Nigeria’s petroleum sector can fare betteron October 01, 2013 at 8:00 am in Stakeholders have argued that Nigeria’s economic development, which is anchored on the petroleum industry could have been comparable to the western world, but for issues relating to environmental degradation, corruption, crude theft, infrastructure deficiency, and insecurity. Assessing the performance of the industry since 1960, the stakeholders noted that these are further compounded by funding challenges, delay in the passage of the Petroleum Industry Bill, PIB, and local content implementation. Upstream has done well Some maintained that the upstream subsector has done comparatively better in the energy value chain, while the other sectors are still struggling. The Executive Director, Gideotech Engineering Limited, Mr. Belema Cookey, said that the upstream sector has done well over the years, but is hampered by the delay in the passage of the PIB and the implementation of the Gas Master Plan. He added that environmental challenges brought about by oil spills and gas flaring have further aggravated the issues. He also reiterated the role of technology, to enable Nigeria harness its huge oil and gas potential effectively and efficiently. He said, “The upstream petroleum sector is a value chain from exploration, drilling, appraisal, production and development. Oil and gas are products that you get beneath the surface of the earth. The problem we have is how do we utilise them to our benefit, not just for export, but to generate revenue? “Also, there is a lot of awareness on gas, especially its economic potential that is why we have the Nigerian Gas Master Plan. “So overall, I will score the upstream sector about 80 percent, it has not failed; we are advancing, especially with the increase in our oil and gas reserves. We have gas reserves of about 170 trillion cubic feet. We have huge oil reserves and we also have the largest oil companies in the world operating here. We are on the right track. The only problem we might have currently is the passage of the Petroleum Industry Bill, PIB, and the Gas Master Plan. “Apart from the challenges of vandalism and the issue of oil theft, in terms of maximizing profit and the profitability area, because about 95 per cent of Nigeria’s revenue is from oil, I will rate the upstream sector over 80 per cent.” PIB will herald new developments Also speaking, Mr. Hans Alagoa, Managing Director/Principal Partner, Hans Nelson Nigeria Limited, expressed optimism that the passage of the PIB will go a long way in addressing the numerous challenges in the oil and gas sector According to him, the industry has recorded significant landmarks, which will be enhanced by the passage of the PIB. He, however, expressed concern with the implementation of the Nigerian Content Law, saying that in terms of engineering; a lot of the jobs are still being ceded offshore. “The oil industry has changed significantly, but in many respect it remains the same. This is because, the capacities of the engineer. Even though they are there, they are still not able to do the kind of things they are supposed to do. There are still instances where a lot of stuff that should be done in Nigeria are still done by the multinationals in their own countries. I will rate the upstream sector 70 per cent, which is not a bad grade, because there is still much room for improvement.” Oil boom heralds corruption Also speaking, Mr. David Adonri, an economic analyst and Chief Executive Officer, Lambeth Trust and Investment, noted that “Up till 1970 when the Nigerian civil war ended, the contribution of crude oil income to the economy was immaterial. The administration of Dr. Yakubu Gowon set the stage for the Petroleum industry to eventually occupy the commanding heights of the Nigerian economy. “Through the subsequent oil boom, Nigeria undertook several development projects which cut across all sectors of the economy. The speedy progress unleashed by General Yakubu Gowon was decelerated when the nation entered the destructive phase of military coups and counter coups. Incursion of the military into politico-economic affairs of the country took the level of corruption to unprecedented heights. The Petroleum industry was where this malaise became most prevalent. Adonri argued that although Nigeria has earned huge income from crude oil exports since 1971, when the oil boom began, the oil wealth has failed to translate to sustainable economic development due to reckless stealing by public officials. He continued, “In addition to corruption, crude oil theft has become so massive that it now threatens the revenue base of the country. The 2014 Federal Budget may be over N400 billion lower than 2013, as a result of anticipated crude oil theft. At the scale oil theft is occurring, it is difficult to believe that public officials and security agencies are not in collusion with the thieves.” Accordingly, he declared that the management of the petroleum industry has failed to meet the aspiration of Nigerians, saying, “The upstream sector has underperformed due to endemic corruption, low local content and exploitative impunity by foreign Oil companies. The proposed petroleum industry bill, if passed, could be the much awaited game changer that will remedy most deficiencies in the industry.” Neglect of the Niger Delta In his opinion, Chief Edwin Clark, elder statesman and former Minister of Information, lamented the neglect and exploitation witnessed in the Niger Delta region since the commencement of oil exploration. He said, “The actions of the oil industry which started as far back as 1956 in Oloibiri village in Ogbkia Local Government Council, Bayelsa State, have led to the devastation of the community. Today, Oloibiri is nothing more than a deserted village with dilapidated buildings, illuminated by natural gas being flared in surrounding areas. “There has been next to no effort made by the Federal Government to develop infrastructure in the area. It seems to have been forgotten that Oloibiri was the first oil producing community in Nigeria and as such, no attempt has been made to develop the area or to restore the village back to its former green luxuriant past. Continuing, Clark said, “From my personal investigations and visits to most of the oil producing communities, it has become apparent that the lives of the locals have become hopeless; they have lost their traditional sources of livelihood as the direct result of the pollution of the rivers and the forests through the activities of oil exploration.” Exploration activities Giving an update of the Nigeria’s upstream sector, the Nigerian National Petroleum Corporation, NNPC, said that from the very beginning of oil exploration in Nigeria in 1937, till early 1993, virtually all exploration and production activities were restricted to land and swamps. The NNPC noted that where prospecting ventured offshore, it was in areas not greater than 200 meters water depth. By the end of 1998, NNPC said deep water operators in Nigeria had achieved the acquisition of 21,000 km 2D Seismic Lines, acquisition of 21,500 km 3D Seismic Lines and drilling of 33 exploration/appraisal wells in depths ranging from 300-1460 meters. The NNPC also stated that against a commitment of $864 million for the first six years of deep water prospecting under a Production Sharing Contract, PSC, the industry had invested approximately $1.3 billion up to the end of 1998. Continuing, the NNPC said, “With a maximum crude oil production capacity of 2.5 million barrels per day, Nigeria ranks has Africa’s largest producer of oil and the sixth largest oil producing country in the world. Nigeria produces only high value, low sulphur content, light crude oils – Antan Blend, Bonny Light, Bonny Medium, Brass Blend, Escravos Light, Forcados Blend, IMA, Odudu Blend, Pennington Light, Qua-Iboe Light and Ukpokiti.” Downstream The downstream is one area that has recorded the greatest indigenous participation, as more Nigerians owned companies are springing up regularly with huge investments. The Chief Executive, Hyde Energy, Mr Dimeji Edwards, who scored the sector as high as 75 percent, however noted that development efforts are being frustrated by funding and infrastructure challenges. He said, “Downstream biggest challenge is funding, and the Central Bank of Nigeria, CBN market policy for the downstream is bad and the Ministry of Finance is not paying subsidy as and when due. “But overall, the market has become very diverse because the players have become a lot more professional, banks are a lot more responsive, and the market a lot more specific. Furthermore, the Petroleum Products Pricing Regulatory Agency, PPPRA, has cleaned up the system, so all the issue with subsidy scam has been eliminated. The Legal Adviser, Independent Petroleum Marketers Association of Nigeria, IPMAN, Mr. Akin Akinrinade, noted that since 1960, Nigeria’s downstream petroleum sector has been growing in terms of private investments. “Operators have visualised the division of products, so we have products. We now have all the products – AGO, PMS and Kerosene. Though in terms of pricing, we have still not done enough. The prices have to come down, especially for kerosene and diesel. Kerosene sells for more than N100/litre, and diesel is about N150 to N160. If you want industrialisation, you have to look at diesel, the price has to come down. Akinrinade, who rated the subsector about 55 per cent, argued that distribution of products is a lot easier. But in terms of pricing, I think government should look at it so that investors and industrialists can come back to the country. Most of the major industries like Cadbury and Nestle, they are all in Ghana now, mostly because of the price of diesel. In the area of refinery, since we have crude oil, it does not make sense for the country to be importing refined products when we have crude oil here. The government should work on our refineries and allow investors to build refineries so that we can have the products here in Nigeria and not importing them. By the time we stop the importation, I think the price will come down. A representative of the major marketers, said in confidence that the downstream subsector has done creditably well, as it now has enough and sufficient products for the people. The representative, who scored the sector about 55 per cent said pricing is not so much as issue as maintaining the infrastructure, nothing that Nigeria has gone from refining 445,000 barrels per day, to importing almost all of her product needs. He said, “The way forward is for you to have your own production. For every businessman, the issue is, what margin are you going to make that is going to say whether it is profitable or not. We have a lot of shortcomings because everybody is happy that there are products, the country is losing a lot of money on the importation of Petrol. This is so because when you are importing in dollars and selling in naira, it hurts your economy.
Posted on: Tue, 01 Oct 2013 09:23:01 +0000
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