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Agenda for the new Petroleum Minister

It may not be altogether welcoming or comforting to say that Nigeria’s new Minister of Petroleum Resources would have his or her hands full, but that is the fact: whoever emerges as the next minister already has their work fully cut out.

The minister will be taking office in a country that has only just emerged from the grip of an excruciating scarcity of petroleum products, unexplainable shortage of gas for power plants to meet the nation’s power needs, a controversial Petroleum Industry Bill (PIB) which is languishing at the National Assembly and a contentious deregulation policy to boot.

Indeed, the attempt here is not to scare the Minister away, but to bring him or her face to face with the growing chaos in the petroleum sector in Nigeria, and help him or her prioritize. For instance, the incoming minister must contend with the inability of government officials over the years to account for the quantity of crude oil exported from the country by foreign oil companies; the exclusion of local companies from the production and export of crude oil; the collapse of the country’s refineries in Kaduna, Warri, Port Harcourt; and the uncertainty in the deregulation of the downstream sector of the petroleum industry.

Unless the incoming Minister has lived in space prior to his or her appointment, by now he or she must be familiar with the situation in the Niger Delta, which has made it impossible for government to meet up with its 2.1 million barrels daily oil production quota by the Organisation of Petroleum Exporting Countries (OPEC), as well as allegations of corruption and poor management at the Nigerian National Petroleum Corporation (NNPC); the nepotism in the allocation of oil blocs to prominent Nigerians, then the outright fraud that characterized the Petroleum Product Pricing and Regulatory Authority (PPPRA), the misuse of funds by other agencies in the sector, the delay in the diversification of the economy with oil revenue, and the calamitous development in the global oil sector, a situation in which oil export to the United States and other western countries is coming under a serious threat.

Gas remains a major issue as well, and this presents a disturbing paradox when the scenario of gas flaring is juxtaposed with that of the persistent complaints from the Power Holding Company of Nigeria (PHCN), lamenting a scarcity of gas to power its stations. Indeed, the major reason given by the Power Ministry for its inability to meet with its target to generate 6,000 megawatts of power for the country since last year is the inadequacy of gas to power the thermal plants across the country.

There is also the issue Petroleum Industry Bill that was in February described by Ann Pickard, former Regional Executive Vice President of Shell Exploration and Production, Africa, as “a cumbersome document that lacks insight into the very basics of our industry.”

This bill, which is touted as the most comprehensive item of legislation in the history of the fifty year old Nigerian oil industry, and branded as the engine that will drive the sector’s much needed reform, is currently bogged down in the National Assembly, and threatens to join the growing list of stillborn bills for which our legislature have come to be known.

Previous ministers had harped on the need for a major reform that will completely alter the structure and tempo of events in the petroleum industry, which led to the creation of some initiatives including the PIB. However, the slow pace of the process is creating an impression that this administration may not be courageous enough to carry out some of the drastic policy changes projected in the reform.

Former President Olusegun Obasanjo who had set up the highly lauded Oil and Gas Reform Implementation Committee (OGIC) did not have the courage to implement them. Of course, the erstwhile government could not issue White Papers on the reform proposal.

They were dumped after colossal sums of money, man-hours and other scarce resources were committed into producing them. It is also suspected that the former Minister of Petroleum Resources, Dr Rilwanu Lukman, who headed the OGIC committee, and who was adviser to Obasanjo on petroleum for several years, threw in the towel out of frustration, considering the double-mindedness of the former president towards the implementation of the reform.

Special mention must be made of the very crucial issue of deregulation, which has been described as the most important defining element of the tenure of the incoming minister. The new minister has a lot of work to do in terms of convincing Nigerians that deregulation will turn out for the good of the majority. He or she will certainly have to bring clarity to the noisy subsidy-or-no-subsidy debate.

These huge tasks have been awaiting action, but not much has been achieved in putting the right structure on place. Even though some of the recommendations in the OGIC reform require the legal backing before implementations there are some other things that need to be fast-tracked in order to provide the enabling ground for the smooth implementations when the Law becomes ready.

The Group Managing Director of the NNPC, Alhaji Mohammed S. Barkindo, recently stated that that a lot was happening in the reform agenda of government but added that it was normal for people to be impatient during reforms.

“It is normal for consumers and stakeholders to be impatient because the result of this reform may not manifest immediately, but as a key participant in the implementation mechanism of the reform agenda I can assure you that at the end of the implementation of the agenda we would not only put our country on the path of growth, once again, but will ensure that we emerge as one of the strongest nations not only on this continent but internationally,” Barkindo said.

He said the new policy direction of the Federal Government in the oil and gas sector was driven by the desire to have an efficient, accountable and result-oriented national oil company operating within the framework of global best practices.

Special mention must also be made of the upstream sector of the petroleum industry, which remains the backbone of Nigeria’s economy. In this sector, almost all Nigeria’s oil and gas production and development projects are owned by joint venture operations via Production Sharing Contracts between the government -owned NNPC and the multinational corporations. However, about 95 percent of Nigeria’s oil and gas production is carried out by multinational corporations under various schemes as joint ventures, production sharing contracts.

There are allegations that the current arrangement is full of dirty deals, corruption and the system lacks transparency and accountability to move the sector forward.

In the down stream sector, it is common knowledge that the refineries in the country and the assets owned by the NNPC such as pipelines and depots are not functioning well as a result the country earns the position of being one of the world’s leading importer of the petroleum products.

As it is, Nigerians are not madly excited about the prospects of change in the petroleum sector, because they believe that if there is one sector in which our technocrats have failed us, it is this one. The last minister, Rilwanu Lukman, came highly recommended for the job. A one-time Secretary General of OPEC, he also served two different administrations (Babangida and Yar’Adua) as Minister of Petroleum, as well as the Obasanjo administration as Presidential Adviser on Petroleum and Energy.

But it was under his watch that Nigerians queued at filling stations for months on end. He could not save the refineries as production dropped to less then 30% in some and others remained shut while massive importation continued at the detriment of the nation’s economy. Lukman is glaring evidence that the Petroleum Ministry needs far more than just a technocrat.

The ministry needs an ambitious, visionary and transparent person, unburdened by conflicts of interest, and armed with a sense of urgency, bearing in mind that this administration has got only one year to work its magic.

There is need for a Minister who can prioritise. The Petroleum Ministry is clearly littered with comatose initiatives and projects. Apart from the ones listed above there are the following: the non take-off of private refineries, years after licenses were first issued, the matter of clean and renewable energy, as well as the Local Content initiative. There is so much that can be attempted, so much that can be potentially distracting.
The incoming minister will have to decide on which ones are the most pressing, and start work immediately.
The Nigerian economy which is heavily dependent on oil revenue has had a disproportionate low contribution to GDP (30%) and economic development as the industry has hitherto not catalyzed commensurate economic activity. Addressing this disconnect is therefore an imperative. Also, Africa’s economy emancipation cannot be divorced from Nigeria’s economic revival. In essence, realigning the industry is vital to economic revival in Nigeria and ensuring regional stability

Nigeria possesses tremendous oil and gas potentials and has had significant capacity additions in the last few years. The industry is also being realigned to ensure sustainability through cross-sectoral linkages and value addition to the economy. In the same vein, the oil and gas industry is rapidly evolving not only as a catalyst to national development but also helping to meet global demand. Consequently, Nigeria is well positioned to meet the global oil and gas supply needs in a sustainable manner whilst ensuring ongoing wealth creation in the domestic economy.


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