The Organisation of Petroleum Exporting Countries (OPEC) announces her demise for selecting Diezani Alison-Madueke, the Nigeria's Minister of Petroleum Resources as its Chairman. The nation's oil empress who was rewarded, ostensibly for her flashing flamboyance and daunting credential of corruption and tendentious failure is now saddled with the responsibilities to champion the cause of global oil price stability. Painfully, the cartel is virtually nonexistent for her inability to stem the tide of falling oil price.
Under the watch of the smashing oil minister, there was presidential pronouncement to the Economic and Financial Crimes Commission (EFCC), to fish out the oil thieves. The anti-corruption agency swooped on the NNPC and the PPPRA as well as the Department of Petroleum Resources (DPR), carting away volumes of official documents relating to the controversial N1.34 trillion fuel subsidy payments as well as other transactions undertaken by the agencies. Disingenuously, those who were found to have shortchanged Nigerians in the fuel subsidy scam are the ones sponsoring president Jonathan's re-election campaign.
At the twilight of 2011, NEXT, one of Nigeria’s most respected newspapers, ran a series of investigative reports that linked the minister herself to monumental corruption. The government is yet to act on those allegations till date! In one of those reports, titled “Oil minister, her jeweller and their sweetheart deal”, the Minister was said to have discretely license one Christopher Aire, a 47-year-old United States-based Nigerian celebrity jewellery designer and merchant, to be lifting crude oil.
In another report also published by NEXT, and entitled “Oil minister in N2.2b bribery scandal”, the minister’s name was mentioned in an elaborate scam which forced marketers to pay huge bribes in exchange for petroleum products import license by the PPPRA. There was also the allegation that she unilaterally assigned prospecting rights in some state-owned lucrative blocks to some briefcase companies without open and competitive bidding.
In the thick of the serious allegations against Diezani Alison-Madueke for squandering N10 billion on chartered private jets since assumption of office, which was stoutly defended in a national television by president Goodluck Jonathan in a media chat, the son of the petroleum minister was caught frolicking, parting and quaffing the nation's resources in a country where 75% of the population are wallowing in abject poverty!
The consequences of Diezani's Chairmanship of the OPEC are manifesting and damning? OPEC is now helpless, inept and unable to stabilise prices at its last annual meeting, which is an indication that the free-fall of oil price has come to stay. To achieve oil price stability, OPEC has to reduce production so as to address the growing oil glut. Last week, the Daily Telegraph reported that "Oil will now enter a period of wild price swings and "disorderly trading" that will benefit cash-rich Middle East petro-states such as Saudi Arabia, but will damage some of OPEC less wealthy members such as Nigeria and Venezuela".
No double that oil price has tumbled by more than 40% since June, when it was $115 a barrel. It is now below $70. This comes after nearly five years of stability. At a meeting in Vienna on November 27th the Organisation of Petroleum Exporting Countries, which controls nearly 40% of the world market, failed to reach agreement on production curbs, sending the price tumbling. The countries that had hit are, Nigeria,Venezuela, Russia, Iran.
Chris Pedersen, the Managing Director of U.S. Operations for Oak Leaf Training Incorporation gives five reasons oil prices would continue to slide:
1. The U.S. Oil Boom.
America’s oil boom is well documented. Shale oil production has grown by roughly 4 million barrels per day (mbpd) since 2008. Imports from OPEC have been cut in half and for the first time in 30 years, the U.S. has stopped importing crude from Nigeria.
2. Libya is Back. Because of internal strife, analysts have until recently assumed that Libya’s output would hover around 150,000-250,000 thousand barrels per day. It turns out that Libya has sorted out their disruptions much quicker than anticipated, producing 810,000 barrels per day in September. Libyan officials told the Wall Street Journal last week that they expect to produce a million barrels per day by the end of the month and 1.2 million barrels per day by early next year.
3. OPEC Infighting
There have been numerous reports about the discord between OPEC members, leading many to believe that OPEC will not be able to reign in production like it has done so in the past. The Saudis and Kuwaitis have reportedly been in an oil price war, repeatedly lowering their prices in order to maintain their market share in Asia. John Kingston, the news director at Platts, believes that the Saudis will not be willing to give up market share like they have done during previous price drops.
4. Negative European Economic Outlook
European Central Bank president Mario Draghi has left investors concerned about the continent’s growth rate which is relatively slow. Germany’s exports were down 5.8 percent in August, stoking the fears of anxious investors that the EU’s largest economy had double dipped into recession last quarter. Across the Eurozone, the IMF again lowered its growth forecast to 0.8 percent in 2014 and 1.3 percent in 2015.
5. Tepid Asian Demand
Beyond slow economic growth and currency depreciation, a number of Asian countries have begun cutting energy subsidies, resulting in higher fuel costs despite a drop in global oil prices. In 2012, Asia’s top spenders on energy subsidies, as a percentage of GDP included: Indonesia 3 percent; Thailand 2.6 percent; Vietnam 2.5 percent, Malaysia 2.3 percent, and India 2.3 percent. India is a primary example. Between 2008-2012, India’s diesel demand grew between 6 percent and 11 percent annually. In January 2013, the country started cutting the subsidies of diesel. Since then, diesel consumption has plateaued.
Sometimes ago, Dr Ngozi Okonjo-Iweala, the minister of finance and the coordinating minister of economy told the bewildered nation about oil bunkering. She said Nigerian state and oil companies are losing a billion dollars or more a month to oil theft by criminal networks whose activities have expanded rapidly under the government of President Goodluck Jonathan. According to Ngozi Okonjo-Iweala, the trade in stolen oil led to a 17 per cent fall in official oil sales in April, or about 400,000 barrels per day). At average April prices of $121 per barrel, this results in a loss of $1.2bn!
However, the minister comes short of telling Nigerians those behind the criminal networks whose activities have led to milking the nation dry. President Jonathan blabbed when Christiane Amanpour of CNN conners him on the oil theft: "The international countries who buy crude oil from oil bunkers should be held accountable for oil theft in Nigeria"! The president refused to show leadership and put an end to the economic plague. Is it that Mr Jonathan knows a thing or two about the oil bunkering at the backwaters of the degraded Niger Delta region?
Those involved in oil bunkering do not fetch crude oil with bowls or buckets. They do so with cargo ships, Marine tankers and ocean liners, and they are known. It's alleged that the wife of Mr President, Mrs Patience Jonathan owes MT Patience cargo ships 1-10 that are involved in oil bunkering at the Forcados Terminal, Brass in Port Harcourt and other oil producing States in the Niger Delta. These gigantic marine tankers don't have wings with which they fly. They are regularly being escorted by the Nigeria Navy and other security apparatus across the coaster lines. Nigeria is Africa’s largest oil producer, accounting for more than two million barrels per day. But from investigation, more than 4 million barrel per day is produced, but only two million is accounted for. Even the Nigeria Liquified Gas, NLG is not left out of this bizarre business.
The Anglo-Dutch oil giant, Shell has severally declared a “force majeure” on crude oil exports from Nigeria as it struggles to repair sabotaged pipelines. Shell’s subsidiary consistently blocked crude export lines at Forcados Terminal in the Western Niger Delta to effect repairs. “Force majeure” is a legal term releasing a company from contractual obligations when faced with circumstances beyond its control.
Shell has blamed repeated oil thefts and sabotage of key pipelines as the major cause of spills and pollution in the oil-producing region. Crude oil theft or “bunkering” is a major problem in Nigeria, with estimates that the country loses some $6 billion (4.3 billion euros) in revenue every year because of the practice. It's safe to say that Nigeria deserves the kind of economy strangulation it faces today. The nation's major sources of earnings - mono-economy - is facing incremental downturn in the international Market. The collapse of oil prices is due largely to oil theft as we all agreed and other sundry issues.
What is the solution. Shouldn't the president show some measures of leadership and reign in his people? Presidential election is less than 8 weeks away and, Nigerians can't bank on president Jonathan's promise to curb corruption or build new refineries he promised in 2011. He should show some enthusiasm, even if it is delirium.
Erasmus Ikhide writes in from Lagos, Nigeria.Twitter: @ErasmusIkhide