The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said only oil and gas projects that have huge net value to the Federation Account will henceforth be sanctioned by the federal government, explaining that there is no more need for international oil companies (IOCs) to develop multibillion dollar projects that will not attract payment of royalties to the government.
Speaking Tuesday in Lagos when he visited the Samsung Yard where the $3.3 billion Floating Production Storage Offloading (FPSO) unit is being integrated by Samsung Heavy Industries (SHI) at LADOL Free Zone, Kachikwu stressed that it will no longer be possible for crude oil price to hit $100, except there is a huge calamity in the producing regions.
He said with oil price depressed at $60 – $70, coupled with the production quota imposed by the Organisation of Petroleum Exporting Countries (OPEC), Nigeria would begin to look at its priority differently.
Kachikwu added that the country lost huge money in some of the previous production sharing contracts (PSCs), saying that no single royalty was paid in some of those projects.
“Oil is not going to be $100 per barrel again except there is a huge calamity in the North Korea peninsula and whatever. So, we are likely to continue to stay depressed at $60-$70, but even at that, that is a huge movement, coming from where we were. But what it says to us as a country is that Nigeria is going to begin to look at its priorities differently. We are going to look at what is the net value for the country in these future projects. We are not as a country, very impressed with the PSCs we put together. We lose a lot of money in the contracts,” Kachikwu said.
The minister said he had worked hard to keep Nigeria’s production within the OPEC quota, adding that the country would focus on projects where it will make more money.
“So, as you look at your numbers; as you look at the terms under which you want to develop these fields, please spend a good amount of time in checking the bottomline and what goes into the Federation Account. There is no need building a huge $70 billion facility- like one field that I looked at that I felt really pained that no single royalty was paid for one reason or the other. Those kinds of things won’t happen any longer. The terms will change,” Kachikwu added.
Kachikwu assured the IOCs that Nigeria will continue to be a prolific economic return model in the world in terms of oil production.
“But we are going to improve our skills. We are going to improve the terms; we are going to make sure that oil companies get away with huge rewards,” he said.
He commended Total and Samsung Heavy Industries for the accomplishments in the Egina deepwater project, saying that President Muhammadu Buhari was impressed to learn that the project will add 200,000 barrels per day of crude oil to Nigeria’s daily production.
In his speech, the Managing Director of Total E & P, Mr. Nicolas Terraz, said the Egina FPSO is the biggest FPSO built by the Total Group worldwide.
According to him, the $16 billion Egina deepwater project is a milestone for Nigerian content and a game changer in the way deepwater oil and gas projects are executed in Nigeria.
He added that all the scopes of the project were delivered on schedule and on budget.
“The plan is to complete the integration work in the next six months so that the FPSO sails away to the Egina field,” he added.
Also speaking, the Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB), Mr. Simbi Wabote, said Egina project recorded first on many fronts.
Wabote urged the minister to ensure that more projects such as Bonga South West, Zabazaba, and Assa North are sanctioned.