By Sonny Atumah
Last week screams rent the air at the NNPC Amphitheatre that bids were transparently opened for offshore processing arrangements and crude oil term contracts. Some petroleum resources managers whose overt or covert actions over the years that smirched the NNPC also smiled broadly with smirks. They took prime airtime displacing scheduled programmes on national television networks (some on live broadcasts) for those ceremonies. Opening of envelopes for tender was what we wasted funds to beam on television and radio to the world as our achievements in the industry.
Many bidders in the orchestrated transparent exercise are non-producing consumer nations. A non-producing consumer nation is that which oil production is 10 percent or less of their consumption. We cannot add value in an industry with investment opportunities for up to 6000 products when we refine a barrel of crude. Yet we sermonise about subsidy as the problem.
The same weekend NNPC’s September report was released with 1.96 percent value of what came out of our four refineries. There was full complement of process plants, staff members and crude at international market rate and other costs. At the level of operations where a company would prefer to close down rather than produce in micro-economics, it is shut down point.
To the GMD and Minister designate, Ibe Kachikwu, it was quite commendable that we got that revelation. The reward and punishment option in management is now needed if he has exhausted the 90-day ultimatum he gave his managers to prove themselves. Some staff members may shape up to the employment market for us to make progress.
In 59 years of petroleum discovery we are struggling (in the upstream sector) to produce about 250,000 bpd as our local contribution to the till for sharing. New methods of injecting gases and foams into wells to force out oil using horizontal drilling and more geophysical information to predict the accuracy of reservoirs are being deployed; where are we? Nowhere!
America dumped us in crude oil import in July 2014, we crept into India and now happy. As a net importer of petroleum India has the largest refinery in the world that refines 1.24 million barrels per day. One of India’s refineries, Digboi Refinery Assam built in 1901 reputed to be the oldest in the world is still functional. We have four refineries with a combined capacity of 445,000 barrels per day and processing only 1.96 percent for the month of September 2015.
Problems have compelled countries to challenge their governments and leaders to action, but ours is lamentation. I only contemplate our suppliers sabotage one day. I do not want to go into varied definitions of research and development (R&D). But a search party for our forgotten thinking caps in research and development is urgently needed by the President Muhammadu Buhari’s administration.
In the first oil crisis of 1973 -74, President Richard Nixon commissioned a think tank on how to solve America’s energy crisis in 10 years. Solution came 40 years after with the shale revolution now unsettling global oil demand and supply even though vulnerable and yet to be perfected.
During the same period, the United States established a Strategic Petroleum Reserve (SPR) to counter-balance the power of Arab producers. It now has 695 million barrels in reserve held in four sites along the Gulf of Mexico coast. On October 26, the White House and top members of Congress reached a budget deal to sell millions of barrels of crude from its SPR from 2018 to 2025.
Sales are due to start by 2018 with 5 million barrels and rising to 10 million barrels by 2023 and totaling 58 million barrels at the end of the period. Additional barrels to be sold would cover a $2 billion programme from 2017 to 2020 to modernize the strategic reserve including building new pipelines.
Again industrialised nations are to reduce fossil fuel consumption which for a long time had been the world’s largest source of electricity. Because petroleum is from a nonrenewable source, and its supply limited, scientists are looking for clean, renewable sources of energy to power machines of the future.
Gasoline which is widely used in applications today is destined to become a thing of the past. Arguments are that renewable energy sources would reduce global greenhouse gas emissions which have dangerous consequences. Electric vehicles have been developed and solar and wind energies are also powering cars and homes.
The International Energy Agency (IEA) reports that by 2030, renewable energy could become the world’s largest source of electricity ahead of conventional sources of coal, natural gas and nuclear power. The Conference of the Parties to the UN global treaty on climate change slated for December 2015, in Paris would have countries submit their Individual Nationally Determined Contributions (INDCs).
The United States has planned to cut greenhouse emissions by 26 to 28 percent by 2030 while the EU plans to cut by 40 percent. China plans to start bringing down its carbon dioxide emissions by 2030. India that we are relying on as our crude oil buyer has given signals of reduction of crude imports by about 10 percent by 2020. Where is Nigeria?
With oil glut and revenues dwindling, we are in dire straits and one believes research and development must not be ignored. Competent and reliable professorial chairs should be endowed now in universities. We should strengthen our research institutes and give them specific targets as we adequately fund them.
Engineers and scientists in the research and development department of the NNPC should be retrained and challenged on how we can navigate from crude oil sales to refining and adding value. Let us institute government research exchange programmes with partners we have bilateral and multilateral agreements.