- Supply concerns put price at $50 per barrel
House of Representatives has revealed that oil companies operating in the country are indebted to the federal government to the tune of $2 billion.
Chairman of House ad hoc committee probing all Oil Prospecting Licences, OPLs, and Oil Mining Leases, OMLs, granted by the government, Gideon Gwani disclosed to the House Press Corps yesterday that oil companies that were supposed to salvage the situation by prompt payment were owing the government hundreds of millions of dollars, thus compounding the economic situation in the country.
While insisting that the situation was alarming and worrisome, Gwani said it was a dangerous trend that could not be allowed to continue.
“It is estimated that the oil companies by their actions have either evade or avoided the payment of these compulsory fees which is presumed to have denied the federal government the sum of about $2 billion.
“At a time when the government is talking of obtaining loans for infrastructural development such as: roads, railways, powers plants, petroleum refineries, among others and where oil blocs have been allocated to some companies to use the proceeds accruing from loyalties, signature bonuses etc, to fund these important projects yet, several years after, these facilities are still in comatose with little or no new projects to show as approved,” Gwani lamented.
The chairman also expressed concern that the Minister of State for Petroleum Resources, Ibe Kachikwu and the governor of Central Bank of Nigeria, CBN, Godwin Emefiele, had not responded to the request of the committee.
He further pointed out that the committee had resolved not to be intimidated, adding that it would go ahead with its investigative hearing on the matter.
Oil hits $50 per barrel mark due to supply concerns
Meanwhile, hope has risen for Nigeria’s bartered economy, as Oil prices yesterday tested the $50-per-barrel mark on Thursday as production outages brought a faster-than-expected recovery to an oversupplied market many thought will stay depressed through the year.
While a crude glut could grow in coming months if demand stalls, wildfires in Canada’s oil sands, unrest in the Nigerian and Libyan energy sectors, and a near economic meltdown in OPEC member Venezuela have knocked out nearly four million barrels per day in immediate production.
That has enabled futures of Brent and U.S. crude’s West Texas Intermediate, WTI, to gain nearly 90 percent from the 12-year lows seen this winter, and recoup about half of what they lost since mid-2014 when both traded at above $100 a barrel.
But some market watchers say oil’s climb to above $50 for the first time in seven months could spur producers, particularly U.S. shale drillers, to revive scrapped operations that could again bloat supplies and trigger a selloff.
Certainly ($50) is a psychological barrier. There is a momentum, people will try and push it up over that,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.
A source at oil producer Chevron said on Thursday its activities in Nigeria had been “grounded” by a militant attack, worsening a situation that had already restricted the supply of hundreds of thousands of barrels.
A meeting of the Organisation of the Petroleum Exporting Countries, OPEC, on June 2 in Vienna to discuss the oil market added further support.
OPEC officials were more positive about oil market conditions at talks in Vienna ahead of next week’s gathering of oil ministers, two sources said on Thursday, in a sign the exporter group is unlikely to change output policy on June 2.
However, the recent rise in oil prices and friction between key members Saudi Arabia and Iran mean a coordinated effort to intervene to support prices is slim.
“A (production) freeze remains a tail risk, but a very small one. The bigger risk is that following the meeting Saudi will increase production to meet rising summer domestic demand, to preserve market share in its oil wars with Iran and Iraq,” David Hufton, head of PVM Oil brokers, said.
“These are all compelling reasons to expect Saudi production to rise over the summer months.”