M a r k e t N e w s

Nigeria: As Lagos Joins Oil Producing States

Posted on : Thursday, 6th November 2014


THAT Lagos State is on the verge of becoming a member of Nigeria's oil producing states by 2015 is good news. The state's government has been undoubtedly progressive and visionary, hence the enabling environment it has created to make this possible is hardly surprising. This new-found status, therefore, is now a clarion call on other states to rise up to the current economic challenges, think and act positively in the larger interests of the people.
According to reports, the joint venture partners on the Aje Field, offshore Lagos have taken the final investment decision on the exploration of the field. The first phase which is scheduled to be brought on stream by end of 2015 is targeting 10,000 barrels per day of oil from two target wells in the Oil Mining Lease 113 area. A re-entry of Aje-4 will form the first production, while drilling of Aje-5 is expected to be the second. The plans include the use of Rubicon's Front Puffin floating production, storage and offloading vessel, which produced oil from the Puffin field in the Timor Sea.
The state government's optimism for complete breakthrough is rooted in the belief that "this development is good for Nigeria generally because our (Nigeria) reserves base has not increased over the years as expected, because the international oil companies are not ready to invest since the Petroleum Industry Bill has not been passed." This is the more reason local entrepreneurs Yinka Folawiyo Petroleum Company Limited as the operator with 25 per cent interest in the field and their partners Vitol, 24.05 per cent; First Hydrocarbons Nigeria Limited, 16.875 per cent; Energy Equity Resources Limited, 16.875 per cent; Panoro Energy ASA, 12.19 per cent; and Jacka Resources Limited, five per cent should be commended for taking up the gauntlet, believing in their own capacity and demonstrating a certain faith in the country. These and similar other ventures should be further encouraged to succeed. The reluctance of the international oil companies to invest, hinged on the incomplete processing and passage of the PIB is a bad statement on years of intrigues about the passage of the bill at the National Assembly. Too many interests - bordering on corruptive tendencies of public officials and stakeholders - are at work, creating impediments for the bill. These have to be removed. The different versions of the bill have to be harmonised just as the lawmakers should put the interest of the country above anyone else's and produce a workable document that could open up the nation's economy.
Nothing is to be taken for granted by the joint venture partners in Lagos. Lagos as a state has also floated its own oil and gas company perhaps in anticipation of playing a major role in the industry. At present, it is enjoying its enviable status as the highest internally generated revenue (IGR) earner with about N29 billion monthly.
It is hoped that the state and the partners would have learnt some significant lessons from existing JV arrangements of the Federal Government with oil multinationals to avoid frictions and pitfalls. Transparency will be key to all dealings to place trust as the framework of a lasting business relationship, being newcomers to the partnership. There will be challenges obviously, but facing up to them and resolving issues arising therefrom, matters.
How the associated problems of environmental degradation, cash-calls, technical support, deals with federal authorities and others will be handled will be germane to the growth of the venture really. Granted that the Federal Government has offered appreciable assistance to date in approvals and other areas, a more cooperative approach between the two levels of government to promote Nigeria's interest and serve as attraction to similar ventures in the immediate future is expected.
Again, that the JV partners only submitted the Field Development Plan for the Aje field in January 2014 to the Department of Petroleum Resources with approval of FDP in March shows that with cooperation and commitment enormous interest of all officials to the success of any project, Nigeria can work. This is commendable. A further potential to develop the block across both OPL 310 and OML 113 should be pursued with the same dispatch.
Now job opportunities will open to Nigerians through the joint venture operations. As a corollary to the move by Lagos, and to encourage the many cash-strapped states, the Federal Government should revisit the issue of solid minerals with a view to taking it out of the current unproductive system, allow each state to exploit what is in its domain and pay royalties to the centre. It is time the country allowed a shift from counter-productive policies and liberated the nation's potentials.

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