Absence of policy blueprint blights Nigeria’s oil and gas reforms
Stakeholders in the oil and gas sector say the lack of a clear-cut policy blueprint guiding Federal government’s reform of the Nigerian National Petroleum Corporation (NNPC) and the entire oil and gas industry may derail current reform efforts.
The solid minerals sector has developed a strategy document to guide it, Babatunde Fashola, minister of Power, Works and Housing has a roadmap for the sector, the agricultural ministry will soon announce its strategy, but Nigeria’s oil and gas sector, has seen bits and pieces of policy pronouncements and reversals and reforms that seemed more like an afterthought rather than a blueprint guiding the sector.
“I think it is one flaw with the current reforms programme, there is no policy document that is guiding this reform. What we see is the Petroleum Minister making declarations about what the government is going to do. Today they are creating new companies, tomorrow they are restructuring them, I have not seen a policy document guiding this reforms,” said Garuba Dauda, Nigerian officer for NGRI.
In March, the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) went on strike immediately after Ibe Kachickwu, junior minister of petroleum resources announced an unbundling of the NNPC into divisions of operations, commercial, monitoring and ventures because the union was not consulted and they did not see the endgame.
“It is wrong for the government to conclude arrangement on restructuring of NNPC without carrying us along. In fact we only heard in the media that is why we disagreed with government on this issue,” said Tokunbo Korodo, South-West Chairman, NUPENG.
Industry watchers say if there was a clear blueprint, sector reforms would have a sense of direction, be coordinated and achieve buy-in of critical stakeholders.
“They did not pass the Petroleum Industry Bill (PIB) that has been in the Senate since 2008 but they suddenly decided to take one aspect of restructuring NNPC,” Korede said.
Experts say failure to properly articulate a national plan for the oil and gas sector that will incorporate the petroleum industry bill is the reason it continues to be stalled.
“The PIB should be part of a national development plan and a bill that important should have been introduced by the Executive rather than private bill. It should have been a holistic bill that globally addresses salient issues in the oil and gas sector,” Isreal Aye, energy legal consultant and managing partner of Sterling Partnership, told BusinessDay.
Analysts have blamed renewed militancy which has knocked off over 800,000 barrels per day of Nigeria’s production resulting in over N60billion loss of revenue according to the NNPC, in three months, on the failure of the Federal government to chart a post-amnesty plan after spending huge resources training ex-militants.
“There is no doubt the absence of national order has hampered the president from delivering on most of the issues. The government needs to stop looking at the rear view mirror. It needs to develop a clear political and economic vision for the country. At the moment it does not exist,” said Olisa Agbakogba in response to questions.
Two months prior to the end of the 2009 amnesty programme conceived by former President Umaru Yaradua, the International Crisis Group published a report warning that increasing complaints over chronic poverty and oil pollution may fuel a renewed rebellion in the region as the Presidential Amnesty Programme for ex-militants reached its twilight in December 2015 but the administration never created a post-amnesty plan as part of a blueprint to engage the sector.
In the upstream sector, the Federal government said it will review all joint venture agreements and production sharing contracts with oil majors in the country. Reforms have been initiated Direct –Sale Direct Purchase agreements, reviews of Offshore Processing Agreements (OPA) and Crude Oil for Production Swap Arrangements without a real policy blueprint.
“Over the last 10 to 15 years, we have not done serious, conclusive turnaround maintenance of these refineries, which averages 30 to 40 years-old and the equipment is dilapidated,” Kachikwu was quoted to have said in defence of his position to sell off the moribund refineries now operating less than 2 percent of their installed capacity in an OPEC bulletin.
However President Buhari said on the first anniversary of this administration that he has no plans to privatise the country’s four state-owned refineries: “We can’t spend so much money to put up the refineries just to sell them,” he said.
Anibo Kragha, chief operating of refineries, NNPC, announced in March that he had opened bids for the co-location of new plants within existing refineries in a quest for a refining capacity of 650,000 barrels per day, a move analysts doubt its feasibility in a downstream sector operators make very low margins and prone to high risks.
Industry operators say Nigeria’s oil and gas industry has a crying need for real, well thought-out reforms. Nigeria’s 2016 budget is supposed to be financed by contribution from crude sales where militancy has knocked off much of the year’s projected earnings.
Also oil prices have tumbled from a high of $100 per barrel in 2014 to less than $50 per barrel and in two weeks, oil prices would have achieved a $40 per day average in the first half of 2016.
ISAAC ANYAOGU