Despite Trump’s Demand for Reduction, Oil Price Nears Three-year High

• Buhari to meet NNPC officials over FAAC, corporation’s remittance debacle

• Glencore to buy back $1bn shares

Omololu Ogunmade and Chineme Okafor in Abuja and Ejiofor Alike in Lagos with agency reports

President Muhammadu Buhari Thursday in Abuja resolved to meet officials of the Nigerian National Petroleum Corporation (NNPC) over its alleged failure to make accurate remittances of oil revenue to the Federal Allocation Accounts Committee (FAAC) in the month of June.

The news of the proposed presidential intervention in the corporation’s dispute with the Federation Accounts Allocation Committee (FAAC) coincided with the NNPC’s Group Managing Director, Dr. Maikanti Baru’s statement that the corporation had repaid the International Oil Companies (IOCs) operating in Nigeria a total of $1 billion out of the discounted $5.1 billion cash call debt owed to the companies.

In the meantime, United States President Donald Trump has again accused the Organisation of Petroleum Exporting Countries (OPEC) of driving crude oil prices higher and urged the cartel to do more to reduce the prices.

In Nigeria, however, President Buhari resolved to meet officials of the NNPC over its alleged failure to make accurate remittances to the FAAC in the month of June.

The president will meet the officials of the apex oil body alongside the Minister of Finance, Mrs. Kemi Adeosun, at an undisclosed date.

His decision was the fallout of a meeting of three All Progressives Congress (APC) governors, the Chief of Staff to the President, Abba Kyari, and the finance minister in the State House Thursday.

The alleged questionable remittances made by NNPC to FAAC in June had compelled the committee headed by Adeosun to reject the remittances, resulting in the suspension of the monthly sharing of collectible revenues between the federal and state governments.

Against this background, three governors, Abdulaziz Yari (Zamfara), Abubabakar Badaru (Jigawa) and Atiku Bagudu (Kebbi) and Adeosun, respectively met Kyari and the president in the State House Thursday to determine the way forward on the development.

At the meeting, it was resolved that given the importance of the issue at stake, the president and the minister would meet the officials of the NNPC, with a view to getting to the root of the matter and also find a lasting solution to the debacle.

Answering questions from journalists after the meeting, Yari said although his visit to the State House along with his colleagues was meant to be a private visit, it eventually turned out to be official, in view of the persistent debacle over fund remittance between NNPC and FAAC.

He said, “There is headway because the president and the minister of finance will meet with the NNPC officials so that we can resolve the problem with the federal allocation accounts committee.”

Also speaking, Adeosun said she was in the State House to brief both the governors and the president on the update on the matter, affirming that the president had promised to intervene in the matter.

She said: “Well, as you know, the last FAAC meeting ended in deadlock and since then, we have been having a series of engagements between ourselves, the governors, the commissioners and of course, various stakeholders.

“Today’s meeting was for me to brief the governors and the chief of staff and by extension, the president on the progress we have made so far on our position. The president has promised to take the next step and to that extent we are very satisfied.”

On why there was yet a remittance problem when NNPC was also part and parcel of the Treasury Single Account (TSA), the minister said all revenue generating agencies make returns to FAAC, adding that the issue under contention was not about gross revenues of the corporation but about deductions it made.

She added that since the last FAAC meeting ended in deadlock, several meetings had been held by the committee with governors, commissioners of finance and other relevant stakeholders.

She explained: “Every agency of government is in the TSA. You know FAAC is unique. FAAC is a meeting where all the revenue generating agencies make returns on net of their expenses. It is in the area where we have disputes – the dispute is not on the gross revenue but what has been deducted from that gross revenue gives us the net which is being brought into the FAAC.”

NNPC Pays $1bn Cash Calls Debt to IOCs, Says Baru

In another development, the NNPC has repaid $1 billion out of the $5.1 billion owed the IOCs as unpaid cash calls for the joint venture projects.

NNPC’s Group General Manager, Public Affairs, Mr. Ndu Ughamadu, quoted Baru as saying in a statement Thursday that the corporation had been successful so far.

He listed some of his achievements to include, the payment of the cash call debts to the IOCs amongst others.

According to him, the NNPC under him had done well in its upstream oil business and so far maintained two million barrels per day (mbd) oil production level in 2018.

“Aside securing approval and signing off the novel financing structure with Schlumberger for the NNPC/First E&P JV which is expected to deliver a peak production of 50,000 bpd and 120mmscfd by 2019, the corporation had maintained commitment to repayment of cash calls arrears where about $1 billion of $5 billion indebtedness has been settled,” Baru, was quoted to have said.

His disclosure suggested that the corporation still had about $4.1 billion to pay off in the negotiated cash call arrears. Although, part of the agreements reached with the IOCs in this regards was that repayment will be based on incremental oil production.

Baru equally said in his message to NNPC’s workers that the oil corporation would remain globally competitive to ensure value addition to Nigeria.

He said: “Going forward, our priority will be to remain globally competitive. In pursuing this, we will ensure the gradual transition of NNPC from an integrated oil and gas company to an energy company.

“We will also review our business models to reflect current operations reality with improved profitability, transparency and accountability as the cornerstone.”

Baru explained that the NNPC would pursue improved relationships with local communities, states; local governments and security formations in the country.

The NNPC, he stressed, had remained a critical gas supplier to the domestic market with a dominant market share, adding that it now supplied an average of 720 million standard cubic feet of gas per day (mmscf/day) to the power sector, representing about 47 per cent of total gas supply to the domestic gas market.

Despite the obvious challenges and poor showings of the corporation’s refineries in Warri, Port Harcourt, and Kaduna, Baru said the refineries have remained operational and strategic in their contribution to petroleum products availability to support domestic supply across Nigeria.

He also stated that he had institutionalised transparency in the bid processes for contracts for lifting of crude oil from the country.

Despite Trump’s demand for reduction, oil price near three-year high

On the international front, President Trump had been asking for oil price reduction.

“The OPEC monopoly must remember that gas prices are up & they are doing little to help. If anything, they are driving prices higher as the United States defends many of their members for very little $’s. This must be a two way street. REDUCE PRICING NOW!” Trump wrote on Twitter.

But oil price edged lower Thursday but still stood not far from its highest in the last three and a half years, boosted by potential disruptions in Iran and the Middle East, despite the fresh demand from Trump that OPEC cut prices.

Trump’s comment is coming as the Swiss commodities trader and a major exporter of Nigeria’s crude oil, Glencore said it would buy back shares worth up to $1 billion in a programme of purchases that would run to the end of 2018

The US Republican president has lashed out at OPEC in recent weeks as rising oil prices could create a political headache for him before November mid-term congressional elections by offsetting Republican claims that his tax cuts and roll-backs of federal regulations have helped boost the country’s economy.

In an earlier tweet on Saturday, Trump said Saudi Arabia had agreed to increase oil output by up to two million barrels, an assertion that the White House rowed back on in a subsequent statement.

Saudi Arabia, OPEC’s biggest member, has assured Trump that the kingdom can raise oil production if needed and that the country has two million barrels per day of spare capacity that could be deployed to help cool oil prices to compensate for falling output in Venezuela and Iran.

Trump has been complaining about OPEC at the same time that Washington is piling pressure on its European allies to stop buying Iranian oil.

Reuters reported that the Iranian OPEC Governor Hossein Kazempour Ardebili said Thursday that Trump had raised oil prices through his tweets.

“Your tweets have increased the prices by at least $10. Please stop this method,” the Iranian oil ministry’s news agency, SHANA, quoted Kazempour as saying.

However, oil edged lower Thursday but still stood not far from its highest level in three and a half years, boosted by potential disruptions to flows from Iran and the Middle East despite a fresh demand from Trump.

While the global benchmark, Brent crude futures were at $77.99 per barrel, the US crude futures were also down at $73.89, not far from Tuesday’s three and a half year high above $75.

OPEC, together with a group of non-OPEC producers led by Russia started to withhold output in 2017 to prop up the market.

Recent price rises have also been spurred by a US announcement that it plans to reintroduce sanctions against Iran from November, targeting oil exports.

OPEC and Russia said in June they were willing to raise output to address concerns of supply shortages due to unplanned disruptions from Venezuela to Libya, and likely also to replace a potential fall in Iranian supplies due to US sanctions.

Despite these measures, Goldman Sachs said in a July 4 note to clients that “the market will remain in deficit” in the second half of the year.

Meanwhile, commodities trader and a major exporter of Nigerian crude, Glencore said Thursday it would buy back shares worth up to $1 billion in a programme of purchases that would run to the end of 2018.