In this second instalment of his paper at the international conference of the Nigerian Association for Energy economics  , Chief Philip Asiodu, CON, explains government’s intention with the Petroleum Industry Bill

THE three international oil companies were: Mobil Oil for Port Harcourt, ELF (now Total) for Kaduna, and Fineste for Warri. All that was left was to execute the Agreements and kick off the process by September 1993. However, I refused to serve on the Interim Government.

Unfortunately for the industry, the agreements were not executed and things continued to deteriorate. Regarding the transportation of petroleum products, there is no reason why the very hazardous jostling of road tankers along Badagry Expressway, Lagos-Ibadan Expressway and all the trunk routes of Nigeria should continue beyond the current Jonathan Transformation Agenda.

Products pipelines should be extended to all the depots of NNPC which are widespread all over the country or even to all state capitals. Road tanker journeys can then be restricted to a radius no more than 100kms from the depots, and to driving during safer hours.

This will reduce the differential costs of delivering products to remoter parts of the country and the need for bridging finance. Appropriate tariffs will make the construction and operation of the product pipelines profitable. National policy should override any resistance or obstruction from vested interests.

Appropriate pricing of petroleum products and petroleum subsidy: It is not difficult to show with clearly set out data how wasteful, unproductive and distorting is the present policy on pricing of motor spirit and the management of petroleum subsidy. The present price regime which encourages wholesale trafficking along Nigeria’s borders and even fraudulent diversion of product tankers probably results in our subsidising without acknowledgement products consumed by our neighbours of up to 100,000 barrels a day or 25 per cent of our total imports. Again, I cannot help recalling with much regret that this issue was all but practically settled in 1993. After a great deal of public education and campaigns on the need for appropriate pricing of petroleum and successful negotiations with the Trade Union and other stakeholders, the Government approved in March 1993, a programme for the removal of oil subsidies. Under the programme, subsidies were removed in April on non-pump products like Aviation Fuel. Lubricants had never enjoyed subsidies. Subsidies on motor spirit and diesel were to be removed starting from June 1, in a phased process. There were to be two sets of pumps in any filling station. On one side, there were to be pumps to sell newly introduced super premium motor spirit which would have no subsidy at all from day one. On the other side, would be pumps selling subsidized products – regular motor spirit and diesel but the subsidies would be reduced progressively a few percentage points at a time until the subsidies would be completely phased out at the end of 24 months. Subsidies were to be kept on domestic kerosene which would be coloured deep purple to discourage its being used for adulterating aviation kerosene or diesel. The consumer would have a choice – either the non-subsidy line where he would be most probably served within three minutes, or the subsidy queue where he might spend hours before buying his fuel. He can make his calculations.  Everything was set. All the marketers were involved. Sale pumps had been recalibrated and marked. Then unfortunately at the instance of Gen. Abacha, Chief Shonekan, the Head of the Transitional Council and I were summoned by Gen. Babaginda, the Military President to Abuja. Gen. Abacha had thought I was acting without Government approval. He was shown the Council Memoranda and conclusions. Unfortunately, with the excuse that the subsidy removal might lead to protests which might affect the then forthcoming June 23 National Election, we were directed to stop the process. But for that, subsidy removal, total deregulation, incentives for investment in refineries, more rational and efficient use of products would have been achieved by the end of 1995… nearly 20 years ago!

Stated Objectives Of PIB

The stated objectives of PIB are very good:

•To create a conducive business environment;

•Enhance exploration and production of petroleum resources in Nigeria;

• Optimize domestic gas supply for power and industrial development;

•Establish a progressive fiscal framework that encourages further investment while optimizing Government Revenues;

•Establish commercially oriented and profit driven oil and gas entities;

•Deregulate the downstream petroleum sector;

•Create efficient and effective regulatory agencies;

•Promote transparency and openness in the administration of petroleum resources;

•Promote the development of Nigerian content;

•Protect health, safety and the environment in the course of petroleum operations.

Constructive dialogue with the operating companies and informed local experts and other stakeholders is necessary to ensure that the stipulations in the Bill actually promote the stated objectives one by one. We are about to enter a situation in the world oil industry which is more fiercely competitive. One of the provisions of the Bill is to transform the NNPC into an independent commercially oriented national oil company. Again, one would recall that, that was the original intention when NNOC was established in 1971. It was charged with all upstream and downstream activities. It was to be business oriented. The participation interests acquired in the oil producing companies – Shell, Mobil, Gulf (later Chevron) etc. were vested in NNOC. It was also decided early in 1971 to grant no further concessions to private interests, indigenous or foreign but to vest all available future acreage in NNOC.

Concession to private interests

Following the 1975 overthrow of Gen. Gowon’s Administration, the Obasanjo Administration in 1977 merged the Ministry of Petroleum and NNOC to create NNPC, both to explore and produce oil and to regulate the industry through its Inspectorate Division. It also set aside policy of not giving oil concession to private interests. NNPC began to assume more the character of a Government Department. This situation did not last very long. In 1983, the Ministry of Petroleum was re-established. It took over the Inspectorate Division of NNPC, renaming it Department of Petroleum Resources.

Now under PIB, the emphasis is to re-create a National Oil Company more like Brazil’s Petrobras or Malaysia’s Petronas or even Algeria’s Sonatrach. Here again, there is a provision which may conflict with the stated intention which is the proposal to make the Minister of Petroleum, who regulates the entire industry, the Chairman of the Board of the new National Company. I remember the Presidential Advisory Council advised against this in 2011, and I am surprised to see it again.

The Power Sector: This critical sector has suffered from more than 30 years of neglect. Today, I am very sad to hear any public official say aloud approvingly that a country of 170 million people has succeeded in generating from a capacity of 4,000 megawatts where we should be talking of 10 times that. I recall that in 1973, Motor Columbus of Switzerland and Shawmont Engineering of Canada were commissioned to produce a Report on Power Requirements of Nigeria from 1975 to 2000 AD, and recommend a Programme.