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Vanguard: Nigeria embargoes further export of Bonga crude

June 19, 2006 

Nigerian Government has embargoed further export of crude oil from the Shell operated 225,000 barrels per day output capacity Bonga crude oil and gas field over non-payment of royalty by the Anglo Dutch oil company.
A senior government official who was part of the government delegation to the just concluded Producer–Consumer Summit on LNG which took place in Washington  D.C., made the disclosure while speaking with Nigerian journalists in New York, USA, weekend.

The Bonga oil field is operated by the Shell Nigeria Exploration and Production Company (SNEPCO) Limited, a subsidiary of Shell Companies in Nigeria (SCiN).

The government official who did not want his name in print said the production sharing contracts executed in the past did not cater adequately for government interest,  adding, however, that efforts were on to redress the anomaly.

He said while government remained committed to its contractual obligations in the upstream, including those entered by predecessors, this did not preclude  government from collecting royalties.

The official noted the case of the Shell operated Bonga oil field in Oil Prospecting Lease 219 as a case in point, adding that the operator would not be allowed to  export a drop of oil from the bloc if it does not pay royalty to the average water depth. “Shell will not be allowed to export the next shipment of crude oil from the  Bonga unless they are ready to pay royalty to government. We have already put the company on notice,” the official said.

The official decried loss of government revenue through loopholes in the PSC guiding the operations of the Shell operated Bonga oil field, noting that cost recovery  was based on number of barrels produced rather than cost of oil in the international market.

Oil exploration and production companies operating mining leases are mandatory required to relinquishment 50 per cent of the bloc yet to be developed after every  10 years, but this has not been the case.

The official said this was one of the ways government was being denied revenue, noting that in the past, operating companies engaged in unwholesome practices,  forcing government officials to look the other way. He said government has decided to use the average water depth of an Oil Mining Lease (OML) to calculate the  royalty.

“We are aware of the use of multi-dimensional drilling. Henceforth, government would not concern itself with where a company is drilling from. Rather, we will use the  average water depth for our calculation, to obtain royalty. We are hopeful of getting between five and 10 per cent as royalty,” he said.

By Hector Igbikiowubo, Vanguard

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