International Oil Companies (IOCs) operating in Nigeria have slashed payments to Nigerian ship owners by almost 40 percent and are pushing to further reduce their payments under the guise of economic pangs from the COVID-19 pandemic.
As part of efforts to secure their contracts, Nigerian security patrol boat owners and ship owners caved into IOCs appeal to lower their rates from around $9,500 per day to $7,500 per day for security patrol boats and from $20,000 per day to $12,000 per day for Platform Supply Vessels (PSVs).
This downward review was at the heat of the COVID-19 pandemic when global crude oil prices crashed below $20 per barrel in May 2020, but an upward turn has been recorded as the current crude oil price is over $110 per barrel.
Speaking with The News Diet, the President of Ship Owners Association of Nigeria (SOAN), Dr. Mkgeorge Onyung stated that the hardship initially stated with the pandemic and consequent economic downturn as IOCs wrote to several SOAN members who had contracts with them to reduce their rates by between 30% and 40%, and the ship owners complied.
Onyung revealed that SOAN has made its dissatisfaction known in a letter titled; “Request for Intervention With The International Oil Companies To Review Rates Of Service Contractors”, and addressed to the National Petroleum Investment Management Services (NAPIMS), last week.
Part of the letter, read: “We wish to bring to your attention the travails of our members who have borrowed monies in billions from various banking institutions to finance the acquisition of different kinds of vessels to service the needs of IOCs. Many of these companies who are members of SOAN borrowed monies from various commercial banks at between 20% and 30% interest rates per annum, and on account of the difficult operating environment initially occasioned by the COVID-19 are now in default.”
“Many have also had to lay off several staff and shut their operations because of inability to meet up with repayments to the various banks. These banks have in some occasions repossessed their vessels and have put them up for sale in market. We have heard that some IOCs are still putting pressure to bring the rate further down in spite of the over 1000% increase in operating cost on account of the loss of value of the naira in the official and parallel markets, which have increased the cost of spare parts and other imported consumables.”
The SOAN President lamented that IOCs had earlier promised that when oil price rises above the $30 mark where it had tanked out during the pandemic, they will review the rates upwards to around $9,500 and $20,000 for security boats and PSVs respectively.
Noting that oil prices are currently at over $100 per barrel and IOCs are yet to keep their end of the bargain while ship owners face bankruptcy, Onyung stressed the Section 70(h) of the Nigerian Oil & Gas Industry Content Development Act wherein the Nigerian Content Monitoring Board is saddled with the responsibility to assist local contractors and Nigerian companies to develop their capabilities and capacities to further the attainment of the goal of developing Nigerian content in the Nigerian oil and gas industry.
“We appeal to you to kindly prevail on the IOCs to review the rates of the service contractors in the maritime sector upward to pre-pandemic levels in order to forestall the closure of many maritime companies, the seizure of their assets by the banks, and the laying off of thousands of young Nigerians and seafarers,” the SOAN boss beckoned on NAPIMS.
Also speaking with The News Diet, a former Director General of Nigerian Maritime Administration and Safety Agency (NIMASA), Barr. Temisan Omatseye, argued that Nigerian ship owners should enjoy benefits of increased global crude oil price from IOCs.
Omatseye pointed out that the downward review of ship owners fares by IOCs was premised on the crash in global oil prices, so he posited that the current increase should lead to another upward review as demanded by SOAN.
His words: “The economy is improving and irrespective of what happened in the past, the truth is that the production of IOCs has tremendously improved. IOCs in Nigeria may not have reached the Organization of Petroleum Exporting Countries (OPEC) goals, but the issue there is an operational issue and has nothing to do with ship owners.”
“The increase in global crude oil price should mean a return to the former freight rates because the downward review was premised on low crude oil prices. At times like this when IOCs are enjoying the boom in global oil prices, they should pass the benefits to the ship owners.”