NNPC Jettisons Oil Swap Deals, Pays Cash for Fuel Imports

The Nigerian National Petroleum Company Limited (NNPC) has begun buying petrol via cash tenders, rather than oil swaps, for the first time in nearly a decade, four sources familiar with the matter told Reuters.
This is coming as the Gbenga Komolafe-led Nigerian Upstream Regulatory Commission (NUPRC) at the weekend moved to put an end to the perennial altercations between oil and gas industry operators and their host communities, with the introduction of a digital interface for both parties.

Also to ensure a harmonious relationship with its host communities, Shell Petroleum Development Company Limited (SPDC) has also disbursed N3.72 billion and an additional $12.32 million (N9.48 billion) for host community development in compliance with the provisions of the Petroleum Industry Act (PIA),
NNPC Limited’s latest tender to buy petrol for delivery in November closed during the week, the sources said. Two of them added that NNPC would pay the last debts owed under the long-running oil swaps by the end of next month.

According to the report, the shift is the result of efforts by President Bola Tinubu to eliminate costly fuel subsidies as part of broader reforms aimed at shoring up the country’s struggling finances.
Last year, NNPC did not remit monies into the government coffers, even amid surging oil prices, as oil-for-fuel swaps consumed all the crude oil it had to sell.
NNPC owed traders up to $3 billion worth of crude oil this year, debts the two sources said would be paid in November.

Tinubu’s reforms in May more than tripled petrol prices, and virtually eliminated cross-border smuggling, which drained millions of litres of petrol daily out of Nigeria to neighbouring countries with higher pump prices.

While it pumps more oil than any other African nation, Nigeria refines little and is almost totally reliant on fuel imports to keep its 200 million people moving.
The last round of swaps included more than a dozen consortia including foreign oil traders such as Vitol, TotalEnergies and Mercuria and local companies.
Despite the reforms, NNPC remains the sole petrol importer, sources said, due to ongoing foreign exchange shortages and an effective pump price cap that has meant private importers can’t make money bringing in fuel.

Komolafe Moves to End Friction Between Oil Companies, Host Communities
Meanwhile, the NUPRC at the weekend moved to put an end to the perennial altercations between oil and gas industry operators and their host communities, with the introduction of a digital interface for both parties.
In a statement issued yesterday in Abuja, the Gbenga Komolafe-led NUPRC said the online platform was designed to ease regulatory compliance, and oversight functions and also enable operators in the industry to meet regulatory requirements in a timely, efficient and cost-effective manner.

Known as HostComply, the commission said the platform will help to streamline reporting of Environmental, Social and Governance (ESG) management for operators, host communities, and regulators, describing it as a cardinal requirement of the Petroleum Industry Act (PIA) 2021.

Given the friction often experienced between operators in the petroleum sector and their host communities, the NUPRC stated that the platform was developed to offer comfort to Host Communities Development Trusts (HCDT) by providing a robust technological tool to interface and engage with the settlors (operators).
NUPRC pointed out that HostComply offers numerous advantages to the operating companies and the host communities, including streamlining reporting and monitoring obligations, building trust and credibility as well and providing a centralised system for managing data related to community development and ESG reporting.

The agency added that it will ensure compliance with regulatory requirements and build trust with communities, investors, and other stakeholders.
Furthermore, the industry regulator noted that it will help to ramp up oil production and revenue for the settlors and the federal government as well as provide business analytics that will help settlors, regulators and other stakeholders identify trends, opportunities, and areas for improvement in their community development and ESG reports.

“The portal will enable the settlor to upload the incorporated HCDT registered, upload the three per cent operating expenditure (Opex) by assets for verification by the regulator; track, analyse, and report on the use of funds for community development initiatives and foresee failure points by leveraging the data insights and mitigate against them,” NUPRC said.

NUPRC said the portal will provide an opportunity to measure and monitor distributional equity amongst the communities.
“The HostComply allows the regulator to detect and identify non-compliant situations through IT forensics and compliance intelligence tools, real-time monitoring of the progress of projects being executed by the HCDT, issue demand notices on the payment of the three per cent Opex contribution by the settlors and verify the three per cent Opex contribution and its distribution,” it said.

Urging stakeholders to fully utilise the portal to ensure regulatory compliance with the provisions of the law, the NUPRC indicated that failure of compliance has serious implications and attracts sanctions, which include revocation of licence or lease.

“Pursuant to the following sections of the PIA, 2021, and for the avoidance of doubt, the licence or lease of a settlor may be revoked if it fails to comply with the host communities’ obligations under Section 96(n) of the Act,” the commission said.
“It will be an interface for submission of complaints and petitions, reporting of fraud, breaches, and malpractices; and an administrative module which will act as a performance evaluation and analytics dashboard for each user group and general overview, management of access rights and permissions as well as review of audit trails,” the NUPRC added.

Shell Releases N13.2bn for Community Development, Unveils More Trusts  
In a related development, Shell Petroleum Development Company Limited (SPDC) has disbursed N3.72 billion and an additional $12.32 million (N9.48 billion) for host community development in compliance with the provisions of the PIA.

The Media Relations Manager of the oil giant, Abimbola Essien-Nelson, said in a statement yesterday that the company had progressed implementation of the PIA with the unveiling of two Trusts in Imo State on October 13, 2023.
As stipulated by the PIA, it said the funds were from the three per cent operating expenditure of the Joint Venture from the previous year and enables Trusts to plan and execute development projects in their communities.

Essien-Nelson stated that SPDC, in collaboration with its joint venture partners — the Nigerian National Petroleum Company Limited (NNPC), TotalEnergies and ENI had so far unveiled 27 Trusts out of the 33 proposed in Rivers, Bayelsa, Delta and Imo states, with more to be funded as the set-up processes mature.
The manager noted that the large number of fully established Trusts since the signing of the PIA into law in August 2021 had been acknowledged as an industry record.

According to the statement, officials of the Imo State Government and community leaders cheered as Assa North and Egbema/Oguta Trusts were formally presented as development vehicles to the public in Owerri.
“The Imo State Government is happy at the progress in the setting up of Trusts and will continue to support them to achieve set objectives,” the statement quoted the Imo State Commissioner for Petroleum Resources, Prof. Eugene Opara, to have said.

SPDC Managing Director and Country Chair, Shell Companies in Nigeria, Osagie Okunbor, in an address read by Community Relations Manager, Central Hub, Evans Krukrubo, advised Trusts to see themselves as partners to industry operators.
“With funding of Trusts derived from operations, community disruptions and vandalism will inevitably lead to fewer cash, resulting in fewer projects and programmes. We expect communities to help ensure hitch-free operations and fully benefit from the new dispensation”, Okunbor said.

In their addresses, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, (NUPRC), Mr. Gbenga Komolafe and Chief Upstream Investment Officer, NNPC Upstream Investment Management Services (NUIMS,) Mr. Bala Wunti, noted that the idea of Trusts would boost community development in oil producing areas if all parties collaborate well and decide to resolve grievances through dialogue.

The chairman of Assa North Trust, Mrs. Eugene Onyiriuka and her counterpart for Egbema/Oguta pledged to work for the development of their communities.

The two Trusts comprise 11 communities which were among the more than 300 that SPDC JV engaged in respect of the PIA implementation.

 “Most of the Trusts are now ready to function fully, having set up the PIA mandated three levels of governance — Board of Trustees, Management Committees and Community Advisory Committees,” she added.