HOW IS NIGERIA CONTRIBUTING TO OPEC PRODUCTION CUT?
Nigeria is fighting its worst economic recession in 25 years and problems are accumulating with such diversity that the results are not what the Government in Abuja would like to see.
Niger Delta Avengers peace negotiation.
Since the start of negotiations in November with militants, Nigeria’s Minister of State for Petroleum has repeatedly said there would be a peace dividend in terms of improved oil-production. But last month Nigeria was pumping about 1.5 million barrels a day late, 30 percent below what it was hoping to achieve and only a modest recovery from an almost 30-year low of 1.4 million in August 2016.
The largest export terminals are experiencing disruptions. Forcados, is still shut down and there is no government update on when the facility can resume operations.
Qua Iboe, the nation’s largest crude stream, is still operating at reduced capacity as permanent repairs are being completed to the damage on the EXXON Mobil pipeline inflicted last July.
It is estimated that about 500,000 barrels a day of production is currently offline because of armed incidents. While the nation’s output recovered to an average of 1.64 million barrels last month from 1.5 million in December, that’s still well below the 2015 average of 1.99 million barrels a day, according to data compiled and reported by Bloomberg.
Even before the resurgence of militant activity, Nigeria was struggling as a result of low oil prices. President Muhammadu Buhari needs a peace deal. It is critical to his government’s ability to steer the economy out of recession and improve his political capital ahead of the 2019 elections.
The 2017 Budget proposed restoring financing for the Presidential Amnesty Program, which pays former militants an allowance, to its pre-2016 level of about $215 million from $66 million budgeted last year. This allowance, was started by President Umaru Yar’Adua in 2009 and expanded by President Goodluck Jonathan in 2011, and this program was credited with maintaining a relative peace in the delta before it was cut, a strategic move that clearly appears to have been a mistake.
Fight against Corruption.
The Nigerian Economic and Financial Crimes Commission confirmed last week that it had secured a court order for the federal government to temporarily seize control of the OPL 245 oil license from Shell and ENI
until its investigation was complete.
In court documents reported by British and Italian newspapers, the agency said the Nigerian government was “in the process” of pursuing charges of “conspiracy, bribery, official corruption and money laundering” against Shell and ENI subsidiaries in Nigeria.
The case, which has also prompted investigations by Dutch and Italian authorities, centers on whether the companies arranged the deal so that the Nigerian government — under then-President Goodluck Jonathan’s leadership — was acting as a conduit for a Nigerian company. The initial license for the block was awarded in 1998 by Dan Etete, then oil minister, to Malabu Oil and Gas, a company in which he had a direct interest.
The results of this investigation triggered major legal action in the UK and in Italy. The most damaging are for the CEO of ENI Claudio Descalzi who now will have to stand trial.
The request of indictment was made by prosecutors in Milan. The Chief Executive Officer is accused of complicity in corruption for about a billion dollars of bribes to members of the former Nigerian Government, according to the accusatory hypothesis to attract, along with Shell, the exclusive rights of exploitation of the Opl245 field.
In addition to the ENI’s CEO similar accusations were presented to 10 more individuals and two organizations, Eni and Shell. Among the defendants, even the previous CEO Paolo Scaroni, and several members of upper management at ENI and former African Government members.
To take advantage of the Opl 245 field, ENI would have paid one billion and 92 million dollars and Shell also under investigation over $200 million paid into a bank account of the Nigerian Government to the benefit of the company of former Minister Malabu Etete.
According to the facts reconstruction made by the Italian Prosecutor this amount would have served to pay alleged bribes to well-connected Nigerian politicians and three different groups: managers of ENI, foreign intermediaries including Russian and Italians.
It is a major setback for Mr. Claudio Descalzi, current ENI chief executive who is up for re-election at the head of ENI.
ENI is a State-owned entity and the Italian government was expecting to renew his mandate later this year. However, 2017 is an election year in Italy and one of the main topic is the fight against corruption.
Although fighting corruption is making sense in this overall economic context it is clearly not helping the image of the Country and the overall results is a low level of production which clearly is helping OPEC in the overall production limitation set in Vienna late November.
Let’s wish Nigeria better luck in the months to come and a more peaceful year in 2017.
