‘FG’s Irresponsibility Grounded Nigeria’s Refineries’
- Oct 20, 2020
- Daily Independent
Dr Louis Brown Ogbeifun, former President of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), shares with MOHAMMED SHOSANYA, issues in Nigeria’s oil and gas industry. Excerpts:
With the COVID-19 pandemic hitting Nigeria so hard, and the ambitious oil search in the Chad basin/Northern Nigeria, what is the prospect of Nigeria developing an alternative to oil now that the world is championing low consumption of oil?
The North has one of the most significant advantages with an all-year-round abundance of winds that could be trapped to produce windmills. For instance, Borno State has about 6.70kwh/m2/day, Katsina, Zamfara, and Sokoto all have abundant natural winds, which could generate vast amounts of wind energy.
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The North is also blessed with abundant energy from the sun, which could be tapped and distrusted as solar. Nigeria is said to receive about 4909.212 kWh of energy from the sun. If this figure is converted to oil, this would equal to about 1.082 million tonnes of oil.
This number is several thousand times more than our crude oil and natural gas daily productions. Besides, the North also has very vast vegetation that could be cultivated for biofuel production.
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These are cleaner sources of energy that would make so much for the country. I am sure that if we had plunged the funds used for prospecting for oil in the North into solar, windmills, and biofuel production, the North would have become a hub for activities in solar, biofuels, and windmills production. If I were the President, I would have used the money for the oil search in the North to develop these alternative energy sources because the North has a comparative advantage in these areas.
What do you think the oil and gas industry should do differently during post-COVID 19?
First, the Executive and the National Assembly should fast track the passage of the remaining legs of the Petroleum Industry Bill.
Second, the government should embark on import substitution to reverse the exportation of crude oil and importation of finished products.
Third, the government should source credible partners to build new refineries and revamp the four in Kaduna, Warri, and Port Harcourt. Nigeria could become a net exporter of finished petroleum products. Irrespective of Dangote refinery birthing soon, Nigeria needs more refineries.
The United States of America, with a population of 330million, has over 130 refineries. Texas alone has over 30 refineries. But Nigeria, with a population of about 210million, has only four moribund refineries. From this analogy, you could see that Nigeria’s refining capacity is grossly inadequate.
Four, speed up the cleanup of Ogoni land and other areas with environmental pollution to instill confidence in oil-bearing communities.
Five, explore co-location as a concept to be deployed in harnessing Nigeria’s gas resources for domestic industrialisation, which would allow the springing up of small-scale industries alongside the NLNG and the refineries. Six, fast track and conclude on the Nigeria Gas Flare Commercialization Programme to provide off-takers for the gas we flare.
What is your take on removing petroleum subsidy, the increase in the pump price of fuel against the backdrop that the so-called deregulation would still be import driven?
Increases in electricity tariffs, petroleum pump price products, and the removal of subsidy are excruciatingly painful.
Gasolene subsidies are often very difficult to scrap or remove and are emotive. We have been at this bus stop several times, and in dealing with the issues now, we need to step back and think through the next steps so that we do not make more mistakes.
The subsidy regime is not a bad idea. Many countries use it to protect the poor and the average consumers from price fluctuations due to the instability in international markets like we just witnessed with COVID-19.
Besides, it is supposed to shield the consumers from market manipulations by the capitalists that want to maximize profits at the expense of the masses.
The petroleum subsidy is a social protection measure to protect the vulnerable in our society.
Unfortunately, the rich and elites are the direct beneficiaries of gasolene subsidy regimes. They are the ones with several cars and own the transport industry.
The poor indirectly benefit from subsidy transfers in organised mass transits, low-cost housing schemes, and low cost of food. All these do not exist in Nigeria. Besides, it has become a source of monumental corruption.
The hike in petroleum pump prices and electricity tariff without prior discussions with the stakeholders and not emplacing social protection policies to cushion the effect on the poor’s most impoverished at this time of COVID-19 seem a terrible period to embark on such drastic reforms.
However, with the global outbreak of COVID-19, which triggered the world’s worst economic slowdown that hit oil prices severely, Nigeria has to cut down oil production from an all-time high of about 2.7mn barrels per day in the first quarter of this year to less than half of that.
The slump in crude oil prices without adequate savings to draw from was double jeopardy for the nation.
Apart from these challenges, Nigeria’s external debt rose from $10.32bn on June 30, 2015, to over $28bn in 2020. Our economic growth has been slow and low.
Besides, unemployment is high and rising, and inflation is in the bracket of double digits with a growing fiscal deficit, the Government is struggling to deliver development to its people. Recall that in 2018, we were labeled the poverty capital of the world.
The reason for this is that we overtook India. This is because we now have the largest absolute number of people living in extreme poverty.
Regrettably, every minute, six Nigerians drop to the poverty bracket.
Sadly, Nigeria is one oil-producing nation that is unable to produce its fuel for local consumption, thereby relying on dollar and import driven process to serve its people. The mismanaged and corrupt fuel subsidy regime is also contributing to the crisis. Petroleum subsidy costs the country around 1 trillion Naira (USD 2.8 billion) each year, which is well over 5% of the budget.
With all the reasons mentioned earlier, it becomes logical to do away with it. However, efforts must ensure that Nigeria refines her crude to reduce the burden on Nigerians.
There is a school of thought which believes that it is the government’s irresponsibility and inefficiency that caused the non-performance of the refineries and the economy and, therefore, should not transfer the cost of its inefficiency to Nigerians. While this looks a plausible argument, that does not remove the fact that the country is in bad shape economically and needs some surgical emergency treatment.
The Vice President was recently quoted to have said Nigerian government has no business running refineries. What is your take on this and who should manage the nation’s refineries?
From Osinbajo’s point of view, I entirely agree that it is in the DNA of successive governments in Nigeria not to have the initiative to manage businesses successfully. They always believe in rent collection and the philosophy of “export the natural resources for dollars and import finished products to have more money to share in FAAC.” They are dollar-focused and, therefore, lost all the initiatives to use natural resources to create more wealth and employment opportunities. That is why foreigners connive with our locals to carry out illicit mining of the mineral resources right under the nostrils of state governors.
The generalisation that government has no business in business is true to the extent that “only irresponsible government should have no business in business or the running of refineries.”
I say this because, even when not directly involved in running businesses, which is not a forbidden fruit, it must create an enabling environment for businesses to thrive. Therefore, the head or tail, government has business in business.
Even at this, it is a swan song to deliberately assist in running the enterprises aground, shout government has no business in business, then turnaround to sell them to cronies.
Often, they don’t run them; they strip the assets. Check out what happened with the steel industries and NITEL facilities.
Kindly investigate the owners of the privatized electricity companies. Check out how many trillions of Naira went into their private pockets in the name of subsidy and bailouts to privatized companies. Did you notice that once the electricity tariff was increased, electricity became very stable in so many places? Yet, no additional pin has been added between the increase and now. That is the conspiracy. That is what it is with privatisation in our country but no so with other countries.
But since we have shamefully proven to be unable to manage anything outside the NLNG, our models of privatisation should be that which works.
Sinopec, PetroChina, Sinochem, and China National Offshore Oil Corp (CNOOC). These companies are China’s state-owned commercial entities. CNOOC has vast investments in Nigeria.
It is China’s largest offshore oil and natural gas developer. China has close to $1 trillion in assets and rated one of the world’s largest sovereign wealth fund. Chinese Government is investing heavily in alternative sources of energy. Are the state actors from the moon?
Equinor ASA (formerly Statoil and StatoilHydro) is a Norwegian state-owned multinational energy company. Its HQ is in Stavanger.
It operates in about 36 countries and now heavily investing in renewable energy. Norway used her oil wealth to build efficient health and educational infrastructures, a good network of roads, and has over US$1 trillion in assets and rated the world’s largest sovereign wealth fund.
Saudi Aramco, also known as the Saudi Arabian Oil Company, is rated as the world’s most profitable company, dwarfing technology giants like Apple Inc. Aramco owns and runs a 600,000 barrels per day refinery in far away from the USA and has over $300 billion sovereign- wealth fund.
These three governments have proven that responsible Government has business in business, and their leaders do not have ten heads. The only difference is that they are patriots, they respect their citizens, love them, want them employed to deal with corruption without the party, religious or tribal affiliations. They also consistently work to remove their citizens out of poverty. Here, our leaders believe in the philosophy of handouts to win elections.
For Nigeria to optimise the benefits of our hydrocarbon resources, we need our refineries using the NLNG model.
The VP’s philosophy is a severe indictment of those them administering the country. The cement armada should have taught us great lessons on how to love Nigeria.
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