Guardian: Budget Office opposes Reps’ plan for new oil benchmark

[NewsCaster]

A PLAN by the House of Representatives to press for a new benchmark above the $65 per barrel proposed in the N4.2 trillion 2011 budget has been faulted by the Budget Office of the Federation.

The lawmakers, who believe that the current positive trend in the international market, which has seen the price of crude oil rising to $100 per barrel, want the Federal Government to review upward the commodity's benchmark in the 2011 Appropriation Bill yet to be passed by the National Assembly.

But the Budget Office, which fears a possible price crash in the market in the near future, has opposed the move, warning that in the event of a decline in price, the implementation of the budget would be difficult.

And in the last five years, Shell, which has been engaged in asset stripping, has realised $30 billion (N4.5 trillion) from the venture across the globe. The company projects additional $5 billion (N750 billion) from sale of more assets in 2011.

But another major operator in the industry, Chevron Nigeria is facing serious challenges from Kokodiagbene and Egbema Gbaramatu communities in Delta State, which have threatened to shut down its operations. The communities want the company to provide them water and electricity or have their facilities closed.   However, the Minister of Niger Delta Affairs, Godsday Orubebe, who is believed to have waded into the matter, has sought the communities' understanding so that development could be brought to their doorsteps.

The Lower House has also tasked the nation's revenue-generating agencies to increase their remittances to the treasury to boost the capacity of the government in funding its projects.

At a meeting with the revenue agencies and the Budget Office yesterday at the National Assembly, the House Committee on Finance said it was in the interest of Nigeria for the oil benchmark to be raised beyond $65 per barrel and reduce the N1.38 trillion deficit of the 2011 budget than resorting to domestic borrowing.

The Director-General of the Budget Office, Dr. Bright Okogu, has however cautioned the National Assembly against the move, pointing out that should the current crude oil price crash, the budget would suffer serious implementation problems.

Okogu, who defended the revenue profile in the budget, urged the National Assembly to stick to it.

The budget is articulated on a crude oil production of 2.3 million barrels per day at a price benchmark of $65 per barrel at exchange rate of N150 to the dollar, and joint venture cash call of $5.4 bill and a projected Gross Domestic Product (GDP) growth rate of seven per cent.

The committee's Chairman, John Enoh, believed that in the face of the prevailing boom in crude oil market, Nigeria could increase its oil benchmark to fund the deficit in the budget.

Enoh said: "Oil price is going between $90 and $100 per barrel now. And we know that if we allow too much money into the Excess Crude Account, the Executive arm of government will simply spend it without the consent of the National Assembly. We should work towards pushing the oil benchmark near the current market price of crude oil."

Okogu swiftly responded in these words:

"No sir. If we increase the benchmark because the price of crude is high in the market, it may lead to a situation where you cannot fund the expenditures projected in the budget. So, the budget might just crash once crude oil price falls. The market is very volatile. It is very important that we do not overstretch our luck because if prices fall drastically, we will have nothing to fallback on because we depend solely on oil revenue to fund our budget. "

The panel charged the revenue generating agencies to work towards attracting additional N300 billion to the treasury this year to reduce the budget deficit.

Okogu had informed the committee that the drive to attract additional revenues to federal government could only fetch N153 billion last year.

He also disagreed with the committee over the least amount of money that the Nigeria Customs Service should be made to remit to the treasury.

According to Okogu, the Nigeria Customs had been asked to remit about N450 billion to the treasury in 2011 but the House Committee is asking for more.

The committee was generally desirous of a situation where the revenue proposal for the 2011 budget could be increased above the N2.8 trillion contained in it.

In Nigeria, Shell has been involved in the disposals of its assets in the past one year, which it classified as "toxic."

Shell's Managing Director, Peter Voser, in the company's 2010 third quarter result released yesterday, said 2010 earnings increased substantially from the 2009 level, driven by improving industry fundamentals, and the firm's production growth and cost performance.

According to him, the company's oil and natural gas production volumes in 2010 were 3.3 million barrels per day, an increase of five per cent.

Meanwhile, the House Committee on Power yesterday expressed disappointment over what it called deliberate frustration of the National Assembly constituency projects on transformer installation nationwide.

It accused the Chief Executive Officers of the nation's 11 electricity distribution companies of sabotaging the lawmakers' efforts at providing stable electricity by refusing to install "virement transformers," which was appropriated for since 1999.

At a meeting with the companies' bosses in the National Assembly, the committee chaired by Patrick Ikhariale, summoned the distribution managers for explanation on the low level of the implementation of the projects.

In the 1999 budget, where the government approved the installation of two transformers in each federal constituency, according to Ikhariale, was deliberately stalled by the managers.

He told the CEOs that their actions amounted to economic sabotage and represented a clear violation of the nation's appropriation laws.

"The virement transformer projects, which has been awarded since 1999 has about 99 per cent of it yet to be completed. I heard it on good authority that there was a gang up by some people to frustrate the projects; some of them ganged-up not to install the transformers for some personal reasons," Ikhariale said.

He regretted that the companies could not pro-rate the N830 million released to each of the companies for the purpose of installing the transformers again, adding that the previous allocations may have been diverted.

The chairman noted that the parliament granted the distribution companies financial autonomy by ensuring direct budgetary allocations because it never wanted any thing to hinder the implementation of the projects.

Responding on behalf of his colleagues, Mr. Abdul Umar, Chief Executive Officer of Abuja Distribution Company, denied allegations of gang-up and sabotage just as he insisted that they were committed to the full implementation of the project.

He acknowledged that there were some surmountable challenges facing the various CEOs in their respective locations.

This threat to shut down Chevron facilities, was handed down to it during a meeting of elders of Ijaw and Itsekiri communities, and firm, with Orubebe in Abuja yesterday.   

Mr. Sheriff Mulade, a representative of Kokodiagbene, lamented that the government had disappointed the people and that their means of livelihood had been destroyed through the activities of the oil company.

"We want to be connected to Chevron gas turbine and we want water. Our water project should be completed. The government has disappointed us. We are ready to drag Chevron until we are connected to their grid," he said, adding that the community was ready to go on peaceful civil disobedience if the water and electricity projects were not completed soon.

Another representative of the community, Rev. Ikem Tolar, noted that though Chevron had completed some projects in the area, the people still needs sand filling of their environment.

The Chairman of Egbema-Gbaramatu Central Development Council, Mr. Edmund Doyah-Tiemo told the minister that the Niger Delta Development Commission (NDDC) had not been helpful in the region.

According to him, the officers only sit in the offices to claim allowances without knowing anything about the communities they were supposed to be working to develop.

Chevron's representative, Mr. Jide Ajide, who is the General Manager  (Operations), said that his company had spent N10 billion on comnmunity development in the Niger Delta since it signed a Global Memorandum of Understanding (GMOU) with the Itshekiri, Ijaw and Ilaje communities under the NNPC/Chevron joint Venture in 2005.




Source: Budget Office opposes Reps' plan for new oil benchmark