The African Energy Chamber has welcomed the appointment of Chief Timipre Silva as the new minister of state, petroleum resources in Nigeria. The new minister was among 43 ministers sworn in yesterday in Abuja by President Muhammadu Buhari for his second tenure

In a statement issued today, the Chamber said, “As a former Governor of the Bayelsa State, in the core Niger Delta region, H.E. Timipre Silva understands the core issues affecting Nigeria’s oil & gas sector, the call for better revenue management and distribution, and the need for increased community involvement across Nigeria’s key oil regions.”

According to the statement, the new minister having also previously served as a Special Assistant to a Minister of Petroleum, he has demonstrated a vast experience and understanding of Nigeria, African and international energy dynamics.

“The appointment of a well-versed former Governor with a demonstrated ability to work with different parties and a good understanding of the oil sector is a clear sign that Nigeria is serious about continuing its pace of reforms,” declared Nj Ayuk, Executive Chairman at the Chamber and CEO of the Centurion Law Group, said in the statement.

“Africa’s biggest oil producer needs such an experienced figure to lead the industry and our continent into new heights. The African Energy Chamber has congratulated H.E. Timipre Silva on behalf of all its partners and will continue to work closely with the Department of Petroleum Resources to pursue local content development, support the regionalization of Nigerian oil and services companies, and assist any foreign investors seeking to do business in Nigeria,” he concluded.

Silva replaces Emmanuel Ibe Kachikwu who was Nigeria’s representative at the Organisation of Petroleum Exporting Countries (OPEC) meetings, as well president of the African Petroleum Producers Organisation (APPO). It is not clear if the new minister of state will replace Kachikwu as President of APPO.

“Investors need to know that their investments are safe and that they will be protected by the law in case the other parties falter on their obligations”

Last week, a commercial court in the United Kingdom gave reason to a claim by engineering company Process and Industrial Developments Ltd (P&ID), which demands over USD$9 billion from the Nigerian government over a failed gas deal. The decision follows a 2017 arbitration award and turns it into a legal judgement, which could allow P&ID to seize Nigeria’s international commercial assets.

P&ID’s claim is based on a 2010 contract signed with the government of Nigeria for the construction and operation of a “gas processing plant to refine natural gas (“wet gas”) into lean gas that Nigeria would receive free of charge to power its national electric grid,” the company’s website states. Under the deal, the Nigerian government should have provided the necessary infrastructure and pipelines needed to supply gas to the plant. P&ID would build the plant for free and then operate it and commercialize the output for a period of 20 years.

The company claims that over this period it would have earned USD$6.6 billion in profit, an incredible figure that becomes ever more fantastic as the company claims that the yearly 7% interest it is supposedly charging on this capital has now accrued to USD$2.4 billion, at the rate of USD$1.2 million a day, which closes the full amount at a perfectly round USD$9 billion. The whole situation is in itself extremely puzzling.

After all P&ID, a company created specifically for this project, is claiming it is entitled to the full amount of what it would have gained over a period of 20 years of work, even though that period would not be over for another decade and some. Further, it is already charging interests on capital it would, if the project went forward, it would still be a decade away from generating. On top of that, it has chosen to pursue the matter in a British court, and has a separate law suite in an American court, when the contract was signed in Nigeria, under Nigerian law, and should be pursued in a Nigerian court, as the Nigerian legal team has repeatedly stated.

Nigeria is seeking an appeal to the decision, but P&ID is not wasting any time in trying to seize Nigerian assets abroad, and it might well manage to do so, at least in part.

Further, P&ID has never even broken ground on the construction of this power plant, which it claims would have benefitted so many thousands of Nigerians. The company has reportedly spent USD$40 million on preparatory work, although it is impossible to attest what that work has been.

Even just looking to the amount spent, work done and compensation sought, the figures seem simply absurd. USD$9 billion corresponds to 20% of Nigeria’s foreign exchange reserves, it would be unthinkable that a nation state would pay that much capital to a small unknown enterprise that invested not but a small fraction of that amount in the country and done none of the contracted work. Further, it is perplexing that a British court would even consider such a decision.

However, this issue represents an important cautionary tale for African governments everywhere. Very few things matter more in the struggle to attract investment and build a favourable business environment that will push the economy forward than the absolute sanctity of the contracts signed.

Investors need to know that their investments are safe and that they will be protected by the law in case the other parties falter on their obligations, as it seems to have happened with the Nigerian government. It is by no means the first time a situation like this happens. Just in March, an international court ordered the Democratic Republic of Congo to pay South African DIG Oil Ltd USD$617 million for failing to honor two oil contracts.

This is an unacceptable and unjustifiable loss of capital for the people of the DRC. Particularly taking into account that the loss is incurred because the country’s leaders failed to comply with a contract that could have brought a considerable amount of wealth for the country for many years to come, in both royalties and taxes, as well as help develop its oil industry.

Senegal’s government under President Macky Sall was very smart to avoid this kind of litigation when it was confronted with the issue of the Timis Corporation and its ownership of acreage that included the Tortue field, which is estimated to contain more than 15 tcf of discovered gas resources.

If President Macky Sall would have proceeded with terminating a valid contract for the acreage, the Timis Corporation would have engaged in arbitration and would have probably gotten a favorable judgment against Senegal. In the process, the gas fields would have sat dormant and produced no returns for Senegal and its citizens. Sometimes leaders are confronted with tough choices and it takes a profile in courage to find solutions and still respect the sanctity of contracts.

Even with criticism from civil society groups, Equatorial Guinea has honored contracts with U.S. oil companies that many oil analysts believe are unfavorable to the state. This principle has kept Equatorial Guinea’s oil industry stable and US firms continue to invest in new projects like the EGLNG backfilling project with Noble, Atlas Oranto, Glencore Marathon and the state.

African leaders and African nations can not afford this sort of mistakes anymore. If on the one hand, contracts must be respected, protected and followed through, the people in charge of evaluating and signing those contracts must have the project’s feasibility as the dominant reasoning behind any decision. What is the purpose of signing contracts for fantastic projects where there is neither the capital nor the conditions to pull it through.

Our economies live out of their reputation too. No investor wants to work in a system where contracts are not honored and where their investments are not protected. While P&ID’s request for USD$9 billion in compensations seems absurd, companies that see the contracts they sign with African governments, or any governments, disrespected, must have the right to claim compensation, just in the same way that African leaders must be responsible for the contracts they sign and must make sure that situations like this do not repeat themselves.

Enough money has been wasted on lawsuits that could be used to benefit the lives of Africans. This is true for the oil and gas industry and in any other industries.

NJ Ayuk is the CEO of Centurion Law Group, Executive Chairman of the Africa Energy Chamber, author of the upcoming book, Billions at Play: The Future of African Energy and Doing Deals.

Peace Obi

Amidst “record-breaking” production, the US government has shown appetite to develop industrial dialogue with Africa on LNG as the Assistant Secretary for Fossil Energy, Steven Winberg, will join 22 Pan-African ministers at the Africa Oil Week summit in Cape Town this November.

Winberg will use the event to share US energy policy points with the continent and outline a vision for deeper US commitment to Africa in the oil, gas and power sectors.

The announcement of Secretary Winberg’s attendance to the summit comes alongside several major US private-sector investments into the African energy sector. ExxonMobil is making progress in Mozambique with their Rovuma LNG project in deepwater Area 4 block which contains more than 85 trillion cubic feet of natural gas.

Particularly notable is Anadarko’s recent announcement of its Final Investment Decision (FID) to construct a $20 billion gas liquefaction and export terminal in Mozambique, the largest single LNG project approved in Africa.

A representative from ExxonMobil will be covering the Rovuma LNG project in Mozambique at Africa Oil Week and there will be a strong presence from ENH and INP at the conference. Africa Oil Week is putting a renewed focus on the place of gas, with 5 dedicated sessions dedicated solely to LNG during the event.

USA participation at the Africa Oil Week 2019 is believed to be necessitated by its growing gas production and the promotion of gas as a “cleaner, cheaper” energy source a continued priority for the current White House, the US Department of Energy is now looking towards Africa to develop opportunities in the exploration, production and monetization of LNG.

According to the US Energy Secretary, Rick Perry, “increased amounts of US LNG on the world market benefit the American economy, American workers and consumers and help make the air cleaner around the globe.”

Africa Oil Week had hinted that the vision looks set to encompass increased two-way trade and investment between the US and Africa, with the US making potential capital available on joint-ventures and to part-finance LNG infrastructure for energy-lacking African countries.

Factors motivating US move include the steady growing appetite for imported gas across the African continent, just as South Africa recently announced plans to open its first LNG import terminal in 2024.

Meanwhile, US gas production is skyrocketing, currently put at 6 billion cubic feet (bcf) per day and forecast to grow to 10 bcf by the end of 2020. This confluence of circumstance makes Africa a common-sense partner for the US as it sets out to cement its position as an Energy Superpower.

As part of fresh measures aimed at getting Nigeria rid of the menace of oil and gas pipeline breaks by vandals, the new management of the Nigerian National Petroleum Corporation (NNPC) has said that it is putting in place a performance-based pipeline protection system to enable relevant security stakeholders to live up to their billings.

Although details of the performance-based protection system is yet to be unveiled, the top management of the Nigerian oil corporation said it has sealed a partnership with the Nigeria Security and Civil Defence Corps (NSCDC) to work together to run pipeline vandals and oil thieves out of business in the country.

Rising from the pact-making meeting in Abuja yesterday, the group managing director of NNPC, Mallam Mele Kyari, represented by the chief operating officer, downstream, Engr. Adeyemi Adetunji noted that the collaboration between the NNPC and NSCDC had gone a long way in ensuring uninterrupted supply and distribution of petroleum products through the pipelines and various depots.

“I want to applaud the NSCDC for contributing their quota towards the protection and security of our pipelines. Their efforts have made our pipelines to be available for the transportation of petroleum products from one asset to another petroleum asset,” Mallam Kyari averred.

Earlier, the commandant general of the Corps, Mr Muhammadu, represented by the deputy commandant general, Aminu Abdullahi, said protection and security of NNPC pipelines and oil assets were part of the constitutional responsibilities of the Corps, stressing that NSCDC would continue to do its best to send pipeline vandals out of business.

He noted that the NSCDC would declare a date of the year that would soon be announced as an anti-pipeline vandalism day as part of concerted efforts to create more awareness on the dangers of pipeline vandalism to the national economy.