two companies executed relevant agreements, including a Joint Operation Agreement in 2001. Shell took 40 per cent participating interests in the venture in a farm-in- agreement and also signed an agreement with Malabu as its technical partner for the venture. The licence was subsequently revoked by the Federal Government on July 2, 2001.

Malabu petitioned the House of Representatives Committee on Petroleum to look into the matter. The Committee found no rational basis for the revocation and directed the Government to withdraw the re-award of the block, which it had, in the meantime, made to Shell Nigeria Ultra Deep Limited, which brought ENI's local subsidiary, Nigerian Agip Exploration Limited into the block.

Malabu also instituted a suit before a Federal High Court in Abuja, which was subsequently struck out, but then lodged an appeal at the Court of Appeal in Abuja.  An amicable settlement was entered between Malabu and the Federal Government before the appeal was heard. In compliance with the settlement agreement executed on November 30, 2006, OPL 245 was to be fully and completely restored to Malabu in consideration of Malabu withdrawing its appeal.

The terms of the settlement were however not implemented and in 2010, when the current administration came to power, Malabu again petitioned the Federal Government to implement the terms of the settlement on the basis of which Malabu had discontinued its appeal.

A new settlement was reached on April 29, 2011 between the Federal Government and Malabu Oil & Gas Limited under which Malabu agreed that in consideration of the company receiving compensation from the federal government, it would settle and waive any and all claims to any interest in OPL 245.

In furtherance of the Resolution Agreement, SNUD and ENI agreed to pay Malabu through the Federal Government acting as an obligor, the sum of US$ 1,092,040,000 billion in full and final settlement of any and all claims, interests or rights relating to or in connection with Block 245 and Malabu agreed to settle and waive any and all claims, interests or rights relating to or in connection with Block 245 and also consented to the re-allocation of Block 245 to Nigerian Agip Exploration Limited (NAE) and Shell Nigeria Exploration and Production Company Limited (SNEPCO).

In consequence, there was effectively a purported sale of OPL 245 to the Shell/Agip consortium for the sum of $1,092 billion and immediate transfer of the entire sum to Malabu Oil and Gas Limited, an indigenous oil company as compensation for its alleged prior interest in the Oil block.

Nigeria's crude oil production, including condensates and natural gas liquids, was estimated at 2.26 million barrels per day (mbd) or 207.92 million barrels for the third quarter. Crude oil export was estimated at 1.81 mbd or 166.52 million barrels for the quarter, while deliveries to the refineries for domestic consumption remained at 0.45 mbd or 41.4 million barrels.  

The average price of Nigeria's reference crude, the Bonny Light (370 API), estimated at US$111.04 per barrel, rose by 1.6 per cent over the level in the preceding quarter.

Although oil revenues fell, crude prices drove up foreign reserves. The Excess Crude Account was also a beneficiary of the crude prices with the Federation Accounts Allocation Committee (FAAC) of Nigeria has lodging US$1.07 billion into the ECA, bringing the new balance to US$9.66 billion in November.  

A number of oil and gas producers recorded excellent results in the markets. Two notable companies were Oando and Afren.

Oando revealed its third quarter un-audited results. Turnover increased by 25% to N487.7 billion naira. At the same time, gross profit has improved by 12% to N50.6 billion while profit after tax stands at N9.3 billion.

Oando Energy Resources (OER) completed its listing on the Toronto Stock Exchange (TSX). Chairman of Oando Plc was there for the formal listing of the company which was marked by the ringing of the bell to open trading.  OER obtained approval from the TSX to list its shares after the exploration and production arm of Oando Plc, Oando Exploration and Production, completed the acquisition of Canada-based Exile Resources Incorporated. All the assets of Oando E&P have now been transferred to OER.  

London Stock Exchange listed independent oil and gas company, Afren Plc confirmed that it was on track to realise over a billion dollars of net operating cash flow in 2012 as it released its nine-month results. The oil and gas explorer announced record sales revenue of almost $1.1 billion (£0.7 billion) and operating cash flow before movements in working capital of $787.7 million. Afren said its record financial results were driven by the year-on-year increase in net production from the Ebok field offshore Nigeria.

Capital Oil was delisted following its implication in fuel subsidy fraud.

Bank lending in oil and gas continued to rise on the back of major acquisitions in which local banks participated in financing.

Skye Bank reported early in the year that its lending for the previous year had risen to $1 billion. Of that sum, $700 million went to finance the upstream sector, including sole financing of four marginal fields. About $200 million was spent on downstream financing and $120 million went to oil service companies. The Managing Director of Skye, Kehinde Durosimi-Etti reported that the companies have generally maintained good payment records.

First Bank Group announced that it had committed over N500 billion for the finance of oil and gas projects. The bank intends to support indigenous companies in an effort to boost the local content in the oil and gas sector.  

The Forbes list of Africa's Richest 40 people released in early in December showed Nigerians to be among the richest Africans, second behind South Africa. The list also shows that oil and gas accounted for the fortunes of most of the Nigerians, 9 out of 11, on the Rich List. Aliko Dangote topped the list for the second year running with a net worth of $12 billion. Mike Adenuga of Conoil Producing was 5th, Folorunso Alakija and Theophilus Danjuma were joint 24th, Oba Otudeko, chairman of the Honeywell Group was 26th, Mohammed Indimi, chairman of Oriental Energy Resources, O.B. Lulu Briggs of Moni Pulo was 31st, Sani Bello of Amni Petroleum was 37th, and Hakeem Bello-Osagie was 40th.

AMCON showed it meant business when it issued a list of its debtors to the Central Bank of Nigeria. Central Bank issued the list to banks in Nigeria on the 21st of September, barring them from advancing further credit facilities to the debtors. There were a number of petroleum companies and among these were Capital Oil, Forte Oil, MRS Holdings and Zenon Petroleum. Some of the companies, including Nestoil, reached a compromise with AMCON for repayment of their debts and are no longer blacklisted. However, the Capital Oil case seemed to take on a life of its own as AMCON made a determined pursuit of the company's assets over a N48 billion debt.

The Supreme Court judgment on the disputed Bakassi oil wells was delivered in the middle of July. In the dispute between Cross River State and Akwa Ibom State, the Court ruled that the disputed 76 offshore oil wells did not belong to Cross River State, as the wells were no longer within the area of its maritime territory.  

The court held that the 76 oil wells had been correctly attributed to Akwa Ibom State by the Revenue Mobilisation Allocation and Fiscal Commission (RMFAC). This meant that Akwa Ibom State could benefit from the revenue sharing formula between the Federal Government and the States in which the oil fields lies. Under the formula, Akwa Ibom was entitled to 13% derivation revenue from production from the 76 oil wells as they are within its maritime territory. In spite of press reports of further legal action, it seems the matter is now legally settled.

Another inter-state oil well dispute erupted soon after between Rivers State and Bayelsa States over the Soku and Oluasiri oil wells and fields which are on the boundary of both states.

The President met with both State Governors in an attempt to mediate between them on this issue. 

The National Boundary Commission (NBC) is understood to be working to resolve the issues and say they have scheduled activities to be undertaken with officials of the two States in order to resolve the matter once and for all.

Economic and Financial Crimes Commission (EFCC) announced the commencement of the prosecution of fuel subsidy suspects. The first batch of arraignments of 7 oil companies and 12 individuals was delayed due to "logistic and procedural issues" giving ammunition to sceptics who do not believe that much will come of the prosecutions. Since then more companies and individuals have been charged and are on trial for subsidy fraud.

Reacting to the news of the indictments, the Executive Director of the The NGO Africa Network for Environment and Economic Justice (ANEEJ), Rev. David Ugolor, warned the Commission not to fail to deliver justice: "The Judiciary and the EFCC cannot afford to disappoint Nigerians and the global community watching how they handle this case."

There was also wide environmental damage after the nation-wide flood that ravaged parts of Nigeria, especially the oil-producing communities, and slashed the country's daily crude oil production for the third quarter of 2012 by 500,000 barrels.

Notable incidents reported were:

• Shell's shut down of a pipeline in Bonny, leading to a declaration of force majeure on Bonny Light deliveries.

• Shell's reported breach in its Nembe Creek Trunk Line in the Delta region.

• Shell's shut down of the Imo River Trunkline in its Eastern operations after it found several crude theft points on the facility. Production of some 25,000 barrels of oil per day was deferred.  

• ENI reported oil spill in its Nembe-Obama pipeline in Nigeria's onshore Niger Delta due to sabotage.

• Mobil Producing Nigeria reported oil spill on the coast in Ibeno, Akwa Ibom. The company claims it spent $500 million in the clean up of the spill, after local communities complained about the delay in cleaning up the spill. Much of the money, they say was spent engaging the community youth in the clean up.

Other notable events were:

• Nigeria's National Oil Spill Detection and Response Agency (NOSDRA) recommended a fine of $3 billion dollars against Chevron for the rig explosion, which caused a 46-day fire at its Funiwa 1A gas exploration well.

• Friends of the Earth and some Ogoni individuals took Shell to the Dutch Courts over the issue of alleged oil pollution in Ogoni land. The case was filed by four Nigerian plaintiffs in conjunction with Friends of the Earth Netherlands/ Milieudefensie and supported by Friends of the Earth Nigeria.

• Federal Government and other stakeholders commenced the implementation of the report of the United Nations Environment Programme (UNEP) on Ogoniland in Rivers State after making a budgetary allocation for the implementation of parts of the report.

Oil companies are generally very keen to be seen to be doing good in view of the bad press they get over the environment, so it was not surprising to see so many companies handing out scholarships and tools to their host communities. However, the most notable CSR activities were following the floods. Oil companies rallied round to assist communities that had been devastated by the floods. The support came as the National Emergency Management Agency (NEMA) announced that the floods claimed 363 lives and displaced 2.1 million people in different parts of the country.

SPDC presented relief and medical materials worth over N75 million to the people of Rivers, Bayelsa and Delta states, where the flooding hit hardest. This was in addition to the $1 million jointly donated by SPDC and Shell Nigerian Production Company (SNEPCo) through the Red Cross in support of flood displaced persons in 24 states across the country.

Mobil Producing Nigeria Unlimited (MPN) and Esso Exploration and Production Nigeria Limited (EEPNL), affiliates of Exxon Mobil Corporation also donated the sum of $500,000, about N80million to victims of the disaster in five of the worst hit states.

Addax Petroleum Exploration (Nigeria) Limited joined the relief effort by presenting relief materials to the Eziorsu and Orsu-Obodo communities in Imo state, where its Izombe Flow Station is located.

Among other notable CSR activities in the year were Afren Plc, which is supporting the Petroleum and Chemical Engineering Department of the University of Uyo, Akwa Ibom State, in its bid to win back accreditation for the programme which it lost in 2008 and the 2012 recipients of the ExxonMobil scholarship which will enable 5 women, described by the company as "best and brightest", to attend one of the world's most prestigious Masters programmes in global health at world leading University of Oxford.