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Oil: Jonathan’s Mid-Term Report And Downstream of Excuses By Ifeanyi Izeze

June 4, 2013

The Federal Government’s mid-term self-assessment report presented by the Minister for National Planning, Dr. Shamsudeen Usman as part of the May 29 Democracy Day celebration in Abuja clearly show the administration unlike previous ones is still struggling to register significant positive impressions in the minds of the people as impacts on their welfare and wellbeing despite the fact that it is already chanting the “one chance more” slogan. Remarkably, in almost all the sectors of the economy particularly the oil and gas sector, what we heard were still promissory notes on what the government thinks it should do.

The Federal Government’s mid-term self-assessment report presented by the Minister for National Planning, Dr. Shamsudeen Usman as part of the May 29 Democracy Day celebration in Abuja clearly show the administration unlike previous ones is still struggling to register significant positive impressions in the minds of the people as impacts on their welfare and wellbeing despite the fact that it is already chanting the “one chance more” slogan. Remarkably, in almost all the sectors of the economy particularly the oil and gas sector, what we heard were still promissory notes on what the government thinks it should do.



For instance, the main thrusts as pertain the oil and gas sector in the transformation booklet was that the administration will develop a comprehensive framework to increase production of crude oil to from where it met it at about 2.45 million barrels per day to 4 million barrels per day within its lifespan; it would build new refineries to ensure availability of petroleum products for local consumption to end long queues and price fluctuations in the filling stations across the country; it would ensure the review of the petroleum industry law as captured in the Petroleum Industry Bill (PIB); it would embark on massive investment in gas infrastructure (building new facilities and repairing/upgrading existing ones) to meet existing demand and encourage more domestic consumption.

As of today, nobody knows who is telling the truth- the foreign operators or the Ministry of Petroleum Resources as both parties always come out with conflicting information on the health of our oil sector especially the upstream. And so today, the Nigerian upstream has remained an arena of confusion and rather than progress, it is regressing beyond already achieved milestones especially in officially recorded production output from the nation’s oilfields.

Though whenever the foreign operators cry for lack of investment or investment flight, there is always a very thin line between mischief/blackmail and actual state of things. We are everyday being bombarded by threats of the imminent shrink, even death, of the Nigerian upstream oil sector due to lack of honest commitment on capital expenditures in the sector by government.

In 2011, Nigeria’s crude oil production output peaked at about 2.6 million barrels per day. And rather than appreciate, it plunged to a crest of 1.89m through 2.52 million barrels per day in 2012. Now, the situation is even more pathetic as no person including the Minister of Petroleum Resources could provide a definite figure on what we pump out as crude oil from this country. The Ministry of Petroleum Resources believes Nigeria still pumps between 2.1-2.59 million barrels per day but the oil workers union (NUPENG) recently contended that figure insisting that the nation’s output has dropped to as low as 1.8 million barrels per day. And all the reasons adduced for this unimpressive performance fell purely within the purview of government’s inability to carry out its responsibilities- particularly securing oil facilities to stamp-out the ever-increasing crude oil theft which has become a national embarrassment.

Similarly, the downstream sub-sector of the nation’s oil economy has remained arena of excuses and unacceptable explanations. Jonathan promised that all our existing refineries will be rehabilitated by March 2013, and new ones built such that we are able to refine 1 million barrels of crude oil per day by 2014.

And as said, it would have been an easy feat to achieve considering that the present administration inherited a plan to build three more refineries in Lagos, Kogi and Bayelsa States from the Yar’adua/Jonathan administration. But rather all that was presented were outright downstream of excuses. Midway to the lifespan of the administration, no iota of progress has been recorded beyond where former President Umaru Yar’adua stopped in the federal government’s plan to build three more refineries one each in Lagos, Kogi and Bayelsa States.

Despite billions of naira sunk into revamping the nation’s three and half refineries, the major components and various units of Fluid Catalytic Cracking Units, Crude Distillation Units and Vacuum Distillation Units of all the refineries are in terrible shapes. And what goes on at some of the plant are mere cracking of crude oil and no more.

For instance, some parts of the country are experiencing acute shortage of Kerosene, and there is no convincing reason for this market situation. The PPMC provides kerosene to some marketers for sale to consumers at N50 per litre but even in refinery and bulk storage towns such as Port Harcourt, Warri and Lagos, this same product sells for between N100- N150 per litre and farther away inland, it goes for between N200-300 depending on the distance from the source. If truly our existing refineries produce about 5.53 million liters of dual purpose kerosene as claimed by the PPMC, the problem of kerosene shortage across the country would not have as chronic.

In 2012, the federal government signed a joint venture agreement with Vulcan Energy Corporation for a deal worth $4.5 billion to jointly build six modular refineries. The vice president of Vulcan was quoted as saying then that it would take 13 months to complete the full circle of getting one modular refinery to start operation anywhere in Nigeria. So it would take a total of 78 months to complete the six modular plant with combined processing capacity of 180,000 barrels per day.

Meanwhile that’s only one side of the story because the issue of the location of the proposed modular plants is yet to be resolved. It is very obvious the geopolitical concept adopted for citing the plants may not be feasible because of the issue of availability of crude oil feedstock to the plants.
Today, not only are none of the existing refineries working at anywhere near-impressive capacity utilisation, there is nothing to show that even a single new refinery will be nearing completion by 2015. It takes at least 48 months to build a sizable refining plant with tangible volume per stream day capacity. So even till the end of this present administration, Nigerians should not expect any new refinery anywhere except the sort built everyday in the creeks of the Niger Delta. And any person promising otherwise is only set out to deceive the gullible citizenry.

As part of the administration’s agenda in the contract with the Nigerian people, President Jonathan promised that the gas sector would be “developed with special focus on meeting the domestic and individual demands of gas within the country, especially with the anticipated increased demand due to the Vision 20:2020 intent of rejuvenating the manufacturing sector.” How this is being pursued is at best blurred and at worst obscured.

For whatever reasons, the government has not been able to clearly define what it wants in the gas sub-sector. Policy pronouncements after the release of the promised transformation plan in the gas business clearly show that the government till today has no single idea on how to resolve the conflict between the policy of producing natural gas mainly for export as encapsulated in the various LNG programmes and projects and freeing produced gas for domestic use- in the power and manufacturing sectors and even for home use as cooking resource.

Also for whatever reasons, the thorny issue of appropriate pricing of gas for domestic purposes is still far from being addressed. Is the government going to continue the present subsidy regime on gas supplies to the power plants and other private manufacturing interests or allow the oil companies to produce and sell at market-driven rates? Unknown to many Nigerians, this issue of gas pricing is one of the biggest setbacks to the government’s independent power initiative and until it is resolved- in a frank and honest manner, most of the power plants being built may find it difficult to source gas feedstocks for their operation.

Three years down, the roadmap as proposed in the transformation booklet of 2011 is still leading nowhere. We have used three years or more to plan. Now is the time to move from the arena of promises to actual delivery- “yes we can.”

Ifeanyi Izeze is an Abuja-based Consultant and can be reached at: [email protected]

 

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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