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Greetings!
Welcome to our 39th issue. We are looking forward to participating in our first NOG conference organised by CWC. It will be taking place in Abuja from the 18th to the 21st of February. Please make sure to visit us there at the Guardian Stand where we will be happy to tell you more about NOGintelligence and how we can be of service to you. I look forward to seeing many of you.
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NNPC, Petroleum Ministry In 'Hot Seat' Over Gas Flaring Fund
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The Ministry of Petroleum Resources and the Nigerian National Petroleum Corporation (NNPC) are to answer questions on the management of funds generated from penalties imposed on international and indigenous oil companies that still flare gas in their operations.
NOGintelligence gathered that Senate has written to both government entities asking for explanations from them. According to reliable sources, the Chairman, Senate Committee on Gas Resources, Mrs. Nkechi Nwogu said that the Senate was particularly interested in knowing how much has accrued to government from such penalties and where the money was being paid to.
According to the source, she said, "We just wrote to the NNPC and the Ministry. The letters were signed on Thursday last week. We want to know how much has been received as dividends and where the money is being paid into."
"As a committee, it is our responsibility to find out because we feel the truth should be known to Nigerians."
The fine was introduced by the government as a way of stopping or reducing to the barest minimum, cases of gas flaring in the production fields of most oil firms, especially the International Oil Companies (IOCs), who are now forced by this action to develop and work on programmes to address the menace of gas flaring to a globally acceptable standard.
The recent call by the Senate, an industry source told NOGintelligence, may not be unconnected with the revelations last year by the Nuhu Ribadu led Petroleum Revenue Special Task Force that none of the oil companies operating in Nigeria had paid any penalty into government coffers for gas flaring since the beginning of the year.
The source who pleaded anonymity said: "As part of its oversight function I think the Senate is taking the bull by the horn with the decision to quiz NNPC and the Ministry of Petroleum Resources on the whereabouts of monies expected to have been made from fines paid by the IOCs for gas flaring. I think it is a fall out of the damning revelation by Nuhu Ribadu last year that the oil companies were not paying any penalties to the coffers of the government."
But when contacted on phone as regard the development, an official of the ministry feigned ignorance of such letter but however said if it is true there was nothing strange about getting an invitation from the Senate for clarification on a particular issue.
When pressed further on the veracity of the claim by Nuhu Ribadu that the oil companies were not paying into the coffers of the government, he declined to comment.
It is believed that the country suffers an annual financial loss of around US $2.5 billion as a result of gas flaring. The nation currently routinely flares between 1.3 billion cubic feet and 1.4 billion cubic feet of gas a day. The country's annual gas flare is put to about 460 billion standard cubic feet out of the 187 trillion (SCF) of proven gas reserves and 600 trillion SCF of unproven gas reserves. Environmentalists find it particularly worrisome that the country remains inactive over gas flaring despite the regulations.
Under the Associated Gas Re-Injection Act 1979, flaring was prohibited under environmental regulations as from 1st January 1984, unless a ministerial consent has been lawfully issued and conditions are complied with. Under section 3 of the Act, consent could only be issued if the Minister was satisfied that the utilization or reinjection was not appropriate or feasible in a particular field or fields. The Minister was empowered to require the companies to pay a penalty for continued flaring. The penalty of 2 kobo per mmscf introduced as from 1st January 1984 has repeatedly been increased. Following the unveiling of the Nigerian Gas Master Plan 2008, the National Domestic Gas Pricing & Supply Regulations were brought in, under which new projects have to be designed without any gas flaring. The penalty for flaring was also increased to $3.50 per mmscf.
In spite of deadlines that have been imposed by the government, the last one being the end of 2012, oil producing companies continue to flare associated gas. They 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. Mr Gbite Adeniji, an oil and gas lawyer, advocates a carrot and stick approach of big incentives and stiff penalties to encourage oil companies to stop flaring and start utilising associated gas.
Last year, the Federal Government said it might shut down some oil fields as it tried to clamp down on gas flaring defaulters, even if it would lead to loss of revenue. It also said it might choose to make public the names of defaulters if the IOCs failed to adhere to directives of the Department of Petroleum Resources regarding flaring. The government has failed to carry out any of those threats.
Despite repeated requests by Environmental Rights Action/Friends of the Earth Nigeria, no consents or conditions for the granting of consents have been disclosed by any of the companies.
Currently, Nigeria is the holder of the world's seventh largest natural gas reserves and is considered to be one of the top two gas flaring nations in the world, after Russia. There is evidence however that the situation is improving. Last year, different reports suggested that gas flaring dropped from 19 per cent in December 2011 to around 15 per cent towards the end of last year. The Nigerian National Petroleum Corporation (NNPC) attributed the drop to the increased use of gas for power generation, export and industrial applications.
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ExxonMobil's Force Majeure On Some Qua Iboe Exports
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Exxon last week warned customers of supply disruptions from the nation's largest oil stream, Qua Iboe due to pipeline damage. Not long before, Shell had announced that gas supplies to one of the world's largest Liquefied Natural Gas, LNG terminals would be delayed, also due to pipeline damage.
With all the disruptions to supply experienced last year by International Oil Companies (IOCs) this further dents the reputation as a reliable energy supplier at a time when demand for Nigeria's crude imports is falling in the United States and Asia has an increasing choice of suppliers.
Nigeria's oil has been highly sought after for decades by the United States because it is easy to refine into gasoline, but the world's biggest economy is increasingly serving its fuel needs domestically.
Asian buyers have a far greater choice of oil producers in Africa than a few years ago, especially from West African neighbour Angola, which often provides China with more oil than Nigeria.
The latest force majeure declarations follow a raft of problems at the end of last year when four oil majors - Shell, Exxon, Total and Eni - announced outages due to rampant oil theft and the worst floods Nigeria has seen in 50 years.
Analysts estimate that in the last year oil theft and pipeline vandalisation cost Nigeria up to $7 billion in revenue out of its 2 million barrel per day crude export business.
Exxon said that despite declaring the force majeure - an inability to fulfil contracts due to unexpected events - on Qua Iboe exports, which can reach 400,000 bpd, it continued to produce benchmark grade and the export terminal was open. An eight day delay on cargoes is expected.
Exxon only lifted a three-week long force majeure on Qua Iboe in December, which was caused by flooding and oil spills, which locals said is still being cleaned up.
Oil theft is a major problem in the winding creeks and waterways of the Niger Delta, where it is easy to conceal boats and illegal refineries in the dense mangroves. Nigeria estimates around 150,000 bpd is stolen, much of it sold abroad according to commentators.
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NNPC Approves Erha North Phase II Project
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Erha North Phase II project just got a boost as the approval for the award of three engineering, procurement and construction (EPC) contracts for the project was granted to ESSO Exploration and Production Nigeria Limited (EEPNL), operator of Oil Mining Lease 133, by the Nigerian National Petroleum Corporation (NNPC).
Disclosing this in a statement, the NNPC General Manager, Public & Government Affairs, Paul Arinze, said the EPC awards represent significant milestones in the development of Erha North Phase II and demonstrate continued cooperation between NNPC and EEPNL to grow the business and support the Nigerian government in meeting national goals.
He said the contracts were in line with Erha North Phase II project objectives, which include significant national content contributions, to bring direct and indirect benefits to the Nigerian economy through project spending and employment.
The multi-billion dollar project and others like it under joint ventures with the International Oil Companies (IOCs) had earlier witnessed a review from NNPC who took a second look at the high cost estimates of the projects in a bid to shore up the Federal Government's take from the oil fields.
After being previously accused by the IOCs of dragging its feet, NNPC responded that it would not be stampeded into abandoning its firmly established process of contract award by what it termed calculated media blackmail ostensibly by the (IOCs) and other interested parties.
The Corporation, in a statement noted that while the industry concern is normally expected in the process leading to the award of major oil and gas projects, it has an established procedure of contract and project approval which includes the conduct of economic analyses to establish project viability and federal government's take from investments in the upstream sector of the industry.
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OPEC Daily Basket Price Still Riding High
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The price of Organization of the Petroleum Exporting Countries (OPEC) basket of twelve crudes stood at $114.67 a barrel on Thursday, compared with $114.94 the previous day, according to OPEC Secretariat calculations.
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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OPEC's Lifts 2013 Demand Forecast
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In the latest OPEC report, the organization lifted its 2013 oil demand growth forecast to 840,000 barrels a day, an increase of 80,000 barrels a day compared with an earlier estimate. OPEC cited signs of economic recovery and colder weather for the demand increase, with the bulk of higher consumption coming from China.
OPEC's monthly report was "mildly supportive, featuring a minor upward revision to demand," but production of 30.32 million barrels per day was still above the projected 2013 call on OPEC crude of 29.78 million barrels per day, said Tim Evans, energy futures analyst at Citi Futures, in a note. That implies a surplus of around 540,000 barrels per day for the year as a whole "unless OPEC trims production further," said Evans.
The price of OPEC basket of twelve crudes rose to $114.94 on Wednesday following the release of the report. At the same time the previous week, the OPEC basket price stood at $112.68.
"Oil prices look to be gaining strength from the demand-side of the equation, as OPEC raised its demand forecast and macroeconomic sentiment turned somewhat more upbeat," said Matthew Parry, senior oil-market analyst at the International Energy Agency (IEA).
He however warned traders to remain cautious as the economy looks far from certain at the moment.
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DPR Seals 23 Petrol Stations In Abuja, Kogi
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The Department of Petroleum Resources (DPR) has shut about 23 petrol stations in Abuja and Kogi, due to their alleged involvement in "sharp practices".
In a media statement on Wednesday, the department said in the course of its recent routine surveillance and inspection of petrol stations under its Abuja zone, it sealed three petrol stations in Benue State.
The Deputy Director, Public Affairs, Belema Osibodu said in the statement that, Prime Power and Aptro Nigeria Limited were sealed for six months for the sale of adulterated diesel, whilst Mitano Nigeria Limited, was sealed for one month for under-delivery of Premium Motor Spirit.
An additional 20 petrol stations within Lokoja and other parts of Kogi State found operating without licences, according to her, were also sealed.
She said: "Since this exercises, 10 of the petrol stations have come to regularize their licences with the DPR. The essence is to ensure that all operators are licensed to operate within the law.
"Also, following a recent exercise in Idah and Ayingba in Kogi State respectively, Total Nigeria Plc, Oando Plc, Sylet Nigeria Limited, Yaman Nigeria Limited, NEGS Nigeria Limited, Alfa Allied Nigeria Limited, Du Muktar Petroleum and Asta Petroleum Limited, were found to be engaged in product diversion, selling above approved price and operating without licence".
She added that in line with the agency's mandate to maintain standards and eliminate sharp practices in the downstream sector of the petroleum industry, DPR would continue to engage in the surveillance of petrol stations and ensure the full sanction of any of them found to be involved in sharp practices.
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Falcon Petroleum Targets Ghana For Gas Distribution
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Falcon Petroleum Limited, one of the leading indigenous oil companies with a franchise to distribute natural gas to industries and bulk energy users in Ikorodu, Lagos has concluded arrangements to extend distribution of the product to Ghana.
The Managing Director of the company, Prof Joseph Ezigbo made this known at an event for the pipeline's host communities in Ikorodu. He also revealed that they are looking to expand to Ghana. "We are not only hoping to invest in Nigeria we are also looking at Ghana. At the moment we are working with our partners in Ghana to supply gas to the West African country. We are interested in building a gasification plant in Ghana to supply gas to industries in that country," he said.
Though Ghana is already getting gas from Nigeria through the West Africa Gas pipeline Company (WAGPCo), this is not enough for the country at the moment.
On the other plans of the company, Ezigbo said: "Falcon Petroleum has grown substantially. We are consolidating on pumping gas to industries. We are also increasing our capacity. At the moment the company is building a 12-inch gas pipeline. This will increase the gas supply as well as gas coming into our system. This will also increase the ability of customers to be connected to our gas supply grid."
"We have gone into assembly and manufacturing of equipment which is used in the country's oil and gas sector. We have entered into partnership with a company in India to operate a company in Nigeria to fabricate gas stations," he explained.
"We hope to complete the first phase by March this year. We are also trying to expand to other areas of the country because whether we believe it or not, industries depend on gas and the industrial revolution will not just be within the western region but all over the country."
He also praised the Ikorodu community for providing a friendly environment for the company's operations.
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Total Lost 3% Global Output to Nigerian Flooding
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French oil giant, Total has reported that it lost 3 per cent of its global hydrocarbon production in 2012 to the flooding that ravaged many parts of the Niger Delta and the Elgin gas leak incident in the United Kingdom's North Sea.
In its fourth quarter and full year 2012 results, which was released recently, Total also stated that its hydrocarbon production in 2012 was 2,300,000 barrels of oil equivalent per day, representing a decrease of two per cent, compared to 2011.
Total also partly blamed the gas leak at its Ibewa gas field in Ogba/Ndoni/Egbema Local Government Area (ONELGA) of Rivers State for its decline in production in 2012.
Focusing on the good news, Global Chief Executive Officer of Total, Mr. Christophe de Margerie noted that in 2012, the company delivered solid performance, with a net income of 12 billion euros and reinforced its strong financial position.
"The environment remain favourable upstream with Brent prices above $110 per barrel and, in the downstream, refining margins benefited from a temporary rebound at mid-year," he said.
Total however noted that it would spend more than 80 per cent of its $28 billion organic investment budget for 2013 on its upstream activities. The French major said it expected to achieve production growth targets of 3 per cent per year, on average, through to 2015.
Total is also targeting 3 million barrels of oil equivalent per day (boepd) by 2017. According to the French multinational, the production growth should be fuelled by the extension of Oil Mining Lease (OML) 58 in Nigeria as well as its 2012 start ups and its anticipated 2013 start ups in Gabon, Angola LNG, Kashagan in Kazakhstan.
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Local Content: Expatriate Workers To Scale Biometric Exercise Hurdle
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As part of the local content agenda, expatriates working in the Nigerian oil and gas industry will now be required to undertake biometric registration as part of the conditions they must fulfill before their organisations can secure expatriate quota approvals from the Board.
This directive which was handed down by the Nigerian Content Development and Monitoring Board (NCDMB) is to capture details of all foreigners working for operating and service companies in Nigeria on the electronic platform - Nigerian Content Joint Qualification System, (NOJICJQS) - being operated by the Board.
The Executive Secretary of Board, Ernest Nwapa, stated this in Lagos at the Addax Executive Business Seminar on Nigerian Content disclosing that the exercise will start in the first quarter of 2013.
He noted that the registration will help the board evaluate the skills of the expatriates and confirm that such skills are not available locally in the industry. It will also assist the board to electronically track the numbers of expatriates in the industry, their length of stay, compliance with provided succession plans and expected date of exit.
At the completion of the biometric registration, he said each expatriate will get a unique card, which he or she will produce whenever the monitoring team from the Board come for periodic verification.
Nwapa added that Section 33 of the Niger Oil and Gas Content Development Act (NOGICD) Act mandates operators to apply and receive the approval of the Board before making any application for expatriate quota to the Ministry of Internal Affairs or any other agency of the Federal Government.
Among other conditions, the Board requires companies seeking to get expatriate quota approvals for their operations in the oil and gas industry to first advertise the positions to Nigerians through national and international media outfits.
Other new initiatives of the Board endorsed by its Governing Council, which is chaired by the Petroleum Minister, Mrs. Deziani Alison-Madueke, include the planned establishment of industrial parks in every oil producing state in partnership with State governments. This will stimulate the participation of the communities in the local supply chain and provide a direct platform for collaboration with original equipment manufacturers (OEMs), which are now required to manufacture a minimum proportion of components in Nigeria.
He said the Board will collaborate with major operators, service companies and the relevant state governments to build the industrial parks, which will support operations of the industry and help achieve service efficiency through shared services.
Other benefits of the industrial park concept include the reduction of start-up investment cost for new business, stakeholders' collaboration and industry commitment to utilise manufactured products from industrial parks.
The parks will host manufacturing activities driven by oil and gas industry demand but will service other sectors of the economy as they grow organically into integrated industrial zones. The start-up product slate will include steel pipes and allied fittings, switchgears, panels, skids, pipe racks and brackets, environmental protection equipment and chemicals. It will also include industrial gases, computers, telecom and other ICT equipment components, furniture, liquefied petroleum gas (LPG) cylinders, bolts and nuts, and drilling fluids.
He said the Board would activate the provisions of the Act to provide specific incentives for OEMs that participate in the initiative such as locking in orders for equipment or components manufactured/assembled in these parks for an extended period. He added that Nigerian companies had committed to invest over $600 million in the manufacture and assembly of various equipment and components.
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Senate Moots First Line Charge Idea For Crude Oil Refining
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There are indications that the Senate may be planning to put the refining of crude oil on first line charge in order to check alleged excesses in the nation's oil sector and encourage local refineries. The Chairman of the Senate Committee on Petroleum (Downstream) Magnus Abe who disclosed this in Abuja said it is in the wisdom of the upper chamber that one way of clearing the mess in the oil industry was to encourage local refiners by way of first-line charge.
First-line charges are revenue allocations that do not pass through the Presidency, but are made directly by the National Assembly, such as those to the National Assembly, the Judiciary and the Independent National Electoral Commission (INEC).
He said: "We should, as a matter of policy, introduce a first-line charge on all crude oil produced in this country for local refining so that if you build a refinery in Nigeria, you don't even have to talk to the government. Once you show capacity to actually refine crude oil here, it is possible."
Explaining the positive implications of the first-line charge, he said: "You have the right to buy Nigerian crude before people who are taking it out unrefined and that rule applies in a lot of countries, including the United States of America (USA). You can take it out of Nigeria but if you have a rule like that, it would help people who are uncertain as to what the climate would be in terms of, if you go and invest in building a refinery here, are you going to actually have access to crude to fix stock to run your refinery?"
"Even in the Petroleum Industry Bill (PIB), we are going to try to push some of these things to make it legal and be backed by law because it exists in other places," he continued.
"So, you must add value to our crude before you can take it out and if you are prepared, you will get preference over those who are not adding value. This is a common sense solution and it will help to fire up refinery business because it guarantees you fuel stock and compels those who are drilling in Nigeria to invest in trying to refine in Nigeria."
On the $1.5 billion loan being proposed by the NNPC, the lawmaker said that the Senate would not hesitate to take a legal action if the proposal was carried out without the approval of the National Assembly.
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NNPC Pipeline Gas Leak Puts Rivers Community At Risk
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The management of the Port Harcourt Refinery has rushed to allay the fears of the people of Ibuluya-Okrika, a community in Okrika Local Government area of Rivers State, who are worried that they are facing a grave risk of gas fire from the vandalized pipelines of the Nigerian National Petroleum Corporation (NNPC) in that area.
The spokesman of the Refinery, Ralph Ugwu who confirmed the development said the area had been cordoned off, with the pipelines clamped and repairs being made. He said the leakage was caused by the activities of vandals who thought the product in the pipelines was fuel.
He said: "What we did first was to cordon off the area and clamped the affected parts of the pipelines. The leakage stopped with the clamping. Immediate repairs have been done and there will be no harm to the people. The officials of the refining have begun work. The safety of the people of the area is guaranteed."
The Chairman of Okrika local Government area, Tamuno Williams, also said there was no cause for alarm. He assured the community that he had taken steps to ensure that gas eruption does not reoccur.
The Chairman of the Community Development Committee (CDC) of the community, Remember Chukwudi however called for government intervention. It appears too that fears remain within the community that the leakage could lead to a major fire incident. The source said: "The people of Ibuluya-Okirika are living in fear. Nobody cooks. We cannot put on lanterns and when motorcycles get to the area, they must get off their bikes and push them for fear of explosion. The management of the refinery is not maintaining the gas lines."
He continued: "The people of the community are not safe. This is not the first gas leakage we are experiencing. We suffered a gas blowout in 2102. Do they want to kill us?" According to the source, the maintenance people came from the refinery and left without doing anything.
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CORPORATE SOCIAL RESPONSIBILITY NEWS
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WAV Group Donates Bus to Down Syndrome Foundation
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As a way of giving back to the society, an oil servicing company, the West African Ventures Group (WAV) has donated a brand new 18-seater bus to the Down Syndrome Foundation of Nigeria. At the presentation of the bus at the Foundation's office in Lagos, the company's President who was represented by Mrs Agada Eno said the gesture was the company's way of putting smiling faces on the needy and less privilege in the society.
On the choice of the Foundation as a beneficiary, Eno said the Foundation was found to be in dire need, and the WAV Group felt honoured to meet that need.
She said: "Their fliers got us, and we visited the premises and based on our findings, we presented a report to the President who immediately took the decision that the company should donate a brand new bus to the Foundation."
Receiving the key of the bus, the National President of the foundation, Mrs Rose Mordi, expressed appreciation for the kind gesture from the company.
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SNEPCO - Bonga FPSO Insurance Policy
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The Shell Nigeria Exploration and Production Company Limited (SNEPCO) is seeking qualified insurers for the provision of operations insurance coverage for its assets and liabilities which include the FPSO Assets including Operators Extra Expenses. Closing date for to register to tender for this opportunity is Monday 4th March 2013.
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Addax - Provision of Accommodation/Crane Barge and Surfer Boats
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Addax Petroleum Development (Nigeria) Limited invites interested contractors to tender for the provision of Accommodation/Crane Barge and two surfer boats. The barge will provide accommodation, workshop and warehousing facilities for production and maintenance personnel on Addax's OML 123. The two surfer boats will perform inter-site transportation for the transfer of personnel, chemicals and equipment to the various platforms and locations associated with the company's offshore operations in OML 123. The closing date for registration to tender for this opportunity is 7th March 2013.
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Total - Provision of Fabric Maintenance Services on Apko FPSO Facilities
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Total Upstream Nigeria Limited, the operator of OML 130, invites contractors to tender for the provision of Fabric Maintenance Services on Akpo FPSO facilities. closing date for tenderers to register for this opportunity is Thursday 7th March 2013.
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Selected upcoming oil and gas events
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Once again, please don't don't forget to join our mailing list if you haven't done so already. Remember, you won't have to look anywhere else for your weekly Nigerian oil industry updates, and it's free to join. Do send us your news. And let us know if you want to advertise in NOGintelligence.
Sincerely,
Remi Aiyela
Editor, NOGintelligence Back to top
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