The federal government is set to sign a cash-raising oil deal with India for $15 billion by the end of this year, just as Nigeria’s oil production is also expected to rise by 22 per cent to 2.2 million barrels per day in the same period when oil companies lift the force majeure on fields that were shut down as a result of militancy in the Niger Delta.
A statement from the Director, Press in the Ministry of Petroleum Resources, Idang Alibi, said that the Minister of State for Petroleum, Dr. Ibe Kachikwu, negotiated a $15 billion investment with India monday with terms to be agreed, where the Indian government would make an upfront payment to Nigeria for crude purchases.
This, the statement explained, would be repaid on the basis of firm term crude contracts over some years and in consideration for Indian public sector (PSU) companies collaborating in the refining sector as well as exploration and production activities on a government-to-government basis by Indian PSU companies, long term contracts for supply of crude to Indian PSU companies from Nigeria, and also possibilities of executing CGD and LPG infrastructure projects by Indian PSU companies in Nigeria.
Kachikwu, who is currently on a three-day visit to India, concluded talks on the investments in Nigeria’s oil and gas sector in a bilateral meeting with his Indian counterpart, Shri Dharmendra Pradhan.
Both ministers, said the statement, noted the existing and significant engagement between the two countries in the hydrocarbon sector, while acknowledging that Nigeria was one of the largest trading partners of India in Africa, which is dominated by import of crude oil and gas from Nigeria.
In 2015-16, India imported nearly 23.7MMT of crude (nearly 12 per cent of India overall imports) and over 2 MMTPA of LNG from Nigeria.
Following this negotiation, the two countries have agreed to work on a memorandum of understanding (MoU) to facilitate investments by India in the Nigerian oil and gas sector and specifically in areas such as the term contract, participation of Indian companies in the refining sector, oil and gas marketing, upstream ventures, the development of gas infrastructure, and in the training of oil and gas personnel in Nigeria.
The MoU is expected to be firmed up in December 2016 during PETROTECH-2016. Both ministers also agreed to strengthen the existing cooperation in the oil and gas sector, and in particular to explore investment opportunities for Indian public and private sector companies in Nigeria.
On the sidelines of the visit, Kachikwu had one-on-one meetings with top executives of Indian public sector oil and gas companies and also representatives of some Indian private sector oil and gas companies.
Speaking further on Nigeria’s oil output, Kachikwu said he hoped the force majeure on all the country’s oil fields would be lifted by December 2016 or January 2017.
Reuters confirmed that India’s oil ministry said that Nigeria, whose economy has been hit hard by low oil prices and militancy, had requested an upfront payment.
“Nigeria has a bit of a cash flow problem right now. Our reserves are not as strong as we want them,” Kachikwu told reporters in New Delhi, the Indian capital.
“The impact of that is the value of the naira (currency) is coming down. So what we are trying is to leverage on the assets we have to receive immediate cash,” Kachikwu added.
He said the Organisation of Petroleum Exporting Countries (OPEC), which had agreed to cut world output to shore up prices, has however allowed a production window of 1.8 million bpd to 2.2 million bpd for recession-hit Nigeria.
Apart from the impact of low oil prices, whose sales account for 70 per cent of the federal government’s revenue, the country’s oil and gas production facilities have been crippled by attacks by militants.
Attacks by Niger Delta Avengers (NDA) and other militant groups have curbed Nigeria’s production, with ExxonMobil’s Qua Iboe, Nigeria’s largest export stream, and Shell’s Forcados still under force majeure.
Kachikwu, who said oil prices would rise from current levels by December, met the Indian oil minister to discuss expanding energy ties between the two countries.
In the last fiscal year ended March 31, Nigeria accounted for nearly 12 per cent of all crude oil imports by India.
“We agreed on significant potential for diversifying (India’s) engagement in E&P (exploration and production), refinery building and marketing in Nigeria,” Pradhan said in a tweet.
In 2014, India took over from the United States as the largest importer of Nigerian oil, according to statistics by the Nigerian National Petroleum Corporation (NNPC).
While India accounted for imports of 30 per cent of Nigeria’s crude, the U.S., which initially reduced its oil demand from Nigeria to 250,000 barrels per day, later completely stopped oil imports from Nigeria due to increased domestic shale gas and oil production.
Shale oil production in the U.S. has led the International Energy Agency (IEA) to forecast that the U.S. will be largely energy independent by 2035.
However, the NNPC’s monthly report for June 2016 showed that for the first time in over two years, the U.S. overtook India as the biggest importer of Nigeria’s crude oil.
According to the report, the U.S. bought 10.79 million barrels of Nigerian crude in June, up from 4.76 million barrels in May, while India’s imports stood at 9.62 million barrels, down from 16.29 million barrels in January.
NNPC’s report further showed that U.S. imports of Nigerian crude rose by 577.8 per cent in the first quarter of 2016, compared to the same period in 2015.
In February 2016, the U.S. imported 12.12 million barrels from Nigeria, making it the second largest buyer of the country’s crude after India, the report added.