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Nigeria Demands $62B from Oil Majors

 

(Bloomberg) -- Nigeria is seeking to recover as much as $62 billion from international oil companies, using a 2018 Supreme Court ruling the state says enables it to increase its share of income from production-sharing contracts.

The proposal comes as President Muhammadu Buhari tries to bolster revenue after a drop in the output and price of oil, Nigeria’s main export. It’s previously targeted foreign companies, fining mobile operator MTN Group Ltd. almost $1 billion for failing to disconnect undocumented SIM-card users, and suing firms including JPMorgan Chase & Co. in a corruption scandal.

In the latest plan, the government says energy companies failed to comply with a 1993 contract-law requirement that the state receive a greater share of revenue when the oil price exceeds $20 per barrel, according to a document prepared by the attorney-general’s office and the Justice Ministry. The document, seen by Bloomberg, was verified by the ministry.

While the government hasn’t said how it will recover the money, it has said it wants to negotiate with the companies. In its battle with MTN, the fine imposed on the company was negotiated down from an initial penalty of $5.2 billion.

Nigerian presidency spokesman Garba Shehu didn’t answer three phone calls or respond to a text message requesting comment.

Under the production-sharing contract law, companies including Royal Dutch Shell Plc, ExxonMobil Corp., Chevron Corp., Total SA and Eni SpA agreed to fund the exploration and production of deep-offshore oil fields on the basis that they would share profit with the government after recovering their costs.

When the law came into effect 26 years ago, crude was selling for $9.50 per barrel. The oil companies currently take 80% of the profit from these deep-offshore fields, while the government receives 20%, according to the document. Oil traded at $58.29 a barrel on the London-based ICE Futures Europe Exchange.

Most of Nigeria’s crude is pumped by the five oil companies, which operate joint ventures and partnerships with the state-owned Nigerian National Petroleum Corp.

Representatives of the oil companies met Justice Minister Abubakar Malami Oct. 3 in the capital, Abuja, according to two people familiar with the discussions who asked not to be identified because the meeting wasn’t public. Malami told them that while no hostility is intended toward investors, the government will ensure all the country’s laws are respected, the people said.

Ruling Challenged

Oil companies including Shell have gone to the Federal High Court to challenge the government’s claim that they owe the state any money, arguing that the Supreme Court ruling doesn’t allow the government to collect arrears. They also contend that because the companies weren’t party to the 2018 case, they shouldn’t be subject to the ruling.

“We do not agree with the legal basis for the claim that we owe outstanding revenues,” Shell’s Nigerian unit said in an emailed response to questions.

Chevron spokesman Ray Fohr said the company doesn’t comment on matters before the court. Its units in Nigeria “comply with all applicable laws and regulations,” he said by email.

Exxon and Total declined to comment, while Eni officials didn’t immediately respond to requests for comment.

The Supreme Court ruling followed a lawsuit by states in Nigeria’s oil-producing region seeking interpretation of the nation’s production-sharing law. The states argued that they weren’t receiving their full due. The court ruled in their favor and asked the attorney general and justice minister to take steps to recover the outstanding revenue.

The 1993 law required that its provisions be reviewed after 15 years and subsequently every five years. The attorney-general’s office insists that the provision for a higher share of revenue doesn’t require legislative action to take effect, according to the document.

“Instead it imposes a duty on the oil companies and contracting parties, being NNPC, to by themselves review the sharing formula,” the ministry said.

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8 minutes ago, ceo_energemsier said:

When the law came into effect 26 years ago, crude was selling for $9.50 per barrel.

Seriously? I just looked up an oil price chart.. unless I'm missing something, and that is always possible, then oil prices might have briefly touched $10, nominal as opposed to inflation adjusted, once in all of the 1990s. Chart link here. (Remember to uncheck inflation adjusted and log scale at the top.) $9.50 would then represent the very bottom of the market over decades. These guys did a deal at the very bottom of the market, didn't think to put in any price adjustment clause and are only now suing? The price went to $140 nominal late last decade! The story is an interesting one but there must be more to it.. the story does hint, now that I think about it, that its a ploy by the government to get the oil companies to cough up more..   

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5 hours ago, markslawson said:

Seriously? I just looked up an oil price chart.. unless I'm missing something, and that is always possible, then oil prices might have briefly touched $10, nominal as opposed to inflation adjusted, once in all of the 1990s. Chart link here. (Remember to uncheck inflation adjusted and log scale at the top.) $9.50 would then represent the very bottom of the market over decades. These guys did a deal at the very bottom of the market, didn't think to put in any price adjustment clause and are only now suing? The price went to $140 nominal late last decade! The story is an interesting one but there must be more to it.. the story does hint, now that I think about it, that its a ploy by the government to get the oil companies to cough up more..   

Oil was down to $9.50/bbl in 1998 for an extended time, it finally started going back up into the 20s and 30s in 2000.

It is Nigerian gov ploy to strong arm and black mail the companies into paying them more. Call it corruption in the Nigerian oil structure that probably would account to such deals, plus dont forget that the oil companies such as XOM and Shell had to invest billions and billions of $$$ up front for getting these deals and invest into exploring and developing the fields and infrastructure. The NNPC and their oil ministry and whatever else agency or ministry is trying to make up for the billions of $$$ of oil revenues that is lost to oil theft and corrupt people sell them on the black market.

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Time for all the operators in Nigeria to leave for greener pastures. This operating environment will just get worse. Don’t worry, China will slot right in there. Let them deal with it.

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Most of the companies will still be in Nigeria, they have spent and invested billions of $$$ and there is billions of barrels of oil to be produced, more to be discovered. There are also many independent explorers in Nigeria too.

But if they keep trying to hit the companies with these sham payment demands , they will wise up, either terminate their existing JVs or sell to others and leave. NNPC isnt technically capable of finding new deepwater oil or offshore oil for that matter, their oil production will probably flounder like Venezuela.

Look that the oil refineries owned by the gov in Nigeria, they  have enough throughput refining capacity but they fail to meet the domestic demands and they could be refining their oil right in their own refineries and wont need to import anything.

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19 hours ago, ceo_energemsier said:

Oil was down to $9.50/bbl in 1998 for an extended time, it finally started going back up into the 20s and 30s in 2000.

Really? The graph I linked doesn't show that at all - the minimum was more than $12 for maybe three months, but perhaps this is just a detail. The Nigerians and the oil majors must have been referencing something so they must have been using some sort of index.. anyway, otherwise I thoroughly agree.. its strongarm stuff with a legal cover. Shades of Venezuela...

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Why Govt Can't Recover U.S.$62 Billion From International Oil Companies - Sylva

 

 

Abuja — Minister of State for Petroleum Resources, Mr. Timipre Sylva, said yesterday that it was impossible for the Federal Government to recover a total $62 billon from International Oil Companies, IOCs, being revenue lost to oil exploration since 2003.

The minister stated this while fielding questions from State House correspondents at the end of the Federal Executive Council, FEC, meeting presided over by President Muhammadu Buhari at the Council Chamber, Presidential Villa, Abuja.

Recall that the Federal Government, through the Office of the Attorney-General of the Federation, AGF, had written to oil companies, demanding various sums of money from them on the basis of an October 17, 2018, judgment of the Supreme Court.

 

The apex court had in the said judgment, ordered the Federal Government to immediately take steps to recover all revenues lost to oil-exploring and exploiting companies due to wrong profit-sharing formula since August 2003.

About five suits are currently before the Abuja and Lagos divisions of the Federal High Court stalling the Federal Government's move to recover about $62billion from international oil companies.

Speaking on the development as it relates to the judgment, the Minister said the federal government had started discussions on the matter.

He said: "Well, we have started discussions. Let us consider that as a lost opportunity, the money was not in a cupboard, they have taken it. Nobody can bring out that kind of money, I mean we can't get $62billion.

 

"We can maybe get something from them but not $62billion. It's an opportunity we have lost. We have already started discussions with them but what is clear is that it is a lost opportunity really."

Sylva further explained that the existing Deep Offshore Act in the country which is very old, was part of the problem and needed to the repealed if the government could get it right in terms of Production Sharing Contracts with the oil majors.

"Most of these laws are old already and they need to be amended. The amendment of these bills really portends a lot for us. There are a lot of missed opportunities already. The previous law provided that when oil prices went beyond twenty dollars, we are supposed to negotiate and get some additional revenues.

"We didn't take advantage of that and, of course, when we approached the oil companies, they said look, this is a lost opportunity, it's not lost money because this money is not just there, it is not being kept in some cupboard.

 

 

"So, it is a lost opportunity, we have to do something quickly to ensure that we don't lose this opportunity in the future. That is why we have to ensure that this bill is passed. With this bill now, there will be some adjustments in the fiscal regime and we believe that the government will get a lot from the oil companies, especially their deep shore exploration activities.

"You know that the PSCs means that they invest the money, they recover their cost before the government begins to get some revenues from it. Unfortunately, each time they keep investing, they keep recovering.

"So, if you don't take time, you never really get to the point where you benefit at all because the oil companies are perpetually recovering cost. So, with the Deep Offshore Act Amendment, all those things are taken care of."

Asked if such laws will take a retroactive measure, the minister explained: "The amendment of the bill cannot be retroactive. Laws cannot be retroactive, we have to look forward."

 

 

 

 

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On 10/12/2019 at 1:39 AM, markslawson said:

its strongarm stuff with a legal cover. Shades of Venezuela...

It may seem that way. But having actually done business there my impression is that IOCs in reality like the chaos because it lets them negotiate very favourable terms. 

I don't have an opinion on the specific demand. But I would just like to point out that the IOCs are not stalwarts of virtue. 

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Look on the bright side. Most of this money will be recycled into the economies of London, Paris, New York, Geneva, Dubai..........

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8 hours ago, Rasmus Jorgensen said:

It may seem that way. But having actually done business there my impression is that IOCs in reality like the chaos because it lets them negotiate very favourable terms. 

I don't have an opinion on the specific demand. But I would just like to point out that the IOCs are not stalwarts of virtue. 

The IOC's definitely try and get the best deal for them, however in the case of Nigeria (as in other countries in the same region and elsewhere) , Their Petroleum Ministry and their NOC are to blame and need to take responsibility for being inept at best and corrupt at worse.

Have dealt with Nigerian upstream for a long time through various agreements and understand how they operate.

Corruption @ all levels is rampant. The tampering and illegal tapping into pipelines, causing explosions and fires, theft of oil from trunk lines and other sites, then being sold on the black market for a huge discount. Hundreds of millions of $$ spent on refineries, yet none of them can provide the fuels. Corruption in awarding the OPL's and OML's to companies that have zero experience backed by powerful and influential Nigerians. It is not just limited to the oil industry.

I disagree that IOC's like chaos, it only creates and causes operational headaches, failure to implement and execute plans and delivery projects on time and under budget. Chaos leads to time and cost over runs and loss of revenues in existing projects not to mention the threat of loss of life of employees and contractors and damage and loss of hard assets.

Virtue begins @ home and it seems in this case , home lacks that.

 

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4 hours ago, NickW said:

Look on the bright side. Most of this money will be recycled into the economies of London, Paris, New York, Geneva, Dubai..........

Like the money from Angolan oil and the Suisse auction off the expensive real estate and vehicles !!!!

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With Billions at Play, Russia and China move into African Oil while US sits on side-lines

 

 

NJ Ayuk's latest book, Billions at Play The Future of African Energy and Doing Deals. launches October 22, 2019 and is already an Amazon #1 Best-Seller in two categories: Oil and Energy, and African Politics. As Russian and China move in, and on the heels of Russian President Vladimir Putin's Russia Energy Week, the US is poised to invest and support oil and energy in Africa.

The clock is ticking, however, as other nations take advantage of a distracted US government and its skittish business investors. Ayuk is the Executive Chairman of the African Energy Chamber and his book is the roadmap for the US to participate.

As NJ explains in his powerful expose, Africa holds vast amounts of oil and energy opportunities, untapped and underutilized. African economies are undergoing a transformative period. The energy sector, in particular, holds great potential to revitalize African economies and empower the growth and development.

Billions at Play sets out to answer these questions below and more:

+ Why must the US and Africa collaborate now?
+ How much of an advantage does Russia and China have already?
+ The trust issue-can the US and investors trust African leaders?
+ What can African leaders do to put their countries on a sustainable, profitable path?
+ How can all parties win in Africa's energy deals of the coming decades?
+ How does African oil and energy production impact the environment?

In a straightforward and clear approach, he outlines exactly what Africa will need to do to accomplish its energy goals and prosper, and win with the right US alignment.

Ayuk says, "Africa is rich in resources. By partnering with the U.S., we create cleaner, greener, cheaper energy sources, and create jobs, which has the potential to put those dollars back into the global economy, namely our partners in the US."

Making the case for the petroleum industry having the power to support and transform emerging economies, he unpacks key issues including what and how Africa can learn from itself, the role of natural gas in Africa's energy future, effective and sustainable investment strategies, strategic oil and gas revenue management and, the role of women in the African petroleum sector.

"Ayuk also address the very real problem of gas flaring in Nigeria," says OPEC Secretary General Mohammad Sanusi Barkindo in his forward to the book,...."where natural gas could be harnessed to provide long-overdue access to reliable electricity for large segments of the population."

Natural gas resources can make clean energy more accessible to people in rural communities across the continent for the first time. Oil production can drive economic growth in Juba, South Sudan; Kampala, Uganda; and countless other cities and towns throughout the African continent. To some degree, it has already started.

One promising example is happening about an hour east of Lagos, Nigeria, where the construction site of a USD12 billion oil refinery and petrochemical plant has become a multicultural hub of sorts. More than 7,000 workers from Nigeria, India, and other countries are reporting to work daily, and construction is moving forward at a frenzied pace.

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2 hours ago, ceo_energemsier said:

Like the money from Angolan oil and the Suisse auction off the expensive real estate and vehicles !!!!

I'd be more sympathetic if this was to build infrastructure in Nigeria but it won't - it will simply line the pockets of the rich and politicians while the poor will remain poor in an infrastructure poor country. 

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Africa's Biggest Oil Producer Aims to Stop Imported Fuel Reliance

 

 

(Bloomberg) -- Africa’s biggest oil producer is trying to get its refineries working in an attempt to wean itself off imported fuel. Yet again.

Over the past 12 years, Nigeria tried and failed four times to crank up its aging and unprofitable crude-processing plants. Now the state-run energy company is giving it another shot -- a move that, if successful, could end the nation’s reliance on fuel imports. However, the country’s recent track record means there’s skepticism about the latest effort.

“For our refineries that have not been been properly maintained for years, it might be easier to build a new one,” said Cheta Nwanze, head of research at SBM Intelligence, a Lagos-based risk advisory.

The West African country of about 200 million people imports more than 90% of products like gasoline and diesel, swapping its prized export -- crude -- for petroleum products that people need in their everyday lives.

The Nigerian National Petroleum Corp., or NNPC as the state energy company is known, operates four refineries that have long run at a fraction of their capacity. The newest is almost four decades old. By successfully making its own fuels, Nigeria would stop being reliant on traders bringing supplies on tankers from thousands of miles away -- with all the extra costs that entails.

Truly Committed

Mele Kyari, the newly appointed group managing director of NNPC, says this time will be different.

He’s made fixing the plants a key part of his agenda since taking the helm of the company in July, and says President Muhammadu Buhari is the country’s first leader in years to be committed to the revamp. Kyari has revived a target to upgrade the plants and end fuel imports by 2023, after the company missed a previous goal for the end of this year.

Minister of State for Petroleum Resources Timipre Sylva said in an interview in London this month that the overhaul should be successful this time because Nigeria is asking the owners of the refinery technology to get more involved in the work. Once the plants are operational, they will be run by external people, which will also help, he said.

The work is scheduled to begin in earnest in January, first on the Port Harcourt complex, a two-refinery facility with the capacity to process 210,000 barrels of crude a day. Repairs will then move to the smaller refineries.

Dangote Boost

Some of Nigeria’s challenges to become more self-sufficient in fuel may soon be alleviated for another reason. In the next few years, a new, privately owned 650,000 barrel-a-day refinery is due to come online. In theory, it could meet all of the country’s fuel needs and have enough left over for exports.

The plant, being built by Africa’s richest man Aliko Dangote, is not owned by the Nigerian state though. That means that the country would have to pay market prices -- similar to those charged by traders -- for the fuel the refinery churns out. There would be little reason for Dangote to subsidize Nigeria’s domestic fuel prices if it were more profitable for the refinery to sell elsewhere.

The skepticism that state-run plants can return to full operation stems from NNPC’s previous attempts. Efforts to overhaul its refining industry -- in 2007, 2010, 2012 and 2016 -- all failed to work out. The state energy company has to compete with other domestic demands for funding, such as health care, education and other social services.

Three years ago, Nigeria sought external financing for its refineries following a plunge in crude prices, oil theft and attacks on its pipelines by militants and other saboteurs. That effort crumbled after it failed to convince investors of the viability of the venture.

NNPC is talking to the African Export-Import Bank and other financial institutions to fund the revamp.

“The money to comprehensively fix the refineries is simply not there,” said Ayodele Oni, chair of the energy and natural resources practice at Bloomfield Law in Lagos. “It is a difficult task to attract any significant funding required for their repairs in their present state.”

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Billionaire Isabel dos Santos Denies Wrongdoing at Sonangol

 

 

(Bloomberg) -- Isabel dos Santos, Africa’s richest woman and the daughter of former Angolan President Jose Eduardo dos Santos, said she did nothing wrong when she was chairwoman of state-owned oil company Sonangol and called a probe into the transfer of millions of dollars from the Luanda-based firm “political vengeance.”

Angolan newspaper Novo Jornal reported on Oct. 18 that Angola’s prosecuting authority started a criminal investigation into the transfer of $38 million from Sonangol authorized by dos Santos. Her successor at Sonangol, Carlos Saturnino, accused dos Santos last year of authorizing the transfer to a company in Dubai days after she was dismissed as chairwoman. Saturnino was sacked in May.

“To say there was a transfer order after my dismissal is simply false,” dos Santos said in statement emailed on Monday. “The fight against corruption can’t be used to feed an agenda of persecution or a witch hunt.”

Dos Santos said the fund-transfer was legal and was made while she was still in her position at Sonangol on Nov. 15, 2017, the day she was dismissed and before a new board was appointed the next day. She said payment instructions were given one or two days before her dismissal.

If Angolan authorities are serious about fighting corruption they should investigate why Sonangol had about $20 billion in debt at the end of 2015, before her appointment, and how this money was “used and lost,” said the 46-year-old dos Santos.

Dos Santos was dismissed as head of Sonangol amid a crackdown on corruption by Joao Lourenco, who replaced her father as president in 2017. Sonangol, long the main engine of Angola’s oil-focused economy, has been at the center of Lourenco’s anti-graft campaign.

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On 10/21/2019 at 6:02 PM, ceo_energemsier said:

Have dealt with Nigerian upstream for a long time through various agreements and understand how they operate.

As have I and I still do. And for that reason I have to discontinue this discussion.

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With so many wealthy Nigerian princes still looking to give away free money to western dupes, I fail to see how this latest version of the Nigerian Prince scam will be taken seriously.

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They Took His Supercars, But Dictator’s Son Still Flaunts Riches

 

(Bloomberg) -- Sign up to our Next Africa newsletter and follow Bloomberg Africa on Twitter

Teddy Obiang enjoys the finer things in life. That much is clear from the growing list of assets that authorities on three continents have seized from him over the better part of a decade -- including luxury vehicles, mansions and expensive watches.

None of that has stopped Obiang, the son of a West African dictator, from showcasing his latest prized possessions and adventurous exploits on Instagram.

In a July 11 post, two men tend to him as he lounges at a clothing store, tea service within reach. A week later, he’s seen snorkeling in brilliant turquoise waters. An Aug. 29 post shows him waving to the camera from a boat off the Capri coast.

Earlier this month -- not long after Swiss authorities wrapped up a years-long corruption probe with the auction of more than two dozen supercars that once belonged to him -- Obiang, 51, added photos of himself sitting on the hood of a souped-up Jeep, parked beside a helicopter emblazoned with the flag of Equatorial Guinea.

Obiang, first vice president of the oil-rich African nation and son of President Teodoro Obiang Nguema Mbasogo, faced corruption investigations in three countries over the past decade and denied wrongdoing in each case.

Human Rights Watch, which alleged in a report that corruption by senior government officials has siphoned money from social programs in Equatorial Guinea, said two superyachts at the younger Obiang’s disposal are worth a combined $250 million. The 250-foot “Ebony Shine” and 300-foot “Ice” recently were located off the Italian Riviera, data compiled by Bloomberg show. While Equatorial Guinea told a Swiss court that the two boats are state property, VesselsValue, a provider of data on the global maritime market, said the entities that own the boats are controlled by Obiang.

“Governments don’t like him but they don’t want to make too much of an enemy of Equatorial Guinea,” said Ken Hurwitz, senior counsel for the Open Society Justice Initiative, which is backed by billionaire George Soros and represents individuals and groups worldwide in court cases concerning economic justice. “Most of the oil is still controlled by American companies.”

In 2014, Obiang reached a settlement with the U.S. Department of Justice, agreeing to relinquish more than $30 million of assets, including a hilltop mansion in Malibu, California.

France landed a bigger blow in 2017, when Obiang was convicted in absentia of embezzlement. A Paris court ordered more than 100 million euros ($110 million) of assets to be seized, including a mansion near the Champs-Elysees. He avoided jail time as the court handed down a 3-year suspended sentence. His lawyers argued he had diplomatic immunity and that the property served as Equatorial Guinea’s embassy.

Watches, Cars

Last year, Brazilian authorities stopped Obiang at an airport, reportedly seizing 20 watches worth $15 million and more than $1.4 million in cash. They ultimately returned $10,000, the maximum amount of cash that can be brought into Brazil undeclared. The secretary of Equatorial Guinea’s embassy in Brazil said the watches were for personal use and the cash was to be used on a subsequent trip to Singapore, Globo.com reported.

And then the Swiss auctioned off the supercars on Sept. 30 for $27 million as part of a settlement. They include a Bugatti Veyron, Rolls-Royce Phantom, Lamborghini Veneno and Koenigsegg One, court and auction records show. Equatorial Guinea had argued that the cars belonged to a state-owned company.

The nation’s embassy in Washington didn’t reply to phone messages or an invitation to comment through the government’s official web page. Additional attempts to reach Obiang for comment via Instagram and through Equatorial Guinea’s information minister were unsuccessful. Kevin Fisher, a California lawyer who represents him in a lawsuit over a subsequent sale of the Malibu property, declined to comment.

Since the discovery of oil in 1996, Equatorial Guinea’s gross domestic product has surged more than 5,000%, making the 28,000-square-mile nation Africa’s third-richest per capita. Oil accounted for 80% of the country’s fiscal revenue in 2015, according to the U.S. Energy Information Administration. The Obiangs have said they’re using the mineral wealth to improve the lives of Equatorial Guineans.

 

The distribution of those oil riches, however, is uneven. More than half of children under 5 years old lack access to adequate food, and about 9% of youngsters in that age group die, Unicef said in a 2017 report. The average life expectancy in Equatorial Guinea is just 58, compared with 66 in neighboring Gabon, according to the World Bank.

Obiang “shamelessly looted his government and shook down businesses in his country to support his lavish lifestyle, while many of his fellow citizens lived in extreme poverty,” then-U.S. Assistant Attorney General Leslie R. Caldwell said in a statement announcing the 2014 settlement.

He did manage to keep a Gulfstream jet, which is targeted for seizure if it ever returns to the U.S., and $1 million worth of Michael Jackson memorabilia, including a sequin-encrusted glove, according to the statement.

Equatorial Guinea, which sought a $700 million loan from the International Monetary Fund to bolster its currency, reached a three-year financial agreement with the IMF after meetings last week in Washington.

The IMF has “supported the authorities’ efforts to devise a national strategy to improve governance and fight corruption through the preparation of a report on governance,” a spokeswoman for the fund said in an emailed statement.

 

Sarah Saadoun, a corruption researcher at Human Rights Watch, suggested another way for the country to raise money.

“If they just sold those two yachts, they’d have a third of their loan request,” she said.

 

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Nigeria's Cost of Oil Production Is Unsustainable - Minister

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Nigeria must do all within its powers to reduce the cost of crude oil production to help boost revenue generation for economic growth and national development, the Minister of State for Petroleum Resources, Timipre Slyva, has said.

Mr Sylva, who spoke at a seminar on effective cost management in the oil and gas sector in Abuja on Tuesday, said the current production cost of over $30 per barrel in Nigeria was not sustainable.

The minister was represented by his Chief of Staff, Moses Olamide.

The seminar was organised by the Petroleum Technology Development Fund (PTDF) in collaboration with the Quantity Surveyors Registration Board of Nigeria (QSRBN).

 

 

"Let me go back memory lane. The technical cost of crude oil production in the 1980s/90s was around $4 per barrel. In early 2000, it was between $5 and $6 per barrel. Today, it is over $35 per barrel.

"It is interesting to note that some countries, like Kuwait and UAE, are producing at less than $10 per barrel.

The minister said in the regime of $50/60 per barrel price of crude oil, a cost of production of over $30 was unsustainable, adding that was why Nigeria needs to come up with the idea on what needs to be done to reverse the trend.

The minister said Nigeria, the largest economy in Africa with a gross domestic product (GDP) of about $400 billion and a population of over 180 million needs aggressive industrialisation and economic diversification.

In spite of the quest for economic growth and great investment opportunity in the oil and gas sector, Mr Sylva said the cost of crude oil production in Nigeria remained one of the highest in the world.

 

He said the government had set the target through an industry policy document to reduce the cost of crude oil extraction by at least 30 per cent.

The document, he said, recognised that to cut production cost, reducing contract approval cycle, promoting transparency, and regulatory transaction cost, among others, were imperatives.

 
 

"Currently, there is an industry committee headed by the Permanent Secretary on the reduction of crude oil production cost and crashing of contracting cycle in the ministry," he said.

Commendation

While commending PTDF and QSRBN for organising the workshop, the minister urged the Quantity Surveyors and Cost Engineers to deploy the principles of total cost management and come up with a solution on how to minimise the impact of cost drivers.

 

He named the drivers to include corruption, national body policies, infrastructure deficit, bureaucracy, regulatory issues, insecurity in the oil-producing areas, among others.

The minister urged the engineers to always come up with ideas on how to better achieve effective cost management in the oil sector.

Meanwhile, the Minister of Works and Housing, Babatunde Fashola, said the oil and gas sector was one of the most important sectors in Nigeria's economy as it contributes about 10 per cent to the national GDP.

Mr Fashola said President Muhammadu Buhari's administration placed a high premium on projects and administrative cost reduction, adding that organising the seminar was in consonance with the next level agenda of the present administration.

"The involvement of Quantity Surveyors in oil and gas sector, such as exploration, pipelines installation, road, bridges, building, heavy engineering services with other professionals will ensure efficient allocation and utilisation of resources, probity, value for money in our infrastructural development in Nigeria," the minister said.

Also, the Executive Secretary of PTDF, Bello Gusau, said in the fund's industry skill and competency gap analysis, issues of cost engineering control, estimating was among the areas of greatest challenge in the oil sector.

He assured that the PTDF was willing to partner and collaborate with the industry to find the solution to critical issues affecting the full realisation of government vision for the oil and gas sector.

 

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