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Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal - Politics - Nairaland

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Buhari To Probe Ibe Kachikwu Over Oil Swap Deals / Buhari Terminates Oil Swap Agreement / Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal (2) (3) (4)

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Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by firstmedia: 10:01am On Jun 29, 2015
Both legal and oil experts have advised that the Nigerian independent oil operators should be considered first in the award of Oil and Gas contracts. Nigerian service companies should also be considered for contracts and services in line with the local content law just as they called for subsidy removal.
A legal expert Bar. Ayo Samuel noted that the “Local content Law specifies that Nigerian independent operators be given “first consideration” in the award of Oil and Gas focused contracts and Nigerian service companies be given “exclusive consideration” for contracts and services.
This is the dilemma that the government is facing. Experts say that an agreeable compromise will be a scenario where Nigerian Companies are allowed to participate, along International Oil Majors”.

President Muhammadu Buhari’s cash strapped government may have to do away with fuel subsidies in order to channel scarce resources to capital project development in Nigeria. This is in line with the views of Industry experts and Global Investment banks who agreed that a solid structured and transparent swap arrangement will ensure product availability even as NNPC refineries are operating below their plate capacity.
“Subsidies are expensive, accounting for an average of 2.5 percent of the gross domestic product from 2006-2012, according to the IMF. The government set aside N914 billion ($4.6 billion) for it in 2014. Nigeria’s national oil company the NNPC currently receives about 450,000 barrels per day for its refineries to process for domestic crude consumption.
However Nigeria is almost wholly reliant on imports for the 40 million litres per day of gasoline it consumes, as most of the NNPCs four refineries produce at less than 20-60 percent of their name plate capacity. The NNPC has often had to engage in crude for oil (swap) and offshore processing contracts and direct importation of products to bridge about 50 percent of the supply gap.
The Managing Director and Head – Africa Macro Global Research at Standard Chartered, Razia Khan said: “Having contracts directly with the oil majors for refined product would be a big win, said Razia Khan, adding, “Ultimately, the healthiest development would be to sell the refined product to end-users at cost-reflective prices.
“Any savings from a fuel subsidy could increase the amount that Nigeria spends on social safety nets – so that the poorest, most vulnerable Nigerians benefit directly,” Khan said.
This view was corroborated by members of the Independent Petroleum Marketers Association of Nigeria (IPMAN); they stated in recent news report that the Oil Swaps is a better option for Government to end scarcity and keep off subsidy payment. The association further made a case to government for IPMAN members to partake in the Crude Oil Swap Arrangement.
While many Nigerians may believe that the Crude Swap/ OPAs was a recent arrangement under the immediate past administration, our source within the NNPC stated that Crude Swap/ Offshore Processing Arrangements have been a Federal Government initiative since 1977 in partnership with International Oil companies (IOCs).
The anonymous source reiterated that “Nigerians must know that the supposed interim policy of the NNPC to bridge the gap between petroleum products demand and supply was initiated over three decades ago between 1977 and 1986 when Nigeria needed heavy crude from Venezuela to feed the Kaduna refinery. We as a nation swapped Venezuela heavy crude for Nigeria’s light crude”.
He further stated that: “the scope of crude swap was later broadened specifically because our refineries began to produce below their stipulated name plate capacity. In addition, NNPC/PPMC from late 1990s-2010, imported Petroleum Products on an Open Account backed by a PPMC Payment undertaking stating that payment will be made 45 days after imported vessels arrive, this payment timeline was never met with payment delays running to 400 days late in backlogs.
Our research findings indicated that NNPC has an outstanding debt to Importers and Bankers of close to USD 2 Billion currently standing at 7 Years late payment. Consequently, for any NNPC/PPMC import project to receive a nod, the financing bank will need to see and verify a “Solid Bankable Security or Guarantee” in order to finance such project.
NNPC/PPMC usually rely on refineries un-utilised Crude oil barrels to fund these open account Payment Batches. However, the foregoing challenge posed a problem to 50% of fuel supply into Nigeria around 2009 and 2010. In order to close the supply gap and avert scarcity crisis, NNPC/PPMC advertised in 2009 inviting for proposals for Offshore Processing Arrangement and other proposals to guarantee fuel supply to Nigeria.
Thus crude Swap/ OPAs concept widened to include crude for refined products, which had been in practice with Oil Majors more than two decades; at the time, British Petroleum and SIR refinery of Ivory Coast were engaged to swap crude for refined products under very shadowy terms. Yet no one complained, this begs the question: why the outrage when Nigerian companies were engaged to deliver same service to the NNPC/PPMC?
Perhaps it is easier to become outraged when the government of Nigeria, partners with indigenous oil and gas companies towards promoting local content laws than be dismayed by the many years of International Oil Companies (IOCs) under cutting Nigerians in disguise of service to a people.
Nonetheless, the industry is witnessing increased participation of Nigerian oil and gas companies and expressed concerns on the direction the new administration may take while being optimistic that our government will deepen the gains in the oil and gas sector as a result of promoting local content development.
According to verifiable data, Nigerian companies now control over 35% of upstream business activities in Nigeria. This significant bump from less than 10% in 2010 is as a result of passing the local content act into law; driven by the Nigerian Content Development and Monitoring Board (NCDMB).
Sadly, these local companies are faced with herculean task of dealing with various challenges associated with doing business in Nigeria. This has been recently demonstrated when perceived ANTI-LOCAL CONTENT AGENTS conspiring with International News and Reporting Policy analyst, unleashed a media onslaught against indigenous companies participating in the Crude for Products Exchange Agreement, that is aimed to provide petroleum products to the everyday Nigerian.
It is very curious to see all of these negative reports and also the exclusion of the names of Foreign and International Companies that have for many years taking part in these SWAP and Offshore Processing Contracts absent from all of these negative reportage. These Foreign companies create wealth and employment for their Countries, why can’t Nigeria do the same with its own people and companies?
Our findings indicates that the Crude Swap/OPAs arrangement entails the allocation of crude oil by NNPC for processing in a refinery, depending on the crude type and yield pattern resultant refined petroleum products mainly Gasoline and Kerosene are delivered by the contract operators into the country. The by-products not required are paid in cash to NNPC. A refining fee is paid for this refining.
The Contract Operator places a “Bank Stand by Letter of Credit” before it is allowed to lift the crude, as a form of security. The SWAP is a very straight forward arrangement, which simply means you load the Crude Oil and you deliver refined petroleum products on a value to value based contract.
Approximately, for a standard Nigerian cargo of 950,000+/- 5% Barrels (950kb) of Crude Oil loaded, the resultant volume for refined products (PMS and DPK which formed the subject matter of this Agreement) is 3 cargoes of 30,000mts +/- 10%.
The SWAP Agreement stipulates that a revolving Standby Letter of Credit (SBLC) is established in favour of PPMC, before the Supplier’s vessel is cleared to load any volume of the crude oil nominated and programmed for this purpose. This in effect guarantees that there is no exposure to PPMC for the Crude Oil lifted at any point in time during the Agreement, as this SBLC can be encashed, in the event of default.
Curiously, verifiable facts indicated that the terms on which the Federal government engaged local players where far more strenuous than the terms of engagement with the International Companies that partnered with the Federal Government. This in itself was a paradox…
It is on record tha when foreigners were handling crude swap and delivering Petroleum Products on Open Account for Nigeria, our government was buying refined products at PLATTS plus $136-180/metric from these multinationals. Government was equally required to pay interest to the multinationals on delayed receivables. Government incurred the cost of logistics and handling.
Unlike the arrangement where we have local players participating, only the principle of exchanging crude for refined product remained the same. Local companies sell at PLATTS plus $82/metric Ton. Government does not pay interest on delayed receivables. Yet, the local players remained steadfast towards supporting the Federal Government of Nigeria on making sure that finished products are available and accessible by Nigerians without hassle.
Unfortunately, instead of applauding the doggedness of local entrepreneurs, some unscrupulous elements in Nigeria are making frantic efforts to hound and frustrate growth driven by local companies in the sector. This is our quagmire as a people. Accordingly, the implementation of the Local Content Law is one that must be encouraged. Certainly without doubt, the above well documented procedure ensures compliance and discredits the unguided and unfounded opinion of those calling a dog a bad name in order to kill it.

Culled from Vanguard news

http://www.vanguardngr.com/2015/06/local-content-law-implementation-a-call-for-retaining-oil-swap-and-subsidy-removal/

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 10:03am On Jun 29, 2015
remove dis subsidy stuff and let

each oil/gas firm decide their price.


while we buy from d cheapest

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by 48noble(m): 10:03am On Jun 29, 2015
How is this paying salaries undecided

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by pacmanito: 1:09pm On Jun 29, 2015
Good if it will bring about inclusive development. and not putting wealth in the pockets a some few pockets

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 1:21pm On Jun 29, 2015
This is a very good investigative research.

What really kills me is the way we try to destroy ourselves and embrace this yeye oyibo people.

Personally, I believe government should encourage local companies to begin to play major roles in the sector.

We should stop using the tag word "corruption" as a tag word to destroy our very own.

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 1:27pm On Jun 29, 2015
48noble:
How is this paying salaries undecided

Everywhere is stagnant, no crude sales, no economic activities in Nigeria. simple.

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Paxastan: 1:31pm On Jun 29, 2015
Sincerely speaking subsidy need to go, but we need to bear in mind the pain of the people of Nigeria, as we cant continue to pay subsidy and feel no developmental impact.

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 1:38pm On Jun 29, 2015
Paxastan:
Sincerely speaking subsidy need to go, but we need to bear in mind the pain of the people of Nigeria, as we cant continue to pay subsidy and feel no developmental impact.
This subsidy thing is a menace, it a calculated fraud by those who institutionalised it. If Nigerians trusted Jonathan enough, by now we would have adjusted well enough. Now we have a government that is not capable of taking any meaningful action since May 29th. Expectations of all is for him to take this rubbish out and deal with the outcome early. This big people will always throw their weights on deepening our suffering as a nation.

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by BeefitLtd: 2:13pm On Jun 29, 2015
I am deeply saddened by some of the facts revealed in this article, if it is true that the conditions under which the Nigerian companies handled SWAP for NNPC was very strenuous, then something off somewhere....

Some questions come to mind:
1. Why are Nigerian businesses treated like second tier class of businesses in our own country?
2. Why is the current propaganda against oil and gas companies engaged in swap limited to Nigerian companies?
3. Why are we Nigerians gullible?

It is fully understandable that squabbles must be in a capitalist business environment amongst competitors, however, what I believe the government should do is to include new marketers on the swap list while retaining existing companies with over five years experience in handling this type of transaction for the government.

The provision of the local content act is very clear and I believe the government of CHANGE is not going into the business of making decisions that are contrary to the provisions of the law. This must be upheld.

Buhari should equally pursue the passage of the PIB into law towards reducing the concentrated powers of the leadership structure of the NNPC.

Nigerians are hopeful.

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 2:17pm On Jun 29, 2015
BeefitLtd:
I am deeply saddened by some of the facts revealed in this article, if it is true that the conditions under which the Nigerian companies handled SWAP for NNPC was very strenuous, then something off somewhere....

Some questions come to mind:
1. Why are Nigerian businesses treated like second tier class of businesses in our own country?
2. Why is the current propaganda against oil and gas companies engaged in swap limited to Nigerian companies?
3. Why are we Nigerians gullible?

It is fully understandable that squabbles must be in a capitalist business environment amongst competitors, however, what I believe the government should do is to include new marketers on the swap list while retaining existing companies with over five years experience in handling this type of transaction for the government.

The provision of the local content act is very clear and I believe the government of CHANGE is not going into the business of making decisions that are contrary to the provisions of the law. This must be upheld.

Buhari should equally pursue the passage of the PIB into law towards reducing the concentrated powers of the leadership structure of the NNPC.

Nigerians are hopeful.

Spot on, but we hear that some of these companies may have embezzled government finance in collaboration with the almighty Diezani ...

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 2:19pm On Jun 29, 2015
pacmanito:
Good if it will bring about inclusive development. and not putting wealth in the pockets a some few pockets

I think what is more important is making sure Nigerian companies have right of first refusal before engaging these foreign neo-colonialistic companies.

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Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by pacmanito: 2:42pm On Jun 29, 2015
MIPNIG:


I think what is more important is making sure Nigerian companies have right of first refusal before engaging these foreign neo-colonialistic companies.

Nice one
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by nchipo: 2:54pm On Jun 29, 2015
Well, let's see what Buhari got to offer.
There are uncertainties about his strategic directions.
But why call for removal now when we all kicked against 3 years ago
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 2:55pm On Jun 29, 2015
I hope Nigerian oil and gas companies are taking advantage of the local content law. We have been empowered to take ownership of the sector. If we keep sitting back and waiting for God to favour us, this few big Nigerian companies will create a cartel that may be impenetrable over time. Accountability is key much as we want local companies to remain in charge.
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by nchipo: 2:59pm On Jun 29, 2015
MIPNIG:
I hope Nigerian oil and gas companies are taking advantage of the local content law. We have been empowered to take ownership of the sector. If we keep sitting back and waiting for God to favour us, this few big Nigerian companies will create a cartel that may be impenetrable over time. Accountability is key much as we want local companies to remain in charge.

Hope this bill will not be an endless cry. Above all, are Nigerian labourers protected by the bill? Because we are our worse enemies. Nigerian entrepreneurs are good at extorting labourers unlike Europeans who respect labour dignity undecided
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 3:23pm On Jun 29, 2015
nchipo:
Well, let's see what Buhari got to offer.
There are uncertainties about his strategic directions.
But why call for removal now when we all kicked against 3 years ago

I believe Nigerians were not sure of what it meant for them at the time. Six months into a government you removed subsidy on the first day of the year, it was good policy wrong timing considering how superstitious Nigerians are. Timing in politics is everything. Bihari has a chance to take advantage of this opportunity to take this out now!
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Nobody: 3:25pm On Jun 29, 2015
nchipo:


Hope this bill will not be an endless cry. Above all, are Nigerian labourers protected by the bill? Because we are our worse enemies. Nigerian entrepreneurs are good at extorting labourers unlike Europeans who respect labour dignity undecided

Our unions and workers don't really know their rights. An average Nigerian labourer is well protected by our laws, but the unions don't necessarily pursue agendas that will benefit their follow comrades, rather they seek to protect their pockets
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by Orunto: 4:25pm On Jun 29, 2015
I like this and I will share it forever. Afterall swaps are just trades by barter that you must ensure to accept adequate consideration for your goods in exchange. Subsidies are discretional, unorthodox, command favouratism and can be grossly abused. So consider controls to make SWAPS effective but SUBSIDIES must be stopped.
Re: Local Content Law Implementation: A Call For Retaining Oil Swap &subsidy Removal by nchipo: 4:38pm On Jun 29, 2015
MIPNIG:


Our unions and workers don't really know their rights. An average Nigerian labourer is well protected by our laws, but the unions don't necessarily pursue agendas that will benefit their follow comrades, rather they seek to protect their pockets


Well, it's a problem of endemic failure. We need a revamp of our institutions. Integrity and selflessness are rare gems in the country and these will mar the success of the local content bill. it will be a case of GDP growing and Nigerians wallowing in abject poverty

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