By Shedrack Amigo
NIGERIA’s oil and gas sector challenges are many. Obsolete laws and regulations, volatility of oil prices, pipeline vandalism, gas flaring, petrol smuggling, lack of transparency, etc, are some of the longstanding hydra-headed monsters awaiting any minister overseeing the sector.
Minister of Petroleum Resources, Timipre Sylva, must know this well. A monitoring team has been put in place to see to the implementation of the strategic priorities. The report of the monitoring team is fed into his quarterly briefing at the Federal Executive Council, FEC. The priority projects are eradication of smuggling of PMS across Nigerian borders; complete gas flare commercialisation programme; increase crude oil production to three million barrels per day (b/d);
reduction in the cost of crude oil extraction by at least five per cent; aggressively promoting the passage of the Petroleum Industry Bill; aggressively promoting passage of Deep Offshore and Inland Basin Production Sharing Contract Amendment Bill; increase in domestic refining capacity; creating of a large number of well-paying jobs, and implementing a strategy towards lifting 100 million Nigerians out of poverty.
Achieving each of these presidential mandates is probable if what has been termed the ‘Nigerian factor’ does not play out. Take, for instance, the quest for reducing the cost of crude oil extraction by at least five per cent. This cannot be done without coming to an understanding with the players in the upstream sector.
Unlike some of his predecessors, Sylva appears to not only be aware of this, but is also passionate enough to do what needs to be done. Thus, the petroleum ministry has enlisted the support of local vendors within the Nigerian content framework to cut the production cost of a barrel of oil from Nigeria by at least five per cent.
By the minister’s calculations, local vendors will have to deliver premium services and support to drive down the cost of crude oil production, increase the contribution of the oil sector to the country’s Gross Domestic Product, GDP, and guarantee the security of oil production. But there are questions.
If reduction of the cost of crude oil extraction by at least five per cent is achieved, will this rub off on the availability of the product and prevent scarcity? Will the issue of fuel importation be in the trash can of history? Will new refineries be established and/or the moribund ones revamped to enable all-round availability of the product? Will there be increased domestic refining capacity?
It is heart-warming that the government seems to have taken these into consideration too. To resolve these issues, the government said it would take advantage of the African Continental Free Trade Area, AfCFTA, to transform the country into a petroleum products refining hub for the African region with its attendant socio-economic benefits.
This would position the sector for its next phase of growth and is in line with the achievement of the country’s vision of its national petroleum policy and national gas policy.
Sylva revealed this last month at the AfCFTA Oil and Gas Virtual Workshop, organised in collaboration with the Federal Ministry of Industry, Trade and Investment, under the theme: ‘Nigeria-Africa’s Refining and Services Hub under the AfCFTA.’ Represented at the workshop by the Permanent Secretary Ministry of Petroleum Resources, Mr Bitrus Nabasu, the Minister said Nigeria had ratified the AfCFTA, which would begin implementation this month. According to him, the AfCFTA aims at redefining trade relations within African states and proposes the creation of a central market for goods and services, enabling free movement of people and investments across Africa’s 54 countries.
Government, he said, had begun rehabilitating the country’s four refineries, using a public-private partnership strategy, even as he added that the refineries would have a 90-per cent combined production capacity by 2023. He said the Dangote Refinery, Lagos, and the Waltersmith Modular Refinery, Imo, as well as others coming on stream in the next few years, would transform Nigeria from a net importer to a net exporter of petroleum products. Last November, the Dangote Group said work at its 650,000 bpd integrated refinery had reached 80 per cent.
There is hope that the issue of obsolete laws and regulations will be resolved when the Petroleum Industry Bill, PIB, is passed into law. The minister said as much, noting that it would provide the fiscal framework for attracting more investments into the sector. One of the problems identified to be responsible for retrogression of the Nigerian economy is economic sabotage which manifests in the form of petrol smuggling across the country’s borders.
How can this be curbed? The Federal Government reasoned that prevention of petrol from being smuggled across our land borders is essential. So, one of the strategies towards achieving this was the difficult decision to close Nigeria’s land borders in 2019, despite its attendant negative effects on the country.
Justifying government’s action, Minister of Trade and Investment, Chief Adeniyi Adebayo, said it did not only give security agencies the opportunity to assess prevalent challenges on smuggling at the borders, but also stopped petrol smuggling.
Also, government-mandated the Nigerian Customs Service to ban the supply of petroleum products to filling stations within 20 kilometres from Nigeria’s land borders to stop the smuggling of the product to neighbouring countries. There is evidence that the restriction on the supply of petroleum products as well as border closure was effective in tackling smuggling. Nigeria’s fuel import bill dropped by about N2 billion daily and about 10 million litres of Premium Motor Spirit was saved daily, according to the Federal Government.
The country’s daily consumption of petrol was approximately 61 million litres fell to 51.7milllion litres between August and September 2019, according to the Petroleum Products Pricing Regulatory Agency, PPPRA. Another presidential mandate was gas commercialisation programme. To achieve this goal, two programmes were initiated by the Federal Government: the National Gas Expansion Programme and National Autogas Roll-out Initiative.
While unveiling the National Gas Expansion Programme and National Autogas Roll-out Initiative which was done virtually, President Buhari urged Nigerians to embrace the use of gas as an alternative to fuel. He noted that Nigeria’s vast natural gas resources were hitherto used sub-optimally as a result of a lack of gas processing facilities and infrastructural connectivity for effective and optimal domestic utilisation.
According to him, with a reserve of about 203 trillion Cubic Feet, TCF, and the additional upside of 600 TCF ranking Nigeria as the ninth in the world currently, the need for domestic gas expansion and utilisation were apparent.
He admitted that the deregulation of the downstream sector had exposed many to price volatilities in the global market, and advised that attention should shift to a more affordable alternative for energy, especially with Nigeria’s hefty gas reserve. Such alternatives including gas in form of LPG, CNG and LNG. Could the roll-out of the National Gas Expansion Programme, Autogas Initiative have been done at a better time?
The President didn’t think so. Neither do stakeholders, especially in light of global crude oil market fluctuations coupled with the full deregulation of the local PMS market.
These developments made it imperative to focus on gas as an alternative fuel to move Nigeria from the conventional dependence on white products for autos and prime-movers of industrial applications, to cleaner, more available, accessible and affordable energy source. Apart from cushioning the effect of the downstream deregulation that this government has to painfully implement, it is also expected to create new markets and huge job opportunities, among.
The President said the autogas initiative will lead to increased domestic gas utilisation and enrich the trajectory of national economic growth and development. He urged Nigerians to embrace gas in form of LPG, CNG and LNG as an alternative fuel for autos and other prime-movers.
To walk the talk, President Buhari directed Sylva to commence the process of handover of mass transit buses to Organised Labour as part of the government’s pledges to continue to provide the support that will ease the transportation challenges Nigerians are subjected to.
Undoubtedly, the realisation of these goals depends on human capital development that will be required to drive the process. Mindful of this, Sylva said the ministry is focusing on the development of skills, technology and manpower as well as growth in the utilisation of LPG, CNG and LNG. With the level of commitment the federal government has invested in tackling the sector’s challenges, there is room for optimism that, finally, Nigerians may sooner than later, get an oil and gas industry to be proud of.
Amigo, a teacher, wrote from Abuja.