By Emeka Anaeto
The ongoing face-off between Mobil Producing Nigeria Unlimited (MPN), an ExxonMobil subsidiary and some Supernumerary (Spy) Policemen it recently disengaged from its workforce, highlights one of the key reasons the country’s Oil & Gas sector has underperformed its potentials in one of the leading hydro-carbon producing countries in the world.
The Spy Policemen, who have blockaded the Company’s Corporate headquarters and official residential quarters in Lagos and Eket respectively since their disengagement on July 13, 2018, claim they were dismissed without entitlement after a Supreme Court judgement in their favour. ExxonMobil has made several official statements to the effect that they fully complied with the Supreme Court ruling by accepting the Policemen, who they say were engaged initially on a third party basis, as their staff and communicating their entitlements to them based on their length of service and rank before their disengagement.
While this lingers, the company’s operations has no doubt suffered, with workers not having access to their officesand movements from the official quarters in both locations restricted for over a week. The implications of this operational challenge to one of the country’s oil majors goes far beyond the company to the Nigerian economy. Should this situation persist or escalate, Nigeria risks losing over approximately 450,000 barrels of crude oil production, amounting to over $35M daily revenue loss. For a country still struggling with serious economic challenges even after emergence from recession in 2017, this is certainly not cheery news.
The wider implications of this latest challenge for national and state budget implementation are no less dire, with the looming spectre of a return to recession which the country can simply not afford.
Frequent disruptions to the Oil industry in the form of Strikes, Operational Shutdowns, Pipeline Vandalism, Crude Oil theft and Kidnapping, among others, have made the Nigerian Oil and Gas industry among the most challenging and costliest operating environments globally.
According to the financial report of the Nigerian National Petroleum Corporation (NNPC) for the month of February, 2018, Nigeria’s oil sector is estimated to have lost over 754,000 barrels per day (bpd) in February, 2018 to production shut-in occasioned by pipeline vandalism alone.This translated to revenue loss of about $49.010million (N17.643billion) at an average price of $75 per barrel.
For an industry that generates about 90 per cent of the country’s foreign exchange earnings and essentially drives its economic activity, the frequency with which its operations are disrupted in Nigeria over the years, simply does not bode well for the long term success of the industry and its continued contributions to Nigeria’s economic development.
With competition for Foreign Direct Investment in the Oil and Gas industry in Africa mounting from such countries as Mozambique, Ghana, Angola, South Africa and South Sudan, there is an urgent need to improve productivity and stability in the Nigerian Oil and Gas industry to enhance its competitiveness to the international investing community.
We believe it is time the Oil and Gas industry is classified as a strategic national asset, with special measures taken to ensure it suffers minimal disruptions in its operations. This would entail not only clearly outlined and enforced systems of dispute resolution within the industry, but also stipulate sanctions for frivolous and sometimes whimsical disruptive actions that the industry frequently witnesses currently at untold monetary and material costs to the nation. For instance, labour issues in the industry should be resolved via Specialized Dispute Resolution Mechanisms specifically meant for the industry, without resulting in major operational disruptions/shutdowns of its day-to-day operations as is occasionally the case today.
More security should also be provided for the industry, beyond what is available currently as insecurity is a major issue and a key expense item for all the operators in the industry, especially in the upstream sector.
The implications of not taking urgent, far-reaching measures are all too glaring. Procter & Gamble’s recent decision to close its $300 million factory at Agbara, Ogun State, barely one year after commissioning; MTN’s reported N12 billion loss in four days of labour-related shutdown and the sell-off of Oil & Gas assets by some of the country’s Oil majors are certainly developments that would puzzle even the most intrepid of foreign investors.
For us to get the best value from such critical industries as Oil and Gas, Telecommunications and Power, we need to create enable environments comparable to climes where such industries have been optimized for all-round development. Making such industries as Oil and Gas strategic national assets, with appropriate legislative, regulatory and infrastructural support, will help Nigeria attract and retain foreign direct investment into the sector even in the face of increased competition, to the overall benefit of the country and its citizenry.