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Baru: Message to Reengineer nnpc

Sonny Atumah

The Greek mathematician Euclid of the 4th century BC who was responding to Ptolemy 1 if there were an easier way to solve theorems said that there is no ‘royal road’ to geometry. The reality in solving complex problems had never been with impressive generosity and existed since time immemorial. The procedure to tackle identified problem is what makes the difference.

In context it is difficult to situate our problem; whether the government or the people, but former President of the United States Ronald Reagan who saw it all captured it succinctly: ‘’Government is not the solution to the problem-government is the problem’’. But one asks who the government is? The people!

Asking what the problem is expands the frontiers of knowledge. Imagine Nigeria a solution for others in so many other ways; we supply countries with crude oil and buy petroleum products at exorbitant rates from them. A great paradox! Some argue that others we supply crude oil actually explore and exploit the crude oil for us. We wait for crude oil to be sold for the earnings. We become prodigal by requesting for our share to spend profligately.

Indeed some of us offer opinions on petroleum from the sidelines for those on the saddle.  Not oversimplifying it as it sounds petroleum management has become a sing along for Nigeria’s economic diversification. One is not putting the new GMD of the NNPC, Dr. Maikanti Baru on the spot, but to remind him that our four refineries are idle and decaying infrastructures that can be rehabilitated and possibly upgraded. They should not be sold.

Baru a first class engineer and an insider knows that the national oil company, NOC like some state owned enterprises, SOE has been mired with corruption, inefficiency, underinvestment, underutilization of staff and research laggards. Apart from the activities of militiamen in the Niger Delta, we produce less crude and more expensively than we should through unrealistic joint venture agreements and production sharing contracts. We could squeeze more revenue from each barrel if we are more efficient.

The global scenario today is that fuel inventories across America (Gulf coast), Europe (northwestern Europe) and Asia (Singapore) where refining margins are quoted brimmed with oversupply, burdensome oil prices despite falling crude oil stockpiles. Industry experts believe market has moved steadily towards the glut in fuels. Weak prices have prompted traders to store fuels on tankers at seas for later delivery, as storage on land tightens. Even if crude output tapers some believe sustained price recovery would be hard due to glut.

At this time making the NNPC an effective integrated national oil company, NOC would create value additions for energy, technology and skills. Doing so means reaping the benefits of local refining that we have up to 6000 by-products and derivatives, a diversified economy along vertical linkages, wealth creation, induced savings and investments, employment, increased GDP, increased fiscal revenue and reduced national destabilisation tensions.

Major petroleum products when we refine a barrel of crude oil are imported: gasoline, kerosene, diesel, fuel oils, liquefied petroleum gas, lubricants, asphalts, naphthas, paraffin wax, plastics, fertilisers, pesticides, and coke, bunker oils, etc. We have gas reserves in abundance that can be produced for processing and marketing. Natural gas facilities can process crude oil into various Gases to Liquids, GTL for transport, naphtha, and oil for lubricants, for industrial use, power plants etc.

Petrochemicals are from crude oil and natural gas. Base petrochemicals are either from olefins (ethylene, propylene and butadiene) or aromatics (benzene, toluene and xylene). We spend tens of billions of dollars importing petrochemicals and petroleum-based raw materials annually. The profitability in olefins, ethylene and propylene cannot be quantified especially as it can soak employment in our army of youth that are becoming restive.

Imagine the cost of importing the following fashion, beauty and daily needs products from our scarce foreign exchange – toothpaste, toothbrush, soap, face powder,  Vaseline, body lotion, perfume, lip stick, lip gloss, lip plumper, foundation,  mascara, concealer, makeup remover, eye liner, eye makeup,  eye shadow, sunscreen, nail polish, hair brush,  shampoo, hair gel, hair spray,  hair conditioner, hairbands, bobby pins, tampons, sanitary pads, socks, buttons, stretchy parts of underwear, all bras, running shoes, stretchy jeans, shirts, plastic earrings, bracelets, necklaces, sunglasses etc.

The multiplier effect of local refining and ancillary businesses thereof will employ millions of our distressed Nigerians within and also bring back all our nationals that have become destitute and layabouts in cities all over the world. Our wholly owned petrochemical plant at Eleme was sold in 2006. The two refineries in Warri and Kaduna have petrochemical components.

Environmentalists continue to pile on the pressures for global fuel efficient technologies to conserve energy and reduce greenhouse emissions using renewable and alternative energies including solar, geothermal, and nuclear energy sources. But developed technologies are yet economic substitutes viable for liquid fossil fuel in petroleum products. So petroleum usage will continue for decades.

More investments are needed. We increased pump prices of petroleum products and withdrew subsidies as if they were the problems. Not having local refining capacity was the problem. We have been discussing privatization from the point of the downstream. We emulate countries with publicly owned oil companies where upstream and downstream have been in the public regime; they maximize oil revenues through taxes and royalties. As a NOC we operate joint venture businesses with integrated oil companies including super majors in the upstream with all the associated corruption and expect them to rescue our downstream. Don’t forget the PIB.

Again who is the NNPC staff member? A national oil company should not be operating the way the NNPC is. Proper restructuring may be needed but not in the mould of the recent past. A lot of staff members are underutilized. Many staff members are support staff or what we popularly call casual staff. Although some close aides tried to colour it we know the NOC abandoned the colour difference in identification. For corporate governance absorbing them is the solution. Some of them have been support staff for upwards of 15 years and not pensionable. It is discriminatory and against Nigeria labour laws.

A functional research and development department is needed in the NNPC. The situations of our petroleum resources management elicit enquiry and strategic thinking. Our refineries are not working for reasons of corruption, mismanagement and technical incompetence. It is obvious the absence of methodical investigation to develop a plan of action based on facts discovered which research is. We all want the luxuries of life without imagining the thought that produced them. This structural deficiency is the bane and laggard of our development.

We pray the NNPC under Baru would instill discipline in its business strategies. A business process reengineering to reorganize the way petroleum business is run is needed i.e. a management approach that would examine aspects of its business platform to galvanise the efficiency of the underlying processes. To do this is to tinker with a petroleum policy for the country that is yearningly needed. .


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