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JV partners put major oil, gas projects on hold

DailyTimesofNigeria.com: JV partners put major oil, gas projects on hold

“Shell alone had planned to spend $2.7 billion for its oil and gas projects but cut to $2.3 billion”

Bid for increased crude production threatened

BY KAYODE EKUNDAYO, energy Editor

Posted 7 July 04

DUE to a cut in their yearly budget, the multi-national joint venture (JV) partners have deferred execution of major oil and gas projects, raising fears over the country meeting its target of 40 million barrels of crude oil reserves in 2007.

It was learnt that the JV partners, namely Chevron-Texaco, Shell Petroleum Development Company (SPDC), Nigerian Agip Oil Company (NAOC), Exxon-Mobil, and Addax have put their major gas and oil projects on hold pending when they would get enough financial resources to pursue them.

The JV partners operators are in partnership with the Nigerian National Petroleum Corporation (NNPC), the proxy of the Federal Government in the oil business.

For instance, due to lack of fund the NAOC’s Kwale gas power project which would have come on stream in 2003 could not. Besides, the oil firm had budgeted $400 million to pursue the 450 megawatts gas power station.

Also, SPDC’s gas turbine Afam $700 million power station has been temporarily put on hold due to Federal Government’s failure to fulfilling its own side of the bargain.

Twice, years 2003 and 2004, the federal government had cut yearly budget of the joint venture partner. For instance, last year, the oil firms had proposed a budget of $3.5 billion but was slashed to $3.2 billion Shell alone had planned to spend $2.7 billion for its oil and gas projects but cut to $2.3 billion. This year, the Ministry of Finance had slashed NNPC and its joint venture partners budget to $3.2 billion. They had submitted a $4.9 billion budget to the Federal Government.

Confirming the development, Shell External Relations Manager, Mr. Precious Omuku lamented that government only made available $2.3 billion last year. The implication of this, he explained, major oil and gas development projects were deferred in 2003 and this also affected or caused a drastic reduction in the company’s community development budget.

The company had spent $30 million last year on social community intervention. This was against $60 million spent on similar programme in 2002.

Operators however feared that major oil projects such as ChevronTexaco’s Agbami project, ExxonMobil’s Erha and Bosi Statoil’s Nnwa/Doro and Shell Nigeria Exploration Company (SNEPCO)’s chata exploration projects may be delayed in coming on stream before 2007. Federal Government is expecting about 1.5 million barrels per day from the capital intensive and technological driven shallow and deep offshore region on which the projects are located.

“We could not drill on number of well and this affected our daily output greatly,” another operator said.

In spite of these challenges, SPDC said it has paid Petroleum Profit Tax (PPT) of $1.2 billion and $608 million to the Federal Government last year.

At the presentation of its sixth edition of its annual people and Environment repost of the weekend, the company’s External Director, Precious Omuku said Shell had also made a contribution of $54.5 million to the Niger Delta Development Commission NDDC in the years 2002 and 2003. He said Shell contributed $16.4 million last year.

With a daily production of 910,000 barrels per day and a reserve base of one million barrels, Omuku said case of crude oil that were still on increase as the company last nine million barrels in 2003 from 88 cases reported, aside of deferment of another 13.8 million barrels. This figure was higher than the year 2002 lost of six million barrels.

The External Relations Director said 2003 was a good year for gas business as his company sold 1,171 million standard cubic feet per day of gas, surpassing the target of 1,100 mscf/r. This was against year 2002’s 812 million sct/d.

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