The outcome of last OPEC meeting held in Vienna, Austria on the 31st of May 2013 was an unexpected departure from the past, openly admitting for the first time, the threat to its dominance in global oil supplies – hydraulic fracturing and horizontal drilling. Fracking is indisputably changing the geopolitical dynamics of global energy supplies and challenging the survival of oil export dependant nations like Nigeria. The grave consequences of this fracking revolution on our economy can never be underestimated by any right thinking government. So what is fracking?
The outcome of last OPEC meeting held in Vienna, Austria on the 31st of May 2013 was an unexpected departure from the past, openly admitting for the first time, the threat to its dominance in global oil supplies – hydraulic fracturing and horizontal drilling. Fracking is indisputably changing the geopolitical dynamics of global energy supplies and challenging the survival of oil export dependant nations like Nigeria. The grave consequences of this fracking revolution on our economy can never be underestimated by any right thinking government. So what is fracking?
Fracking is the process of forcing water, chemicals and sand at high pressure into shale rock deposits underground. This process causes the rock to fracture and allows recovery of shale gas and shale oil, otherwise known as "tight oil", that was trapped in the rock. It enables wells that would flow only at very low rates to produce oil and gas in commercially viable volumes ~ Financial Times Lexicon
Hydraulic fracturing accompanying by horizontal drilling has provided the US the opportunity of cleaner and less expensive source of energy. Despite being a contentious way of extracting energy by environmentalist, recent interest in development of local Shale gas by China, UK, Argentina, etc. and technological advancement, indicate a deviation from the convectional dependence on OPEC supplies. Few weeks ago, one of America’s corporate giants, GE announced it is investing billions of USD into fracking cutting edge technology in a plant in Oklahoma. Similarly, South African energy company, Sasol, gave a nod toward a multi-billion USD investment for the construction of two plants in Louisiana, which will produce transportation fuel and fuel additives. The fact also that China is planning a huge investment in fracking locally, to realise its ambitious energy targets and meet its ever increasing energy demand, should be of great concern to the Nigerian government, which its economy revolves on the pivot of crude oil export and global oil prices.
Nigerian Minister of Petroleum Diezani Alison-Madueke recently declared US Shale Oil “a grave concerned” while her Saudi counterpart Ali al-Naimi says he welcomes the Shale boom. The reason is that in 2012 from 2011, US oil production increased 21%, while African nations – Nigeria, Algeria, Angola and Libya exports fell by 41% mainly due to effect of shale oil fracking revolution and insecurity. Recent report of staged walkout by State Finance Commissioners on the Minister of State Finance, Yerima Ngama, at the Federal Account Allocation Committee (FAAC) – national cake sharing meeting, is a pointer to the fact that despite touting average 7% annual GDP increase as economic growth by President Jonathan Administration, Nigeria economy is in a gloomy situation. In my opinion, the combination of dwindling revenue, reckless spending and increasing youth unemployment/ underemployment rate is a greater national security threat than Boko Haram insurgency!
In this new epoch, we cannot afford to take a pew and observe as we have done in the past. This is an urgent call for the economic management team to swing into action by developing and implementing clear policies to mitigate the effect of dwindling oil revenues as a result of surge in Shale gas production and oil theft in the Niger Delta. The following below are some measures, which the government need to consider:
Overhaul NNPC
There is no doubt that NNPC since its inception as the national oil company has failed to meet its objectives. The institutional, mental and moral infrastructures of NNPC are long due for overhauling. Government should reposition NNPC to function independently; insulated from government politics, corruption and manipulations. What benefit is NNPC as currently constituted to Nigerians since birthed 36 years ago? Absolutely nothing! NNPC should journeyed from a state owned domestic-based national oil company into a fully autonomous public and privately owned integrated multinational oil and gas corporation such as Petrobras of Brazil, Petronas of Malaysia, Aramco of Saudi, Qatar Petroleum of Qatar, etc. NNPC is expected to make profits and not source funds from the national treasury. The present structure of NNPC as a ‘rent-seeker’ is a drainpipe on the Nigerian economy. You cannot continue to fund a corporation that has failed to deliver its responsibilities.
Downstream Sector Investment
Nigeria produces what it does not consume, and consume what it does not produce. I wonder what business we still have with importation of refined petroleum products after so many years of exploration and production of crude oil. Research shows that for every barrel of crude oil exported, we equally export five jobs (direct and indirect). Nigeria ought to be the petrochemical hub of sub-sahara Africa; we ought to be the supplier of refined petroleum and petrochemical products to other African countries and the world at large. So why do our present and past leaders opt to toll this shameful, difficult, fraudulent, corrupt and inefficient path?
Most times, the government argued that the downstream unlike the upstream is capital intensive and not economically viable. Some are of the opinion that private investors are not interested because of fuel subsidy policy. We should start by paying subsidy on locally refined petroleum products if that would encourage investors! This will create lots of local jobs for our teaming unemployed youths roaming our streets. There is an urgent need to develop and strengthen the value chain of crude oil in Nigeria to mitigate effect of low demand as a result of surge in fracking activities.
Stop Oil Theft
There has been upsurge in the activities of crude oil theft and illegal refineries operation in the Niger Delta region of Nigeria since the last three years. Approximately 7% (150,000 bpd) of Nigerian crude oil production are stolen daily, with an estimated market value of $15 million USD per day. Politicians, military leaders and international traders with the collusion of militants, JTF and oil workers are the biggest forces behind this illicit trade in Nigeria. Stolen crude oil is either loaded in ships offshore or refined locally. These activities are causing great harm and disaster to the environment in the Niger Delta. If this trend is allowed to continue, it could derail the implementation of 2013 budget and beyond considering that the country is largely dependant on oil revenue for survival.
In my opinion, this economic sabotage should be treated as crime against the state - treason. These sophisticated criminal networks whose activities have expanded under President Jonathan’s watch are not ghosts, they should be brought to justice no matter how highly placed they are in the society. It is obvious that this present administration is either not sincere about fighting this criminality or they are benefiting from it. I wonder why we still have security agencies such as Navy, Air Force, JTF, NIMASA, etc. if we cannot fight this scourge. If Nigeria must succeed, we desperately need a government that is sincere and has the political will to bring an end to this criminality. No government should be rewarded with another term for its failures and inefficiencies.
Economy Diversification
With about 75% of our state revenue from crude oil sale, Nigeria is a prime example of single volatile commodity dependant country. The looming threat of the demand of Nigeria’s crude oil as a result of fracking, is an urgent call to diversify the economy by exploring other sources of revenue. I am a strong believer of a private sector driven economy especially SME’s with the government providing an enabling environment. Our problem is not the right policies, but lack of pragmatic approach in implementing these policies. Almost all sectors of Nigerian economy are begging for attention.
Revamping Nigeria decaying infrastructure is long overdue. It is a shame that Nigeria is still grappling with the problem of infrastructural deficit with several billions of dollars realised from sales of crude oil. Modern infrastructures in sectors such as power, education, transport, health, etc are pivot on which an economy spins. Funds are allocated yearly to various sectors of the economy for infrastructural development, but there is absolutely nothing on ground to show for it. These funds have rather developed wings, dashed out and domiciled in the private bank accounts of our politicians and contractors alike. Nigeria should set out measurable targets with timelines, not this vague and anti-people ‘you chop I chop’ documents rolled out and rubber stamped as annual budgets.
An economy driven by agro-allied industries with high utilisation of local raw materials can have a permeate effect on employment, services provision and a GDP with stream of national wealth to the citizens.
In conclusion, rather than concentrating on the job at hand and repositioning the mainly oil dependant economy, it is obvious that the present administration is more concerned about 2015 general elections or who becomes NGF chairman. No body certainly has the monopoly to power. Nigerians should be allowed to freely choose their leaders at various levels based on performance, integrity and leadership vision. I have not seen any football match where a coach is planning for a second game during the first half of an ongoing game. In the past few months, political office holders who have only spent less than half of their tenures and their supporters have heated the polity to an unprecedented level as a result of 2015 elections. It is only in countries like Nigeria you will find political office holders being rewarded with a second or even ‘third’ term for underperformance.
Nigerians should not be discouraged by the selfish interest of the ruling class. None of these so called ‘ELDERS’ and ethnic dogmatists who have failed their generation and future ones, have the moral or constitutional rights to dictate who occupies any political office in Nigeria. Revolution is imminent in our land! Not a violent one with dangerous weapons, but the one by our votes through the ballot boxes. 2015 presents a great opportunity to change any government (Councillor, LGA, State and National House of Assemblies, Governors and President) that performed abysmally through the ballots. It is time to say goodbye to injustice, ruse of law, corruption, impunity, mismanagement and unemployment. We need pragmatic and selfless leaders with clear-cut policies, who can translate these policies into reality to meet the yearnings of the ordinary Nigerians.
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of SaharaReporters
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