A Review of the Nigerian Energy Industry

No country takes 13 years to sign a bill like PIB – Ogbeifun

pib.pdf04 March 2014, Lagos – Former President of Petroleum and Natural Gas Senior Staff Association of Nigeria, and former Deputy President-General of Trade Union Congress of Nigeria, Dr. Brown Ogbeifun, spoke with journalists on the protracted Petroleum Industry Bill before the National Assembly.

What is your impression on the state of oil and gas industry in Nigeria as at today?

The state of the industry as at today is a mixed grill of gains and losses. The refineries’ capacity utilization was enhanced though still not where they should be and this meant that Nigerians were able to fuel their cars without tears for another whole year. On the other side of the coin are the sad issues of massive vandalism of petroleum products pipelines, crude oil theft and further divestments by some of the oil majors. Overall, as a Nation, we should have done better in the repositioning of the nation’s oil and gas sector that would have enabled it take the central role of being the central focus in global oil and gas affairs.

What is your take on the unabated theft of the nation’s crude and pipeline vandalism?

Vandalism and crude oil theft are whirlwinds that shall do no good to the nation. I do not know of any other nation where petroleum products’ pipelines are vandalised in order to steal crude is as rampant as we have in Nigeria. Figures ranging from 200,000 to 350,000 have been touted as daily crude oil stolen from the lines between 2010 and 2013. Apart from other leakages, this is a very serious economic hemorrhaging condition that should be stopped by all means. What analysts usually focus on in calculating the losses is the amount of crude stolen without putting into consideration the cost of cleaning the spills and fixing the pipelines by the companies. What of the damage to our national image and the untoward effect of discouraging foreign investments? This is an incalculable damage that cannot be accounted for in naira and kobo. But it seems security agencies are finding it tough to deal with because of the enlarged circle of the powerful cabals and conspirators. The international community, financial institutions within and outside Nigeria, possible connivance of some security operatives and Nigerians are also culpable because we seem to be looking the other way while these nefarious activities take place. The vandals operate in communities inhabited by Nigerians and the barges used are not submarines that cannot be detected or match boxes that can be stuffed in the pocket.

The illegal refineries use crude as its feedstock and such refineries are within communities in the Niger Delta. The products are sold in towns and villages in this country. The unused crude finds its way to the international market and paid for in dollars. The cabals do not have underwater banking institutions where these proceeds are kept. They use conventional banks within and outside Nigeria.

The negative impacts of vandalism and crude oil theft include the destruction of aquatic and farmlands, economic sabotage which explains the shortfall of Nigeria’s 2014 budget from $29.3 billion in 2013 to $23.3 billion in 2014 and divestments by some IOCs with attendant job losses thereby compounding the unemployment situation in Nigeria. Compounding the situation is the security challenges facing us as a people. Under these circumstances, apart from corrupt investors, no transparent investor will be ready to make any meaningful investments in this critical sector.

The effects of vandalism and crude theft are so colossal that no nation can progress with such a negative societal value. It is for this reasons that the United States of America (USA) called on the Federal Government of Nigeria to do everything possible to address the issue of large-scale oil theft in the Niger Delta, and the House of representatives has also set up a 17 man committee to look into the same issue.

In your opinion, what is the way forward?

The international community should stop playing the ostrich by blaming us for corruption and at the other end accepting to keep proceeds of corruption in their vaults. They should adopt a don’t see and don’t touch stolen crude oil from Nigeria approach and seriously sanction or blacklist any marketer found guilty of trading in stolen crude oil. Once there are no buyers, illegal bunkering shall become less attractive and at the end gradually fizzle out.

As citizens, the communities where these illicit activities take place should report all clandestine and illegal bunkering activities to security agencies because they suffer or shall suffer the negative impacts of the nefarious activities of these vandals. Their environments are being destroyed with reckless abandon while the illegal bunkers smile to the banks with their loots in foreign currencies. The community farmlands and water are destroyed and some of the crude ways of managing the stolen crude by the vandals have severe health consequences for this and the next generation. So, it is in the interest of the communities to assist government in eradicating the menace of vandalism and crude theft.

Our security agencies must up their strides against these criminals and consistently work to identify and flush out the enemies within that may be sabotaging their efforts. They seem to be the last hope of this rescue mission because we as helpless civilians cannot confront these menacing vandals with our bare hands. Failure to do this may lead to a collapse of the entire oil and Gas Sector with not enough money to service salaries and other critical sectors. Tackling them with kids’ gloves may lead to a more fairy and deadlier wars as drug war rages in some parts of Latin America. We may think it is impossible. But when one looks at the body languages of the Governors who come to Abuja for monthly FAAC rituals, one can say that continued puncturing of our economic jugular by vandals and stealing the crude meant for the development of the country portends serious danger for Nigeria.

What are the implications of the uncertainty in the industry as a result of the protracted Petroleum Industry Bill?

The implications of the uncertainty in the industry as a result of the protracted PIB can be summarized in the words of Omano Edigheji et al; which states that “While various stakeholders engaged in intense labyrinthine debate, with acute positioning by powerful interest groups with the means to stall, distort and reinvent paths leading to no concrete progress in the advancement of the reform agenda, it is Nigeria’s national interest that suffers. Partly because of the inability to enhance the potential of the oil and gas sector, Nigeria remains one of the least developed countries in the world. The country is characterized by high levels of unemployment and underemployment, and a majority of its people (72.9%) lives below the poverty line of less than two dollars a day”.

From the above quote, one can in bold terms say that the delay in passing the PIB is a disservice to the nation, the good people of Nigeria and posits grave dangers for the country as it is the only opportunity we have to galvanize the oil and gas sector for a better performance. Passing the Bill is not an automatic commencement of what the Bill entails because it is a huge change that will affect a whole lot of issues. For instance, Not many people know that the journey of the deregulation of the Communication Sector started with the decreeing into existence of the Nigerian Communications Commission (NCC) by Decree number 75 by the military on 24 November 1992 by the General Ibrahim Babangida (Rtd) administration. We only started reaping the fruits under the administration of General Olusegun O. Obasanjo (Rtd). So the more we delay the review of our oil and gas laws, the more we delay the progress and derivable benefits to Nigeria.

Take the Obama care reform. He saw it as a necessity and went for it and in less than four years he was done. The opposition party and so many elite Americans spoke against it before it was passed. But our own PIB started its journey with the OGIC about thirteen years ago. No country procrastinates for this long to give effect to a Bill that will change its fortune the way we have done with PIB. Unfortunately the very powerful interest groups who are unfairly thinking of their own interests and not the interest and survival of Nigeria have succeeded in sucking us in. Let me stress from the outset that the document may not be a perfect one, but there is no law that is perfect hence the period review of laws and constitutions. Having said that let me say that the changing global dynamics of oil and gas makes it an imperative to review our Gas laws. We have about 16-25 tax laws, policies and guidelines in dispersed form that needs to be synthesized into one accessible readable text, Nigerians clamored for transparency and accountability in oil and gas sector. In response, government saw the need to reposition our oil and gas industry for optimal performance hence the establishment of the Oil and Gas Sector Reform Implementation Committee (OGIC) April, 2000 under the Chairmanship of Dr. Rilwanu Lukman (CFR). This finally culminated in the PIB. The Bill is an all-embracing one. It largely addresses the issues of acreage management, ensuring that companies holding on to acreages should either develop them or make them available to the public through a competitive bidding process, fiscal regimes, liberalization and deregulation of the down and mid-streams of the oil and gas sector, governance structure, transparency and accountability, delineation of responsibilities among the various government agencies, Health Safety and environment, establishment of a National Oil and Company like other producing nations, establishment of distinct and strong regulatory bodies for each of the streams, National Oil and Policy etc. These are critical components of the Bill that is lying moribund in the hallowed chambers of the National Assembly. Since we are unable to take a decision on the future of our oil and gas, the IOCs are signing new agreements in Angola, Mozambique and elsewhere for their nas needs.

I know the multinationals have their fears about the PIB. The fears are germaine but that should not stall the entire process. That is why it is in the House for Nigerians to look at it through public hearings and at the end fine-tuned by the Law makers. If we had passed this bill six years ago, most of the IOCs would have had no option but tag along. But today the tale is different and they can afford to say go to hell and drink your oil because of huge oil and gas reserves discovered in more secured and economic friendlier environments.

No country takes thirteen years to determine the end point of a reform of this nature. We are just toying with the future of our children and it is painful. Let me reinstate that if nothing is urgently done, the bio diversity and the discovery of Shale Oil by the Major economies will make getting markets for our oil and gas in the next few years very impossible. Yet we do not have alternatives to help the future of this country. It is worrisome that despite this seeming catastrophe, our politicians are only interested in the sharing of the monthly FAAC allocations, overheating the polity and focusing on 2015 while the care of the people take the back seat. Politicians and the elites are taking Nigerians Happy people status for granted. Except a serious turnaround is done, we are edging towards a time when FAAC allocations will dry up, salaries unpaid and by extension the collapse of the extended family system. When these happen, people shall be forced to cater for their immediate families, the poverty level shall increase, and more children shall become uneducated and unable to access health care. With the combination of poverty and a people infected with the Severe Poverty of the mind Disease (SPOTHMD); the masses shall so unleash terror on the rest of us that even having a bicycle will qualify for being tagged enemy of the masses. I sincerely pray we do not get to this bus stop.

Is privatisation of public refineries the best available option for the country?

If you are talking of privatization as I read in the news media, then I am afraid we do not have so many options available. All the stakeholders including PENGASSAN and NUPENG had agreed in 2004 and 2007 respectively that the refineries should be privatized using a particular model. This can be verified. So the issue is not whether the refineries should be privatized or not. The lingering issue has been the model to be used in the privatization of the refineries.

Unlike other commercialized oil and gas companies, government as the sole stakeholder exercises its right to interfere in the running of the holding company and its subsidiaries from time to time. One example that readily comes to mind is the reshuffling the Top Management at will. I was voted as President of PENGASSAN in 2003 and had Labour-Management relationships with OANDO with Mr. Wale Tinubu as the Chief Executive Officer (CEO). As we speak, he has moved from a single window to multiple windows in the upstream, mid-stream and downstream. He was able to do this because of the continuity and stability of his team. But take a look at the NNPC that manages the refineries and the company that holds forth for government in joint venture arrangements and you will find that it has had not less than seven group managing directors from 2003 till date. This also led to very high turnover of the group executive directors and the managing directors of the refineries. These rapid changes kill consistency in policy formulation and implementation; reduces investor confidence and breeds anxiety among staff as one does not know what to expect. With this type of picture, privatization in whatever form will remove these challenges, allow for stability in the internal dynamics of the refineries, expands the risk sharing among the partners, the refineries will be revitalized to produce optimally thereby creating more employment opportunities and investments along the value chain. Again, this brings us back to the issue of PIB. If the PIB has been passed, the privatization of the refineries would have been a done deal.

– This Day

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