Nigeria’s oil industry fails to gain traction under Buhari

*Suspense, uncertainty reign

Oscarline Onwuemenyi & Kunle Kalejaye 12 February 2016, Sweetcrude, Lagos – Eight months after he was sworn in as President of the Federal Republic and five months after he chose to exercise direct supervision of the ministry of petroleum resources, the much anticipated growth of Nigeria’s oil and gas industry has failed to gain traction under President Muhammadu Buhari’s watch.

Buhari 1

President Buhari

An air of suspense remains over clarity of the fiscal terms regarding upstream investments vis a vis non passage of the Petroleum Industry Bill, PIB; the muddled up contracting processes of NAPIMS, the NNPC investment arm; lack of clarity over investigation of fraud and malfeasance surrounding the oil subsidy regime under the Jonathan administration; a failure to get the NNPC to account for unremitted revenues originally meant for the federation account and a failure to get stalled projects moving.

President Buhari is being assisted in this role by a minister of state who in charge of the day-to-day affairs of the ministry. Naturally, the role as Minister places the President in charge of the entire oil and gas business in the country and most especially, the national oil and gas behemoth, the Nigerian National Petroleum Corporation, NNPC.
Some observers have said Buhari’s past experience with the oil sector, may be tied to the reason for his decision. He served as Federal Commissioner for Petroleum and Natural Resources from 1976 to 1978, under then Head of State, General Olusegun Obasanjo. Also, when the NNPC was inaugurated in 1977, he was appointed Chairman.
But a few months into the president-minister role, during a period the oil and gas industry in the nation has faced some of the biggest headwinds it has ever seen, including falling revenues due to global collapse in the price of crude, massive divestments by multinational oil and gas companies, scarcity of products for local consumption, and the resurgent violence by militants in the Niger Delta, many people are beginning to question if it was a wise decision by the president to burden himself with such a role. More importantly, people are asking why Buhari thinks his absorption of the office of petroleum minister could yield any difference in the oil sector.
Indeed, it does appear that Buhari has been affected by these developments to the extent that he does not have time for the oil and gas sector. This, according to observers, has shown up in the sense that nearly a year in office, nothing new has happened in the sector. The only visible achievement in his Ministry is his government’s efforts in battling fuel scarcity.
But, Buhari is not the first president to become Minister of Petroleum. Former President Olusegun Obasanjo during his tenure from 1999 to 2007 also doubled as Minister of Energy/Petroleum. However, the sector did not enjoy transparency at the time. According to ex-Vice President, Atiku Abubakar, affairs of the sector were cloaked in secrecy and it did not help with accountability and transparency in the oil and gas industry. “There was a time we were handed with a Ghana-must-go memo on the oil and gas and asked by the president for our input and I refused to support it,” Atiku said. 
According to him, Obasanjo took decisions to benefit himself. For instance, in 2005, he allocated four oil blocs, OPLs 218, 219, 209 and 220 to Transcorp Hilton, a company where he had major shares, an action he probable couldn’t have taken if he hadn’t retained the portfolio as substantive minister of petroleum resources, while serving as president.
What separates Obasanjo as Petroleum Minister from the current Buhari’s tenure is that in spite of the allegations of corruption, the Obasanjo regime moved the industry forward, meaning that it had some level of direction. President Buhari’s direct supervision of the ministry has so far been characterised by inaction and lack of clear direction as far as the industry is concerned.
The inaction in the oil and gas industry and the absence of policy direction is palpable. Arising from this, both investors and stakeholders have adopted a ‘wait and see attitude,’ until things begin to really unfold.
Observers also believe that the inaction has somehow stifled investment and slowed down exploration, eliminating the possibility of fresh discoveries that would shore up Nigeria’s dwindling oil reserves. The decline in oil prices has only added to worsening bad situation.
Waiting on the Minister to act on perceived corruption
Given Buhari’s change and anti-corruption mantra, many who see the oil and gas sector as the nation’s corruption core-centre had assumed that the fight against the malaise would commence from there.
For instance, soon after assuming office last year, President Buhari told Nigerians in the diaspora during an official visit to the United States, that it had been found that a few individuals were stealing 400,000 barrels of the nation’s crude oil daily and that those behind the crude oil theft would be brought to book. In fact, he revealed that they had been identified and that the process for prosecution was about to commence. Nothing has come out of this intention.
Also, in spite of the glaring corruption surrounding NNPC’s infamous oil swap deal, the president, or rather the minister has so far done nothing about it even as he pontificates daily about adequate accounting for the nation’s oil and gas.
President Buhari’s promises to combat other forms of corruption in the industry including the case of ex-Petroleum Minister Diezani Alison-Madueke, who allegedly pilfered billions of dollars in oil revenues, is yet to become reality.
The real problem is the NNPC 
Buhari has stated in the past that his desire is to ensure the clean-up of the sector, more especially the NNPC. A 2012 report by the Nuhu Ribadu-led Petroleum Revenue Special Task Force, PRSTF, revealed that the NNPC could be using huge oil revenues for illicit purposes. The 178-page report further disclosed that the corporation was being used as a front for illegal dealings within Ministries, Departments and Agencies, MDA’s, as well as the Presidency. The report, however, suggested that a clean-up within the system is impossible, due to the secretive nature through which the corporation runs its procedures.
So far, the long anticipated reforms of the industry, starting with the NNPC to make it leaner, efficient and profit-oriented, has yet to materialise despite promises to that effect by the president. Even the administration’s promise to fast-track the passage of the Petroleum Industry Bill, PIB, through the National Assembly appears to have stalled needlessly. 
Reactions from stakeholders
During the 2016 Offshore West Africa conference held in Lagos, some industry players bared their mind to SweetcrudeReports on the issue of absence of clear cut direction for the oil and gas sector and inaction by government in advancing the industry.
An exhibitor who pleaded anonymity but simply gave his name as Agboola ‎said: “We are just sitting and watching out for what will happen. Nothing positive is happening now except loss of jobs and cutting down of budgets and projects.”
Another delegate at the conference, Mr. Austin Abiola, said oil companies have their hands tied as they are suffering the effects of poor oil prices in addition to suspense created by a government that is saying nothing about major policy issues.
Noise was made about the passage of the Petroleum Industry Bill, PIB, when the new government assumed office last year, he said, lamenting that passage of the bill “has been consigned to the back waters”.
“Since then (last year), nothing has been heard. The PIB, when passed will unlock the potentials of the industry,” Austin said.
An energy analyst, Mr. Zakka Bala, claimed that there are three reasons the industry has been quiet. 
“The first which is obvious is the collapse of crude oil prices‎, the second has to do with joint venture cash call, whereby Nigerian National Petroleum Corporation has failed to fund joint venture projects. The third is that there is no policy direction,” he said. 
He added: “Despite the slim budget of the oil companies, operators are still waiting to see government’s direction for the industry especially with regard to the Petroleum Industry Bill, the Gas Master Plan and Deregulation of the downstream sector.
“Given the situation on ground, oil companies are being careful, they are trying to limit their exposure”. 
Mr. Mark Iwe, a delegate at the OWA 2016 conference, held that it would be difficult for government to prosecute those who stole 400,000 barrels of crude per day. 
“This is because our oil cannot be traced. We have not introduced what is called ‘finger printing’ of Nigeria’s crude oil. 
“If our crude oil has finger printing, it will be easy to trace the buyer of the crude and eventually the original seller,” he said.
 Zakka Bala on his part, calculated that 400,000 barrels of crude oil stolen daily was equal to 16.8 million gallons. He explained that 16.8 million gallons equals 66 million litres, which, according to him, meant that about 2,008 tankers left the Nigerian territorial waters with stolen crude on a daily basis. 
“There is no way that 2,008 tankers will leave our water ways without being spotted. This shows that crude oil theft was a well syndicated, crafted and coordinated business,” Bala stated.
Bala is of the opinion that it might be difficult for this administration to track the stolen crude due to absence of documented evidence. 
“If there was documented evidence on how the crude was stolen and where it was taken to, it would have been easy for government to commence prosecution of those involved,” Bala stated. 
President of Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Mr. Francis Johnson, described as unfortunate the fact that the industry is in “silent mode”. 
According to him, the absence of policy direction has created uncertainty, noting that the uncertainty in the industry was part of the reason international oil companies, IOCs, were down-sizing.  
He, therefore, suggested that in the face of the current realities facing the industry, the Minister of State, Dr. Ibe Kachikwu should call all stakeholders in the industry to a round table discussion. 
“There is need for the Minister of State to call all stakeholders ‎in the industry to a round table discussion. There is need for stake holders to be carried along on the direction the government wants the industry to go,” Johnson said. 
Downstream sector heads, well, downstream 
For more than four months, Nigeria, Africa’s largest oil producer, has been caught in the throes of an inexplicable fuel shortage, which seemed to have defied any plausible solution. 
According to an oil and gas expert at the International Institute for Petroleum Energy Law and Policy, Dr. Martins Alu, “The long queues at petrol stations around the country have become something of a national landmark, which has led to many people asking: ‘Where is the president in this time of crisis?, Where is the petroleum minister?’. I’m sure given the challenges the President has had to wake up to everyday in the past few months, mainly in the energy sector he may be wishing someone else was Minister of Petroleum Resources.”
Alu contends, however, that in the face of the huge challenges facing the petroleum industry “the president should consider putting someone in charge who has complete control over decisions and policy, so as not to create stagnation. Right now, things look and feel like they are stagnant.”
He notes that a sense of aloofness has pervaded the industry, and “people are feeling frustrated at the rather slow pace of things. Maybe, the dwindling oil price may have knocked the wind out of them (Buhari’s team), but never in the history of the oil sector have things been so slow-motion.”
“For instance, consider how so much blame has been passed around about who or what is behind the perennial fuel scarcity, and efforts by the nation’s biggest importer of petroleum products, NNPC, to find a resolution have only yielded half-hearted results. Sometimes, it feels like no one is in charge anymore.” 
In the meantime, long standing issues of subsidy remain unresolved, with the government either unwilling or unable to act decisively on the matter, even as petroleum marketers – those that benefit most from a messy subsidy environment – tighten their stranglehold on the industry. 
Absentee Minister
Since the list of ministers and their various portfolios were announced, the Ministry of Petroleum Resources – which once resembled the centre of power, influence and swagger during the recent past – may have lost much of its aplomb. Staffers at the ministry now complain they are treated like orphans. 
“Our Minister (Buhari) has yet to visit his ministry, to even give us a sense of belonging,” complained one staff who would want to remain anonymous. He said even though daily demands of a bureaucracy still go on at the ministry, staff morale has ebbed considerably.
“Even the Minister of State is rarely seen around here, as he prefers working from the adjoining complex housing the headquarters of the NNPC.”You cannot blame the Minister of State (for taking up residence at the NNPC) since he was first appointed as Group Managing Director, GMD, before being made a junior minister. Besides, the office of the GMD has more grandeur, and he can host his guests who mostly come to discuss oil and gas business,” the staff explained.  
Another staff noted that, “with Buhari’s constant traveling for international obligations, many Nigerians are wondering when he does have time to attend to matters of state generally, and issues affecting the petroleum industry specifically.” 
“Many Nigerians think that the President’s decision to make himself petroleum minister has not been in the best interest of the country. They point out that he has responsibilities as President, therefore his role as petroleum minister is causing friction with the presidential post,” the staff noted.
While some may argue that Dr. Ibe Kachikwu, Minister of State for Petroleum can always represent him in matters like this, the soft-spoken Kachikwu may be having his hands full with the internal politics of superintending a behemoth such as the NNPC.
According to Alu, “Given the dire state of the nation’s oil and gas industry in the last eight months, one can reasonably contend that President Buhari needs to think like a president and act like a petroleum minister, because he is failing his first test as minister. Otherwise, he can find a competent person to take charge, full-time, before things get out of hand.”
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