Clearing the Rots in Nigerian Oil Sector

By ifeanyi Nwabugu 

Despite some genuine complaints by some  elements in the country, evidence are bounds that Nigerians had breathe a sigh of relief in the oil sector since President Goodluck Jonathan mounted the saddle of leadership as the President of Nigeria in May 2011. Before Jonathan resumption of office reports of scarcity of petroleum products mostly petrol was talk of the town. Kerosine was out of the common man rich, while gas was nowhere to be found. Vehicle owners queue all day long waiting for petrol, while others did night vigil at the petrol station.

Evidence  also    abound that during the military regimes, there were incidences of pipeline vandalism by unpatriotic citizens who made dubious gains from the petroleum resources including petrol, kerosene and gas and in some cases fire outbreaks from such vandalized pipes claimed several lives and lost of property running into billion of Naira.. The pipeline vandalism persisted unabated until the Nigerian National Petroleum Corporation, (NNPC), was left with the option of completely shutting down the nation’s refineries most of which were not properly maintained at the time. As a result, Nigeria which is the fourth largest crude oil producer within the Organization of Petroleum Exporting Countries, OPEC, could no longer produce fuel for local consumption.

During Olusegun Obasanjo administration, fuel queue which was a major relic of the dark days of the military regimes held sway as hoarding, adulteration and black market selling of products continued. When President Yar’Adua’s came into office, his government initiated measures to revive the moribund refineries but could not achieve much as the petroleum industry in the country was already in a stage of comatose.

Determined to reverse the embarrassing trend, President Jonathan took the bull by the horns immediately he assumed power by initiating several reforms to  reposition the upstream and downstream sectors.  Part of the reforms was to engage an expert in the oil industry to pilot the affairs of the Petroleum Ministry.  He appointed Mrs. Diezani Alison-Madueke.  Until her appointment into the federal cabinet as Minister of Transport in 2007, Mrs. Alison-Madueke who hailed from President Jonathan’s home state Bayelsa, was the first female Executive Director in Shell Petroleum Development Company (SPDC).  She moved to the Ministry of Mines&  Steel Development in December 2008 from where she was appointed Minister of Petroleum Resources in April 2010. President Jonathan appointed Diezani Alison-Madueke based on her good understanding of the petroleum sector and the tremendous cooperation she enjoys from chieftains of the oil industry.

Within the period of President Jonathan, the nation’s crude oil production has been consistently maintained above the budgeted production level of 2.3 million barrels per day. This is direct fallout of the amnesty programme which has now allowed for the renewal of production activities in wells hitherto shut-in as a result of the Niger Delta crisis. Effort at increasing the nation’s stock of crude received major attention under Mrs. Alison-Madueke with the escalation of oil exploration activities in the Inland Sedimentary Basins especially in the Chad Basin. Already the Nigerian National Petroleum Corporation and the Federal Ministry of Petroleum Resources are concluding arrangement for contract award for advanced seismic data acquisition and processing.

In all, the seven in-land basins of Bida, Gongola, Sokoto, Anambra , Dahomey , Chad and Benue are billed to benefit from the programme. Yet the drive to increase the nation’s crude and gas reserve is not limited to the In-land Basin. As part of the effort at growing the capacity of the Nigerian Petroleum Development Company, (NPDC), eight producing blocks have been assigned to the company. With special support by the President for NPDC’s operatorship of the blocks, the impact has been tremendous on the NPDC’s growth aspiration with current production now averaging 80,000 barrels per day.

At the midstream sector gas supply for power generation and industrial use has been sustained with supply outstripping demand both in the Western and Eastern axes. Available records indicate that the volume of gas available for power generation is unprecedented in the history of oil and gas in Nigeria. Renewed efforts at ensuring relevant Gas Supply Purchase Agreements are being executed in order to encourage upstream gas development.  Report has it that as    at the last count-Three Gas Supply & Purchase Agreements (GSPAs) have been signed among buyers, gas suppliers and Aggregator Company (Egbin / Shell / Chevron / PanOcean). Contracts for the critical pipeline infrastructure for gas supply to Alaoji, Olorunsongo have been awarded with projects’ completion in 2012. Upon completion, this would lead to the availability of additional gas to generate extra 2000MW of electricity.

The Brass LNG project is been fast-tracked, while the  implementation of the critical gas projects as encapsulated in the Gas Revolution was given a boost with the visit of the investors (Xenel of Saudi Arabia and Nagajurna of India) to the proposed site at Koko, Delta State for the 1.3 metric tonnes per annum Petrochemical and 1.3 MTPA fertilizer plants. There has generally been increased investor confidence in the Gas Revolution with additional gas utilization projects being pursued. These include:2.75 metric tonnes per annum Dangote Fertilizer plant in Edo State, 2.4metric tonnes per annum Brass Fertilizer plant in Bayelsa State, 1.34 metric tonnes per annum Indorama Fertilizer and 1.2MTPA methanol plants at Eleme, Rivers State  and 450, 000 tonnes per annum methanol plant at Onne, Rivers State  among others.

As for the downstream sector it is evident that products supply has been sustained nationwide through a combination of offshore processing, SWAP arrangements and increased domestic refining. The first 100days has seen the re-streaming of Kaduna Refinery and sustained operation of Warri Refinery. The issue of kerosene availability has been tackled through NNPC direct distribution programme. The integrity of key product pipeline infrastructure (Kaduna-Kano, Kaduna-Gusau, Kaduna-Suleja) has been re-established. The impact of this is that more products are now available in inland depots, which will enable faster intervention when necessary.

Beside the aforementioned achievement of the Federal Government in the oil sector, sustained efforts at increasing local refining capacity, through revamping the existing refineries with a view to increasing their contribution to national demand of petroleum products is on-going. An NNPC team is currently in Japan to conclude the engagement of the original Engineering Procurement Construction, EPC contractor for Port Harcourt Refinery which will be the first to be so rehabilitated.

Already the Nigerian Content Initiative signed into existence on April 22, 2010 by President Goodluck Jonathan is designed to ensure that Nigeria achieves the much desired In-country capacity in the oil and gas industry. This would guarantee that a huge chunk of the estimated $20 billion annual industry spend domicile in the country for the benefit of Nigerians and indigenous Nigerian Companies and Service Providers. Under the watch of the President, the Nigerian Content Development Board, NCDMB, which has the Honourable Minister of Petroleum Resources as Chairman of the Governing Council has ensured the escalation of the historic use of made-in-Nigeria pipelines by Exxon Mobil recently at its Edop – Idoho Offshore field, secured the placement of over 100 kilometers of pipelines orders in Nigeria ’s only pipe manufacturing company, SCC Abuja, ensured the increase of in-country fabrication tonnage from 1,000,000 in 2009 to 1,200,000 currently  and an advanced talks with Jiangsu Yulong of China to establish 250,000 tons per annum LSAW Pipe mill in Nigeria

As for employment in the oil industry, the Federal Government has developed the Nigerian Oil and Gas Employment and Training Strategy, which has resulted in the absorption of over 5,000 engineers, geologists, welders and other skill sets into the industry and formed the basis of a national skill database. Nigerian Content activities have already generated over 30,000 direct and indirect jobs and will surpass 300,000 within the next four years

Jonathan short period in government has witnessed sustained interaction with the National Assembly to ensure passage into law an oil reform legislation known as Petroleum Industrial Bill (PIB)  that will stand the test of time to the benefit of Nigeria , and give fair Return on Investment. Regulatory Control and Monitoring Considerable efforts have been made under the watch of Mrs. Alison-Madueke to ensure effective regulatory compliance in the Nigerian oil & Gas industry in the  areas of  enforcement of flare penalty of $3.50/1000scf to discourage flaring and encourage commercialization of the gas that is being flared, the launch of the “Offshore Safety Permit (OSP)” to account for the safety and competencies of personnel who embark on  swamp, offshore and deep offshore duties in line with the expectation of the Nigerian Content Policy,  the establishment offshore training centre within the Nigeria and completion of a pilot scheme of the National Production and Monitoring system (MPMS) aimed at ensuring independent real time production monitoring and accurate production accounting.

The massive transformation of the NNPC, the passage and implementation of the Nigerian Content Act, the push for the passage of the Petroleum Industry Bill, the implementation of the Gas master plan as well as achievement of improved relations with critical stakeholders across the oil and gas value chain, were among practical measures through which the administration has ensured unprecedented stability in the supply and distribution of petroleum products across the country.

Many Nigerians are of the view that the petroleum sector under Jonathan’s presidency has been recording giant leap forward to the betterment of the country and apart from boosting the nation’s earnings from oil, employment opportunities had been increased.  Within the past one year that the Nigerian Content Act was passed into law, over 30,000 direct employments and training opportunities had been created for Nigerians, making the sector the highest employer of labour.

However, these commendable efforts require sustainability to enable Nigerians continue to benefit from the reforms being implemented by the new administration of President Jonathan.  Therefore, the need to retain Mrs. Madueke in the Petroleum Ministry to continue with the ongoing reforms cannot be overemphasized.  Her administration having shown so much commitment and sympathy to the sector should be allowed to implement ongoing programmes that have succeeded in restoring the confidence of Nigerians and foreign investors in the sector.

President Jonathan has continued to demonstrate his commitment towards improving the lives of Nigerians by ensuring that their basic needs are within their reach. In the petroleum sector, the administration has clearly shown within the past one year that Nigerians can enjoy petroleum products without being exploited by dubious marketers who had made life unbearable for the citizenry for several years. Since this relief came through the instrumentality of Mrs. Alison-Madueke’s leadership acumen in the Petroleum Ministry and with the enormous challenges ahead that requires an expert to surmount, the status quo should be maintained so that various programmes lined up to ensure stability of the petroleum sector are not eroded by putting a square peg in a round hole in the new administration.