Despite the many challenges,
there are a few reassuring glimpses that presage a better future for
Nigeria’s oil sector. This, writes Shaka Momodu, owes much to the gritty
resolve of petroleum minister, Mrs. Diezani Allison-Madueke
There’s no question about that; the petroleum sector is the primary
driver of Nigeria’s socio-economic development - being the chief foreign
exchange earner. Perhaps, its then not surprising that over 50 years’
experience in the oil and gas industry continues to reveal the complex
dynamics of balancing global energy security, domestic economic growth,
climate, and environmental considerations. Currently, all alternative
revenue generation efforts and options for the country pale when
compared to the sheer size of petroleum revenue in Nigeria.
The sector has drawn and continues to attract intense focus, wrangling
and debate. In effect, being the key driver and supervisor of this
all-important ministry then poses the most policy-making, operational
and structural challenges - more than that experienced by any other
Nigerian minister. This has been the lot of Mrs. Diezani
Allison-Madueke, the nation’s first lady petroleum minister. But
significantly the Bayelsa-born technocrat has shown surprising strength,
focus and vision.
On top of her game, the minister herself succinctly captures key
grounds her ministry had covered in the preceding two years, a detail
presented during the recent mid-term report. Her words: “The Ministry of
Petroleum Resources has in the last two years vigorously pursued the
Transformation Agenda of President Jonathan’s administration. Oil and
gas which is the mainstay of government revenues and expenditure in
Nigeria is critical to supporting various policies and programs of
government.
“The Ministry of Petroleum Resources through its parastatals gives
effect to government’s aspirations in the oil and gas industry and has a
direct link with the ability of the government to deliver on
transformation agenda through - building sustainable industries with
indigenous participation; delivering quality products to the Nigerian
people and creating oil and gas institutions of the future.”
More specifically, she stated that the key accomplishments in the
period 2010-2013 cover the entire oil and gas value chain namely;
Upstream - “where we have increased exploration in frontier areas and
sustained production in spite of incessant crude theft and pipeline
vandalism; Midstream (Gas) - where we have increased gas supply to
power, enhanced gas commercialisation, implemented the gas
infrastructure plan and gas for industrialisation.”
In the midstream (Oil) and downstream arenas, Mrs. Allison-Madueke
identified the ongoing repairs and upgrading of facilities in the
refineries and pipelines distribution network in order to sustain
in-country product supply. In the downstream, Nigerians are of course
witnesses to the product supply stability that is often taken for
granted now. “We have ensured stable supply of petroleum products in
spite of pipeline vandals and product theft, effective and efficient
administration of the subsidy programme which remains unsustainably
expensive and increased domestic refining,” she had further explained.
Perhaps of more than passing significance are specific improvements in
local capacity and indigenous participation in infrastructure
investments which have been vigorously pursued. The observable outcome
has been in upgraded training facilities and increased regulatory
compliance with local content requirements.
Going forward, some of the key positives of the petroleum ministry within this period cover the following arena:
PIB
One of her most important achievements is putting together the
Petroleum Industry Bill (PIB), now before the National Assembly and
generating all sorts of controversy. The Bill essentially targets a
fundamental restructuring of the petroleum industry to maximize returns
on the country’s investment in the oil and gas sector. Stemming from the
Oil and Gas Reform Implementation Committee (OGIC) empanelled to review
the subsisting 16 laws that governed the nation’s hydro-carbon
resources arena, the PIB represents a one-stop-shop legislation that
would guide the sector and effect a pro-Nigeria restructuring of the
country’s lop-sided relationship with international oil companies
(IOCs).
The initial efforts to push the PIB were scuttled in the Sixth National
Assembly. no thanks to intense intrigues that stoked a few business
divestment from Nigeria as well as prospective investors heading to
nearby countries such as Angola, Ghana and Burkina Faso which boasted
more stable policies. Today, for Nigeria, the story appears different.
The PIB cobbled under the watch of Diezani essentially incorporates the
legal outline that will delineate and shape the oil sector. The
creation of a conducive business environment for petroleum operations;
optimization of domestic gas supplies, especially for power generation
and industrial development; establishment of a progressive fiscal
framework that encourages further investment in the petroleum industry
while optimising revenues accruing to the government; the establishment
of commercially oriented and profit-driven oil and gas entities; as well
as the deregulation and liberalization of the downstream petroleum
sector form central pegs of the PIB.
Midstream Oil (PPMC)
Of great importance is the rehabilitation and upgrade of PPMC major
petroleum pipelines and strategic product depot facilities across the
nation. “After many years of being inoperable due to pipeline vandals,
the Port Harcourt – Aba product line has been rehabilitated and the Aba
product Depot was re-commissioned after seven (7) years of inactivity.
This has enabled products to be sent directly from the Port Harcourt
refinery to Aba for onward distribution in the Eastern parts of the
country. Aba – Enugu product pipeline is expected to be recovered by
third quarter, 2013.
Similarly, Warri – Benin product line has been recovered and the Benin
depot has been re-commissioned. Other lines recovered so far include:
Kaduna – Suleja, Kaduna – Gusau, Suleja – Minna, Kaduna – Jos and Jos –
Gombe all of which are now fully operational.
According to the Minister, her ministry is aggressively working on the
recovery of the remaining product pipelines and depots namely; Enugu –
Markurdi; Gombe – Maidugri and Markurdi – Yola. “Restoration work in the
refineries and pipeline distribution network / storage systems have
contributed to stable supply of petroleum products across the country
despite the challenges of vandals and the criminal activities along
these vital and critical infrastructure.”
It is to the credit of the Minister and PPMC that despite stoppage of
importation by the oil marketing companies during subsidy saga, the
nation did not witness any significant disruption in product supply
across the country.
Growing reserves and production
The ministry in line with government’s drive to achieve the national
aspiration of 40 billion barrels of oil reserves and 4 million barrels
of oil per day production, including condensate, as captured in vision
20:20:20, has increased exploration activities in the Offshore, Onshore
and Inland Basins.
From THISDAY checks, in order to meet the above national target, a
total of 19 exploration wells were drilled comprising eight exploration
wells in the JV and 11 wells (3 Exploration and 8 Appraisal wells) under
the PSC in 2012.
A further 93 development wells were drilled comprising 55 development
wells under JV while the PSC delivered 38 development wells and within
the same year, 33 Workover wells were also drilled consisting of 32
work-over wells under JV and 1 workover well in PSC.
The petroleum ministry has significantly maintained crude oil
production (including condensate) above an average of 2.30 Million
Barrels per Day (MBOPD) despite illegal oil bunkering, crude oil theft
and pipeline vandalism. Following the federal government’s amnesty
programme, Nigeria’s production rose from an average of 1.9 mmbopd in
2009 to a peak of 2.62 mmbopd in October 2010.
Sustaining production at these levels continues to be challenged by
increasing pipeline vandalism and crude theft, which intermittently
results in production falling below the programmed 2.46 mmbopd and
rebounding following government intervention to stem this menace. But
happily, the government is tackling this problem through enforcement and
the Crude Oil Fingerprinting Initiative.
The local content challenge
The Nigerian Oil & Gas Industry Content Development Act 2010 (the
“Local Content Act” or “NCA”) received presidential assent on Thursday,
April 22, 2010. Now in operation, the Act seeks to increase indigenous
participation in the Nigerian oil and gas industry (the “Industry”) by
prescribing, inter alia, minimum thresholds in relation to the
utilization of local services and goods.
The Local Content Act which derives from the Nigerian Content Policy
focuses on the promotion of value addition to the Nigeria economy
through the utilization of local raw materials, products, and services
in order to stimulate growth of indigenous capacity.
The NCA accords certain privileges and preferential treatment to
companies that qualify as “Nigerian Companies” pursuant to the Act,
including preferential treatment in the award of contracts for projects
in the Industry. To qualify as a Nigerian Company under the NCA, a
minimum of fifty one per cent (51%) of the issued shares must be held by
Nigerian shareholder(s); whilst the remaining forty nine per cent (49%)
of its issued shares can be held by foreigners.
Nigeria’s product supply and distribution system consists of about
5,000km of pipeline network interconnected to the four refineries with a
total capacity of 445kbd at three locations namely Warri, Port-Harcourt
and Kaduna. The reliability of this network holds the key to
sustainable supply of petroleum products across the country.
Nigeria’s petroleum product consumption for white products is estimated
at about 38 Million Liters PMS , 12 Million Liters AGO and eight
million litres DPK, whose production is inadequate for meeting domestic
consumption even if they operate at design level. This scenario has led
to importation of products from proceeds of crude exports to supplement
supply from domestic refineries.
The plan going forward is to rehabilitate the refineries so as to
obtain maximum production from them. This will meet about 70 percent of
the country’s needs. The deficit will be met by on-going plans to
construct Greenfield Refineries. The ministry is also cooperating with
private initiatives for construction of new refineries and have
progressed with plans for rehabilitation of the refineries commencing
with the Port Harcourt refinery.
Clearly, these challenges will continue to drive innovation and change
in the petroleum ministry’s approach to delivering an oil and gas
industry that is internationally competitive and is governed by open and
transparent processes to ensure security of investment for both
domestic and international investors.
