By Sonny Atumah
Bravo! I have been vindicated on subsidy. President Muhammadu Buhari you indeed understand what subsidy is. We have been clamouring for transparency, honesty and accountability in running the affairs of the NNPC. Last Monday, the President aligned himself with my campaign that subsidy removal was not the issue but the management of our petroleum resources.
According to the President, ‘’I have received many literature on the need to remove subsidies, but much of it has no depth.’’ He said that lack of security, sabotage, vandalism, corruption and mismanagement, not necessarily subsidies, are the most serious problems of Nigeria’s oil sector.
The President said ‘’ When you touch the price of petroleum products, that has the effects of triggering price rises on transportation, food and rents. That is for those who earn salaries, but there are many who are jobless and would be affected by it’’. The President directed the NNPC to review the existing agreements for the swapping of crude for refined products.
The President’s understanding of the subsidy regime was a masterstroke, and marks statesmanship. It reminds one of this quote by Sir Winston Churchill: ‘’You can measure a man’s character by the choices he makes under pressure.’’
The President agreeing to beam a searchlight on the NNPC to kill the monster is the solution. NNPC should not die. With potentials for up to 6000 investment opportunities when we refine a barrel of crude, our economy for now revolves around Petroleum and the NNPC.
Our National Oil Company and indeed the refineries are strategic for energy, technology, employment, improved skills acquisition, increased GDP, and increased fiscal revenue and therefore a reduced national destabilisation owing tensions. They are national assets that should be guarded jealously for the diversification of our economy for sustainable development.
President Muhammadu Buhari’s administration can leverage on petroleum refining as a fulcrum to jump-start the Nigerian economic development especially now that the price of crude is very low in the international market. We ask what the job of the national oil company is if it kills its refineries and imports refined petroleum products?
The NNPC swaps crude of 450,000 barrels per day in an agreement to reciprocal exchange for refined products worth that same amount. At the same time they import refined products of same quantity with attendant subsidy claims for what has been taken care of in oil swap or Offshore Processing Agreements (OPAs). That is the fraud. NNPC when you refine, import goes, subsidy dies; My bet on that.
Chevron that visited the President last Monday has downstream investments in South Africa and has no refinery in Nigeria. South Africa could be described as a non-producer consumer nation in terms of oil. Shell the biggest player in Nigeria has a refinery in Durban, South Africa. Also, Shell owns the Shell Eastern Petroleum (Pte) Ltd Singapore with a refining capacity of 462,000 barrels per day.
Exxon Mobil Corporation of the United States, the largest refiner in the world with 37 refineries in 21 countries has no refinery in Nigeria. It owns the ExxonMobil Refining & Supply Company in Singapore with a refining capacity of 605,000 barrels per day capacity. That refinery is the 5th largest in the world. Its refining capacity is higher than our four refineries combined capacity of 445,000 barrels per day.
Up till now we have six export terminals that are owned and controlled by the oil majors; Forcados and Bonny (Shell), Qua Iboe (ExxonMobil), Escravos (Chevron), Brass (Agip) and Penington (Texaco). That stranglehold of the oil majors is still very much there since they discovered oil on Sunday 15th January 1956 at Oloibiri. NNPC should engage oil majors constructively.
For the umpteenth time we have called for change of attitude in the management of our petroleum resources but nay we are lone rangers until the President now wielded the big stick. A Middle East friend of mine jocularly told me of how he went to the towers and met his friends’ celebrating the election of their boss in 2013 as the president of the African Refiners Association. He said he was startled that the celebrating president, an NNPC group executive director was a superintendent of four refineries in Nigeria that could not refine a barrel of crude. That is the Nigerian paradox of not having a functional refinery but leading a group of refiners in Africa.
We had tolerated a group that had developed this penchant for crude gains they have over our commonwealth. Is it corruption, subsidy scam, oil swap scam, oil theft, no record keeping, no bookkeeping, looting, name it; you will find them in the NNPC.
Fiery Governor of Kaduna State, Nasir el Rufai was in his elements last Monday to advocate for the abolition of the Nigerian National Petroleum Corporation (NNPC). He was indeed full of extreme emotions, a situation any rational thinking being would solicit for even in a near war situation.
El Rufai , the Guest Speaker at the annual lecture to mark the 81st anniversary of Nobel laureate Wole Soyinka, said that with the NNPC controlling about 40 percent of Nigeria’s revenue, it had constituted itself into a ‘parallel government’. He reeled out figures of what NNPC did not remit to justify killing the NNPC.
One appreciates the frustrations of El Rufai, but let us tarry a while. El Rufai as a student of corporate governance would admit that the NNPC should be investigated before giving it a death knell. A dangerous reptile in the house does not warrant setting the house ablaze to kill it. Let us find out what happened to forestall a recurrence. Nigerian Banks that were either private or public were similarly killed because of lack of punishment and reward system, the hallmark of corporate governance. Do we kill Nigeria or form another country because it is dubbed a corrupt nation? Nigeria is made up of many individuals that do not believe in Nigeria. We need to reform them.
Let us examine our legal and regulatory frameworks that make sleaze to thrive. How is it done elsewhere? Nigeria is not the only country with National Oil Company. Out of the 12 member OPEC, Nigeria is the only one that her petroleum managers kill their refineries and import petroleum products even from non-producing consumers.
A non-producing consumer nation is that which oil production is 10 percent or less of their consumption. Japan, Germany, South Korea, France, Italy, Spain, Netherlands and Turkey are in this category; most of Nigeria’s refined petroleum products are imported from West European countries.
The oil glut is compounding our situation. The Nigerian crude is floating on the seas and in storage tanks with no destination because there is no refinery demand in Europe. We now discount our crude to have interested buyers in the international market.
Meanwhile, ExxonMobil’s reports that its international refining business is taking advantage of low cost of crude to refine oil in every market in which it operates. ExxonMobil profits from its network of global refineries, is manifold in the first quarter of 2015. NNPC is not taking advantage of refining to keep us in business.
Mr. President, as you embark on the United States trip on July 20; in continuation of your presidential honeymoon with the west, issues of bilateral talks on the checkered relationship should be on the cards. For example the United States have not imported a barrel of Nigerian crude since July 2014 even when it increased crude imports from other countries. For a trade balance for now, we want their oil majors to come and set up oil process plants and refine in Nigeria.
Again, we must articulate a position for bi-partnership strategy to curb oil theft and maritime security in the Togo Triangle. Stolen crude end up in European refineries. President Buhari should tell President Obama that New York is a major hub for money laundering of illegal oil proceeds. Nigeria should also demand for a repatriation of laundered money from other global financial hubs including London, Geneva, Singapore and elsewhere.
Assurances should also be given of a review of the legal and regulatory frameworks in the operations of the petroleum sector to make oil majors operate not only in the upstream but also in the downstream sector for a balance in joint venture business relationships.