Disturbed by the country’s dwindling oil revenue, the Federal Government of Nigeria has stated that it has concluded plans to take over all idle oil wells from operators holding on to them.
The government also threatened to revoke all licenses given to individuals and companies that have refused to start oil exploration.
Chief Heineken Lokpobiri who is the Minister of State for Petroleum Resources (Oil), made this disclosure on Monday evening at an event held in Lagos by The Petroleum Club.
According to the minister, Nigeria has lost about $30bn to low oil production in the past two and half years.
Earlier in his opening speech, the Chairman of The Petroleum Club, Mr Austin Avuru, said the club had invited the minister to speak on the topic, ‘Funding Our Way Out of the Current Crisis: Looking Up to the Oil and Gas Industry.’
Avuru expressed worries that the country’s production keeps depleting while the government keeps giving figures different from those of the Organization of the Petroleum Exporting Countries.
Speaking, the minister also expressed concern that Nigeria was losing about 480,000 barrels of crude oil per day due to the Seplat/ExxonMobil crisis.
He said the asset was producing about 600,000bpd until the crisis began in 2022, saying the nation was losing millions of dollars daily.
Africa Today News, New York reported earlier that ExxonMobil and Seplat Energy had in 2022 announced a $1.6bn sales agreement deal that would see Seplat purchase ExxonMobil’s complete shares in the state-owned Nigerian National Petroleum Company Limited.
However, just when all hopes were high for the completion of the deal, a letter dated May 16, 2022, by the Nigerian Upstream Petroleum Regulatory Commission to ExxonMobil, stated that the deal could no longer hold because the Nigerian National Petroleum Company had exercised its right of pre-emption first refusal on the assets.
Read Also: Iran-Israel Tensions: Equity Slump, Oil Price Surges
Right of pre-emption is a legal right to parties in a joint venture to be the first to be considered for any planned sale or takeover of assets in the JVs if either party chooses to trade them off.
According to reports, the NNPCL objected to the sale of ExxonMobil’s equity to Seplat and insisted on exercising its first right of refusal, after which the corporation reportedly made an offer above $1.6bn to ExxonMobil.
Lokpobiri said, “For the past two and a half years, oil has been hovering around $80 per barrel. 480,000bpd, multiply it by two and a half years, it will give you about $34bn. When I was on the table, I was doing a rough mathematics. If one asset was doing about 600,000 barrels; but because of the problems which we are trying to resolve, production declined to 120,000 barrels, which means we’ve lost about 480,000bpd. Multiply it by $80, every day you get about $240m; multiply it by two and half years; we are talking of over $30bn. Inject that into our economy today, the dollar will naturally drop. This exchange rate is a matter of demand and supply”.
Lokpobiri maintained that his target was to ensure the country ramped up production through investments and grow revenue, stressing that was the mandate given to him by President Bola Tinubu.
He said, “One of the things we want to do to ramp up production is to see that any well that is idle has to be allocated to people. The Petroleum Industry Act gives the opportunity that any well that hasn’t been used in the past few years could be farmed out and be given to people who have proven capacity to do exploration so that we can boost production.
“I am engaging stakeholders, the IOCs, the Nigerian National Petroleum Company Limited to say, ‘Look, if you have a multiplicity of oil wells and you are not using them, we will apply the law’
“One of the reasons why our production is low is because we have too many shut wells, some of them contiguous to our marginal fields or oil wells. But by the time we take those wells in line with the law and give you people, and we give a timeline upon which you must produce, we will be able to increase production.”
The minister disclosed that out of the over 60 companies that got approvals in the last marginal bid round, only about had five started production, saying he would not hesitate to cancel unused licences.
“I don’t need to know you to renew or sign your licence and I will also not look at your face for me to cancel it. Out of those who benefited from the last marginal bid round, out of about 60, maybe only about three or four or five have started producing. Their licences will expire sometime this year because it is for three years, and renewable for another three years. But the condition is that you have a work plan. if you don’t follow your work plan, I also have the discretion to cancel it.
“If somebody has the marginal oil licence and doesn’t have the capacity to raise funding, you’re just impoverishing him,” the former senator mentioned.
He said the government would no longer allow any company or individuals to hold on to licences as souvenirs, threatening to farm them out.
“The ‘Big Boys’ are holding on to these licences as souvenirs, they are not doing anything about them. That is why we are farming them out. We will not allow any company to do that. Let’s start to do things differently,” he noted.
The minister further said that, “the worst thing that will happen to Nigeria is for our refinery to be fully rehabilitated and we will have to import crude from another country. That’s why I’m here to engage you that together, let’s change this story.
“In solving the funding challenges, pull your resources together, go into partnerships, so that you can fund the investments in this sector”.
He spoke further that divestment is not peculiar to Nigeria.