Page 13 - DMEA Week 15 2020

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letter by April 10. As of press time, though, the bank president had not commented publicly on the matter.
Some of the organisations that endorsed the letter have also sought to discourage South Afri- ca’s Standard Bank and Japan’s Sumitomo Mitsui Banking Corp. (SMBC) from helping to finance EACOP. Last year, 21 African NGOs and 10 international groups asked the banks to abandon their plan to serve as lead arrangers for a $2.5bn credit deal for the project.
Uganda and Tanzania have said that EACOP will eventually follow a 1,445-km route from
Hoima, a city near the Lake Albert oilfields, to Tanga, a port on the coast of the Indian Ocean. The link would allow Uganda to export future crude production at the rate of 216,000 barrels per day (bpd).
Work on the project is currently stalled, owing to the collapse of talks between Tullow Oil (UK/Ireland) and two other companies on the sale of a stake in the Lake Albert fields. Tullow had hoped to farm out part of its stake in the upstream assets to China National Offshore Oil Corp. (CNOOC) and Total (France), but the deal fell apart as a result of tax disputes.™
FUELS
Nigeria announces end to fuel subsidies
NIGERIA
Nigeria wants to provide private firms with an incentive to import fuel.
NIGERIA is ending decades of fuel subsidies in order to ensure more stable supply and cut costs for the state, Nigerian National Petroleum Corp. (NNPC) announced last week.
Nigeria relies on fuel imports to meet its domestic needs, as its own four ageing refineries are barely operable. However, it has maintained subsidies to keep domestic fuel prices low for years, draining billions of dollars from public coffers. More than NGN780bn ($2bn) was spent on these subsidies last year alone.
As recently as late March, Nigerian Pres- ident Muhammadu Buhari’s government refused to remove caps on fuel prices, instead cutting them twice over the past month. The move to end them comes as Nigeria, Africa’s biggest oil producer, grapples to keep a han- dle on its finances following a catastrophic collapse in oil prices over the past month. The government has already slashed its 2020 budget by $5bn and is preparing to make fur- ther cutbacks.
“What we are putting in place today is a sit- uation where market forces will take control of prices and eliminate subsidies,” NNPC’s manag- ing director Mele Kyari said in a video shared on
his Twitter page. “There is no subsidy ... It is zero forever.”
Savings from the measure will be reinvested in infrastructure, healthcare and education, he said.
Nigeria will maintain some control of prices but is drafting a new system that will take mar- ket rates more into account. Because domestic prices are kept artificially low, NNPC imports virtually all of Nigeria’s gasoline, as private com- panies are unable to make a profit doing so. The new pricing system is aimed at providing private firms a sufficient incentive to import fuel.
However, some doubt that this system truly signals an end to subsidies.
“Nigeria needs to let go of this obsession with control, price control,” SBM Intelligence told Reuters last month. “Inevitably oil prices are going to go up. What do we do at that time? We start paying subsidies again.”
Nigeria recently also announced it would shut down its creaking oil refineries while it searches for financing to upgrade them. Once they are modernised, NNPC intends to trans- fer operational control of the facilities to private hands, easing another burden on the state.™
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