A Review of the Nigerian Energy Industry

A nation without fuel: Our demand for six new refineries – PENGASSAN

Port Harcourt refinery13 April 2014, Lagos – The move by the Federal Government to privatise the four nation’s refineries is unsettling for many stakeholders in the oil and gas sector. While some stakeholders are against the idea, saying the privatization of enterprises like Daily Times, Air Nigeria, NICON Insurance and, most recently, Power Holding Company of Nigeria (PHCN) are not yielding the desired result, others advised government to build more refineries and

give them to third parties who can run them prudently and pay government every year to recoup its investment. The Lagos Zonal Chairman, Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Comrade Folorunso Oginni, spoke on the controversy surrounding the refineries, subsidy crisis, persistent scarcity of petroleum products, casual workers in the industry and the urgent need for government to invest in refineries to meet the demand for products in the country.

Why do we have persistent scar city of fuel despite the fact that Nigeria has crude oil?
To start with, Nigerian government does not have any reason to import fuel. We have four refineries that were built around 1979. If these refineries are producing at 100 per cent capacity, they ought to produce about 18.2million litres daily. Today, these plants are producing less than 30 per cent of the installed capacity.

According to statistics, we consume about 32.8million litres of petrol daily. If you look at the difference between 32.8million litres and 18.2million installed capacity, you can see the wide gap, but, unfortunately, we are not even producing up to the installed capacity.

Look at the sad situation. Even when at 100 per cent capacity, there is a wide gap, let alone now that we produce less than 30 per cent of 18.2million installed capacity. Then we ask the question, why do we engage in importation of fuel, when we have crude oil and the man power ready to work in these plants?

Today, our economy is at a cross roads, as many graduates who left school three years ago have no jobs, and we remain backward where we are; a nation without tangible economic development.

As the senior arm of oil workers in the country, what is PENGASSAN doing, in terms of advising government on how to tackle petrol scarcity in the system?
We have been appealing to the Federal Government to build new refineries, at least one plant each in the six geo-political zone of the country. Government refused to build plants, saying Nigerians are not managing government enterprises prudently. We came out to say that there is a way out of the issue of mismanagement, which government is using as an excuse.

What do you think is the way out of this mismanagement barrier?
The way out is to build more plants and give them out to third parties who will run the plants profitably. In doing so, government should have agreement with them on how much they will remit every year; and within a short period, government will recoup its investment, after which more money will still come in as profit from

the plants. For example, there are many hotels built in Lagos and given out to people to manage adequately. Because the owners realised that they do not have the technical-know-how to run the hotels, they built, equipped and gave them out to experts to manage.

Why is government not yielding to your suggestion?
This is because our government takes delight in importation and subsidy. I want the media to investigate the reasons behind huge subsidy allocations and issuance of licences for importation of petroleum products. It is glaring that if you close subsidy and importation, it simply means you are closing the sources of their income.

So, you can see the situation we are in this country. The sad thing is that the import licences are issued to their friends and cronies, who are making a lot of money for themselves, to the detriment of the masses of Nigeria. The subsidy account cannot be reconciled because of the corruption embedded in it. People have asked several questions, no answers. The situation can be described as the more you look, the less you see.

Importation and subsidy allocations have become veritable sources of income for some individuals, while most Nigerians live in abject poverty and unemployment. This is why government is not interested in building more plants to reduce importation of fuel. That is why our economy is going backward. Our elders usually say if you fail to plan, it means you are planning to fail. This is our situation in Nigeria today.

Another challenge is that the Naira often slides to the dollar. For instance, if someone placed importation order last December when Naira was 155 to the dollar, can he still bring in product now that Naira is between 165 to170 per dollar? It is certainly not possible, because of the slide in the Naira. So, the importer will not bring in

the product again. Does it even make any economic sense for Nigeria, which is one of the largest crude oil producing countries, to import refined petroleum products? We have what it takes to build refineries but those in authority are not interested due to selfish reasons.

Singapore has no crude oil but that country has over 30 refineries. They buy crude oil from outside, refine and sell to develop their economy. Recently, it was reported that government refused to issue import licences in December 2013, and that is partly why there is scarcity now. That took place three months ago and the supply chain was disrupted due to the three months gap. Once the supply chain is disrupted, there is bound to be

scarcity of product. The problems are not diversion of product and hoarding as they are making Nigerians to believe, but corruption associated with issuing import licences and subsidy. Why didn’t we have scarcity of fuel in December when most people travelled across the country? They are telling lies against Nigerians, so that government will put everything at the door steps of few individuals to enrich themselves. You can only hoard a product that is scarce.

Judging by the analysis, who should be blamed in this situation between government and oil importers?
Government is to be blamed because since government refused to plan, it planned to fail. Look at Saudi Arabia and other countries where there is crude oil. Is any of them importing fuel? The fuel they sell in Saudi Arabia today when converted to Naira is N11.25k per litre, while Nigeria is selling at N97 per litre, and government keeps telling us that they are subsiding fuel. So, who is subsiding who?

Since the masses are not benefiting from fuel subsidy, who are those actually enjoying the subsidy money?
This is the question government must answer. We are telling this government to build refineries and close subsidy. There is no point subsiding fuel. We are not interested in subsidy. Government should invest in refineries to remove us from this ugly situation, because it is obvious that the masses are not benefiting from the so-called subsidy. In Nigeria, nobody is ready to tell the masses the truth and that is why we are in this shameful situation.

Can you give us the monetary estimate in naira and kobo how much government needs to build refineries?
Government can build a modern refinery for $4billion. We advised government to build at least one plant in each geo-political zone in the country. What obtains all over the world now is modern, automated refinery and not analogue. Our consumption rate currently is 32.8million litres daily. If we can meet this production capacity, why do we need to deceive ourselves with importation of fuel?

South Africa has a population of over 40million, yet they generate 36,000 mega watts (MW) of electricity, while Nigeria of over 160million people generates only 4,000MW. What a shame! You can see that our economy is at a cross roads.

What exactly is responsible for this sudden decline in Nigeria’s economy and prevalent rate of unemployment.
Here we are only looking at the decay in the oil and gas industry but it is quite clear that deception is the order of the day in Nigeria. Niger Republic built a refinery of recent; when their President was asked what their plans were, since they cannot consume everything that will come out of the plant, he said they will sell to

neighbouring countries, including Nigeria. Can you imagine how our situation has deteriorated so that Niger, that desert country, is targeting Nigeria to sell fuel to? Does it not speak volumes, the negligence of our government?

Look at young Nigerians who were into tailoring, welding and other small scale businesses all on the streets as Okada riders just to earn a living. They have nothing to do because there is no electricity for their businesses to thrive. In my area now, there is no electricity. Foreigners have taken over our economy. Some buy over our

local companies and move abroad to get their people to work in Nigeria, while our youths are rooming the streets unemployed. Few of them who engage Nigerians treat them as slaves in their own country.
(This is the first part of this interview. The second segment on privatisation of government enterprises and the resultant effect will be published next week.)
*Udeme Clement – Vanguard

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