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‘FG Earned N3.99 Trillion from Oil in 2004’

Posted by By Mike Oduniyi in Lagos and Onyebuchi Ezigbo in Abuja on 2005/08/22 | Views: 234 |

‘FG Earned N3.99 Trillion from Oil in 2004’


Nigeria earned a total of $30 billion (N3.99 trillion) from the oil and gas sector last year bolstered by high oil prices.

* Closure of Shell facility raises crude prices


Nigeria earned a total of $30 billion (N3.99 trillion) from the oil and gas sector last year bolstered by high oil prices.

Crude oil prices however, bounced up yesterday after shedding $3 on Wednesday following the continued closure of a Shell flowstation in Rivers State as well as news of a brief fire at a Venezuelan refinery.

Speaking at a forum on Revenue Transparency in the Oil Industry, put together by a United Kingdom-based group, 'Save the Children' in collaboration with Nigerian transparency outfit, 'Publish What You Pay', the Business and Environment Manager of Shell Petroleum Development Company (SPDC), Mr. Ola Sobande, said Shell and its Joint Venture partners alone, paid over $3 billion in petroleum profit tax and royalties to the Nigerian government in 2004.

Apparently responding to the wind of transparency blowing across the oil industry, Shell representative said it costs $4 to produce a barrel of crude oil from its facilities in the country while the company makes an average $2 per barrel as profit.

"We make an average profit of $2 per barrel of crude oil with a production cost of about $4 per barrel", he said.

Shell revenue disclosures came just as the UK-based non-governmental body, "Save the Children" released a startling statistics from an independent assessment of revenue transparency in the oil industry, showing an abysmal low level of accountability by most oil companies.

The group's report presented by Ms. Venessa Herringshaw said out of the seven oil companies, Transatlantic, Shell, ExxonMobil, Chevron Texaco, BP, Total and Statoil whose operations were investigated and which has oil production operations in at least one of the six countries studied, only four have publicly disclosed any payments to governments.
The four are Shell, ChevronTexaco, BP and Statoil.

The results of the study showed that Shell occupied the top place with 81.8 per cent followed by Transatlantic, which scored 45.5%.

Senate President Ken Nnamani, who declared open the forum, noted with concern misconstrued perception by the international community over issues of corruption and lack of transparency in governance. He said quite often credit ratings and other perception indexes on corruption and corrupt practices failed to focus on the activities of companies and home governments who instigate these corrupt practices.

"The truth is that it takes two to tango. Corruption in the extraction industry is a result of failure of policy in the home and host governments", he said.

He said in pursuance of the fight against corruption and lack of transparency in the extractive industry, greater responsibility lies with the home government, the simple reason being that it has the greater incentive and the power of sovereignty to impose standards and enforce compliance.

Nnamani gave the lawmakers' tacit support to the activities of the Nigeria Extractive Industry Transparency Initiative (NEITI) saying that the National Assembly would assist the executive and the civil society organization on any legislative initiative to complement government policy in that regard.

The Minister of Solid Minerals and chairperson of NEITI, Mrs. Oby Ezekwesili, who was represented by the acting Executive Secretary, Dr. Bright Okogu, said the transparency body has engaged a foreign accounting group to understudy the operations of Nigeria's oil industry between 1999 to date.

She said the study would also look into all the allegations connected with award of contracts and revenue earning accruing to the country from the industry within the period.

Meanwhile, the continued closure of Shell's Agbada 1 oil flowstation since Monday, created fresh concern of shortages of crude supply, and saw the US light sweet crude close higher yesterday at $63.62 per barrel for its September deliveries on the New York Mercantile Exchange. The Brent closed at $62.64 per barrel.

Oil prices had plunged by more than four percent on Wednesday to settle at $63.25 per barrel, amid selling from hedge funds and other speculators after the market's recent rally, which saw prices rise as high as $67.10 by last weekend.

The closure of the Shell facility led to the loss of 14,200 barrels per day (bpd) of crude production.

"We do not believe that the oil market has yet fully convinced itself that more than $60 is sustainable in terms of growth, and until that occurs, any move much higher is likely to be rather fleeting," Paul Horsnell, head of energy research at Barclays Capital in London, wrote in a research note.

There has been renewed concerns of supply shortages, sparked by Wednesday's US midweek petroleum supply report showing a large decline in gasoline inventories.

The US Department of Energy said the nation's supply of gasoline fell by five million barrels in the week ending August 12, 2005 putting inventories at 198.1 million barrels, or 12 percent below last year. Crude oil inventories grew by 300,000 barrels last week to 321.1 million barrels, or 11 percent above year-ago levels.

The report is a yardstick for determining demand and usage levels from the world's largest energy consumer.

News of output disruptions at Shell's Agbada flow station in Nigeria triggered by protests from villagers, and supported by news of a brief fire at the Venezuelan Amuay refinery, were to further contribute to the bullish trading.
Production has been reduced from 410,000 bpd to 150,000 bpd at the massive Venezuelan refinery, regarded as one of the world's largest refining installations.

The Shell flowstation remained shut as at yesterday. According to an official of the company, the meeting being held with representatives of the Mgbuchi, Elikpokwodu, Rukpokwu and Mbodo-Aluu communities since Wednesday, continued till yesterday.

Shell is demanding the reopening of the facility as a basis for further talks on the demands by the communities.

The communities are demanding the sum of $5million for an oil spill in 2003. The communities said they are protesting against what they called "Shell inhumanity in awarding paltry total compensation of $938.60 to two communities for a crude oil devastation which impacted over 500 hectares of the respective communities.”

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Comments (2)

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Toluwalase Samuel Olufemi(Ijebu, Ogun, Nigeria)says...

Authority belongs to God, once He decrees it is final and binding

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Ikponmwosa Osamede(Edo, Nigeria)says...

Your meaning of Osamede is wrong. Osamede means God has given me a crown