The December 2008 deadline for the cessation of gas flaring set by the Federal Government has again taken another blow that may make its realisation unlikely.
Shell Petroleum Development Company (SPDC) said weekend it needs an additional $5 billion (N600 billion) to end gas flare in its operational areas in the Niger Delta region.
According to SPDC�s managing director, Mutiu Sunmonu, beyond funding, the security situation in the Niger Delta also would play a decisive role in determining when gas flare would end. He however said a dedicated team was working to actualise the flare-out programme.
Sunmonu, who spoke to journalists weekend in Port Harcourt shortly after returning from an “all day meeting” with President Umaru Yar�Adua in Abuja, stated that the company had spent $3 billion (about N360 billion) in “commissioning facilities to gather and process gas.”
He admitted that SPDC was involved in arranging a $1.3 billion loan deal for the Federal Government, for which the �head agreement,� not the final agreement has been signed. Sunmonu explained that lawyers were still putting final touches to enable the government begin a draw-down of the loan. He also admitted that the Federal Government is indebted to Shell, although he failed to disclose the amount.
Government, Sunmonu said, is still trying to obtain the loan to pay its counterpart funding to SPDC but constraints in the negotiations were stifling the agreement. SPDC therefore offered to provide the money below commercial rates so that as soon as the banks� loan is successfully negotiated, the loan would be repaid.
The repayment would enable SPDC begin accelerated payment of debts owed contractors, local or foreign as the oil giant moves to address the debt issue to contractors. The issue came up in the meeting with the presidency, but Sunmonu regretted that a lot of “misconceptions” have come into play. “We pay contractors monthly but the Federal Government�s default has led to a significant backlog,” he stated.
He denied paying contractors with links to the militants but admitted that some local contractors were being given priority because they did not have access to bank loans.
On the loss of oil rights in Ogoni area of Rivers State, Sunmonu said “government is yet to tell us [in writing]”, but insisted that SPDC had 30 percent equity stake in the oil wells in Ogoni, “at least as at today.”
He revealed that SPDC operated at a loss in 2007 and that loss trend began somewhere in 2006 when he said Shell recorded as low as zero percent in oil production. He however said operations as of now are as high as 130,000 barrels per day (bpd).
The attack on Bonga oil field, he said, was shocking to SPDC, but noted that it was the duty of its sister company, SNEPCO, to worry about. He denied rumours that SPDC was about to sack another 2,500 staff, saying: “The entire company is about 5,000, so how could we sack the so-called 2,500 and sack another 2,500”.
He explained that 95 percent of those who left went away voluntarily and “we rewarded them handsomely. Only a few others were asked to go. It�s a mutually agreed divorce.”
Earlier while briefing media executives who attended a meeting with Shell, Sunmonu said the company was working hard to commission the Afam power station before the end of the year to add 460 megawatts to the national grid. He said this would boost power generation by 20 percent.
Source: Business Day