President Umaru Musa Yar�Adua has ordered the Nigerian National Petroleum Corporation (NNPC) to immediately recover outstanding payments of $1.91 billion (N236 billion) due to the Federal Government from Shell and ExxonMobil on the Production Sharing Contracts (PSCs) for the Bonga and Erha oil fields.
The President�s order is coming just as crude oil prices hit a new high yesterday, soaring above $129 a barrel as supply concerns intensified the momentum of buying that has lifted crude oil deeper into record territory.
Addressing State House correspondents in Abuja yesterday, the Special Adviser to the President on Communications, Mr. Olusegun Adeniyi, said the President gave the order based on the recommendations of the committee set up by the Federal government.
The committee, according to Adeniyi, was mandated to determine whether any revenue opportunities had been lost by Nigeria in the implementation of the PSCs for the two deep-offshore oil fields, which account for about 20 per cent of the country�s total oil production.
�President Yar�Adua directed as follows: That the total sum of $1.496 billion accruable to NNPC based on the proper application of the PSC�s capital allowance should be recovered. This sum is made up of $850 million from Bonga and $646.3 million from Erha;
�That the sum of $414.6 million accruable to NNPC and to government from Bonga gas sales and as tax revenue from the gas sales should be recovered; and
�That all future government gas sales agreements should account for Natural Gas Liquids (NGLs) to ensure that government derives maximum economic benefits from them and that this position be adopted in the renegotiation of all existing PSC agreements which are due for renegotiation,� he said.
Adeniyi said Yar�Adua further directed that the Federal Inland Revenue Service (FIRS) should pursue the company income tax payments due from Shell Nigeria Exploration and Production Company and Esso Exploration and Production Nigeria Limited on the operation of the Bonga and Erha oil fields.
Receiving the report of the committee chaired by the President�s Special Adviser on Petroleum Matters, Dr. Emmanuel Egbogah, Adeniyi said that Ya�Adua reaffirmed his commitment to establishing full accountability and transparency in the operations of Nigeria�s oil and gas sector.
�He said that his administration will [would] continue to do everything possible to ensure that Nigeria derives maximum economic benefits from the exploitation of its God-given resources and that the revenues so derived are properly utilised to enhance the living conditions of all Nigerians.
�The President will soon unveil his broad agenda for the total restructuring of the oil and gas sector in line with his vision to turn it from a mere extractive industry to one that adds tangible values to the overall economy of the country,� he said.
Members of the committee whose assignment lasted six months are the FIRS Chairman, Mrs. Ifueko Omogui-Okauru, Egbogah, the Governor of Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, the President�s Economic Adviser, Tanimu Kurfi, the Minister of Finance, Samsudeen Usman and Minister of State, Petro-leum, Odien Ajumogbobia.
Although oil prices are currently being driven higher by supply concerns, the latest surge was sequel to the assertion by the Organisation of Petroleum Exporting Countries� (OPEC) President and Algerian Energy Minister Chakib Khelil, that the organisation would not increase its output before its next meeting in September.
According to an agency report, the June contract for light and sweet crude traded as high as $129.46 on the New York Mercantile Exchange before settling back to $129.10, up $2.05.
The imminent expiration of the June contract is adding to the volatility. The contract however was expected to end at the close of trading yesterday.
The contract reached a new closing high of $127.05 on Monday after Khelil said that OPEC would not increase its output during the U.S. summer driving season, which begins this weekend.
OPEC’s next meeting is scheduled for September 9. The report added that concern about supply had recently become the primary driver of the market, replacing earlier worries about a weakening dollar and not even Saudi Arabia’s promise last week of an additional 300,000 barrels of crude a day could alleviate the new concerns.
Despite the pledge from the world’s leading oil producer and the US move to temporarily stop filling government stockpiles, prices have shown no indication of stopping their record run.
Through Monday’s close, the front-month contract has hit nine trading or closing records in 11 sessions.
Analysts have said speculative buying has also contributed to oil’s record high run. In other news lifting prices, independent refiner, Holly Corp., said a key unit at its New Mexico refinery was shut down for repairs, cutting estimated May gasoline production by as much as 756,000 gallons per day.
The shutdown occurred while the fluid catalytic cracking unit was being brought back online from a previous shutdown May 7.
As oil prices reach new heights, so have gasoline and diesel costs.
�Average gasoline prices in the US rose for an eighth straight week and for the 15th time this year, up 1.8 per cent or 6.9 cents to a record $3.791 a gallon,” noted Stephen Schork in his Schork Report.
Gasoline at the pump is averaging 28.5 per cent above last year’s pace. Drivers in some parts of the US are paying considerably more, however.
Gas pump prices in parts of California have been stuck above $4 a gallon for weeks now. In other Nymex trading, heating oil futures rose 0.14 cent to $3.7665 a gallon, while gasoline prices rose 4.89 cents to $3.2855 a gallon.
Natural gas futures rose 17.9 cents to $11.133 per1,000 cubic feet.
May212008