A Review of the Nigerian Energy Industry

Shell, ENI, others react to alleged questionable practices

25 November 2012, LAGOS (AFP) – Reactions from major oil firms operating in Nigeria over a report from a government-appointed panel alleging questionable practices in Africa’s biggest oil-and-gas industry:

On the claim that its SNEPCO division owes Nigeria $947 million from gas produced at its offshore Bonga field:
“That allegation is incorrect but we cannot comment further as we do not know the basis of the calculations that yielded the $947 million number. Suffice to say that SNEPCO as the contractor has an economic interest in the gas, the extent of which is yet to be agreed upon as provided in the production sharing contract which guides operation of oil mining lease 118.”

On the claim that Nigeria may have lost out on $29 billion due to lower-than-usual prices for gas sales to NLNG, whose shareholders include Shell, Total, ENI and state oil firm NNPC:

“NLNG is a separate entity and the NLNG feedgas price was negotiated at arm’s length and is several times higher than the current price of domestic gas. However any calculation based only on the difference between raw feedstock gas and end-user gas price in the international markets will be fundamentally flawed, as it does not take into account the cost of processing, transportation, liquefaction and shipping. These elements are very capital intensive.”

On operating in Nigeria:
“Each operating environment has its distinct challenges and possibilities. The Niger Delta continues to be a challenging place to operate for many reasons. There is a fundamental lack of basic infrastructure in many areas, and poverty and lack of employment opportunities, widespread criminality and other factors are all contributing to the social and economic difficulties in the Delta.”

On a claim related to gas sales to NLNG, whose shareholders include ENI, the company referred to a statement issued by NLNG.

NLNG said “it is an error to compare the price of raw material (natural gas feedstock) to that of finished product (regasified LNG). It is even worse to declare the difference as losses or cut-down rates. This sort of comparative economic analysis is simply bizarre. It fails to recognize the intensive production/liquefaction costs, the shipping costs, the regasification costs, taxes and levies and other ancillary charges.”

On operating in Nigeria:
“Nigeria is a country with an enormous growth potential. ENI has been operating here for the past 50 years supporting the economic and social development through investments and projects and in line with the principles of our Corporate Social Responsibility programs. We want to keep working for the country’s further development and expansion, and for a continuous improvement of the work and business environment.”

EXXON-MOBIL declined to comment in detail, but responded to one aspect of the report regarding an alleged lack of information on gas production or sales:

“Gas production and utilization figures are shared daily and monthly with the regulatory bodies. Gas produced by our Nigeria facilities is used to provide fuel for our operations or re-injected.”

TOTAL declined to comment, while CHEVRON did not respond to requests for comment.

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  • It really does take two to tango. These companies couldn’t possibly have failed to pay what they should if some government personnel hadn’t connived with them to short change the system. Government needs to identify those under whose watch this happened and punish them accordingly. That’s the only way the IOCs will take government seriously.

  • Big grammer no substance. Why not address the issues raised. somebody is trying to hode something with this semantics.