Market News

Nigerian Ship Owners Lament 40% Loss In Earnings - NEW TELEGRAPH

MAY 25, 2022

Nigerian ship owners have lost almost 40 per cent of their earnings to international oil companies operating in the country. The IOCs are pushing to further reduce their payments under the guise of economic pangs from COVID-19. It was gathered that 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) as part of efforts to secure their contracts. This downward review was at the heat of the pandemic when global crude oil prices crashed below $20 per barrel in May 2020. An upward turn has, however, been recorded as the current crude oil price is over $110 per barrel.

The President of Ship Owners Association of Nigeria (SOAN), Dr. Mkgeorge Onyung, explained that IOCs wrote to several SOAN members, who had contracts with them, to reduce their rates by between 30 per cent and 40 per cent, saying that the ship owners complied in a bid to retain their jobs. Onyung noted that the association had expressed dissatisfaction with the development to the National Petroleum Investment Management Services (NAPIMS) in a letter titled: “Request for intervention with the international oil companies to review rates of service contractors.” He explained: “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 per cent and 30 per cent 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 despite the over 1,000 per cent increase in operating cost on account of the loss of value of naira in the official and parallel markets, which have increased the cost of spare parts and other imported consumables.” The president noted that IOCs had earlier promised that when oil price rises above the $30 mark where it had tanked out during the pandemic they would review the rates upwards to around $9,500 and $20,000 for security boats and PSVs respectively.

Onyung, however, said now that oil prices had gone up to over $100 per barrel, IOCs were yet to keep to the bargain, while ship owners face bankruptcy. He stressed 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.

Onyung noted: “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.”


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