HomeBUSINESSNorthern oil search: Spotlight as Buhari’s tenure draws to a close

Northern oil search: Spotlight as Buhari’s tenure draws to a close

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As the conclusion of its second and last term approaches, attention has turned to the administration of President Muhammadu Buhari’s push for oil and gas in the nation’s north.

Buhari has made it his mission to locate oil and gas resources in the nation’s north since taking office in May 2015.

He has constantly emphasized the dominance of the north as the nation’s dominant political and economic force a top priority.

In October 2017, Jim Yong Kim, the then-president of the World Bank, informed reporters that Buhari had asked the bank to give its development programs in northern Nigeria priority.

“In my very first meeting with President Buhari he said specifically that he would like us to shift our focus to the northern regions of Nigeria and we’ve done that,” said Kim, who added that his organisation had largely complied with Buhari’s request.

During a visit to Washington in 2015, Buhari said in front of a live audience that the regions who massively supported him should anticipate more from his administration than the ones that did not.

“The constituents, for example, who gave me 97 percent (of the vote) cannot in all honesty be treated on some issues with constituencies that gave me 5 percent,” he said when he was asked about his administration’s policy of inclusiveness at the United States Institute of Peace on July 22, 2015.

The Nigerian National Petroleum Company Limited (NNPC) was directed to drill for and identify oil deposits in the North as soon as the president took office. The president previously served as the federal commissioner for petroleum resources and is currently the minister of petroleum resources.

The NNPC started looking for oil in various northern states in 2016.

Oil companies with operations in the nation have previously entered the area to look for hydrocarbon resources. However, drilling missions were put on hold due to the low success rate in finding commercially viable hydrocarbon resources.

The Kolmani River area, a border hamlet between the states of Bauchi and Gombe, was where crude oil, gas, and condensates were discovered, according to a 2019 announcement from the NNPC. Additionally, the business has been told to look for oil in the states of Kogi and Nasarawa.

Buhari claimed Kolmani has 500 billion cubic feet of gas and 1 billion barrels of oil in reserve.

There are concerns that the president is politicking and ethnicizing a commercial decision that should have been made based on a sound business case basis, even though diversifying Nigeria’s hydrocarbon sources, boosting existing reserves, and increasing daily production remain critical to the country’s economy.

The state-owned NNPC has been in charge of promoting oil exploration and commercialization in the region as the oil majors avoid exploring for oil in the nation’s North.

Over the years, the NNPC has neglected to maintain its four refineries, which are now all idle. The corporation was charged with failing to account for roughly 107,239,436 barrels of crude oil lifted for domestic use in 2019 by the Office of the Auditor-General for the Federation in 2022.

Sources within the organization contradict the firm and government’s claims that the Kolmani project has drawn $3 billion in funding.

“Practically the entire funding for the project and others in the North is coming from NNPC alone,” a senior NNPC official said, adding, “SEEPCO is providing minimal technical support while NNDC (New Nigeria Development Company) is a partner just on paper because they hold the Oil Prospecting Licences (OPL) 809 and 810 at the Kolmani field sites in Bauchi and Gombe states.

“The reality is that the funding for the exploration of hydrocarbons in the North is coming from the Frontier Exploration Fund, which allocates 30 percent of the profit from NNPC’s upstream oil and gas contracts for the purpose of oil exploration in frontier basins. Simply put, the proceeds of oil deals from the South are being used to fund explorations of Kolmani and others in the North with little being done by NNPC to expand the search for more oil acreages in the South,” the source added.

An Indian oil company named Sterling Oil Exploration and Energy Production Company (SEEPCO) is a collaborator on the Kolmani project. According to the Indian financial daily of Mint, multiple people who claimed to work for the company in Nigeria tweeted the Indian government asking for assistance in June 2016. Their salary hadn’t been paid in more than a year.

V.K. Singh, the minister of state for external affairs, stated on June 15 that the “Indian embassy was making all efforts and will solve your problem” in response to one of those tweets from Prashant Singh, who claimed to be employed as a geophysicist at SEEPCO’s exploration site in Lagos, Nigeria.

The newspaper claims that the fugitive brothers Nitin and Chetan Sandesara are the owners of SEEPCO. Recently, the Central Bureau of Investigation asked Interpol Nigeria for information on the whereabouts of Nitin Sandesara and his family. The Sandesara brothers were already being investigated. In connection with a money-laundering investigation involving 5,000 crore in a bank fraud case, the Enforcement Directorate attached properties worth 4,700 crore of Sterling Biotech Ltd, of which they are promoters, earlier this year.

“The brothers told people in their business circles about how they were confident of making $100 million per month (roughly Rs.700 crore) annually from their crude oil business in Africa. But they could not produce the desired results in Nigeria.”

In order to de-risk the project and attract the critical investment, Buhari instructed the NNPC to use its enormous asset portfolio across all of its operational areas in November 2022.

BusinessDay was informed by a representative of the Kolmani Integrated Development Project that no oil has been produced at the project site. “We’re still drilling to make sure it’s viable. We haven’t had much success yet,” he remarked.

The official’s claim runs counter to the federal government’s assertion that Kolmani contains 500 billion cubic feet of gas and 1 billion barrels of oil reserves.

“The NNPC’s northern project has been characterised by extreme opacity and ambiguity,” an industry stakeholder said on condition of anonymity. “It is as if they are hiding something. They need to come clean and be transparent with Nigerians.”

The stakeholder said: “Based on evidence we see, there is no reason to doubt that there is oil and gas in other parts of the country outside the Niger Delta.

“The model we have in Nigeria is that commercial oil companies bid for blocks and spend their resources to prospect and when they find, they exploit them. We need to ask ourselves: Why is this new effort to find oil being led by NNPC? What’s the data like? And where is the data? There is always data available and commercial companies can buy the data and prospect for oil.

“The problem is that NNPC is leading these explorations and announcing timelines that are politically expedient – timelines before Buhari leaves office. It would be advisable that the search for oil in different parts of the country should be commercially driven and not politically driven so that we don’t incur huge debts that will end in nothing to show for it.”

Afe Babalola University professor of law and member of the Governing Board of the Nigeria Extractive Industries Transparency Initiative (NEITI), Damilola Olawuyi, stated last year that the federal government must provide transparent and verifiable information on commercially viable fields, the advancements that have been made thus far, the challenges that still need to be overcome, and the next steps.

According to him, such openness and clarity would offer pertinent information for potential market participants to accurately assess the opportunities offered and the investment circumstances. He asserts that several further regulatory procedures must be completed before a prospect can enter full production and commercialization once it has proven to be both technically and commercially viable.

Olawuyi said: “For example, a development plan has to be submitted to the relevant authorities for review and approval. Similarly, the right to drill must be secured through a competitive bidding process before drilling can begin. While it is quite discouraging that several of these next steps have proceeded rather slowly in the North, it does not call for despair.

“Oil and gas production activities worldwide are currently undergoing complex challenges in light of the ongoing global energy transition, which has continued to limit the availability of financing for new oil and gas assets. Also, the sector is recovering from oil price volatility, which has resulted in all forms of production quotas and limits for existing and new production activities.”

 

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